Document:

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                             SUBSCRIPTION FOR SHARES

        (Part 5 Accredited Investor Exemption Pursuant to "Multi-lateral
  Instrument 45-103 - Capital Raising Exemptions" - Alberta Residents Only and
    Accredited Investor Exemption Pursuant to "Ontario Securities Commission
                     Rule 45-501" - Ontario Residents Only)

TO:     Kodiak Energy, Inc. (the "Corporation")
        734  7th Avenue S.W. Suite 460
        Calgary AB, T2P 3P8

The undersigned subscriber (the "Subscriber")  acknowledges that the Corporation
is proceeding  with an Offering of shares  ("Sharess") at a price of US$0.02 per
Share for gross  proceeds of US$ . Each Share is one (1) common  share  ("Common
Share").  The  undersigned  Subscriber  hereby tenders to the  Corporation  this
subscription offer which, upon acceptance by the Corporation, will constitute an
agreement of the Subscriber to subscribe for, take up, purchase and pay for and,
on the part of the Corporation,  to issue and sell to the Subscriber, the number
of Shares set out below on the terms and  subject to the  conditions  set out in
this Subscription Agreement. Until the Closing of the Offering, all subscription
funds shall be held in a non-interest  bearing account of the Corporation.  Upon
Closing of the  Offering,  all of the  subscription  proceeds  (net of  expenses
thereon) will be released to the Corporation. In the event the Offering does not
close, any and all subscription proceeds will be returned to subscribers without
interest,  deduction or penalty.  The Subscriber hereby  acknowledges and agrees
that the terms and conditions  contained in the attached  Schedule "A" form part
of this Subscription Agreement and are incorporated herein by reference.

-----------------------------------     Number of Shares:
Name of Subscriber - please print
                                        ----------------------------------------

                                        ----------------------------------------
By: -------------------------------     Aggregate  Subscription  Price
    Authorized Signature                (No. of Shares X US$0.02 per Share):

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

                                        ----------------------------------------
-----------------------------------     No.  of  Common  Shares  Currently  Held
Official Capacity or Title              (excluding  Common Shares comprising the
 - please print                         Shares subscribed for herein):

-----------------------------------     ----------------------------------------
(Please print name of individual
whose signature appears above if        ----------------------------------------
different than the name of the          Deliver the Shares as set forth below:
Subscriber printed above.)
                                        ----------------------------------------
                                        Name
-----------------------------------
Subscriber's Address                    ----------------------------------------
                                        Account reference, if applicable
-----------------------------------
Facsimile Number                        ----------------------------------------
                                        Contact Name
-----------------------------------
Telephone Number     E-Mail Address     ----------------------------------------
                                        Address

-----------------------------------     ----------------------------------------
Register the Shares as set forth        Telephone Number          E-Mail Address
below:

-----------------------------------
Name

-----------------------------------
Account reference, if applicable

-----------------------------------
Address

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

ACCEPTANCE:  The  Corporation  hereby accepts the above  subscription as of this
_______  day of  ________________,  2005  and  the  Corporation  represents  and
warrants to the Subscriber that the  representations  and warranties made by the
Corporation  are true and correct in all  material  respects as in all  material
respects as of this date and that the Subscriber is entitled to rely thereon.

                                       Kodiak energy, Inc.

                                       By:  ------------------------------------

           This is the first page of an agreement comprised of 8 pages
                           (not including Exhibits).

<PAGE>

             SCHEDULE "A" -TERMS AND CONDITIONS OF SUBSCRIPTION FOR
                          SHARES OF KODIAK ENERGY, INC.

Definitions

In this Subscription Agreement:

     (a)  "Closing"  or  "Closing  Date"  means  the  closing  of  the  Offering
          initially  expected  to occur on or about  December  22,  2005 or such
          other date or dates as may be  determined  by the  Corporation  in its
          sole discretion and such other subsequent  closings as may be required
          to complete the Offering;

     (b)  "Common  Share"  means a  common  share  in the  capital  stock of the
          Corporation;

     (c) "Corporation" means Kodiak Energy, Inc.;

     (d)  "MI  45-102"  means   Multilateral   Instrument  45-102  -  Resale  of
          Securities;

     (e)  "MI 45-103" means  Multilateral  Instrument  45-103 - Capital  Raising
          Exemptions;

     (f)  "Offering"  means the offering of Shares by the Corporation at US$0.02
          per Share;

     (g)  "OSC Rule 45-501" means  Ontario  Securities  Commission  Rule 45-501-
          Exempt Distributions;

     (h)  "Securities"  means the  Shares,  the Common  Shares and the  Warrants
          comprising the Shares, and the Warrant Shares;

     (i)  "Subscriber"  means the person or company identified as the Subscriber
          on the face page of this Subscription Agreement;

     (j)  "Subscription  Agreement"  means  this  agreement,  together  with the
          schedules and exhibits  attached  hereto,  as amended or  supplemented
          from time to time;

     (k)  "Subscription  Price" means the aggregate  subscription  price paid by
          the Subscriber,  being the number of Shares  subscribed for multiplied
          by US$0.02 per Share and ;

     (l)  "Share"  means  a Share  consisting  of one (1)  Common  Share  of the
          Corporation;

Terms of the Offering

1.   The Subscriber  hereby confirms its  subscription for and agrees to take up
the Shares as provided  for on the initial page of this  Subscription  Agreement
and  delivers  herewith  a  certified  cheque  or  bank  draft  payable  to  the
Corporation  in  the  amount  of  the  Subscription  Price  and  authorizes  the
Corporation  to  release  the said funds for use by the  Corporation  on Closing
against delivery to the Subscriber of duly issued certificates  representing the
Common Shares and Warrants comprising the Shares subscribed for herein.

2.   The Subscriber  acknowledges  that the Shares subscribed for hereunder form
part of a larger issuance and sale by the Corporation of a maximum of 15,000,000
(fifteen  million) Shares of the Corporation at a subscription  price of US$0.02
per Share.

3.   The  Subscriber  acknowledges  that if the  Offering  does not close on any
subscriptions  received, the amounts received for subscriptions will be promptly
returned by the  Corporation  to  subscribers  without  interest,  deduction  or
penalty.  The Shares offered are subject to acceptance by the Corporation and to
rejection  or  allotment  by  the  Corporation  in  whole  or in  part  and  the
Corporation  reserves the right to discontinue  the Offering at any time without
notice.

4.   The  Subscriber  acknowledges  that  this  Subscription  Agreement  and the
Exhibits hereto require the Subscriber to provide certain  personal  information
to the  Corporation.  Such information is being collected by the Corporation for

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<PAGE>

the purposes of completing the Offering,  which  includes,  without  limitation,
determining the Subscriber's eligibility to purchase the Shares under applicable
securities  legislation,  preparing and  registering  certificates  representing
Shares to be issued to the  Subscriber and  completing  filings  required by any
stock exchange or securities  regulatory  authority.  The Subscriber's  personal
information  may be  disclosed  by the  Corporation  to: (a) stock  exchanges or
securities regulatory authorities,  (b) the Corporation's registrar and transfer
agent,  and (c) any of the other  parties  involved in the  Offering,  including
legal  counsel  and may be  included  in  record  books in  connection  with the
Offering. By executing this Subscription Agreement,  the Subscriber is deemed to
be  consenting  to  the  foregoing   collection,   use  and  disclosure  of  the
Subscriber's personal information. The Subscriber also consents to the filing of
copies or originals of any of the Subscriber's documents described in Section 11
hereof as may be  required  to be filed with any stock  exchange  or  securities
regulatory authority in connection with the transactions contemplated hereby.

5.   THE SUBSCRIBER  FURTHER  ACKNOWLEDGES THAT AN INVESTMENT IN THE SHARES MUST
BE  CONSIDERED  SPECULATIVE  AND IS  SUBJECT  TO A NUMBER OF RISK  FACTORS.  THE
SUBSCRIBER  COVENANTS AND AGREES TO COMPLY WITH MI 45-103 OR OSC RULE 45-501, AS
APPLICABLE,  MI 45-102 AND ANY OTHER APPLICABLE SECURITIES  LEGISLATION,  RULES,
REGULATIONS,  ORDERS OR POLICIES CONCERNING THE PURCHASE, HOLDING OF, AND RESALE
OF THE SECURITIES.  THE SECURITIES ARE SUBJECT TO RESALE  RESTRICTIONS  AND WILL
BEAR A LEGEND TO THAT EFFECT.

6.   In addition to one manually  signed,  completed  copy of this  Subscription
Agreement,  the Subscriber will execute and deliver to the Corporation all other
documentation as may be required by applicable  securities  legislation,  rules,
policy  statements,  and  orders,  including  MI 45-103 or OSC Rule  45-501,  as
applicable,  to  permit  the  issue  and  sale  of the  Shares.  The  Subscriber
acknowledges and agrees that any such documentation, when executed and delivered
by the  Subscriber,  will  form  part of and  will  be  incorporated  into  this
Subscription   Agreement  with  the  same  effect  as  if  each   constituted  a
representation and warranty or covenant of the Subscriber hereunder in favour of
the  Corporation,  and the  Subscriber  consents to the filing of such documents
and/or  information  contained in such  documents as may be required to be filed
with  any  securities  or  the  regulatory  authority  in  connection  with  the
transactions contemplated hereby.

Representations, Warranties and Covenants by Subscriber

7.   The Subscriber  represents,  warrants and covenants to the Corporation (and
acknowledges  that the Corporation and its counsel are relying  thereon) both at
the date hereof and at the Closing Date that:

(a)  the  Subscriber  has been  independently  advised as to  restrictions  with
     respect  to  trading  in  the  Shares  imposed  by  applicable   securities
     legislation,  confirms that no representation  has been made to it by or on
     behalf of the Corporation  with respect  thereto,  acknowledges  that it is
     aware of the  characteristics  of the  Shares,  the  risks  relating  to an
     investment  therein  and of the fact that it may not be able to resell  the
     Securities  except in accordance with limited  exemptions  under applicable
     securities  legislation and regulatory policy,  including MI 45-102 and the
     United States  Securities  Act of 1933, as amended (as defined below) until
     expiry of the applicable  restricted  period and compliance  with the other
     requirements  of  applicable  law;  and  the  Subscriber  agrees  that  any
     certificates  representing the Securities,  and all certificates  issued in
     exchange  therefore  or  in  substitution   thereof,  will  bear  a  legend
     indicating that the resale of such Securities is restricted; and

(b)  the  Subscriber  has  not  received  or  been  provided  with,  nor  has it
     requested,  nor does it have any need to receive,  any offering memorandum,
     or any other  document  (other than an annual  report,  annual  information
     form,  interim  report,   information  circular  or  any  other  continuous
     disclosure  document,  the  content  of which is  prescribed  by statute or
     regulation)  describing the business and affairs of the  Corporation  which
     has been prepared for delivery to, and review by, prospective purchasers in
     order to assist  it in making an  investment  decision  in  respect  of the
     Shares; and

(c)  the Subscriber has been afforded the  opportunity (i) to ask such questions
     as it deemed necessary of, and to receive answers from,  representatives of
     the Corporation  concerning the terms and conditions of the offering of the
     Shares and (ii) to obtain such additional information which the Corporation
     possesses or can acquire  without  unreasonable  effort or expense that the
     Subscriber  considered  necessary in connection with its decision to invest
     in the Shares; and

(d)  the Subscriber has not become aware of any advertisement,  article,  notice
     or other  communication  in  printed  media of  general  and  regular  paid
     circulation  (or  other  printed  public  media),  radio,  television,  the

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<PAGE>

     internet or  telecommunications  or other form of advertisement  (including
     electronic display) with respect to the distribution of the Shares; and

(e)  this  Agreement  is made  unconditionally  as a result of the  Subscriber's
     desire to participate in the future development of the Corporation; and

(f)  the  Subscriber  is  purchasing  as  principal  and  it  knows  that  it is
     purchasing the Shares  pursuant to an exemption under MI 45-103 or OSC Rule
     45-501, as applicable, and, as a consequence, is restricted from using most
     of the civil remedies  available under applicable  securities  legislation,
     may not receive information that would otherwise be required to be provided
     to it under  applicable  securities  legislation,  and the  Corporation  is
     relieved  from  certain   obligations  that  would  otherwise  apply  under
     applicable securities legislation; and

     (i)  if a resident of Alberta, the Subscriber is a resident in or otherwise
          subject to the  applicable  securities  laws of  Alberta  and it is an
          "accredited   investor",   as  such  term  is  defined  in  MI  45-103
          promulgated  under the Securities  Act (Alberta) and has  concurrently
          executed and delivered a Representation Letter in the form attached as
          Exhibit 1 to this Subscription Agreement; or

     (ii) if a resident of Ontario, the Subscriber is a resident in or otherwise
          subject  to  the  applicable  securities  laws  of  Ontario  and is an
          "accredited  investor",  as such term is  defined  in OSC Rule  45-501
          promulgated  under the Securities  Act (Ontario) and has  concurrently
          executed and delivered a Representation Letter in the form attached as
          Exhibit 2 to this Subscription Agreement; and

(g)  if the  Subscriber  is  resident  in any  jurisdiction  not  referred to in
     Subsection  7(f) above:  (a) the purchase of the Shares does not contravene
     any of the applicable  laws in the  Subscriber's  jurisdiction of residence
     and does not trigger (i) any  obligation  to prepare and file a prospectus,
     an offering memorandum or similar document,  or any other ongoing reporting
     requirements  with  respect  to such  purchase  or  otherwise,  or (ii) any
     registration or other  obligation on the part of the  Corporation;  (b) the
     sale of the Shares as contemplated in the Subscription  Agreement  complies
     with  or  is  exempt  from   applicable   securities   legislation  of  the
     Subscriber's jurisdiction of residence and the Subscriber will provide such
     evidence  of  compliance  with  all such  matters  as the  Corporation  may
     request;  (c) the  Subscriber  will comply with the provisions of Section 5
     and  Subsection  7(a) as if they were a resident  of  Alberta;  and (d) and
     notwithstanding  that the Subscriber is not a resident of Alberta, it is an
     "accredited  investor",  as such term is defined  in MI 45-103  promulgated
     under the  Securities  Act  (Alberta)  and has  concurrently  executed  and
     delivered a Representation Letter in the form attached as Exhibit 1 to this
     Subscription Agreement; and

(h)  no person has made to the Subscriber any written or oral representations:

     (i) that any person will resell or repurchase any of the Securities;

     (ii) that  any  person  will  refund  the  purchase  price  of  any  of the
          Securities;

     (iii) as to the future price or value of any of the Securities; or

     (iv) that any of the Securities  will be listed and posted for trading on a
          stock exchange or that  application has been made to list and post any
          of the Securities for trading on a stock exchange; and

(i)  the Subscriber has no knowledge of a "material  fact" or "material  change"
     (as those  terms are  defined  by  applicable  securities  legislation)  in
     respect  of the  affairs  of the  Corporation  that has not been  generally
     disclosed  to the public,  other than  knowledge  relating  directly to its
     subscription for the Shares; and

(j)  the Corporation may complete additional  financings in the future, and such
     future  financings  may have a  dilutive  effect on  then-current  security
     holders of the Corporation, including the Subscriber; and

(k)  it is aware that the  Securities  have not been and will not be  registered
     under  the  United  States  Securities  Act  of  1933,  as  amended  ("U.S.
     Securities  Act") and that the Securities may not be offered or sold in the
     United  States or to, or for the account or benefit  of, a U.S.  Person (as
     defined in Regulation S under the U.S.  Securities  Act) (a "U.S.  Person")
     without  registration  under the U.S.  Securities  Act or  compliance  with
     requirements  of an  exemption  or  exclusion  from  registration  and  the

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<PAGE>

     applicable  laws  of  all  applicable  states  and  acknowledges  that  the
     Corporation  has no present  intention of filing a  registration  statement
     under the U.S. Securities Act in respect of the Securities; and

(l) the Shares have not been offered to the Subscriber in the United States; and

(m)  it is not a U.S.  Person and is not  purchasing the Shares on behalf of, or
     for the account or benefit of, a U.S. Person; and

(n)  the  Subscriber  undertakes  and agrees  that it will not offer or sell the
     Securities in the United States unless such securities are registered under
     the U.S. Securities Act and the securities laws of all applicable states of
     the United  States or an  exemption  or  exclusion  from such  registration
     requirements  is  available,  and  further  that it  will  not  resell  the
     Securities   except  in  accordance   with  the  provisions  of  applicable
     securities legislation,  regulations,  rules, policies and orders and stock
     exchange rules; and

(o)  it will not engage in hedging  transactions  with regard to the  Securities
     except in compliance with the U.S. Securities Act; and

(p)  it  understands  and  acknowledges  that the  Corporation  must  refuse  to
     register  any transfer of the  Securities  not made in  accordance  with an
     available exemption or exclusion from the registration  requirements of the
     U.S.  Securities Act or pursuant to registration under the U.S.  Securities
     Act; and

(q)  if the Subscriber is a "distributor"  (as defined in Regulation S under the
     U.S. Securities Act) or is an "affiliate" (as defined in Rule 405 under the
     U.S.  Securities  Act)  of a  distributor  or  is  acting  on  behalf  of a
     distributor,  (i) it agrees  that it will not offer or sell the  Securities
     during the one year period after the completion of the  distribution of the
     Shares (the "Distribution  Compliance  Period") to a U.S. Person or for the
     account or benefit of a U.S. Person (other than a distributor), and (ii) if
     it sells Securities to another distributor, a dealer (as defined in Section
     2(a)(12)  of the U.S.  Securities  Act) or a  person  receiving  a  selling
     concession fee or other  remuneration,  during the Distribution  Compliance
     Period,  the Subscriber agrees that it will send a written  confirmation or
     other notice to the purchaser  stating that the purchaser is subject to the
     same  restrictions  on offers  and sales that  apply to a  distributor  and
     setting forth the restrictions on offers and sales of Securities within the
     United States or to, or for the account or benefit of, U.S. Persons; and

(r)  if any Securities are being sold in the United States  pursuant to Rule 144
     under the U.S.  Securities Act, the United States restrictive legend may be
     removed from the certificates  representing the Securities by delivering to
     the  Corporation  a written  opinion of  counsel,  of  recognized  standing
     reasonably  satisfactory to the Corporation,  to the effect that the legend
     is no longer required under applicable  requirements of the U.S. Securities
     Act or state securities laws; and

(s)  if a corporation, partnership,  unincorporated association or other entity,
     it has the legal  capacity to enter into and be bound by this  Subscription
     Agreement and further certifies that all necessary  approvals of directors,
     shareholders or otherwise have been given and obtained; and

(t)  if an  individual,  it is of the  full  age  of  majority  and  is  legally
     competent  to  execute  this  Subscription  Agreement  and take all  action
     pursuant hereto; and

(u)  it  acknowledges  that the net  subscription  proceeds (gross proceeds less
     expenses,   including   legal   fees  which  have  not  been  paid  by  the
     Corporation),  will be  immediately  releasable to the  Corporation  on the
     Closing Date or later closing dates, as the case may be; and

(v)  this Subscription Agreement has been duly and validly authorized,  executed
     and delivered by and  constitutes a legal,  valid,  binding and enforceable
     obligation of the Subscriber; and

(w)  the  entering  into of this  Subscription  Agreement  and the  transactions
     contemplated  hereby will not result in a violation of any of the terms and
     provisions of any law applicable to it, or any of its constating documents,
     or of any  agreement to which the  Subscriber  is a party or by which it is
     bound; and

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<PAGE>

(x)  in the case of a subscription  by the Subscriber for Shares acting as agent
     for a disclosed  principal,  it is duly  authorized  to execute and deliver
     this  Subscription  Agreement  and all  other  necessary  documentation  in
     connection  with such  subscription  on behalf of such  principal  and this
     Subscription Agreement has been duly authorized,  executed and delivered by
     or on behalf of, and constitutes a legal,  valid and binding  agreement of,
     such principal; and

(y)  the Subscriber  has such knowledge in financial and business  affairs as to
     be  capable  of  evaluating  the  merits  and  risks  of  the  Subscriber's
     investment and the  Subscriber,  or, where the Subscriber is not purchasing
     as principal,  each beneficial purchaser, is able to bear the economic risk
     of loss of the Subscriber's entire investment in the Shares; and

(z)  except  for the  representations  and  warranties  made by the  Corporation
     herein, it has relied solely upon publicly available  information  relating
     to the Corporation and not upon any verbal or written  representation as to
     fact or otherwise made by or on behalf of the Corporation and  acknowledges
     that the Corporation's counsel are acting as counsel to the Corporation and
     not as counsel to the Subscriber; and

(aa) the Subscriber understands that Shares are being offered for sale only on a
     "private  placement"  basis and that the sale and delivery of the Shares is
     conditional  upon such sale being  exempt from the  requirements  as to the
     filing of a prospectus  or delivery of an offering  memorandum  or upon the
     issuance of such orders, consents or approvals as may be required to permit
     such sale without the  requirement  of filing a prospectus or delivering an
     offering  memorandum  and, as a consequence (i) it is restricted from using
     most of the civil remedies available under securities legislation;  (ii) it
     may not receive information that would otherwise be required to be provided
     to it under securities  legislation;  and (iii) the Corporation is relieved
     from  certain  obligations  that would  otherwise  apply  under  securities
     legislation; and

(bb) if required  by  applicable  securities  legislation,  regulations,  rules,
     policies  or  orders,  MI  45-103,  OSC Rule  45-501  or by any  securities
     commission,  stock exchange or other regulatory  authority,  the Subscriber
     will execute, deliver, file and otherwise assist the Corporation in filing,
     such reports, undertakings and other documents with respect to the issue of
     the Shares (including,  without  limitation,  a completed and duly executed
     Representation  Letter,  attached  as  Exhibit 1 and  Exhibit 2 hereto,  as
     applicable); and

(cc) the Subscriber will not resell the Securities except in accordance with the
     provisions of applicable  securities  legislation and stock exchange rules,
     if applicable, in the future; and

(dd) the  Subscriber  deals at arm's  length  with the  Corporation  within  the
     meaning of the Income Tax Act (Canada)  and will  continue to deal at arm's
     length  with the  Corporation  at all  times  which are  relevant  for this
     Subscription Agreement; and

(ee) none of the funds the  Subscriber  is using to purchase  the Shares are, to
     the knowledge of the Subscriber,  proceeds obtained or derived, directly or
     indirectly, as a result of illegal activities; and

(ff) the funds  representing the total Subscription Price which will be advanced
     by the Subscriber to the Corporation  hereunder will not represent proceeds
     of crime for the purposes of the Proceeds of Crime (Money  Laundering)  Act
     (Canada) (the "PCMLA") and the Subscriber acknowledges that the Corporation
     may in the future be required by law to disclose the Subscriber's  name and
     other  information   relating  to  this  Subscription   Agreement  and  the
     Subscriber's  subscription  hereunder, on a confidential basis, pursuant to
     the PCMLA; and

(gg) to the best of its knowledge,  the subscription funds to be provided by the
     Subscriber  (i) have not been or will not 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,  and (ii) are not being tendered on
     behalf of a person or entity who has not been  identified to the Subscriber
     and the Subscriber  shall promptly notify the Corporation if the Subscriber
     discovers that any of such representations cease to be true, and to provide
     the Corporation with appropriate information in connection therewith; and

(hh) the  Subscriber  acknowledges  that it has been  encouraged  to and  should
     obtain independent legal,  income tax and investment advice with respect to
     its subscription for these Shares and accordingly,  has been  independently
     advised as to the meanings of all terms  contained  herein  relevant to the
     Subscriber for purposes of giving representations, warranties and covenants
     under this Subscription Agreement.

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<PAGE>

Representations, Warranties and Covenants of the Corporation

8.   The  Corporation  hereby  represents and warrants to the Subscriber that it
has been duly  incorporated and is a valid and subsisting  corporation under the
laws of the State of Delaware,  United States,  and has full corporate power and
authority  to  enter  into  this  Subscription  Agreement  and  to  perform  its
obligations hereunder.

9.   The Corporation  hereby covenants with the Subscriber that it will take all
corporate  action  required to issue to the  Subscriber the Common Shares on the
Closing Date.

Registration Rights

10.  If the  Corporation  proposes to  register,  pursuant  to any  registration
rights agreement (a "Registration  Rights  Agreement"),  for shareholders  other
than the  Subscriber,  any of its Common Shares or other equity  securities  (or
securities  convertible into equity securities) under the U.S. Securities Act in
connection with the public  offering of such  securities  solely for cash (other
than a registration on Form S-8, Form S-4 or Form F-4), the Corporation will, at
all such times,  promptly give the  Subscriber  written  notice of such proposed
registration.  Upon the written request of the Subscriber,  given within 20 days
after the  mailing of such  notice by the  Corporation,  the  Corporation  will,
subject to the provisions of applicable Registration Rights Agreements,  use its
commercial  best efforts to cause a registration  statement  covering all of the
(i) Common Shares being  acquired  hereunder that each such Holder has requested
to be registered to become effective under the U.S.  Securities Act. Only to the
extent they apply to "piggy back" registrations, such registration shall also be
subject  to  the  other  provisions  of  each  applicable   Registration  Rights
Agreement.  For greater certainty, (i) such registration shall not be subject to
any provisions of any Registration  Rights Agreement that are applicable only to
"demand"  registrations,  and (ii) the  Subscriber  acknowledges  that except as
contemplated by this Section,  the Corporation is under no obligation  hereunder
to register any of its  securities or to complete any offering of its securities
it proposes to make,  and the  Corporation  will  therefore  incur no  liability
(including  any  penalties  that may be  incurred  under a  Registration  Rights
Agreement) to the  Subscriber  for its failure to register any of its securities
or to complete any offering of its securities.

Closing

11.  The Subscriber  agrees to deliver to the  Corporation,  not later than 4:30
p.m.  (Calgary  time) on the Closing Date:  (a) this duly completed and executed
Subscription  Agreement;  (b) a certified cheque or bank draft payable to Kodiak
Energy,  Inc. for the Subscription Price of the Shares subscribed for under this
Subscription  Agreement;  (c) if the Subscriber is an  "accredited  investor" in
Alberta or is purchasing  Shares pursuant to Subsection  7(g), a fully completed
and duly executed  Representation Letter,  attached as Exhibit 1 hereto; and (d)
if the Subscriber is an "accredited  investor" in Ontario, a fully completed and
duly executed Representation Letter, attached as Exhibit 2 hereto.

12.  The purchase and sale of the Shares pursuant to this Subscription Agreement
will be completed at the offices of the Corporation's solicitors,  Borden Ladner
Gervais LLP, in Calgary, Alberta on the Closing Date or such other place or time
as the  Corporation  decides in its sole  discretion.  On the Closing Date,  the
Corporation shall receive all completed subscription agreements,  including this
Subscription  Agreement,  and the  Subscription  Price  against  delivery by the
Corporation of the certificates representing the Shares.

13.  The  Corporation  shall be entitled to rely on delivery of a facsimile copy
of executed  subscriptions,  and acceptance by the Corporation of such facsimile
subscriptions shall be legally effective to create a valid and binding agreement
between the Subscriber and the Corporation in accordance with the terms hereof.

General

14.  The Subscriber agrees that the representations, warranties and covenants of
the Subscriber  herein will be true and correct both as of the execution of this
Subscription  Agreement  and  as of  the  Closing  Date  and  will  survive  the
completion of the issuance of the Shares.  The  representations,  warranties and
covenants of the Subscriber  herein are made with the intent that they be relied
upon by the  Corporation  and it's counsel in determining  the  eligibility of a
purchaser  of Shares and the  Subscriber  agrees to indemnify  the  Corporation,
including  its  respective  affiliates,   shareholders,   directors,   officers,
partners,  employees,  advisors and agents,  against all losses,  claims, costs,
expenses and damages or liabilities  which any of them may suffer or incur which
are  caused  or arise  from a  breach  thereof.  The  Subscriber  undertakes  to
immediately  notify the Corporation at 734 7th Avenue S. W. Calgary AB, T2P 3P8,
Attention:  Mark  Hlady  (Fax  Number:  (403)  262-5118),  of any  change in any

                                       7
<PAGE>

statement or other information relating to the Subscriber set forth herein which
takes place prior to the Closing Date.

15.  The  obligations of the parties  hereunder are subject to acceptance of the
terms of the Offering by any required regulatory approvals.

16.  The  Subscriber  acknowledges  and agrees  that all costs  incurred  by the
Subscriber (including any fees and disbursements of any special counsel retained
by the  Subscriber)  relating to the  purchase  of the Shares by the  Subscriber
shall be borne by the Subscriber.

17.  The contract arising out of this  Subscription  Agreement and all documents
relating  thereto shall be governed by and construed in accordance with the laws
of the  Province of Alberta and the federal laws of Canada  applicable  therein.
The parties  irrevocably  attorn to the exclusive  jurisdiction of the courts of
the Province of Alberta.

18.  Time shall be of the essence hereof.

19.  This Subscription  Agreement represents the entire agreement of the parties
hereto  relating to the subject matter hereof and there are no  representations,
covenants or other  agreements  relating to the subject  matter hereof except as
stated or referred to herein.

20.  The terms and provisions of this  Subscription  Agreement  shall be binding
upon and enure to the benefit of the  Subscriber and the  Corporation  and their
respective heirs, executors,  administrators,  successors and assigns;  provided
that,  except for the  assignment  by a  Subscriber  who is acting as nominee or
agent to a beneficial owner and as otherwise herein provided,  this Subscription
Agreement  shall not be assignable by any party without prior written consent of
the other parties.

21.  The Subscriber,  on its own behalf and, if applicable,  on behalf of others
for whom it is contracting hereunder,  agrees that this subscription is made for
valuable  consideration  and  may not be  withdrawn,  cancelled,  terminated  or
revoked by the  Subscriber,  on its own behalf and, if applicable,  on behalf of
others for whom it is contracting hereunder.

22.  Neither  this  Subscription  Agreement  nor any  provision  hereof shall be
modified,  changed,  discharged or terminated except by an instrument in writing
signed by the party against whom any waiver, change, discharge or termination is
sought.

23.  The  invalidity,  illegality or  unenforceability  of any provision of this
Subscription Agreement shall not affect the validity, legality or enforceability
of any other provision hereof.

24.  The Subscriber acknowledges and agrees that acceptance of this Subscription
Agreement will be  conditional,  among other things,  upon the sale of Shares to
the  Subscriber  being  exempt  from  any  prospectus  and  offering  memorandum
requirements of all applicable  securities  laws. The Corporation will be deemed
to have accepted this  Subscription  Agreement  upon the delivery on the Closing
Date of the certificates representing the Shares to or upon the direction of the
Subscriber in accordance with the provisions hereof.

25.  The headings  used in this  Subscription  Agreement  have been inserted for
convenience of reference only and shall not affect the meaning or interpretation
of this Subscription Agreement or any provision hereof.

26.  The  covenants,  representations  and  warranties  contained  herein  shall
survive the Closing of the transactions contemplated hereby.

27.  Each party  shall from time to time do such  further  acts and  execute and
deliver such further documents as shall be reasonably required in order to fully
perform and carry out the terms of this Subscription Agreement.

28.  In this  Subscription  Agreement,  words importing the singular include the
plural and vice versa and words importing persons include firms or corporations.

29.  This  Subscription  Agreement may be executed in any number of counterparts
with the same effect as if all parties to this Subscription Agreement had signed
the same document and all counterparts will be construed together and constitute
one and the same instrument.

                                       8
<PAGE>

30.  All notices  hereunder  will be in writing and  addressed  to the party for
whom it is intended at the address indicated herein.  Either party may by notice
to the other  party  change its  address  for  service.  Any  notice  personally
delivered  will be deemed to have been given or made on the date it was actually
delivered, or if sent by electronic facsimile, will be deemed to have been given
or  made  on the  business  day  next  following  the  date  upon  which  it was
transmitted.

31.  In this  Subscription  Agreement  references  to "$" are to  United  States
dollars unless stated otherwise.

                                        9

<PAGE>

                                    EXHIBIT 1

                              REPRESENTATION LETTER

                       (FOR ALBERTA ACCREDITED INVESTORS)

TO:               KODIAK ENERGY, INC. (the "Corporation")

     In connection with the purchase of Shares of the Corporation  ("Shares") by
the undersigned subscriber or, if applicable,  the principal on whose behalf the
undersigned  is purchasing as agent (the  "Subscriber"  for the purposes of this
Exhibit 1), the Subscriber hereby represents,  warrants, covenants and certifies
to the Corporation that:

1.   The  Subscriber  is  resident  in  Alberta or is subject to the laws of the
Province of Alberta;

2.   The Subscriber, unless it is a person or company described in paragraph (p)
or (q) in the attached Appendix "A" that is deemed pursuant to the provisions of
section  1.2  of  Multilateral   Instrument  45-103  entitled  "Capital  Raising
Exemptions" to be purchasing as principal, is purchasing the Shares as principal
for its own account;

3.   The  Subscriber  is  an  "accredited   investor"   within  the  meaning  of
Multilateral  Instrument 45-103 entitled "Capital Raising  Exemptions" by virtue
of  satisfying  the  indicated  criterion  as set  out in  Appendix  "A" to this
Representation Letter; and

4.   Upon execution of this Exhibit 1 by the Subscriber, this Exhibit 1 shall be
incorporated into and form a part of the Subscription Agreement.

  Dated: _________________________, 2005.

                    __________________________________________________________
                    Print name of Subscriber

                    By:   ____________________________________________________
                          Signature

                          ____________________________________________________
                          Print name of Signatory (if different from Subscriber)

                          ____________________________________________________
                          Title

     IMPORTANT: PLEASE INITIAL THE APPROPRIATE PARAGRAPH(S) ON APPENDIX "A"

<PAGE>

                                  APPENDIX "A"
                                  to Exhibit 1

         Accredited Investor - (defined in MI 45-103) means:

______    (a)  a Canadian financial  institution,  or an authorized foreign bank
               listed in Schedule III of the Bank Act (Canada); or

______    (b)  the Business  Development Bank of Canada  incorporated  under the
               Business Development Bank of Canada Act (Canada); or

______    (c)  an association  under the  Cooperative  Credit  Associations  Act
               (Canada)  located  in  Canada  or a  central  cooperative  credit
               society for which an order has been made under subsection  473(1)
               of that Act; or

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

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

______    (f)  an  individual   registered  or  formerly  registered  under  the
               securities   legislation  of  a  jurisdiction  of  Canada,  as  a
               representative  of a person or company  referred to in  paragraph
               (e); or

______    (g)  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;  or (h) a
               municipality, public board or commission in Canada; or

______    (i)  any  national,   federal,  state,   provincial,   territorial  or
               municipal  government of or in any foreign  jurisdiction,  or any
               agency of that government; or

______    (j)  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
               Canada; or

______    (k)  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 CAD$1,000,000; or

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

______    (m)  a person or company,  other than a mutual fund or  non-redeemable
               investment  fund,  that,  either alone or with a spouse,  has net
               assets of at least CAD$5,000,000 and unless the person or company
               is an  individual,  that  amount  is shown  on its most  recently
               prepared financial statements; or

______    (n)  a mutual  fund or  non-redeemable  investment  fund that,  in the
               local jurisdiction, distributes its securities only to persons or
               companies  that are  "accredited  investors"  (as  defined  in MI
               45-103); or

______    (o)  a mutual  fund or  non-redeemable  investment  fund that,  in the
               local  jurisdiction,  is  distributing  or  has  distributed  its
               securities under one or more prospectuses for which the regulator
               has issued receipts; or

<PAGE>

                                  APPENDIX "A"
                                  to Exhibit 1

______    (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,  trading as a trustee or agent on behalf of
               a fully managed account; or

______    (q)  a person or company trading as agent on behalf of a fully managed
               account if that person or company is  registered or authorized to
               carry  on  business  under  the   securities   legislation  of  a
               jurisdiction  of Canada or a foreign  jurisdiction as a portfolio
               manager or under an  equivalent  category of adviser or is exempt
               from  registration  as a  portfolio  manager  or  the  equivalent
               category of adviser; or

______    (r)  a registered  charity under the Income Tax Act (Canada)  that, in
               regard to the trade,  has  obtained  advice  from an  eligibility
               adviser or other  adviser  registered  to  provide  advice on the
               securities being traded; or

______    (s)  an entity organized in a foreign  jurisdiction  that is analogous
               to any of the entities  referred to in paragraphs (a) through (e)
               and paragraph (j) in form and function; or

______    (t)  a person or  company  in  respect  of which all of the  owners of
               interests,  direct or indirect,  legal or beneficial,  except the
               voting securities  required by law to be owned by directors,  are
               persons or companies that are "accredited  investors" (as defined
               in MI 45-103).

          NOTE: The investor must initial  beside the applicable  portion of the
     above definition.

         For the purposes hereof:

(a)  "affiliate" means an issuer connected with another issuer because

     (i)  one of them is the subsidiary of the other, or

     (ii) each of them is controlled by the same person or company;

(b)  "beneficial ownership" of securities by a person occurs

     (i)  for the purposes of Alberta  securities  law, when such securities are
          beneficially owned by

          (A)  a  company  controlled  by that  person or an  affiliate  of that
               company,

          (B)  an affiliate of that person, or

          (C)  through  a  trustee,   legal   representative,   agent  or  other
               intermediary of that person;

(c)  "Canadian  financial  institution"  means a bank, loan  corporation,  trust
     company,  insurance  company,  treasury  branch,  credit  union  or  caisse
     populaire  that, in each case, is authorized to carry on business in Canada
     or  a  jurisdiction,   or  the  Confederation  des  caisses  populaires  et
     d'economie Desjardins du Quebec;

(d)  "director" when used in relation to a person, includes a person acting in a
     capacity similar to that of a director of a company;

(e)  "eligibility  adviser" means an investment dealer or equivalent category of
     registration,   registered   under  the   securities   legislation  of  the
     jurisdiction  of a purchaser and  authorized to give advice with respect to
     the type of security being distributed;

(f)  "financial assets" means cash and securities;

(g)  "foreign  jurisdiction"  means a country  other than  Canada or a political
     subdivision of a country other than Canada;

(h)  "founder", in respect of the Corporation, means a person or company who,

                                        2
<PAGE>

                                  APPENDIX "A"
                                  to Exhibit 1

     (i)  acting  alone,  in  conjunction  or in concert  with one or more other
          persons or companies, directly or indirectly, has taken the initiative
          in founding,  organizing or substantially reorganizing the business of
          the Corporation, and

     (ii) at the  time  of the  proposed  trade,  is  actively  involved  in the
          business of the Corporation;

(i)  "fully  managed  account"  means an  account  for which a person or company
     makes  the  investment  decisions  if  that  person  or  company  has  full
     discretion to trade in  securities  for the account  without  requiring the
     client's express consent to a transaction;

(j)  "jurisdiction"  means a province or territory of Canada except when used in
     the term "foreign jurisdiction";

(k)  "local  jurisdiction"  means  the  jurisdiction  in  which  the  applicable
     securities regulatory authority is situate;

(l)  "individual" means a natural person, but does not include

     (i)  a partnership,  unincorporated association,  unincorporated syndicate,
          unincorporated organization or a trust, or

     (ii) a natural  person  in the  person's  capacity  as  trustee,  executor,
          administrator or other legal representative;

(m)  "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 part of the net assets,  including a separate fund or trust  account,
     of an issuer of the securities;

(n)  "non-redeemable investment fund" means an issuer,

     (i)  where contributions of security holders are pooled for investment,

     (ii) where  security  holders  do not  have  day-to-day  control  over  the
          management and investment decisions of an issuer,  whether or not they
          have the right to be consulted or to give directions, and

     (iii)whose  securities  do not  entitle the  security  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 part of the net assets of an issuer;

(o)  "person or company" includes

     (i)  for  the   purposes  of  Alberta   securities   law,  an   individual,
          corporation, partnership,  unincorporated or incorporated association,
          unincorporated  or  incorporated  syndicate,  unincorporated  or other
          incorporated organization,  trust, trustee, executor, administrator or
          other legal representative;

(p)  "regulator" means

     (i)  the Executive  Director,  as defined under section 1 of the Securities
          Act (Alberta);

     (ii) such  other  person  as is  referred  to  in  Appendix  D of  National
          Instrument 14-101 - Definitions;

(q) "related liabilities" means:

     (i)  liabilities  incurred  or assumed  for the  purpose of  financing  the
          acquisition or ownership of financial assets; or

     (ii) liabilities that are secured by financial assets;

                                        3
<PAGE>

                                  APPENDIX "A"
                                  to Exhibit 1

(r) "securities legislation" means

     (i)  for Alberta,  the  Securities  Act (Alberta) and the  regulations  and
          rules under such Act and the blanket  rulings and orders issued by the
          Alberta Securities Commission, and

     (ii) for other Canadian jurisdictions,  such other statutes and instruments
          as  are  listed  in  Appendix  B  of  National   Instrument  14-101  -
          Definitions;

(s) "securities regulatory authority" means

(i) the Alberta Securities Commission;

     (ii) in respect of any local  jurisdiction  other than  Alberta,  means the
          securities  commission  or  similar  regulatory  authority  listed  in
          Appendix C of National Instrument 14-101 - Definitions;

(t) "voting security" means any security which:

     (i) is not a debt security; and

     (ii) carries a voting right either  under all  circumstances  or under some
          circumstances that have occurred and are continuing;

(u)  An issuer is considered to be "controlled" by a person or company if:

     (i) for the purposes of Alberta securities law,

          a)   voting  securities  of the issuer  carrying  more than 50% of the
               votes that may be cast to elect  directors  are held,  other than
               for the purpose of giving  collateral for a bona fide debt, by or
               for the benefit of that person or company; and

          b)   the  votes  carried  by the  securities  referred  to in (a)  are
               sufficient,  if  exercised,  to elect a majority  of the board of
               directors of the issuer.

                                       4
<PAGE>

                                   EXHIBIT "2"

                              REPRESENTATION LETTER

                       (FOR ONTARIO ACCREDITED INVESTORS)

TO:               KODIAK ENERGY, INC. (the "Corporation")

     In connection with the purchase of Shares in the capital of the Corporation
(the "Shares") by the undersigned subscriber or, if applicable,  each beneficial
purchaser for whom the undersigned is acting (the  "Subscriber" for the purposes
of this Exhibit 2), the Subscriber hereby  represents,  warrants,  covenants and
certifies to the Corporation that:

1.   The Subscriber is resident in Ontario or is subject to the laws of the
Province of Ontario;

2.   The Subscriber is purchasing the Shares as principal for its own account;

3.   The Subscriber is an "accredited investor" within the meaning of Ontario
Securities Commission Rule 45-501 promulgated under the Securities Act (Ontario)
by virtue of satisfying  the  indicated  criterion as set out in Appendix "A" to
this Representation Letter; and

4.   Upon execution of this Exhibit 2 by the Subscriber, this Exhibit 2 shall be
incorporated into and form a part of the Subscription Agreement.

   Dated:  _______________________, 2005.

                     __________________________________________________________
                     Print name of Subscriber

                     By:  _____________________________________________________
                          Signature

                          _____________________________________________________
                          Print name of Signatory (if different from Subscriber)

                          _____________________________________________________
                          Title

     IMPORTANT: PLEASE INITIAL THE APPROPRIATE PARAGRAPH(S) ON APPENDIX "A"

<PAGE>

                                  APPENDIX "A"
                                  to Exhibit 2

     Accredited  Investor  -  (defined  in Ontario  Securities  Commission  Rule
45-501) means:

______    (a)  a bank listed in Schedule I or II of the Bank Act (Canada), or an
               authorized  foreign  bank listed in Schedule  III of the Bank Act
               (Canada);

______    (b)  the Business  Development  Bank  incorporated  under the Business
               Development Bank Act (Canada);

______    (c)  a loan corporation or trust corporation registered under the Loan
               and Trust  Corporations Act (Ontario) or under the Trust and Loan
               Companies Act (Canada),  or under  comparable  legislation in any
               other jurisdiction;

______    (d)  a co-operative credit society,  credit union central,  federation
               of caisses populaire,  credit union or league, or regional caisse
               populaire,   or  an  association  under  the  Cooperative  Credit
               Associations Act (Canada), in each case, located in Canada;

______    (e)  a company licensed to do business as an insurance  company in any
               jurisdiction;

______    (f)  a  subsidiary  entity of any  person or  company  referred  to in
               paragraph  (a), (b), (c), (d) or (e), where the person or company
               owns all of the voting shares of the subsidiary entity;

______    (g)  a person or company registered under the Securities Act (Ontario)
               or securities  legislation in another  jurisdiction as an adviser
               or dealer, other than a limited market dealer;

______    (h)  the  government  of Canada or of any  jurisdiction,  or any crown
               corporation,  instrumentality  or agency of a  Canadian  federal,
               provincial or territorial government;

______    (i)  any  Canadian   municipality   or  any  Canadian   provincial  or
               territorial capital city; ---------

______    (j)  any  national,   federal,  state,   provincial,   territorial  or
               municipal  government of or in any foreign  jurisdiction,  or any
               instrumentality or agency thereof;

______    (k)  a pension  fund that is  regulated  by either  the  Office of the
               Superintendent of Financial Institutions (Canada) or a provincial
               pension commission or similar regulatory authority;

______    (l)  a registered charity under the Income Tax Act (Canada);

______    (m)  an  individual  who  beneficially  owns,  or who together  with a
               spouse  beneficially  own,  financial  assets having an aggregate
               realizable  value  that,  before  taxes  but  net of any  related
               liabilities, exceeds CAD$1,000,000;

______    (n)  an individual whose net income before taxes exceeded  CAD$200,000
               in each of the two most recent  years or whose net income  before
               taxes combined with that of a spouse exceeded CAD$300,000 in each
               of  those  years  and  who,  in  either  case,  has a  reasonable
               expectation of exceeding the same net income level in the current
               year;

______    (o)  an  individual  who  has  been  granted  registration  under  the
               Securities  Act  (Ontario) or securities  legislation  in another
               jurisdiction as a representative  of a person or company referred
               to in paragraph (g), whether or not the individual's registration
               is still in effect;

______    (p)  a promoter of the issuer or an affiliated entity of a promoter of
               the issuer;

______    (q)  a spouse,  parent,  brother,  sister,  grandparent or child of an
               officer, director or promoter of the issuer;

<PAGE>

                                  APPENDIX "A"
                                  to Exhibit 2

______    (r)  a person or  company  that,  in  relation  to the  issuer,  is an
               affiliated  entity or a person or company  referred  to in clause
               (c) of the definition of  distribution  in subsection 1(1) of the
               Securities Act (Ontario) ("Control Person");

______    (s)  an issuer that is acquiring securities of its own issue;

______    (t)  a  company,   limited  liability  company,  limited  partnership,
               limited  liability  partnership,  trust or  estate,  other than a
               mutual  fund or  non-redeemable  investment  fund,  that  had net
               assets  of at  least  CAD$5,000,000  as  reflected  in  its  most
               recently prepared financial statements;

______    (u)  a person or company that is recognized by the Ontario  Securities
               Commission as an accredited investor;

______    (v)  a mutual fund or non-redeemable investment fund that, in Ontario,
               distributes  its securities only to persons or companies that are
               accredited investors;

______    (w)  a mutual fund or non-redeemable investment fund that, in Ontario,
               distributes its securities under a prospectus for which a receipt
               has been granted by the  Director  (as defined in the  Securities
               Act  (Ontario))  or,  if  it  has  ceased   distribution  of  its
               securities,  has  previously  distributed  its securities in this
               manner;

______    (x)  a fully managed account if it is acquiring a security that is not
               a security of a mutual fund or non-redeemable investment fund;

______    (y)  an  account  that  is  fully  managed  by  a  trust   corporation
               registered under the Loan and Trust Corporations Act (Ontario) or
               under  the  Trust  and  Loan  Companies  Act  (Canada),  or under
               comparable legislation in any other jurisdiction;

______    (z)  an entity organized outside of Canada that is analogous to any of
               the  entities  referred  to in  paragraphs  (a)  through  (g) and
               paragraph (k) in form and function; or

______    (aa) a person or  company  in  respect  of which all of the  owners of
               interests,  direct or indirect, legal or beneficial,  are persons
               or companies that are  "accredited  investors" (as defined in OSC
               Rule 45-501).

     NOTE:The  investor must initial beside the applicable  portion of the above
     definition.

     For the purposes hereof:

(a)  "company" means any  corporation,  incorporated  association,  incorporated
     syndicate or other incorporated organization;

(b)  "Control  Person" means any person,  company or  combination  of persons or
     companies  holding a sufficient  number of any  securities of the issuer to
     affect  materially the control of the issuer but any holding of any person,
     company or combination of persons or companies holding more than 20% of the
     outstanding  voting securities of the issuer, in the absence of evidence to
     the  contrary,  shall be deemed to affect  materially  the  control  of the
     issuer;

(c)  "director" where used in relation to a person,  includes a person acting in
     a capacity similar to that of a director of a company;

(d)  "entity" means a company, syndicate,  partnership,  trust or unincorporated
     organization;

(e)  "financial assets" means cash, securities,  or any contract of insurance or
     deposit or evidence  thereof that is not a security for the purposes of the
     Securities Act (Ontario);

                                       2
<PAGE>

                                  APPENDIX "A"
                                  to Exhibit 2

(f)  "fully managed account" means an investment  portfolio  account of a client
     established  in  writing  with a  portfolio  adviser  who makes  investment
     decisions for the account and has full discretion to trade in securities of
     the  account   without   requiring  the  client's   express  consent  to  a
     transaction;

(g)  "individual"  means a natural  person,  but does not include a partnership,
     unincorporated   association,   unincorporated  syndicate,   unincorporated
     organization, trust, or a natural person in his or her capacity as trustee,
     executor, administrator or other legal personal representative;

(h)  "mutual  fund" means an issuer  whose  primary  purpose is to invest  money
     provided by its security holders and whose securities entitle 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;

(i)  "non-redeemable investment fund" means an issuer:

     (i)  whose  primary  purpose is to invest  money  provided by its  security
          holders;

     (ii) that does not invest,

          (A)  for the purpose of exercising  or seeking to exercise  control of
               an  issuer,  other  than an  issuer  that is a  mutual  fund or a
               non-redeemable investment fund, or

          (B)  for the purpose of being  actively  involved in the management of
               any issuer in which it  invests,  other than an issuer  that is a
               mutual fund or a non-redeemable investment fund; and

     (iii) that is not a mutual fund;

(j)  "officer"  means the chair,  any vice-chair of the board of directors,  the
     president,  any vice president, the secretary, the assistant secretary, the
     treasurer,  the assistant treasurer,  and the general manager of a company,
     and any other  person  designated  an  officer  of a  company  by by-law or
     similar authority, or any individual acting in a similar capacity on behalf
     of an issuer;

(k)  "person"  means an  individual,  partnership,  unincorporated  association,
     unincorporated  syndicate,  unincorporated  organization,  trust,  trustee,
     executor, administrator, or other legal representative;

(l)  "portfolio adviser" means

     (i)  a portfolio manager; or

     (ii) a broker or investment dealer exempted from registration as an adviser
          under  subsection  148(1) of the Regulation  made under the Securities
          Act (Ontario) if that broker or  investment  dealer is not exempt from
          the  by-laws or  regulations  of the  Toronto  Stock  Exchange  or the
          Investment  Dealers'   Association  of  Canada  referred  to  in  that
          subsection;

(m)  "promoter"  means  (a)  a  person  or  company  who,  acting  alone  or  in
     conjunction  with one or more other  persons,  companies  or a  combination
     thereof,  directly or  indirectly,  has taken the  initiative  in founding,
     organizing or substantially reorganizing the business of the issuer, or (b)
     a person or company who, in  connection  with the  founding,  organizing or
     substantial  reorganizing  of the  business  of  the  issuer,  directly  or
     indirectly,  receives in  consideration  of services or  property,  or both
     services and property, 10% or more of any class of securities of the issuer
     or 10% or more of the proceeds  from the sale of any class of securities of
     a particular issue, but a person or company who receives such securities or
     proceeds   either  solely  as   underwriting   commissions   or  solely  in
     consideration of property shall not be deemed a promoter within the meaning
     of this  definition if such person or company does not otherwise  take part
     in founding, organizing or substantially reorganizing the business;

                                        3
<PAGE>

                                  APPENDIX "A"
                                  to Exhibit 2

(n)  "related liabilities" means liabilities incurred or assumed for the purpose
     of  financing  the  acquisition  or  ownership  of  financial   assets  and
     liabilities that are secured by financial assets; and

(o)  "spouse",  in relation to an individual,  means another  individual to whom
     that  individual is married,  or another  individual of the opposite sex or
     the same sex with whom that individual is living in a conjugal relationship
     outside marriage.

Affiliated Entities, Control and Subsidiaries

1.   A person or company is  considered  to be an  affiliated  entity of another
person or company  if one is a  subsidiary  entity of the other,  or if both are
subsidiary  entities  of the  same  person  or  company,  or if  each of them is
controlled by the same person or company.

2.   A person or company is  considered  to be controlled by a person or company
if

(a)  in the case of a person or company,

     (i)  voting  securities of the first mentioned  person or company  carrying
          more than 50% of the votes for the  election  of  directors  are held,
          otherwise  than by way of security only, by or for the benefit of, the
          other person or company, and

     (ii) the votes  carried by the  securities  are entitled,  if exercise,  to
          elect a majority of the  directors  of the  first-mentioned  person or
          company.

(b)  in the case of a  partnership  that does not have  directors,  other than a
     limited partnership, the second-mentioned person or company holds more than
     50% of the interests in the partnership; or

(c)  in  the  case  of  a  limited  partnership,  the  general  partner  is  the
     second-mentioned person or company.

3.   A person or  company is  considered  to be a  subsidiary  entity of another
person or company if

(a)  it is controlled by,

     (i)  that other, or

     (ii) that  other and one or more  persons  or  companies,  each of which is
          controlled by that other, or

     (iii)two or more persons or companies,  each of which is controlled by that
          other, or

(b)  it is a  subsidiary  entity  of a person  or  company  that is the  other's
     subsidiary entity.

                                        4Exhibit 10.2

 

REGISTRATION
RIGHTS AND TRANSFER RESTRICTION AGREEMENT

 

BY AND BETWEEN

 

LEVEL 3
COMMUNICATIONS, INC.

 

LEUCADIA NATIONAL
CORPORATION

 

AND

 

BALDWIN
ENTERPRISES, INC.

 

 

Dated as of December 23,
2005

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
  EFFECTIVENESS; DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Effectiveness

  	
  1

  
	
  1.2

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  REGISTRATION

  	
  6

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Shelf Registration

  	
  6

  
	
  2.2

  	
  Certain Underwritten
  Offerings Pursuant to the Shelf Registration

  	
  7

  
	
  2.3

  	
  Piggyback Underwritten
  Offerings

  	
  10

  
	
  2.4

  	
  Registration Procedures

  	
  12

  
	
  2.5

  	
  Standstill Agreement;
  Restrictions on Transfer

  	
  15

  
	
  2.6

  	
  Blackout Periods;
  Suspension of Dispositions

  	
  16

  
	
  2.7

  	
  Indemnification

  	
  18

  
	
  2.8

  	
  Assignment of
  Registration Rights

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  RULE 144

  	
  21

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Current Public Information

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  MISCELLANEOUS

  	
  22

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Notices

  	
  22

  
	
  4.2

  	
  Governing Law

  	
  22

  
	
  4.3

  	
  Submission to
  Jurisdiction

  	
  23

  
	
  4.4

  	
  Successors and Assigns

  	
  23

  
	
  4.5

  	
  Counterparts

  	
  23

  
	
  4.6

  	
  Severability

  	
  23

  
	
  4.7

  	
  Entire Agreement

  	
  23

  
	
  4.8

  	
  No Waivers; Amendments

  	
  23

  
	
  4.9

  	
  Specific Enforcement;
  Cumulative Remedies

  	
  24

  
	
  4.10

  	
  Time of the Essence

  	
  24

  
	
  4.11

  	
  Construction

  	
  24

  
	
  4.12

  	
  Information

  	
  24

  

 

i

 

REGISTRATION RIGHTS AND TRANSFER RESTRICTION AGREEMENT

 

This AGREEMENT (this “Agreement”), dated as of
December 23, 2005, is entered into by and among Level 3 Communications, Inc.,
a Delaware corporation (the “Company”), Leucadia National Corporation, a
New York corporation (“Leucadia”), and Baldwin Enterprises, Inc. (“Baldwin”),
a Colorado corporation and wholly owned subsidiary of Leucadia.

 

RECITALS

 

WHEREAS, the Company, Leucadia and Baldwin are parties
to an Acquisition Agreement, dated as of October 30, 2005 (the “Acquisition
Agreement”); and

 

WHEREAS, pursuant to the Acquisition Agreement, Baldwin
will receive shares of common stock, par value $0.01 per share of the Company.

 

NOW, THEREFORE, in consideration of the promises,
mutual covenants and agreements hereinafter contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

ARTICLE 1

EFFECTIVENESS; DEFINITIONS

 

1.1                                 Effectiveness.  This Agreement shall be effective as of the “Closing”
as defined in the Acquisition Agreement (hereinafter, the “Closing”).

 

1.2                                 Definitions.

 

“Acquisition Agreement” shall have the meaning
set forth in the Recitals hereto.

 

“Advice” shall have the meaning set forth in Section 2.6.2
hereof.

 

“Affiliate” means, with respect to any Person,
any Person who, directly or indirectly, controls, is controlled by or is under
common control with any Person; and the term “control” (including the terms “controlled
by” and “under common control with”) means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through ownership of voting securities, by
contract or otherwise.

 

“Agreement” shall have the meaning set forth in
the introductory paragraph hereof.

 

“Beneficially Ownership” or “Beneficially
Owning” shall have the meaning ascribed to such term under Rule 13d-3
of the Exchange Act.

 

 

“Blackout Period” shall have the meaning set
forth in Section 2.6.1 hereof.

 

“Block” means one (1) single trade at one (1) single
price with one (1) or more counterparties of at least five million
(5,000,000) shares of Registrable Securities.

 

“Board” means the Board of Directors of the
Company.

 

“Business Day” means any day other than a
Saturday, Sunday or other day on which commercial banks are authorized or
required to close under the laws of the United States or the State of New York.

 

“Common Stock” means the common stock, par
value $0.01 per share of the Company.

 

“Common Stock Equivalents” means, without
duplication with any other Common Stock or Common Stock Equivalents, any
rights, warrants, options, convertible securities or indebtedness, exchangeable
securities or indebtedness, or other rights, exercisable for or convertible or
exchangeable into, directly or indirectly, Common Stock and securities convertible
or exchangeable into Common Stock, whether at the time of issuance or upon the
passage of time or the occurrence of any future event.

 

“Company” shall have the meaning set forth in
the introductory paragraph hereof.

 

“Company Notice” shall have the meaning set
forth in Section 2.3.1 hereof.

 

“Delay Fee” means a daily charge per share of
Registrable Securities, calculated at the rate of 6% per year (based on a 365
day year) on the aggregate Market Value, as of the first date of any period for
which the Delay Fee is applied, multiplied by the number of Registrable
Securities that each Investor holds on the relevant date (subject to equitable
adjustment in the case of securities other than Common Stock).

 

“Damages” shall have the meaning set forth in Section 2.7.1
hereof.

 

“Effective Date” shall mean the date the
Registration Statement becomes effective under the Securities Act.

 

“Exchange Act” means the Securities Exchange
Act of 1934, as amended, or any similar federal statute, and the rules and
regulations promulgated by the SEC thereunder.

 

“Holder” shall mean Baldwin, Leucadia and any
subsidiary of Leucadia.

 

“Investor” means
the Holder and any transferee of the Registrable Securities thereof to whom the
Holder assigns its rights under this Agreement, in whole or in part, and who
agrees to become bound by the provisions of this Agreement in accordance with Section 2.8
hereof.

 

2

 

“Investor Affiliate”
or “Investor Affiliates” shall have the meaning set forth in Section 2.7.1
hereof.

 

“Investor Notice” shall have the meaning set
forth in Section 2.1.4 hereof.

 

“Market Value” means, as of any date, the
average per share closing price of the Common Stock on the NASDAQ National
Market over the 10-day trading period ending on the trading day immediately
prior to such date.

 

“Maximum Offering Size” shall have the meaning
set forth in Section 2.2.1 hereof.

 

“NASD” means the National Association of
Securities Dealers, Inc.

 

“Notifying Investor”
shall have the meaning set forth in Section 2.2.1.

 

“Person” or “person” means any
individual, corporation, partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.

 

“Piggyback Notice”
shall have the meaning set forth in Section 2.2.1 hereof.

 

“Receiving Investor”
shall have the meaning set forth in Section 2.2.1.

 

“register,” “registered” and “registration”
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement.

 

“Registrable Securities” means the shares of
Common Stock to be acquired by the Holder pursuant to the transactions
contemplated by the Acquisition Agreement and any shares of capital stock or
other securities issued or issuable from time to time with respect to the
Common Stock as a result of a reclassification, share combination, share subdivision,
stock split, share dividend, merger, consolidation or similar transaction or
event or otherwise as a distribution on or in exchange for or with respect to
the Common Stock until (a) a registration statement covering all such Registrable
Securities has been declared effective by the SEC and such Registrable
Securities have been disposed of pursuant to an effective registration
statement, or (b) such Registrable Securities are sold pursuant to Rule 144
(or any similar provision then in force).

 

“Registration Expenses” means any and all
expenses incident to the performance of or compliance with any registration or
marketing of securities, including all (i) registration and filing fees,
and all other fees and expenses payable in connection with the listing of
securities on any securities exchange or automated interdealer quotation
system, (ii) fees and expenses of compliance with any securities or “blue
sky” laws (including reasonable fees and disbursements of counsel in connection
with “blue

 

3

 

sky” qualifications of the securities registered), (iii) expenses
in connection with the preparation, printing, mailing and delivery of any
registration statements, prospectuses and other documents in connection therewith
and any amendments or supplements thereto, (iv) security engraving and
printing expenses, (v) internal expenses of the Company (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), (vi) fees and disbursements of
counsel for the Company and customary fees and expenses for independent
certified public accountants retained by the Company (including the expenses
relating to any comfort letters or costs associated with the delivery by
independent certified public accountants of any comfort letters), (vii) fees
and expenses of any special experts retained by the Company in connection with
such registration, (viii) reasonable fees and out-of-pocket expenses of
one counsel to the Investors in an aggregate amount not to exceed $35,000 in an
underwritten offering pursuant to Section 2.2, (ix) filing
fees and reasonable and customary attorneys’ fees in connection with filings
with the NASD in connection with any review by the NASD of the underwriting
arrangements for any underwritten offering pursuant to Section 2.2,
(x) costs of printing and producing any agreements among underwriters,
underwriting agreements, any “blue sky” or legal investment memoranda and any
selling agreements and other documents in connection with the offering, sale or
delivery of the Registrable Securities, (xi) transfer agents’ and registrars’
fees and expenses and the fees and expense of any other agent or trustee
appointed in connection with such offering, (xii) expenses of the Company
relating to any analyst or investor presentations or any “road shows”
undertaken in connection with an underwritten offering of the Registrable
Securities pursuant to Section 2.2  and (xiii) any other fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities by excluding any underwriters discounts and commissions attributable
to the sale of Registrable Securities (other than fees and expenses of any “qualified
independent underwriter”, including fees and expenses of counsel thereto, and
fees and expenses payable in connection with any ratings of the Registrable
Securities, including expenses relating to any presentations to rating
agencies).

 

“Resale Prospectus” shall have the meaning set
forth in Section 2.1.4 hereof.

 

“Rule 144” means Rule 144 under the
Securities Act as in effect on the date hereof and such rule as from time
to time amended and any successor rule or regulation under the Securities
Act.

 

“Rule 144A” means Rule 144A under the
Securities Act as in effect on the date hereof and such rule as from time
to time amended and any successor rule or regulation under the Securities
Act.

 

“Rule 145” means Rule 145 under the
Securities Act as in effect on the date hereof and such rule as from time to
time amended and any successor rule or regulation under the Securities
Act.

 

4

 

“Rule 415” means Rule 415 under the
Securities Act as in effect on the date hereof and such rule as from time
to time amended and nay successor rule or regulation under the Securities
Act.

 

“SEC” means the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.

 

“Securities Act” means the Securities Act of
1933, as amended, or any similar federal statute, and the rules and
regulations promulgated by the SEC thereunder.

 

“Shelf Registration Statement” shall have the
meaning provided in Section 2.1.1 hereof.

 

“Substitution Rights” shall have the meaning
provided in the Acquisition Agreement.

 

“Suspension Notice” shall have the meaning set
forth in Section 2.6.2 hereof.

 

“Suspension Period” shall have the meaning set
forth in Section 2.6.2 hereof.

 

“Takeover Proposal” means any bona fide offer
or proposal by a third party to acquire, directly or indirectly, more than 50%
of assets of the Company and its Subsidiaries, taken as a whole, or more than
50% of the Common Stock then outstanding pursuant to a merger, consolidation or
other business combination, sale of shares of capital stock or other equity
interests, sale of assets, tender offer, exchange offer or similar transaction.

 

“Transferee” shall have the meaning set forth
in Section 2.8 hereof.

 

“Transfer” shall mean to sell, contract to
sell, pledge, grant any option to purchase, acquire any option to sell,
hypothecate, loan, make a short sale or otherwise transfer or dispose of to any
Person, other than to a subsidiary of the Investor which subsidiary agrees in
writing to be bound by the terms of the Agreement.

 

“Transfer Date” shall have the meaning set
forth in Section 2.5.2 hereof.

 

“Transfer Period” shall have the meaning set
forth in Section 2.5.2 hereof.

 

“Underwriting Notice” shall have the meaning
set forth in Section 2.2.1 hereof.

 

5

 

ARTICLE 2

REGISTRATION

 

2.1                                 Shelf Registration.

 

2.1.1                        Shelf Registration
Statement.  The Company shall
promptly upon the consummation of the Closing file with the SEC a shelf
registration statement relating to the offer and sale by the Holder at any time
and from time to time on a delayed or continuous basis in accordance with Rule 415,
through such method or methods of distribution as the Holder shall select, and
in accordance with this Agreement, of all the Registrable Securities (the “Shelf
Registration Statement”); provided that the Shelf Registration
Statement shall be filed no later than the second Business Days after the
Closing or the date on which the Holder provides all information requested by
the Company with respect to the Shelf Registration Statement, so long as the
Company has requested such information from the Holder in a timely manner.  The Company shall use its best efforts to have
the Shelf Registration Statement declared effective as expeditiously as
possible, but no later than thirty (30) days from the date of filing.  The Company shall use its reasonable best
efforts to keep the Shelf Registration Statement effective under the Securities
Act until the second anniversary of the Closing (or for such longer period if
extended pursuant to Section 2.6.3 hereof).  In the event the Shelf Registration Statement
cannot be kept effective for such period, the Company shall, subject to Section 2.6
hereof, use its reasonable best efforts to prepare and file with the SEC and
have declared effective as promptly as practicable another registration
statement on the same terms and conditions as the initial Shelf Registration
Statement and such registration statement shall be considered the Shelf
Registration Statement for purposes hereof. 
The Company shall supplement and amend the Shelf Registration Statement
to reflect changes in the manner of distribution reasonably requested by the
Investors.

 

2.1.2                        Adjustment.  If at any time the outstanding shares of
Registrable Securities as a class shall have been increased, decreased, changed
into or exchanged for a different number or class of shares or securities as a
result of a reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, combination or exchange of shares or other
similar change in capitalization, then an appropriate and proportionate
adjustment shall be made to the number of shares of such stock for all purposes
under this Agreement.

 

2.1.3                        Expenses.  The Company shall be liable for and pay all Registration
Expenses in connection with any registration pursuant Section 2.1.1
hereof.

 

2.1.4                        Notice of Intended Use
of Prospectus.  If, at any time
after the Closing, any Investor intends to use or deliver the prospectus
forming a part of the Shelf Registration Statement (or any prospectus
supplement or amendment thereto) in connection with any offer or sale of
Registrable Securities covered thereby (“Resale Prospectus”), such
Investor shall first give written notice thereof to the Company at least two (2) Business
Days prior to the first date such prospectus or prospectus supplement will be
used or delivered by such Investor in connection with such offer or sale (the “Investor
Notice”).  Notwithstanding anything
to the contrary contained in this

 

6

 

Agreement,
in the event that an Investor provides the Company with the Investor Notice
that specifies that the Investor intends to use or deliver the Resale
Prospectus on a continuous basis for a period of time specified in such Investor
Notice, then the Investor Notice shall be deemed to have been provided each day
during the continuous period of time specified in the Investor Notice.

 

2.1.5                        Eligibility on Form S-3.  The Company represents and warrants that it
meets the requirements for the use of Form S-3 for registration of the
sale by the Investors of the Registrable Securities and covenants that on and
after the filing of the Registration Statement pursuant to Section 2.1.1
hereof it will meet the requirements for the use of Form S-3, and the
Company has filed all reports required to be filed by the Company with the SEC
in a timely manner and covenants that it will continue to do so to obtain and
maintain such eligibility for the use of Form S-3.  In the event that Form S-3 is not
available for sale by the Investors of the Registrable Securities, then (i) the
Company shall register the sale of the Registrable Securities on another
appropriate form as soon as practicable and (ii) the Company shall
undertake to register the Registrable Securities on Form S-3 as soon as
such form is available, provided that the Company shall maintain the
effectiveness of the Registration Statement then in effect until such time as a
Registration Statement on Form S-3 covering the Registrable Securities has
been declared effective by the SEC.

 

2.1.6        Most
Favored Nation Clause. 
Notwithstanding anything to the contrary in this Agreement until the
earlier to occur of (A) the second anniversary of the date hereof and (B) the
date on which no Investor holds Registrable Securities, the Company hereby
covenants that the terms and conditions applicable to the length and frequency
of Blackout Periods shall be at least as favorable as those offered by the
Company to any other Person, and this Agreement shall be automatically amended,
without any affirmative action taken by the parties hereto, as may be necessary
to effect such covenant.

 

2.2                                 Certain Underwritten
Offerings Pursuant to the Shelf Registration.

 

2.2.1                        Underwriting Notice.  In the event that any Investor holding thirty
percent (30%) or more of the Registrable Securities then outstanding (and with
respect to the Holder, as otherwise permitted by the last sentence of this Section 2.2.1)
shall seek to undertake an underwritten offering of any Registrable Securities
(including, without limitation, in connection with any security issued by the
Holder that is convertible into or exchangeable for any Registrable Security)
pursuant to the Shelf Registration Statement, such Investors shall first give
written notice thereof to the Company (the “Underwriting Notice” and
each such party giving notice, a “Notifying Investor”) to the other
Investors (the “Receiving Investors”) at least ten (10) Business
Days prior to the anticipated initiation of such underwritten offering,
specifying the number of Registrable Securities sought to be offered.  The Company shall advise the Notifying
Investor and the Receiving Investors and each Receiving Investor shall advise
the Notifying Investor and the Company in writing within five (5) Business
Days after receipt of such Underwriting Notice (or if the Notifying Investors
intend to execute the underwriting agreement with respect to such underwritten
offering prior to such date, the Notifying Investors shall so

 

7

 

notify
the Company and the Receiving Investors in the Underwriting Notice, and each
Receiving Investor shall advise the Notifying Investor and the Company in
writing on or before the date on which the underwriting agreement is executed
but no less than five (5) Business Days after receipt of such Underwriting
Notice), specifying the number, if any, of shares of Registrable Securities
that such Receiving Investors, as applicable, seek to include in such underwritten
offering (each a “Piggyback Notice”), and subject to the next sentence,
such shares of Registrable Securities shall be included in such underwritten
offering.  If the managing underwriter of
the underwritten offering pursuant to which Registrable Securities are included
pursuant to this Section 2.2 shall advise the Company and the
Investors in writing that, in its view, the number of securities requested to
be included in such underwritten offering exceeds the largest number of
securities which can be sold in such offering without adversely affecting the
offering, including with respect to the price at which such shares can be sold
(the “Maximum Offering Size”), the Company and the Investors will
include in such underwritten offering, to the extent of the number which the
Investors are so advised can be sold in such offering, a pro  rata
amount, based upon the number of Registrable Securities sought to be offered by
each Investor as set forth in the Underwriting Notice and the Piggyback
Notice.  Notwithstanding anything
contained herein to the contrary, and whether or not the Holder owns 30% (thirty
percent) or more of the Registrable Securities outstanding at such time, the
Holder shall be entitled to be the sole Notifying Investor for at least one of
three underwritten offerings permitted herein, so long as the Underwriting
Notice given by the Holder covers not less than the minimum amount specified in
Section 2.2.4(C) hereof.

 

2.2.2        Expenses.  The Company shall be liable for and pay all
Registration Expenses in connection with any underwritten offering pursuant to Section
2.2.1 hereof; provided, however, that in any underwritten
offering pursuant to this Section 2.2 the Investors shall pay any
underwriting commissions and discounts incurred pursuant to and in connection
with any underwritten offering by the Investors and the other fees and expenses
in excess of the thresholds set forth in the definition of “Registration
Expenses.”

 

2.2.3                        No Piggyback Rights.  For the avoidance of doubt, only an Investor
is permitted to provide a Piggyback Notice and seek to include shares of Common
Stock or Registrable Securities of the Company in an underwritten offering made
pursuant to this Section 2.2.

 

2.2.4                        Procedures.  Subject to Section 2.6 hereof,
the Company shall (i) make reasonably available for inspection by the Investors,
any underwriter participating in any disposition pursuant to the Shelf
Registration Statement and any attorney, accountant or other agent retained by
the Investors or any such underwriter, all relevant financial and other
records, pertinent corporate documents and properties of the Company, (ii) cause
the Company’s officers, directors, employees, and use its reasonable best
efforts to cause the Company’s accountants and auditors, to supply all relevant
information reasonably requested by the Investors or any such underwriter,
attorney, accountant or agent in connection with the underwritten offering, (iii) as
may be reasonably requested, cause the Company’s officers and employees to
participate in investor presentations to prospective investors and analysts,
including via “road shows,”

 

8

 

and (iv) generally
accommodate any participating underwriter’s reasonable requests relating to its
due diligence efforts; provided, however, that the Investors
shall only be entitled to effect up to a total of three (3) underwritten
offerings of Registrable Securities pursuant to the Shelf Registration
Statement; provided, further, however, that no such
offering pursuant to Section 2.2.1 hereof shall be made by the
Holder:

 

(A)                              on
more than one occasion during any period of sixty (60) consecutive days after
any other such offering of Registrable Securities in accordance with this Section 2.2
was consummated;

 

(B)                                within
sixty (60) days of the consummation of an offering of Registrable Securities in
which the Investors were offered the opportunity to participate pursuant to Section 2.3
hereof, provided that all the Registrable Securities requested by the Investors
to be so registered were registered for sale in such offering; and

 

(C)                                unless
the Investors will offer for sale at least thirty million (30,000,000) shares
of Common Stock or the equivalent number of shares of Registrable Securities or,
with respect to the third underwritten offering,  at least forty million (40,000,000) shares of
Common Stock or the equivalent number of shares of Registrable Securities.

 

2.2.5                        Effective Registration
Statement.  For purposes of
determining an Investor’s right to sell Registrable Securities pursuant to the
Shelf Registration Statement in an underwritten offering referred to in Section 2.2.1
hereof, an offering of such nature shall not be deemed to have been effected
unless (A) a registration statement with respect thereto has become
effective and remained in effect for the relevant period set forth in Section 2.4.1(b) hereof
(provided, however, that a registration which does not become
effective solely by reason of the refusal of all of the Investors to proceed
with the offering or the refusal by the Company to proceed based upon the
written opinion of outside counsel to the lead underwriter delivered to and
reasonably acceptable to the Company to the effect that proceeding is
inappropriate as a legal matter for a reason relating to circumstances of all
of the Investors shall be deemed to have been effected), (B) after it has
become effective, such registration has not become subject to any stop order,
injunction or other order or requirement of the SEC or other governmental agency
or court for any reason, other than solely by reason of some act or omission by
the Investors with respect thereto, or such stop order, injunction or other
order has been lifted so as to permit such offering and sale of Registrable
Securities, and (C) the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are satisfied or any failure to satisfy such conditions was solely
by reason of some act or omission by the Investors.

 

2.2.6                        Underwriting
Agreements.  If requested by
the underwriters for any underwritten offering by the Investors to be conducted
pursuant to Section 2.2.1

 

9

 

hereof,
the Company will enter into an underwriting agreement with such underwriters
for such offering, such agreement to be in customary form for offerings of this
type and acceptable to the Investors (it being agreed that the Company’s prior
underwriting agreements to the extent applicable for offerings of this type
will be considered in determining what is customary), whose acceptance shall
not be unreasonably withheld, to contain such representations and warranties by
the Company and such other terms as are generally prevailing in agreements of
this type, including, without limitation, representations and indemnities by
the Company and other customary indemnifications.  The Investors will cooperate with the Company
in the negotiation of the underwriting agreement and will give consideration to
the reasonable suggestions of the Company regarding the form thereof.

 

2.2.7                        Holdback Agreement.  Unless the managing underwriter otherwise
agrees, each of the Company and the Investors agree (and the Company agrees, in
connection with any underwritten registration, to use its commercially
reasonable efforts to cause its Affiliates to agree) not to effect any public
sale or private offer or distribution of any Common Stock or Common Stock
Equivalents during such time period after the pricing of any underwritten offering
pursuant to this Section 2.2 as may reasonably be requested by the
managing underwriter (such period of time not to exceed ninety (90) days); provided,
however, that the foregoing restriction shall not apply to (i) if
applicable, any offering made as part of such underwritten registration, (ii) up
to $100 million of 3(a)(9) offerings and (iii) other exceptions
customary for offerings of this type (it being agreed that the Company’s prior
underwriting agreements to the extent applicable for offerings of this type
will be considered in determining what is customary).

 

2.2.8                        Selection of
Underwriters.  In an underwritten
offering of Registrable Securities effected pursuant to this Section 2.2,
the Notifying Investors shall select the investment banking firm or firms to
manage the underwritten offering; provided, however, that such
selection shall be subject to the consent of the Company; provided, further,
that the Company agrees that any selection of Jefferies & Company, Inc.
shall be acceptable.

 

2.2.9                        Participation in
Underwritten Offerings.  Neither an
Investor nor any other Person may participate in any underwritten offering in
which Registrable Securities are to be offered pursuant to this Section 2.2
unless such Person (i) agrees to sell such Person’s securities on the
basis provided in any underwriting arrangements approved, subject to the terms
and conditions hereof, by the Company and the Investors to be included in such
underwritten offering and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers of
attorney) reasonably required under the terms of such underwriting
arrangements.

 

2.3                                 Piggyback Underwritten
Offerings.

 

2.3.1                        Right to Piggyback.  In the event that the Company shall seek to
undertake an underwritten public offering of registered shares of Common Stock
for cash (whether for the account of the Company or the account of any
securityholder of the

 

10

 

Company),
except in the case of an offering registered on Form S-4 or S-8 (or any
successor form) for the registration of securities to be offered in a
transaction of the type referred to in Rule 145 or to be offered to
employees of and/or consultants to the Company or subsidiaries thereof, the
Company shall first give written notice thereof (the “Company Notice”)
to each Investor, which Company Notice shall be given not less than ten (10) Business
Days prior to the anticipated initiation of such underwritten offering and
shall offer the Investors the opportunity to include any or all of its
Registrable Securities in such underwritten offering, subject to the
limitations contained in Section 2.3.3 hereof, unless the managing
underwriter for such underwritten public offering has advised the Company that
the shares to be offered by the Company in such offering constitute the Maximum
Offering Size, in which case, the Company shall give the Investors written
notice to this effect prior to the initiation of such offering in lieu of the
Company Notice and each Investor shall not have the right to include its
Registrable Securities in such offering.

 

2.3.2                        Notice of
Participation in Piggyback Offerings. 
Each Investor shall advise the Company in writing within five (5) Business
Days after the date of receipt of the Company Notice, specifying the number of
Registrable Securities, if any, the Investor seeks to include in such
underwritten offering.  The Company shall
thereupon include in such underwritten offering the number of Registrable Securities
so requested by such Investor to be included, subject to Section 2.3.3
hereof, and shall use reasonable best efforts to effect registration of such
Registrable Securities under the Securities Act; provided, however,
that the Company may at any time withdraw or cease proceeding with any such
underwritten offering of such Investor’s Registrable Securities if it shall at
the same time withdraw or cease proceeding with the underwritten offering of
all other shares of Common Stock originally proposed to be registered.

 

2.3.3                        Priority on Piggyback
Offerings.  If the managing
underwriter of the underwritten offering pursuant to which Registrable
Securities are included pursuant to this Section 2.3 shall advise
the Company and the Investors in writing that, in its view, the number of
securities requested to be included in such underwritten offering (including
securities to be sold by the Company or by other Persons not holding
Registrable Securities) exceeds the Maximum Offering Size, the Company will
include in such underwritten offering, to the extent of the number which the
Company is so advised can be sold in such underwritten offering, (i) first,
securities of the Company that the Company proposes to sell, (ii) second,
Registrable Securities held by the Investors, and (iii) third, securities
of the Company held by other Persons having registration rights proposed to be
included in such registration statement, allocated, if necessary, on a pro
rata basis in accordance with the number of shares proposed to be
included in such registration by such Investors and/or such other Persons, as
applicable.

 

2.3.4                        Expenses.  The Company shall be liable for and pay all
of Registration Expenses in connection with any underwritten offering in which
the Investors have the opportunity to participate pursuant to this Section 2.3;
provided, however, that in any underwritten offering pursuant to
this Section 2.3 the Investors shall pay any underwriting
commissions and discounts incurred pursuant to and in connection

 

11

 

with any
underwritten offering by such Investor and the other fees and expenses in
excess of the thresholds set forth in the definition of “Registration Expenses.”

 

2.3.5                        Limitation on
Subsequent Registration Rights. 
The Company acknowledges and agrees that the Company will not grant to any
other Person or allow the exercise by any other Person rights to piggyback or
participate in registered underwritten offerings of shares of Common Stock for
cash in priority to the rights granted to the Investors in this Section 2.3
or that would impair the rights of the Investors under this Agreement
(including with respect to the timing of any underwritten offering initiated by
the Investors pursuant hereto).

 

2.4                                 Registration
Procedures.

 

2.4.1                        Actions to be taken by
the Company.  If and when the
Company is required to use its reasonable best efforts to effect the
registration of any Registrable Securities under the Securities Act as provided
herein, the Company shall, as expeditiously as possible, but subject to the
provisions of Section 2.6 hereof:

 

(a)                                  prepare and file with
the SEC a registration statement on any appropriate form under the Securities
Act with respect to such Registrable Securities and thereafter use its reasonable
best efforts to cause such registration statement to become effective as
promptly as practicable under the circumstances and to remain effective for the
period set forth in subparagraph (b) below;

 

(b)                                 prepare and file with
the SEC such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement until the earlier of such time as all of such
securities have been disposed of in accordance with the intended methods of
distribution thereof or, in the case of the Shelf Registration Statement, the
expiration of the period set forth in Section 2.1 hereof;

 

(c)                                  furnish to each seller
of Registrable Securities and the underwriters of the securities being
registered such number of copies of such registration statement, each amendment
and supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus), any documents incorporated by
reference therein and such other documents as such seller or underwriters may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such seller or the sale of such securities by such
underwriters (it being understood that, subject to Section 2.6
hereof and the requirements of the Securities Act and applicable state
securities laws, the Company consents to the use of the prospectus and any
amendment or supplement thereto by each seller and the underwriters in
connection with the offering

 

12

 

and sale of the Registrable Securities covered by the registration
statement of which such prospectus, amendment or supplement is a part);

 

(d)                                 use its reasonable
best efforts to register or qualify such Registrable Securities under such
other securities or blue sky laws of such jurisdictions as the managing underwriter
reasonably requests (or, in the event the registration statement does not
relate to an underwritten offering, as the holders of a majority of such
Registrable Securities may reasonably request); use its reasonable best efforts
to keep each such registration or qualification (or exemption therefrom)
effective during the period in which such registration statement is required to
be kept effective and take any other action which may be reasonably necessary
or advisable to enable the Investor and such underwriter to consummate the
disposition in such jurisdictions of the securities owned by the Investor; and
do any and all other acts and things which may be reasonably necessary or
advisable to enable the Investor to consummate the disposition of the Registrable
Securities owned by the Investor in such jurisdictions (provided, however,
that the Company will not be required to (A) qualify generally to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph or (B) consent to general service of
process in any such jurisdiction);

 

(e)                                  promptly notify each
seller and each underwriter and (if requested by any such Person) confirm such
notice in writing (i) when the registration statement, a prospectus or any
prospectus supplement or post-effective amendment has been filed and, with
respect to a registration statement or any post-effective amendment, when the
same has become effective, (ii) of the issuance by any state securities or
other regulatory authority of any order suspending the qualification or
exemption from qualification of any of the Registrable Securities under state
securities or “blue sky” laws or the initiation of any proceedings for that
purpose and (iii) of the happening of any event which makes any statement
made in a registration statement or related prospectus untrue or which requires
the making of any changes in such registration statement, prospectus or
documents so that in either event they will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and, as
promptly as practicable thereafter, prepare and file with the SEC and furnish a
supplement or amendment to such prospectus so that, as thereafter deliverable
to the purchasers of such Registrable Securities, such prospectus will not
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;

 

(f)                                    if requested by the
managing underwriter or any seller promptly incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriter or any seller

 

13

 

reasonably requests to be included therein, including,
without limitation, with respect to the Registrable Securities being sold by such
seller, the purchase price being paid therefor by the underwriters and with
respect to any other terms of the underwritten offering of the Registrable
Securities to be sold in such offering, and promptly make all required filings
of such prospectus supplement or post-effective amendment;

 

(g)                                 as promptly as
practicable after filing with the SEC of any document which is incorporated by
reference into a registration statement (in the form in which it was
incorporated), make a copy of each such document available to each seller or,
at such seller’s request, deliver a copy of each such document to such seller;

 

(h)                                 cooperate with the sellers
and the managing underwriter to facilitate the timely preparation and delivery
of certificates (which shall not bear any restrictive legends unless required
under applicable law) representing securities sold under any registration
statement, and enable such securities to be in such denominations and
registered in such names as the managing underwriter or such sellers may
request and keep available and make available to the Company’s transfer agent prior
to the effectiveness of such registration statement a supply of such
certificates;

 

(i)                                     furnish to each seller
and underwriter a signed counterpart of (A) an opinion or opinions of
counsel to the Company, and (B) a comfort letter or comfort letters from
the Company’s independent public accountants, each in customary form and
covering such matters of the type customarily covered by opinions or comfort
letters, as the case may be, as the sellers or managing underwriter reasonably
requests;

 

(j)                                     cause the Registrable
Securities included in any registration statement to be listed on each
securities exchange, if any, on which similar securities issued by the Company
are then listed;

 

(k)                                  provide a transfer
agent and registrar for all Registrable Securities registered hereunder and
provide a CUSIP number for the Registrable Securities included in any
registration statement not later than the effective date of such registration
statement;

 

(l)                                     cooperate with each seller
and each underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings required
to be made with the NASD;

 

(m)                               during the period, if
any, when the prospectus is required to be delivered under the Securities Act,
promptly file all documents required to be filed with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act;

 

14

 

(n)                                 notify each of the
sellers promptly of any request by the SEC for the amending or supplementing of
such registration statement or prospectus or for additional information;

 

(o)                                 prepare and file with
the SEC promptly any amendments or supplements to such registration statement
or prospectus which, in the opinion of counsel for the Company or the managing
underwriter, is required in connection with the distribution of the Registrable
Securities;

 

(p)                                 enter into such
agreements (including underwriting agreements in the managing underwriter’s
customary form) as are customary in connection with an underwritten
registration; and

 

(q)                                 advise each seller,
promptly after it shall receive notice or obtain knowledge thereof, of the
issuance of any stop order by the SEC suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding for
such purpose and promptly use its reasonable best efforts to prevent the
issuance of any stop order or to obtain its withdrawal at the earliest possible
moment if such stop order should be issued.

 

2.4.2                        Information to be
Provided by the Investors.  The Investors
shall furnish the Company such information regarding such Investor and the
distribution of such securities as the Company may from time to time reasonably
request in writing and as shall be required in connection with the Company’s
performance of its obligations hereunder.

 

2.5                                 Standstill Agreement;
Restrictions on Transfer.

 

2.5.1                        Standstill.  Notwithstanding anything to the contrary
contained in this Agreement, neither the Holder nor any of its Affiliates shall
(i) until June 22, 2006, increase its Beneficial Ownership of the
Common Stock and (ii) thereafter until the third anniversary of the date
hereof, increase its Beneficial Ownership above 15% (fifteen percent) of the
Company’s total outstanding Common Stock without the prior written consent of
the Board, provided, however, that the foregoing limitation set
forth in clause (ii) shall terminate and be of no further force and effect
from and after the time, if ever, that, the Holder’s and any of its Affiliates
Beneficial Ownership of the Common Stock falls below 5% (five percent) of the
Company’s total outstanding Common Stock.

 

2.5.2                        Prohibitions during
Transfer Period.  Prior to the
Effective Date, neither the Holder nor its Affiliates shall Transfer any shares
of Common Stock.  Other than as set forth
below, until the first to occur of (A) 150 days following the Effective
Date and (B) June 22, 2006 (the “Transfer Period”), the Holder
and its Affiliates shall not Transfer in the aggregate on any given day (a “Transfer
Date”) such number of shares of Common Stock that exceeds (i) the
product of (x) three million (3,000,000) shares of Common Stock and (y)
the number of trading days in the period from and including the Closing Date to
and including the Transfer Date less (ii) the aggregate number of shares

 

15

 

of
Common Stock Transferred by the Holder and its Affiliates in accordance with
this Section 2.5.2 during the period from and including the Closing
Date to, but excluding, the Transfer Date; provided, however, that
in no event shall the Holder and its Affiliates be permitted to Transfer,
whether directly or indirectly, more than six million (6,000,000) shares of
Common Stock on such Transfer Date, and provided, further, that in
determining the maximum number of shares of Common Stock that may be sold in
any one day as provided above, any Transfers permitted by the succeeding
sentence shall not be included in such calculation.  Notwithstanding anything herein to the
contrary, the transfer restriction set forth in this Section 2.5.2
shall not apply to:  (1) any
Transfer of shares of Common Stock by the Holder or its Affiliate to any of the
Persons listed on Annex A hereto; (2) any Transfer of shares of Common
Stock after a Takeover Proposal has been made, provided that such
Takeover Proposal is approved by (A) a majority of the members of the
Board or (B) the holders of more than majority of the shares of Common
Stock issued and outstanding as of the date such Takeover Proposal is made; (3) underwritten
offerings permitted by Section 2.2 or Section 2.3
hereof; (4) sales negotiated between the Holder and a buyer in which such
buyer represents to the Holder that either (A) the buyer’s acquisition of Common
Stock will not result in the buyer Beneficially Owning (based upon the number
of shares of Common Stock reported as being outstanding in the Company’s most
recently filed report with the SEC) 5% or more of Common Stock outstanding
after giving effect to the consummation of such sale or (B) such buyer already
Beneficially Owns 5% or more of the Common Stock and, upon consummation of the
proposed sale, will continue to Beneficially Own more than 5% of the Common
Stock (in each case based upon the number of shares of Common Stock reported as
being outstanding in the Company’s most recently filed report with the SEC); (5) any
Block transaction; and (6) any dividend or other pro rata distribution of
the Common Stock made to record shareholders of Leucadia.

 

The Holder (and any subsequent transferee who agrees
to be bound by the terms of this Section 2.5.2) agrees that within
15 Business Days after the consummation of any Transfer referred to in (1) or
(4) above, the Holder (or any subsequent transferee who agrees to be bound
by this Section 2.5.2) shall deliver documentation to the Company
that identifies the buyer, the number of shares of Common Stock transferred and
the date of such Transfer.

 

2.6                                 Blackout Periods;
Suspension of Dispositions.

 

2.6.1                        Blackout Periods.  Notwithstanding anything to the contrary
contained herein (other than as set forth in Section 2.1 hereof),
for a period not to exceed twenty (20) consecutive calendar days and not to
exceed sixty (60) calendar days in any twelve-month period (each a “Black
Out Period”), provided that there must be an interim period of at least
sixty (60) consecutive days between the end of one Black Out Period and the
beginning of another Black Out Period, the Company will not be required to file
any registration statement pursuant to this Agreement, file any amendment
thereto, furnish any supplement to a prospectus included in a registration
statement pursuant to Section 2.4.1(e)(iii) hereof, make any
other filing with the SEC required pursuant to this Agreement, cause any
registration statement or other filing with the SEC to become effective, or
take any similar action, and any and all sales of Registrable Securities by the

 

16

 

Investors
pursuant to an effective registration statement shall be suspended:  (i) if an event has occurred and is
continuing as a result of which any such registration statement or prospectus
would, in the Company’s reasonable judgment based on advice of outside counsel
to the Company, contain 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, (ii) if the Company notifies the Investors that
such actions would, in the good faith judgment of outside counsel to the
Company, require the disclosure of material non-public information which the
Company has a bona fide business purpose for preserving as confidential and
which the Company would not otherwise be required to disclose or (iii) if
the Company notifies the Investors that, in the Company’s good faith judgment
(after consultation with the Company’s proposed managing underwriter, initial
purchaser or outside financial advisor), it is necessary to suspend sales of
Registrable Securities by the Investors, to facilitate a pending or proposed
public or Rule 144A offering by the Company or Common Stock or Common
Stock Equivalents, provided, however, that the Company (X) shall not be
able to exercise any rights under this clause (iii) during the first three
(3) months following the date hereof, and (Y) shall only be able to use
its blocking rights under this clause (iii) for a period not to exceed 15
consecutive days and not more than two times in any twelve month period.  Upon the termination of the condition
described in clauses (i), (ii)  or (iii) of above, the Company shall
promptly give written notice to the Investors and shall promptly file any
registration statement or amendment thereto required to be filed by it pursuant
to this Agreement, furnish any prospectus supplement or amendment required to
be furnished pursuant to Section 2.4.1(e)(iii) hereof, make
any other filing with the SEC required of it or terminate any suspension of
sales it has put into effect and shall take such other actions to permit registered
sales of Registrable Securities as contemplated by this Agreement.  If the Company does not take the foregoing
action as required to permit the Investors to sell the Registrable Securities
upon the end of the permitted relevant Black Out Period, the Company shall pay
to the Investors the Delay Fee for the number of days that the Investors are
unable to sell Registrable Securities.

 

2.6.2                        Suspension of
Dispositions.  Each Investor
agrees by acquisition of any Registrable Securities that, upon receipt of any
notice (a “Suspension Notice”) from the Company of the happening of any
event of the kind described in Section 2.4.1(e)(iii) hereof
such Investor will forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
(the “Suspension Period”) until such Investor’s receipt of the copies of
the supplemented or amended prospectus, or until it is advised in writing (the “Advice”)
by the Company that the use of the prospectus may be resumed, and has received
copies of any additional or supplemental filings which are incorporated by
reference in the prospectus, and, if so directed by the Company, such Investor
will deliver to the Company all copies, other than permanent file copies then
in such Investor’s possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.  The Company shall use its reasonable best
efforts and take such actions as are reasonably necessary to render the Advice
as promptly as practicable.

 

2.6.3                        Extensions.  For the purposes of Sections 2.1.1, 2.1.6,
2.3.1 and 4.1 hereof, the occurrence of any Blackout Period or
Suspension Period pursuant to this

 

17

 

Section 2.6 shall cause the
second anniversary of the date hereof to be deemed extended by the number of
days equivalent to the duration of any periods during which the Holder may not
sell Registrable Securities pursuant to a registration statement required
hereunder.

 

2.7                                 Indemnification.

 

2.7.1                        Indemnification by the
Company.  The Company agrees to
indemnify and reimburse, to the fullest extent permitted by law, each
underwriter of Registrable Securities, each Investor and each of such Investor’s
directors, officers, employees and agents and each other Person who controls
the Investor Holder (within the meaning of the Securities Act or the Exchange
Act) (each an “Investor Affiliate” and collectively, the “Investor
Affiliates”) (i) against any and all losses, claims, damages,
liabilities, and expenses, joint or several (including, without limitation,
reasonable attorneys’ fees and disbursements except as limited by Section 2.7.3
hereof) (“Damages”) based upon, arising out of, related to or resulting
from any untrue or alleged untrue statement of a material fact contained in any
registration statement, prospectus, or preliminary prospectus relating to the
Registrable Securities any amendment thereof or supplement thereto, or any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which they were made not misleading, (ii) against any and all loss,
liability, claim, damage, and expense whatsoever, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation or investigation or
proceeding by any governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon, arising out of, related to or resulting from
any such untrue statement or omission or alleged untrue statement or omission
and (iii) against any and all costs and expenses (including reasonable
fees and disbursements of counsel) as may be reasonably incurred in
investigating, preparing, or defending against any litigation, or investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever based upon, arising out of, related to or resulting from
any such untrue statement or omission or alleged untrue statement or omission,
or such violation of the Securities Act or Exchange Act, to the extent that any
such expense or cost is not paid under subparagraph (i) or (ii) above;
provided, however, that the Company shall not be liable in any
such case to the extent that such statements are made in reliance upon and in
strict conformity with information furnished in writing to the Company by an
Investor or any Investor Affiliate for use therein or arise from an Investor’s
or any Investor Affiliate’s failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished an Investor or any Investor Affiliate with a sufficient
number of copies of the same.  The
reimbursements required by this Section 2.7.1 will be made by
periodic payments during the course of the investigation or defense, as and
when bills are received or expenses incurred.

 

2.7.2                        Indemnification by the
Investor.  In connection with
any registration statement in which an Investor is participating, each such
Investor will, to the fullest extent permitted by law will indemnify the
Company and its directors and officers and each Person who controls the Company
(within the meaning of the Securities Act or the Exchange Act) against any and
all Damages resulting from any untrue statement or

 

18

 

alleged
untrue statement of a material fact contained in the registration statement,
prospectus, or any preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading, but only to the extent
that such untrue statement or alleged untrue statement or omission or alleged
omission is contained in any information or affidavit so furnished in writing
by such Investor or any Investor Affiliate specifically for inclusion in the
registration statement; provided, however, that the obligation to
indemnify will be several, not joint and several, among such Investors of
Registrable Securities, and the liability of each such Investor of Registrable
Securities will be in proportion to, and provided, further, that such
liability will be limited to, the net amount received by such seller from the
sale of Registrable Securities pursuant to such registration statement; provided,
that such Investor shall not be liable in any such case to the extent that
prior to the filing of any such registration statement or prospectus or
amendment thereof or supplement thereto, such Investor has furnished in writing
to the Company information expressly for use in such registration statement or
prospectus or any amendment thereof or supplement thereto which corrected or
made not misleading information previously furnished to the Company.

 

2.7.3                        Notice of Claims, etc.  Any Person entitled to indemnification
hereunder will (A) give prompt written notice to the indemnifying party of
any claim with respect to which it seeks indemnification (provided that the
failure to give such notice shall not limit the rights of such Person except to
the extent that the indemnifying party is actually prejudiced by such failure
to give notice) and (B) unless in such indemnified party’s reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with a single counsel reasonably satisfactory
to the indemnified party; provided, however, 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 (X) the
indemnifying party has agreed to pay such fees or expenses, or (Y) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person.  In the event the indemnified party reasonably
believes such a conflict of interest exists, the indemnifying party shall
indemnify the indemnified party for all reasonable costs and expenses of one
separate counsel for the indemnified party in accordance with Sections 2.7.1
or 2.7.2 hereof) above, as applicable. 
If such defense is not assumed by the indemnifying party as permitted
hereunder, the indemnifying party will not be subject to any liability for any
settlement made by the indemnified party without its consent (but such consent
will not be unreasonably withheld).  If
such defense is assumed by the indemnifying party pursuant to the provisions
hereof, such indemnifying party shall not settle or otherwise compromise the
applicable claim unless (1) such settlement or compromise contains a full
and unconditional release of the indemnified party and the settlement or
compromise does not require any admission of wrongdoing on the part of the
indemnified party or (2) the indemnified party otherwise consents in
writing.  An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such

 

19

 

indemnifying
party with respect to such claim, unless in the reasonable judgment of any
indemnified party, a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim, in
which event the indemnifying party shall be obligated to pay the reasonable
fees and disbursements of such additional counsel or counsels.

 

2.7.4                        Contribution.  Each party hereto agrees that, if for any
reason the indemnification provisions contemplated by Section 2.7.1
or 2.7.2 hereof are unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities, or
expenses (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, liabilities, or expenses
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and the indemnified party in
connection with the actions which resulted in the losses, claims, damages,
liabilities or expenses as well as any other relevant equitable
considerations.  The relative fault of
such indemnifying party and indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or indemnified party, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission; provided that in no event
shall the obligation of any indemnifying party to contribute under this Section 2.7.4
exceed the amount that such indemnifying party would have been obligated to pay
by way of indemnification if the indemnification provided for under Sections
2.7.1 or 2.7.2 hereof had been available under the
circumstances.  The parties hereto agree
that it would not be just and equitable if contribution pursuant to this Section 2.7.4
were determined by pro  rata allocation (even if the Investors or
any underwriters or all of them were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in this Section 2.7.4.  The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities, or expenses (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such indemnified party
in connection with investigating or, except as provided in Section 2.7.3
hereof, defending any such action or claim. 
Notwithstanding the provisions of this Section 2.7.4, the
Investors shall not be required to contribute an amount greater than the dollar
amount by which the net proceeds received by the Investors with respect to the
sale of any Registrable Securities exceeds the amount of damages which such
Investor has otherwise been required to pay by reason of any and all untrue or
alleged untrue statements of material fact or omissions or alleged omissions of
material fact made in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto related to such sale
of Registrable Securities.  No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.  The Investors’ obligations in this Section 2.7.4
to contribute shall be several in proportion to the amount of Registrable
Securities registered by them and not joint.

 

20

 

If indemnification is available under this Section 2.7,
the indemnifying parties shall indemnify each indemnified party to the full
extent provided in Sections 2.7.1 and 2.7.2 hereof without
regard to the relative fault of said indemnifying party or indemnified party or
any other equitable consideration provided for in this Section 2.7.4
subject, in the case of the Investors, to the limited dollar amounts set forth
in Section 2.7.2 hereof.

 

2.7.5                        Effectiveness of
Indemnification.  The indemnification
and contribution provided for under this Agreement will remain in full force
and effect regardless of any investigation made by or on behalf of the
indemnified party or any officer, director, or controlling Person of such
indemnified party and will survive the transfer of securities.

 

2.8                                 Assignment of
Registration Rights.  The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
assignable by the Holder and any subsequent Investor, in whole or in part, including
the Holder’s rights pursuant to Section 2.2 hereof to an Investor
(a “Transferee”), provided that: (i) the Holder agrees in writing
with the Transferee to transfer or assign such rights, and a copy of such
agreement is promptly furnished to the Company after such transfer or
assignment; (ii) the Company is, promptly after such transfer or
assignment, furnished with written notice of (a) the name and address of
such Transferee, and (b) the securities with respect to which such
registration rights are being transferred or assigned and the amount being
transferred or assigned; (iii) at or before the time the Company receives
the written notice contemplated by clause (ii) of this sentence the
Transferee agrees in writing with the Company to be bound by all of the
provisions contained herein (including with respect to Section 2.5.2);
(iv) such Transferee shall be an “accredited investor” as that term is
defined in Rule 501 of Regulation D promulgated under the 1933 Act; (v) in
the event the assignment occurs subsequent to the date of effectiveness of the
Registration Statement required to be filed pursuant to Section 2.1
hereof, the Transferee agrees to pay all reasonable expenses of amending or
supplementing such Registration Statement to reflect such assignment; provided,
however, that any assignment by the Holder of its rights hereunder to
any of its subsidiaries shall not be subject to this clause v; and (vi) after
giving effect to the Transfer, the Transferee will beneficially own not less
than 30% of the Common Stock issued under the Acquisition Agreement (or such
comparable amount of Registrable Securities).

 

ARTICLE 3

RULE 144

 

3.1                                 Current Public
Information.  With a view to
making available to the Investors the benefits of certain rules and
regulations of the SEC that may at any time permit the sale of securities to
the public without registration, the Company agrees to use its reasonable best
efforts to:

 

(i)                                     make and keep public
information available, as those terms are understood and defined in Rule 144,
at all times after the date hereof;

 

21

 

(ii)                                  file with the SEC in a
timely manner all reports and other documents required to be filed by the
Company under the Securities Act and the Exchange Act; and

 

(iii)                               furnish to any
Investor, so long as such Investor owns any Registrable Securities, upon
request by such Investor, (a) a written statement by the Company that it
has complied with the reporting requirements of Rule 144 and of the
Securities Act and the Exchange Act, (b) a copy of the most recent annual
or quarterly report of the Company and (c) such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as the Investors may reasonably request in
availing itself of any rule or regulation of the SEC allowing the
Investors to sell any such securities without registration.

 

ARTICLE 4

MISCELLANEOUS

 

4.1                                 Notices.  All notices, requests and other
communications that are required or may be given under this Agreement shall,
unless otherwise provided for elsewhere in this Agreement, be in writing and
shall be deemed to have been duly given if and when delivered by commercial
courier or other hand delivery, as follows:

 

	
  For the Company:

   

  Level 3 Communications, Inc.

  1025 Eldorado Blvd.

  Building 2000

  Broomfield, CO 80021

  Attention: General Counsel

  	
   

  	
  For the Holder:

  
Leucadia National Corporation

  315 Park Avenue South

  New York, NY 10010

  Attention: Joseph S.
  Steinberg, President

  
	
   

  	
   

  	
   

  
	
  with a copy (which shall not constitute notice) to:

  	
   

  	
  with a copy (which shall not constitute notice) to:

  
	
   

  	
   

  	
   

  
	
  Willkie Farr &
  Gallagher LLP

  787 Seventh Avenue

  New York, New York 10019

  Attention: David K. Boston, Esq.

  	
   

  	
  Weil, Gotshal & Manges LLP

  767 Fifth Avenue

  New York, New York 10153

  Attention: Andrea A. Bernstein, Esq.

  

 

Any notice or communication hereunder shall be deemed
to have been given or made as of the date so delivered if personally delivered
and five (5) calendar days after mailing if sent by registered or certified
mail (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee).

 

If a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.

 

22

 

4.2                                 Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.

 

4.3                                 Submission to
Jurisdiction.  ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS
OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
COMPANY AND THE HOLDER EACH HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS AND APPELLATE COURTS FROM ANY THEREOF. 
EACH OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY CONSENT TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF TO THE COMPANY OR THE HOLDER, AS
THE CASE MAY BE, BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN
RECEIPT REQUESTED, TO SUCH PARTY AT ITS ADDRESS SPECIFIED IN SECTION 4.1.  THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE
ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS.

 

4.4                                 Successors and Assigns.  Except as otherwise expressly provided
herein, this Agreement shall be binding upon and benefit the Company, the
Holder, and their respective successors and permitted assigns.

 

4.5                                 Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall constitute an original, and all of which when
taken together shall constitute one and the same original document.

 

4.6                                 Severability.  In the event any provision in this Agreement
shall be held invalid, illegal or unenforceable in any respect for any reason,
the validity, legality and enforceability of any such provision in every other
respect and the remaining provisions shall not in any way be affected or
impaired thereby.

 

4.7                                 Entire Agreement.  This Agreement and any exhibits and other
documents referred to herein constitute the entire agreement and understanding
among the parties hereto in respect of the subject matter hereof and thereof
and supersede all prior and contemporaneous agreements and understandings, both
oral and written, among the parties hereto, or between any of them, with
respect to the subject matter hereof and thereof.

 

4.8                                 No Waivers; Amendments.  No failure or delay on the part of the
Company or any Investor in exercising any right, power or remedy hereunder
shall

 

23

 

operate
as a waiver thereof, nor shall any single or partial exercise of any such
right, power or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. 
The remedies provided for herein are cumulative and are not exclusive of
any remedies that may be available to the Company or any Investor at law or in
equity or otherwise.  Any provision of
this Agreement may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Company and the Investors.

 

4.9                                 Specific Enforcement;
Cumulative Remedies.  The parties hereto
acknowledge that money damages may not be an adequate remedy for violations of
this Agreement and that any party, in addition to any other rights and remedies
which the parties may have hereunder or at law or in equity, may, in his or its
sole discretion, apply to a court of competent jurisdiction for specific
performance or injunction or such other relief as such court may deem just and
proper in order to enforce this Agreement or prevent any violation hereof and,
to the extent permitted by applicable law, each party waives any objection to
the imposition of such relief.  All
rights, powers and remedies provided under this Agreement or otherwise
available in respect hereof at law or in equity shall be cumulative and not
alternative, and the exercise or beginning of the exercise of any thereof by
any party shall not preclude the simultaneous or later exercise of any other
such rights, powers or remedies by such party.

 

4.10                           Time of the Essence.  Time shall be of the essence in this Agreement.

 

4.11                           Construction.  In construing this Agreement, the following
principles shall be followed: (i) no consideration shall be given to the
captions of the articles, sections, subsections or clauses, which are inserted
for convenience in locating the provisions of this Agreement and not as an aid
in construction; (ii) no consideration shall be given to the fact or
presumption that any of the parties had a greater or lesser hand in drafting
this Agreement; (iii) examples shall not be construed to limit, expressly
or by implication, the matter they illustrate; (iv) the word “includes”
and its syntactic variants mean “includes, but is not limited to” and
corresponding syntactic variant expressions; (v) the plural shall be
deemed to include the singular, and vice versa; (vi) each gender shall be
deemed to include the other genders; and (vii) any exhibit, appendix,
attachment and schedule to this Agreement is a part of this Agreement.

 

4.12                           Information.  The parties acknowledge and agree that in the
course of discussions relating to this Agreement and the transaction
contemplated hereby, neither the Company nor the Holder believes that the
Company has conveyed to the Holder any material non-public information in
respect of the Company and/or its business, operations, pending transactions,
financial condition, results of operations, or prospects.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT
BLANK]

 

24

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the date first written above.

 

	
   

  	
   

  	
  LEVEL 3 COMMUNICATIONS, INC.,

  
	
   

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Robert Yates

  	
   

  
	
   

  	
   

  	
  Name: Robert Yates

  
	
   

  	
   

  	
  Title: Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LEUCADIA NATIONAL CORPORATION,

  
	
   

  	
   

  	
  a New York corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Joseph A. Orlando

  	
   

  
	
   

  	
   

  	
  Name: Joseph A. Orlando

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BALDWIN ENTERPRISES, INC.,

  
	
   

  	
   

  	
  a Colorado corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Joseph A. Orlando

  	
   

  
	
   

  	
   

  	
  Name: Joseph A. Orlando

  
	
   

  	
   

  	
  Title: Vice President

  

 

 

Signature Page 

to 

Registration Rights and Transfer Restriction Agreement

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