-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DnibMHS11Kn1XNeiWUD6cWd6PNFr2Y1bgjANOmOT/kkHSodYT253mrt8OOxsnYz5 uBVni/tFb/j05aU61ZOOVQ== 0001047469-04-021069.txt : 20040618 0001047469-04-021069.hdr.sgml : 20040618 20040618164323 ACCESSION NUMBER: 0001047469-04-021069 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 20040618 GROUP MEMBERS: PETRO-CANADA (US) HOLDINGS LTD. GROUP MEMBERS: RAVEN ACQUISITION CORPORATION FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PETRO CANADA CENTRAL INDEX KEY: 0000795615 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 150 6TH AVE S W CITY: CALGARY ALBERTA CANA STATE: A0 ZIP: T2P 3Y7 BUSINESS PHONE: 4032968000 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PRIMA ENERGY CORP CENTRAL INDEX KEY: 0000318107 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 841097578 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-32011 FILM NUMBER: 04871072 BUSINESS ADDRESS: STREET 1: 1099 18TH STREET STREET 2: SUITE 400 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3032972100 MAIL ADDRESS: STREET 1: 1099 18TH STREET STREET 2: SUITE 400 CITY: DENVER STATE: CO ZIP: 80202 SC 13D 1 a2138532zsc13d.htm SC 13D
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

PRIMA ENERGY CORPORATION

(Name of Issuer)

Common Stock, $0.015 par value

(Title of Class of Securities)

741901201

(CUSIP Number)

Hugh L. Hooker
Associate General Counsel and
Corporate Secretary
c/o Petro-Canada
150—6th Avenue S.W.
Calgary, Alberta
Canada T2P 3E3

With a copy to:

Marilyn Mooney, Esq.
Roy L. Goldman, Esq.
Fulbright & Jaworski L.L.P.
Market Square
801 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2623
Telephone: (202) 662-0200
Telecopier: (202) 662-4643

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

June 9, 2004

(Date of Event which Requires Filing of This Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 741901201


1	NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) PETRO-CANADA (I.R.S. Identification No: Not Applicable—Foreign Corporation)

2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a) ý
				(b) o

3	SEC USE ONLY

4	SOURCE OF FUNDS WC/BK

5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
				o

6	CITIZENSHIP OR PLACE OF ORGANIZATION CANADA

NUMBER OF SHARES		7	SOLE VOTING POWER 0
BENEFICIALLY
OWNED BY EACH		8	SHARED VOTING POWER 2,847,615*
REPORTING
PERSON WITH		9	SOLE DISPOSITIVE POWER 0

		10	SHARED DISPOSITIVE POWER 2,847,615*

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,847,615*

12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
				o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 21.9%* +

14	TYPE OF REPORTING PERSON CO/HC

* Beneficial ownership of the common stock referred to herein is being reported hereunder solely because the reporting person may be deemed to have beneficial ownership of such shares as a result of it being the parent company of Petro-Canada (US) Holdings Ltd. and Raven Acquisition Corp., which have entered into the Stockholder Agreements described in Items 4 and 5 hereof with certain stockholders of Prima Energy Corporation ("Prima"). Such number does not include any shares of common stock issuable upon exercise of options to purchase 884,625 shares of Prima common stock held by such stockholders. Neither the filing of this Schedule 13D nor any of it contents shall be deemed to constitute an admission by Petro-Canada, Petro-Canada (US) Holdings Ltd. or Raven Acquisition Corp. that it is the beneficial owner of any of the common stock referred to herein for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or for any other purpose, and such beneficial ownership is expressly disclaimed.

+ Based on 12,981,192 shares of common stock outstanding as of June 7, 2004, as represented in the Merger Agreement (as defined in Item 4).

Page 2 of 16 pages

CUSIP No. 741901201


1	NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) PETRO-CANADA (US) HOLDINGS LTD. (I.R.S. Identification No: Applied For)

2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a) ý
				(b) o

3	SEC USE ONLY

4	SOURCE OF FUNDS AF

5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
				o

6	CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE

NUMBER OF SHARES		7	SOLE VOTING POWER 0
BENEFICIALLY
OWNED BY EACH		8	SHARED VOTING POWER 2,847,615*
REPORTING
PERSON WITH		9	SOLE DISPOSITIVE POWER 0

		10	SHARED DISPOSITIVE POWER 2,847,615*

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,847,615*

12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
				o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 21.9%* +

14	TYPE OF REPORTING PERSON CO/HC

* Beneficial ownership of the common stock referred to herein is being reported hereunder solely because the reporting person may be deemed to have beneficial ownership of such shares as a result of the Stockholder Agreements described in Items 4 and 5 hereof with certain stockholders of Prima. Such number does not include any shares of Prima common stock issuable upon exercise of options to purchase 884,625 shares of common stock held by such stockholders. Neither the filing of this Schedule 13D nor any of it contents shall be deemed to constitute an admission by Petro-Canada, Petro-Canada (US) Holdings Ltd. or Raven Acquisition Corp. that it is the beneficial owner of any of the common stock referred to herein for purposes of Section 13(d) of the Exchange Act, or for any other purpose, and such beneficial ownership is expressly disclaimed.

+ Based on 12,981,192 shares of common stock outstanding as of June 7, 2004, as represented in the Merger Agreement (as defined in Item 4).

Page 3 of 16 pages

CUSIP No. 741901201


1	NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) RAVEN ACQUISITION CORP. (I.R.S. Identification No: Applied For)

2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a) ý
				(b) o

3	SEC USE ONLY

4	SOURCE OF FUNDS AF

5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
				o

6	CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE

NUMBER OF SHARES		7	SOLE VOTING POWER 0
BENEFICIALLY
OWNED BY EACH		8	SHARED VOTING POWER 2,847,615*
REPORTING
PERSON WITH		9	SOLE DISPOSITIVE POWER 0

		10	SHARED DISPOSITIVE POWER 2,847,615*

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,847,615*

12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
				o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 21.9%* +

14	TYPE OF REPORTING PERSON CO

* Beneficial ownership of the common stock referred to herein is being reported hereunder solely because the reporting person may be deemed to have beneficial ownership of such shares as a result of the Stockholder Agreements described in Items 4 and 5 hereof with certain stockholders of Prima. Such number does not include any shares of Prima common stock issuable upon exercise of options to purchase 884,625 shares of common stock held by such stockholders. Neither the filing of this Schedule 13D nor any of it contents shall be deemed to constitute an admission by Petro-Canada, Petro-Canada (US) Holdings Ltd. or Raven Acquisition Corp. that it is the beneficial owner of any of the common stock referred to herein for purposes of Section 13(d) of the Exchange Act, or for any other purpose, and such beneficial ownership is expressly disclaimed.

+ Based on 12,981,192 shares of common stock outstanding as of June 7, 2004, as represented in the Merger Agreement (as defined in Item 4).

Page 4 of 16 pages

Item 1. Security and Prima.

This Statement on Schedule 13D (the "Schedule 13D") relates to the common stock, par value $0.015 per share ("Prima Stock"), of Prima Energy Corporation, a Delaware corporation ("Prima"). The principal executive offices of Prima are located at 1099 18^th Street, Suite 400, Denver, Colorado 80202.

Item 2. Identity and Background.

(a)-(c), (f) This Schedule 13D is filed by Petro-Canada, a Canadian corporation ("Petro-Canada"), Petro-Canada (US) Holdings Ltd. ("US Holdings"), a Delaware corporation and wholly-owned subsidiary of Petro-Canada, and Raven Acquisition Corp. ("Merger Sub"), a Delaware corporation and a wholly-owned subsidiary of US Holdings and indirect wholly-owned subsidiary of Petro-Canada. The address of the principal business and principal office of Petro-Canada is 150 - 6^th Avenue S.W., Calgary, Alberta, Canada T2P 3E3. The address of the principal business and principal office of US Holdings and Merger Sub is c/o Corporation Services Company, 2711 Centerville Road, Wilmington, Delaware 19808. Petro-Canada is one of Canada's largest oil and gas companies, operating in both the upstream and downstream sectors of the industry in Canada and internationally. US Holdings is a direct wholly-owned subsidiary of Petro-Canada. Merger Sub is a newly-incorporated corporation formed for the purpose of acquiring ownership of Prima.

As a result of entering into the Stockholder Agreements described in Items 4 and 5 below, US Holdings and Merger Sub have formed a "group" with each other and with Petro-Canada, and may be deemed to have formed a "group" with the Subject Stockholders (as defined in Item 3 below) for purposes of Section 13(d)(3) of the Exchange Act and Rule 13d-5(b)(1) thereunder. Petro-Canada, US Holdings and Merger Sub expressly declare that the filing of this Schedule 13D shall not be construed as an admission by them that they have formed a group with the Subject Stockholders.

To the best of Petro-Canada's, US Holdings' and Merger Sub's respective knowledge as of the date hereof, the name, business address, present principal occupation or employment and citizenship of each executive officer and director of Petro-Canada, US Holdings and Merger Sub, respectively, and the name, principal business and address of any corporation or other organization in which such employment is conducted, is set forth in Schedule I hereto. The information contained in Schedule I is incorporated herein by reference.

(d)-(e) During the last five years, neither Petro-Canada, US Holdings nor Merger Sub nor, to the best knowledge of Petro-Canada, US Holdings and Merger Sub, respectively, any of the executive officers or directors of Petro-Canada, US Holdings or Merger Sub, respectively, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), or been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

Item 3. Source and Amount of Funds or Other Consideration.

The Offer (as defined below) and the Merger (as defined below) are not subject to any financing condition. Petro-Canada estimates that the total amount of cash required to purchase all of the shares of Prima Stock pursuant to the Offer and the Merger and to cash out the outstanding Prima stock options, together with related transaction expenses (excluding Prima's transaction expenses), will be approximately U.S.$541 million ("Merger Consideration"). Merger Sub will borrow U.S.$400 million from a Delaware limited liability company ("PCFC LLC") indirectly wholly-owned by Petro-Canada. PCFC LLC will receive these funds through a capital contribution from its parent, a Delaware general partnership owned by Petro-Canada and one of its subsidiaries ("PCF Partnership"). PCF Partnership

Page 5 of 16 pages

will borrow these funds pursuant to a U.S.$400 million fully underwritten committed non-revolving credit facility provided by Bank of Montreal. Merger Sub will acquire the remainder of such funds from a capital contribution from US Holdings, which will receive such funds from a capital contribution by Petro-Canada. Petro-Canada will use borrowings under existing committed credit lines to make the capital contribution to US Holdings. Neither US Holdings nor Merger Sub has paid additional consideration to the Subject Stockholders in connection with the execution and delivery of the Stockholder Agreements.

Bank of Montreal ("BMO") has provided Petro-Canada with a commitment letter (the "Commitment Letter") pursuant to which BMO has agreed to underwrite a U.S.$400 million acquisition credit facility (the "Facility") for PCF Partnership. Borrowings under the Facility will be due 18 months following execution of definitive documentation for the Facility. Borrowings under the Facility, which will be guaranteed by Petro-Canada, will bear interest at varying rates depending on Petro-Canada's senior unsecured debt rating. The Facility will limit Petro-Canada's ability to, among other things, (i) incur debt, (ii) sell or dispose of assets, (iii) change the nature of our business, (iv) create or incur liens, and (v) merge or consolidate with any other entity, and will include a financial covenant. The closing of the Facility is subject to customary conditions, including execution of definitive documentation substantially similar to Petro-Canada's current credit facilities.

Petro-Canada currently has an existing Cdn.$850 million committed bank revolving credit facility (the "Revolving Facility"), provided by a syndicate of lenders, from which it intends to borrow approximately U.S.$141 million, which it will contribute to US Holdings to finance a portion of its acquisition of Prima. At June 17, 2004, Petro-Canada had approximately Cdn. $289 million outstanding. The Revolving Facility expires on March 16, 2005. Borrowings under the Revolving Facility bear interest at varying rates depending on Petro-Canada's senior unsecured debt rating and whether the borrowings are at the Canadian Prime Rate (as defined in the Revolving Facility), LIBOR (as defined in the Revolving Facility) or the U.S. Base Rate (as defined in the Revolving Facility). The Revolving Facility limits Petro-Canada's ability to, among other things, (i) incur debt, (ii) sell or dispose of assets, (iii) change the nature of our business, (iv) create or incur liens, and (v) merge or consolidate with any other entity. The Revolving Facility also contains a financial covenant.

The foregoing summary of the Commitment Letter and the Revolving Facility does not purport to be complete, and references to, and descriptions of, the Commitment Letter and the Revolving Facility in this Item 3 are qualified in their entirety by reference to the Commitment Letter and the Revolving Facility, attached hereto as Exhibits 17 and 18, respectively, which are incorporated by reference in this Item 3 in their entirety.

Item 4. Purpose of the Transaction.

(a)-(g) and (j)

Merger Agreement.

On June 9, 2004, Prima, US Holdings and Merger Sub entered into an Agreement and Plan of Merger (the "Merger Agreement"). The Merger Agreement provides, among other things, for the commencement by Merger Sub of an offer (the "Offer") to purchase all of the issued and outstanding shares of Prima Stock, together with the associated rights to purchase preferred shares (the "Rights") issued pursuant to the Rights Agreement, dated May 23, 2001, as amended, between Prima and Computershare Trust Company, Inc., as rights agent (each share of Prima Stock, together with the Rights, is herein referred to as a "Share") at a purchase price, subject to any required withholding of taxes, net to the seller in cash, without interest, of $39.50 per Share (the "Offer Price"). Merger Sub is not required to accept for payment and pay for, and may terminate or, except as set forth in the Merger Agreement, delay the acceptance of any tendered Shares for payment if, among other things,

Page 6 of 16 pages

less than 50% of the shares of Prima Stock outstanding on a fully-diluted basis have been validly tendered and not withdrawn prior to the expiration of the Offer (the "Minimum Condition"). Upon the terms and subject to the conditions of the Offer, US Holdings will cause Merger Sub to accept for payment and pay for all Shares validly tendered and not withdrawn pursuant to the Offer as soon as practicable after expiration of the Offer.

Promptly upon the acceptance for payment of any Shares pursuant to the Offer, and from time to time thereafter as Shares are acquired pursuant to the Offer, Merger Sub will be entitled to designate for election as directors of Prima such number of directors, rounded up to the next whole number, as is equal to the product of the total number of directors on the board of directors of Prima (the "Prima Board") multiplied by the percentage that the aggregate number of Shares beneficially owned by US Holdings and/or Merger Sub (including Shares accepted for payment pursuant to the Offer) bears to the number of Shares outstanding, and Prima will be required to take all action necessary to cause Merger Sub's designees to be elected or appointed to the Prima Board, including increasing the size of the Prima Board and/or securing the resignations of incumbent directors. Subject to applicable law and to the extent permitted by the Nasdaq National Market listing requirements, Prima will cause individuals designated by Merger Sub to constitute the same percentage as is on the entire Prima Board to be on (i) each committee of the Prima Board and (ii) each board of directors and each committee thereof of each subsidiary of Prima. Prima's obligations to appoint designees to the Prima Board is subject to compliance with Section 14(f) of the Exchange Act. At the request of Merger Sub, Prima will promptly take, at its expense, all actions required pursuant to Section 14(f) and Rule 14f-1 under the Exchange Act in order to fulfill its obligations with respect to Prima Board representation. Notwithstanding the foregoing, in the event that Merger Sub's designees are appointed or elected to the Prima Board, the Prima Board shall at all times until the effective time of the Merger (the "Effective Time") have at least three directors who were directors on June 9, 2004, the date of the Merger Agreement, and who are not employed by Prima and who are not affiliates, stockholders or employees of US Holdings and its subsidiaries (the "Independent Directors"); provided that if any Independent Directors cease to be directors for any reason whatsoever, the remaining Independent Directors (or Independent Director, if there is only one remaining) will be entitled to designate any other person(s) who is not an affiliate, stockholder or employee of US Holdings or any of its subsidiaries to fill such vacancies and such person(s) shall be deemed to be Independent Director(s) for purposes of the Merger Agreement; provided that the remaining Independent Directors shall fill such vacancies as soon as practicable, but in any event within ten business days, and further provided that if no such Independent Director is appointed in such time period, Merger Sub will designate such Independent Director(s); and provided further that if no Independent Director then remains, the other directors shall designate three persons who are not affiliates, stockholders or employees of US Holdings or any of its subsidiaries to fill such vacancies and such persons shall be deemed to be Independent Directors for purposes of the Merger Agreement. In all cases, the selection of any Independent Directors who are not directors on the date of the Merger Agreement will be subject to the approval of Merger Sub, such approval not to be unreasonably withheld or delayed.

Prima has granted to US Holdings and Merger Sub an irrevocable option (the "Top-Up Option") to purchase, at a price per share equal to the Offer Price, a number of shares of Prima Stock (the "Top-Up Option Shares"), not to exceed 2,596,237 shares of Prima Stock that, when added to the number of shares of Prima Stock owned by Parent or Merger Sub or any wholly- owned subsidiary of US Holdings or Merger Sub at the time of exercise of the Top-Up Option, constitutes one share of Prima Stock more than 90% of the number of shares of Prima Stock that will be outstanding immediately after the issuance of the Top-Up Option Shares. The Top-Up Option may be exercised by US Holdings or Merger Sub, in whole or in part, at any time on or after the expiration date of the Offer and on or prior to the tenth business day after the later of (i) the expiration date of the Offer or (ii) the expiration of any subsequent offering period; provided, however, that the obligation of Prima to deliver Top-Up Option Shares upon the exercise of the Top-Up Option is subject to the conditions that

Page 7 of 16 pages

(A) no provision of any applicable law and no judgment, injunction, order or decree prohibits the exercise of the Top-Up Option or the delivery of the Top-Up Option Shares in respect of such exercise, (B) the issuance of Top-Up Option Shares pursuant to the Top-Up Option does not require approval of Prima's stockholders under applicable law or regulation, (C) upon exercise of the Top-Up Option, the number of shares of Prima Stock owned by US Holdings or Merger Sub or any wholly-owned subsidiary of US Holdings or Merger Sub constitutes one share of Prima Stock more than 90% of the number of shares of Prima Stock that will be outstanding immediately after the issuance of the Top-Up Option Shares, and (D) Merger Sub has accepted for payment and paid for all Shares validly tendered in the Offer and not withdrawn.

US Holdings intends, as soon as practicable after completion of the Offer, to have Merger Sub merge into Prima (the "Merger"). By virtue of the Merger and without any action on the part of US Holdings, Merger Sub, Prima or the holders of the shares of Prima Stock, at the Effective Time each Share held immediately prior to the Effective Time (other than (a) any Shares held by Prima, any wholly-owned subsidiary of Prima, US Holdings, Merger Sub or any other subsidiary of US Holdings, which shares, by virtue of the Merger, will be cancelled automatically and retired and will cease to exist, and no payment or consideration will be made with respect to such Shares and (b) shares of Prima Stock held by a holder who has demanded an appraisal for such shares in accordance with the Delaware General Corporation Law (the "DGCL")) will be converted into the right to receive the Offer Price upon surrender of the share certificate formally representing that Share.

The Merger Agreement provides that upon consummation of the Merger, the certificate of incorporation of Prima, as in effect immediately prior to the Merger, will be the certificate of incorporation of the corporation surviving the Merger (the "Surviving Corporation"), and the bylaws of the Merger Sub, as in effect immediately prior to the Merger, will be the bylaws of the Surviving Corporation.

Under the terms of the Merger Agreement, upon consummation of the Merger, the directors of Merger Sub immediately prior to the Merger will be the directors of the Surviving Corporation and the officers of Prima immediately prior to the Merger will be the officers of the Surviving Corporation, in each case until their respective death, resignation or removal or until their respective successors are duly elected and qualified, all in accordance with the certificate of incorporation and bylaws of the Surviving Corporation and the DGCL.

The foregoing summary of the Merger Agreement does not purport to be complete and references to and descriptions of the Merger Agreement are qualified in their entirety by reference to the full text thereof attached hereto as Exhibit 1, which is incorporated by reference into this Item 4 in its entirety.

The purpose of the Offer, the Merger and the Stockholders Agreements is to enable Petro-Canada and US Holdings to acquire control of, and the entire equity interest in, Prima.

It is expected that, initially following the Merger, the business and operations of Prima will be continued substantially as they are currently being conducted. Petro-Canada will continue to evaluate Prima's business and operations during the pendency of the Offer and after consummation of the Offer and the Merger, and will take such actions as it deems appropriate under the circumstances then existing with a view to maximize Prima's potential in conjunction with Petro-Canada's business.

Except as set forth in this Schedule 13D, Petro-Canada does not have any current plans or proposals that relate to or would result in (i) the acquisition by any person of additional Prima Stock, or the disposition of Prima Stock; (ii) an extraordinary corporate transaction, such as a merger, reorganization or liquidation involving Prima or any of its subsidiaries; (iii) a sale or transfer of a material amount of the assets of Prima or any of its subsidiaries; (iv) any change in the present board of directors or management of Prima, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (v) any material change in the present

Page 8 of 16 pages

capitalization or dividend policy of Prima; (vi) any other material change in Prima's business or corporate structure; (vii) changes in Prima's certificate of incorporation or bylaws or other actions that may impede the acquisition of control of Prima by any person; (viii) causing a class of Prima's securities to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system or a registered national securities association; (ix) a class of Prima's equity securities becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or (x) any action similar to any of the foregoing.

Stockholder Agreements

As a condition and inducement for US Holdings and Merger Sub to enter into the Merger Agreement, each of James R. Cummings, Douglas J. Guion, Catherine J. Paglia, George L. Seward, Neil L. Stenbuck, Michael R. Kennedy, Michael J. McGuire, John H. Carpenter, Sandra J. Irlando, Edward L. McLaughlin, Richard H. Lewis, Brakemaka LLLP (an affiliated family-owned limited liability limited partnership of Richard H. Lewis), who are Prima's executive officers and directors, and Robert G. James, the Robert & Ardis James Foundation and the Robert G. James IRA Rollover Account, who are related and together are a principal stockholder of Prima, (each, a "Subject Stockholder") entered into a stockholder agreement, dated as of June 9, 2004, with US Holdings and Merger Sub (each, a "Stockholder Agreement," and collectively, the "Stockholder Agreements"). The Stockholder Agreements cover 2,847,615 shares of Prima Stock owned by the Stockholders.

Pursuant to the Stockholder Agreements, each Subject Stockholder has, among other things, (a) agreed to (i) tender all shares of Prima Stock beneficially owned by it as of the commencement of the Offer (the "Subject Stockholder Shares") into the Offer as promptly as practicable and in no event later than the tenth business day following commencement of the Offer, (ii) appear at any meeting of Prima's stockholders or otherwise cause all Subject Stockholder Shares to be counted as present thereat for purposes of establishing a quorum and (iii) vote all the Subject Stockholder Shares (1) in favor of the approval and adoption of the Merger Agreement and approval of the Merger and (2) against (A) any alternative transactions or certain other actions specified therein and (B) any amendment of Prima's certificate of incorporation or bylaws or other proposal, action or transaction involving Prima or any of its subsidiaries or any of its stockholders, which amendment or other proposal, action or transaction could reasonably be expected to prevent, impede or delay the consummation of the Offer, the Merger or the other transactions contemplated by the Merger Agreement or the Stockholder Agreement or to deprive US Holdings or Merger Sub of any material portion of the benefits anticipated by US Holdings or Merger Sub to be received from the consummation of the Offer, the Merger or the other transactions contemplated by the Merger Agreement or the Stockholder Agreement, or change in any manner the voting rights of Prima Stock presented to the stockholders of Prima or in respect of which vote or consent of the stockholders is requested or sought, (b) represented that any arrangements previously entered into or granted with respect to the Subject Stockholder Shares have expired or been revoked, and (c) agreed not to sell, transfer, pledge or otherwise dispose of or convert any of the Subject Stockholder Shares or any interests therein, subject to the exceptions set forth in the Stockholder Agreement.

Each Subject Stockholder has also agreed that to the extent it exercises options to purchase shares of Prima Stock, such shares will become Subject Stockholder Shares and will be tendered and voted as set forth above. The Subject Stockholders in the aggregate own options to purchase 884,625 shares of Prima Stock.

The covenants and agreements contained in the Stockholder Agreements will terminate upon the termination of the Merger Agreement.

The foregoing summary of the Stockholder Agreements does not purport to be complete and references to and descriptions of the Stockholder Agreements are qualified in their entirety by

Page 9 of 16 pages

reference to the complete text of such agreements attached hereto as Exhibits 2-16, which are incorporated by reference into this Item 4 in their entirety.

(h) and (i). The tender of shares of Prima Stock pursuant to the Offer will reduce the number of shares of Prima Stock that might otherwise trade publicly and will reduce the number of holders of shares of Prima Stock and could adversely affect the liquidity and market value of the remaining shares of Prima Stock held by the public.

Nasdaq National Market Listing. Depending upon the number of shares of Prima Stock purchased pursuant to the Offer, the shares of Prima Stock may no longer meet the requirements of the National Association of Securities Dealers for continued designation for the Nasdaq National Market.

If the Nasdaq National Market were to cease to publish quotations for the shares of Prima Stock, it is possible that the shares of Prima Stock would continue to trade in the over-the-counter market and that price or other quotations would be reported by other sources. The extent of the public market for such shares of Prima Stock and the availability of such quotations would depend, however, upon such factors as the number of stockholders and/or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the shares of Prima Stock on the part of securities firms, the possible termination of registration under the Exchange Act as described below, and other factors. US Holdings cannot predict whether the reduction in the number of shares of Prima Stock that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the shares of Prima Stock or whether it would cause future market prices to be greater or lesser than Merger Sub is presently offering.

Registration Under the Exchange Act. Shares of Prima Stock are currently registered under the Exchange Act. Prima can terminate that registration upon application to the Securities and Exchange Commission ("SEC") if the outstanding shares are not listed on a national securities exchange and if there are fewer than 300 holders of record of shares of Prima Stock. Termination of registration of the shares of Prima Stock under the Exchange Act would reduce the information that Prima must furnish to its stockholders and to the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) and the requirement of furnishing a proxy statement in connection with stockholders' meetings pursuant to Section 14(a) and the related requirement of furnishing an annual report to stockholders, no longer applicable with respect to shares of Prima Stock. In addition, if shares of Prima Stock are no longer registered under the Exchange Act, the requirements of Rule 13e-3 under the Exchange Act with respect to "going-private" transactions would no longer be applicable to Prima. Furthermore, the ability of "affiliates" of Prima and persons holding "restricted securities" of Prima to dispose of such securities pursuant to Rule 144 under the Securities Act may be impaired or eliminated. If registration of the shares of Prima Stock under the Exchange Act were terminated, they would no longer be eligible for Nasdaq National Market listing or for continued inclusion on the Federal Reserve Board's list of "margin securities."

Merger Sub intends to seek to cause Prima to apply for termination of registration of the shares of Prima Stock under the Exchange Act as soon after the completion of the Offer as the requirements for such termination are met. If registration of the shares of Prima Stock is not terminated prior to the Merger, then such shares will be delisted from all stock exchanges and the registration of such shares under the Exchange Act will be terminated following consummation of the Merger.

Status as "Margin Securities." The shares of Prima Stock are presently "margin securities" under the regulations of the Federal Reserve Board, which has the effect, among other things, of allowing brokers to extend credit on the collateral of shares of Prima Stock. Depending on the factors similar to those described above with respect to listing and market quotations, following consummation of the Offer, the shares of Prima Stock may no longer constitute "margin securities" for the purposes of the

Page 10 of 16 pages

Federal Reserve Board's margin regulations, in which event the shares of Prima Stock would be ineligible as collateral for margin loans made by brokers.

Item 5. Interest in Securities of Prima.

(a) and (b). As of the date hereof, neither Petro-Canada, US Holdings nor Merger Sub owns any shares of Prima Stock. However, as a result of US Holdings and Merger Sub entering into the Stockholder Agreements with the Subject Stockholders, Petro-Canada, US Holdings and Merger Sub may be deemed to possess shared power to dispose or direct the disposition of and to vote or direct the vote of, and thus may be deemed to beneficially own, 2,847,615 shares of Prima Stock, or approximately 21.9% of the issued and outstanding shares of Prima Stock, as of June 7, 2004. This percentage is based on 12,981,192 shares of common stock outstanding as of June 7, 2004, as represented in the Merger Agreement. This number does not include any shares of Prima Stock issuable upon the exercise of options to purchase 884,625 shares of Prima Stock held by the Subject Stockholders.

With respect to the disposition and voting of the Subject Stockholder Shares, US Holdings and Merger Sub share the power to cause the disposition and to vote or cause the vote of the Subject Stockholder Shares in accordance with the terms of the Stockholder Agreements. Neither the filing of this Schedule 13D nor any of its contents shall be deemed to constitute an admission that Petro-Canada, US Holdings or Merger Sub is the beneficial owner of Prima Stock referred to in this paragraph for purposes of Section 13(d) of the Exchange Act or for any other purpose, and such beneficial ownership is expressly disclaimed. Petro-Canada, US Holdings and Merger Sub do not, and, to the best knowledge of Petro-Canada, US Holdings and Merger Sub, respectively, none of the persons listed on Schedule I, beneficially owns any shares of Prima Stock other than as set forth herein.

(c) No transactions in Prima Stock were effected by Petro-Canada, US Holdings or Merger Sub, or, to the best knowledge of Petro-Canada, US Holdings and Merger Sub, respectively, any of the persons listed on Schedule I hereto, during the 60-day period preceding the date hereof.

(d) None, other than the current holders of the Subject Stockholder Shares.

(e) Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of Prima.

Except as set forth in this Schedule 13D, to the best knowledge of Petro-Canada, US Holdings and Merger Sub, there are no other contracts, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 or listed on Schedule I hereto, and between such persons and any person with respect to any securities of Prima, including but not limited to transfer or voting of any of the securities of Prima, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees or profits, division of profits or loss, or the giving or withholding of proxies, or a pledge or otherwise subject to a contingency the occurrence of which would give another person voting power or investment power over the securities of Prima.

Page 11 of 16 pages

Item 7. Material to be Filed as Exhibits.

Exhibit No.		Exhibit Description
1.		Agreement and Plan of Merger, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Prima Energy Corporation.
2.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and James R. Cummings.
3.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Douglas J. Guion.
4.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Catherine J. Paglia.
5.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and George L. Seward.
6.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Neil L. Stenbuck.
7.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Michael R. Kennedy.
8.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Michael J. McGuire.
9.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and John H. Carpenter.
10.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Sandra J. Irlando.
11.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Edward L. McLaughlin.
12.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Richard H. Lewis.
13.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Brakemaka LLP.
14.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Robert G. James.
15.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Robert & Ardis James Foundation.
16.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and the Robert G. James IRA Rollover Account.
17.		Commitment Letter, dated June 4, 2004, from Bank of Montreal to Petro-Canada.
18.		Credit Agreement, dated March 18, 2004, between Petro-Canada, the financial institutions signatory thereto, Bank of Montreal, as administrative agent, with BMO Nesbitt Burns, as lead arranger and bookrunner, and RBC Capital Markets and Scotia Capital, as co-syndication agents.
19.		Joint Filing Agreement by and between Petro-Canada, Petro-Canada (US) Holdings Ltd. and Raven Acquisition Corp.

Page 12 of 16 pages

SIGNATURE

After reasonable inquiry and to the best of each of the undersigned's knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.

June 18, 2004	Petro-Canada
	By:	/s/ E. F. H. ROBERTS Name: E. F. H. Roberts Title: Senior Vice-President and Chief Financial Officer
	Petro-Canada (US) Holdings Ltd.
	By:	/s/ FRANCOIS LANGLOIS Name: Francois Langlois Title: Vice President
	Raven Acquisition Corp.
	By:	/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President

Page 13 of 16 pages

SCHEDULE I

I. Directors and Executive Officers of Petro-Canada.

Set forth in the table below are the name, citizenship, business address and present principal occupation or employment of each of the directors and executive officers of Petro-Canada. The business address of each such director or executive officer is c/o Petro-Canada is 150 - 6^thAvenue S.W., Calgary, Alberta, Canada T2P 3E3. Unless otherwise noted, each person listed below is a Canadian citizen.

NAME		PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; CITIZENSHIP
Directors
Brian F. MacNeill		Chairman of the Board of Directors of Petro-Canada.
Ron A. Brenneman		Director, President and Chief Executive Officer of Petro-Canada.
Angus A. Bruneau		Director of Petro-Canada. Dr. Bruneau currently serves as Chairman of Fortis Inc.
Gail Cook-Bennett		Director of Petro-Canada. Dr. Cook-Bennett currently serves as Chairperson of the Canada Pension Plan Investment Board.
Richard J. Currie		Director of Petro-Canada. Mr. Currie currently serves as Chairman of BCE Inc.
Claude Fontaine		Director of Petro-Canada. Mr. Fontaine is a Senior Partner at Ogilvy Renault.
Paul Haseldonckx		Director of Petro-Canada. Mr. Haseldonckx is a Corporate Director and is a citizen of Belgium.
Thomas E. Kierans		Director of Petro-Canada. Mr. Kierans is currently the Chairman of The Canadian Institute for Advanced Research.
Maureen McCaw		Director of Petro-Canada. Ms. McCaw is currently President of Criterion Research.
Paul D. Melnuk		Director of Petro-Canada. Mr. Melnuk is currently the Chairman and Chief Executive Officer of Thermadyne Holdings Corporation.
Guylaine Saucier, F.C.A., C.M.		Director of Petro-Canada. Ms. Saucier is a Corporate Director.
William W. Siebens		Director of Petro-Canada. Mr. Siebens is the President of Candor Investments Ltd.
Executive Officers
Ron A. Brenneman		Same principal occupation as set forth above.
Peter S. Kallos		Executive Vice-President, International of Petro-Canada. Mr. Kallos is a citizen of the United Kingdom.
Boris J. Jackman		Executive Vice-President, Downstream of Petro-Canada.
E. F. H. Roberts		Senior Vice-President and Chief Financial Officer of Petro-Canada.
Brant G. Sangster		Senior Vice-President, Oil Sands of Petro-Canada.
Kathleen E. Sendall		Senior Vice-President, North American Natural Gas of Petro-Canada.
Gordon J. Carrick		Vice-President, East Coast of Petro-Canada.

Page 14 of 16 pages

II. Directors and Executive Officers of Petro-Canada (US) Holdings Ltd.

Set forth in the table below are the name, citizenship, business address and present principal occupation or employment of each of the directors and executive officers of Petro-Canada (US) Holdings Ltd. The business address of each such director or executive officer is c/o Corporation Services Company, 2711 Centerville Road, Wilmington, Delaware 19808. Unless otherwise noted, each person listed below is a Canadian citizen.

NAME		PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; CITIZENSHIP
Hugh L. Hooker		Director of Petro-Canada (US) Holdings Ltd. and Raven Acquisition Corp., Secretary of Petro-Canada (US) Holdings Ltd., President of Raven Acquisition Corp. and Associate General Counsel and Corporate Secretary of Petro-Canada.
W.A. (Alf) Peneycad		Director and Vice-President and General Counsel of Petro-Canada (US) Holdings Ltd. and Vice-President, General Counsel and Chief Compliance Officer of Petro-Canada.
Kathleen E. Sendall		President of Petro-Canada (US) Holdings Ltd. and Senior Vice-President, North American Natural Gas of Petro-Canada.
Francois Langlois		Vice-President of Petro-Canada (US) Holdings Ltd. and Vice-President, Continental North America Exploration of Petro-Canada.

III. Directors and Executive Officers of Raven Acquisition Corp.

Set forth in the table below are the name, citizenship, business address and present principal occupation or employment of each of the directors and executive officers of Raven Acquisition Corp. The business address of each such director or executive officer is c/o Corporation Services Company, 2711 Centerville Road, Wilmington, Delaware 19808. Unless otherwise noted, each person listed below is a Canadian citizen.

NAME		PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; CITIZENSHIP
Hugh L. Hooker		Director of Petro-Canada (US) Holdings Ltd. and Raven Acquisition Corp., Secretary of Petro-Canada (US) Holdings Ltd., President of Raven Acquisition Corp. and Associate General Counsel and Corporate Secretary of Petro-Canada.
Peter A. Hutcheson		Secretary and Treasurer of Raven Acquisition Corp. and Senior Counsel of Petro-Canada.

Page 15 of 16 pages

EXHIBIT INDEX

Exhibit No.		Exhibit Description
1.		Agreement and Plan of Merger, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Prima Energy Corporation.
2.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and James R. Cummings.
3.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Douglas J. Guion.
4.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Catherine J. Paglia.
5.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and George L. Seward.
6.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Neil L. Stenbuck.
7.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Michael R. Kennedy.
8.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Michael J. McGuire.
9.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and John H. Carpenter.
10.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Sandra J. Irlando.
11.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Edward L. McLaughlin.
12.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Richard H. Lewis.
13.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Brakemaka LLLP.
14.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Robert G. James.
15.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and Robert & Ardis James Foundation.
16.		Stockholder Agreement, dated as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., Raven Acquisition Corp. and the Robert G. James IRA Rollover Account.
17.		Commitment Letter, dated June 4, 2004, from Bank of Montreal to Petro-Canada.
18.		Credit Agreement, dated March 18, 2004, between Petro-Canada, the financial institutions signatory thereto, Bank of Montreal, as administrative agent, with BMO Nesbitt Burns, as lead arranger and bookrunner, and RBC Capital Markets and Scotia Capital, as co-syndication agents.
19.		Joint Filing Agreement by and between Petro-Canada, Petro-Canada (US) Holdings Ltd. and Raven Acquisition Corp.

Page 16 of 16 pages

QuickLinks

SIGNATURE
EXHIBIT INDEX
EX-1 2 a2138532zex-1.htm EXHIBIT 1
QuickLinks -- Click here to rapidly navigate through this document

Exhibit 1

Execution Copy

AGREEMENT AND PLAN OF MERGER

DATED AS OF

JUNE 9, 2004

BY AND AMONG

PETRO-CANADA (US) HOLDINGS LTD.,

RAVEN ACQUISITION CORP.

AND

PRIMA ENERGY CORPORATION

TABLE OF CONTENTS

			Page
ARTICLE I THE OFFER			1
	SECTION 1.01.	The Offer	1
	SECTION 1.02.	Company Actions	3
	SECTION 1.03.	Board Representation	4
	SECTION 1.04.	Top-Up Option	5
ARTICLE II MERGER; CONVERSION OF SECURITIES			6
	SECTION 2.01.	The Merger	6
	SECTION 2.02.	Certificate of Incorporation	7
	SECTION 2.03.	Bylaws	7
	SECTION 2.04.	Directors and Officers	7
	SECTION 2.05.	Additional Actions	7
	SECTION 2.06.	Conversion of Shares	8
	SECTION 2.07.	Surrender and Payment	8
	SECTION 2.08.	Company Stock Options	10
	SECTION 2.09.	Dissenting Shares	10
	SECTION 2.10.	Adjustments	11
	SECTION 2.11.	Withholding Rights	11
	SECTION 2.12.	Lost Certificates	11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY			11
	SECTION 3.01.	Corporate Existence and Power	11
	SECTION 3.02.	Corporate Authorization; Organizational Documents; and Minute Books	11
	SECTION 3.03.	Governmental Authorization	12
	SECTION 3.04.	Non-Contravention	12
	SECTION 3.05.	Capitalization	13
	SECTION 3.06.	Subsidiaries	14
	SECTION 3.07.	SEC Reports; Disclosure Controls and Procedures.	15
	SECTION 3.08.	Financial Statements; Undisclosed Liabilities	16
	SECTION 3.09.	Proxy Statement; Schedule 14D-9; Offer Documents	17
	SECTION 3.10.	Absence of Certain Changes; Conduct of Business	17
	SECTION 3.11.	Litigation	18
	SECTION 3.12.	Employee Benefit Plans; Employee Relations	18
	SECTION 3.13.	Taxes	20
	SECTION 3.14.	Finders and Investment Bankers	21
	SECTION 3.15.	Opinion of Financial Advisor	21
	SECTION 3.16.	Vote Required	22
	SECTION 3.17.	Anti-takeover Plan; State Takeover Statutes	22
	SECTION 3.18.	Environmental Matters	23
	SECTION 3.19.	Real Property; Ownership of Premises	24
	SECTION 3.20.	Compliance with Laws; Government Approvals	25
	SECTION 3.21.	Insurance	25
	SECTION 3.22.	Absence of Sensitive Payments	25
	SECTION 3.23.	Contracts	25
	SECTION 3.24.	Regulation as a Utility	26
	SECTION 3.25.	Intellectual Property	26
	SECTION 3.26.	Hedging; Hydrocarbon Sales and Balancing	27
	SECTION 3.27.	Agreements with Regulatory Agencies	27

	SECTION 3.28.	Reserve Report	27
	SECTION 3.29.	Status and Operation of Oil and Gas Properties	28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY			29
	SECTION 4.01.	Corporate Existence and Power	29
	SECTION 4.02.	Corporate Authorization	29
	SECTION 4.03.	Governmental Authorization	30
	SECTION 4.04.	Non-Contravention	30
	SECTION 4.05.	Disclosure Documents	30
	SECTION 4.06.	Financing	31
	SECTION 4.07.	No Ownership of Shares	31
ARTICLE V COVENANTS			31
	SECTION 5.01.	Conduct of the Company	31
	SECTION 5.02.	Access to Information	35
	SECTION 5.03.	No Solicitation	35
	SECTION 5.04.	Notices of Certain Events; Consultation	37
	SECTION 5.05.	Merger Subsidiary; Actions by Parent	37
	SECTION 5.06.	Director and Officer Liability	38
	SECTION 5.07.	Employee Benefits	38
	SECTION 5.08.	Taxes	39
	SECTION 5.09.	Meeting of the Company's Stockholders	39
	SECTION 5.10.	Proxy Statement	39
	SECTION 5.11.	Commercially Reasonable Efforts	40
	SECTION 5.12.	Public Announcements	40
	SECTION 5.13.	Customer Notifications	40
	SECTION 5.14.	Defense of Litigation	40
	SECTION 5.15.	Anti Takeover Plan; State Takeover Statutes	40
	SECTION 5.16.	Filings; Other Actions	40
	SECTION 5.17.	Certificate Concerning Real Property Holding Company	41
ARTICLE VI CONDITIONS TO THE MERGER			41
	SECTION 6.01.	Conditions to the Obligations of Each Party	41
ARTICLE VII TERMINATION			41
	SECTION 7.01.	Termination	41
	SECTION 7.02.	Effect of Termination	43
ARTICLE VIII DEFINITIONS			44
	SECTION 8.01.	Certain Defined Terms	44
	SECTION 8.02.	Cross-References	53
ARTICLE IX MISCELLANEOUS			55
	SECTION 9.01.	Notices	55
	SECTION 9.02.	Survival of Representations and Warranties and Agreements	55
	SECTION 9.03.	Amendments; No Waivers	56
	SECTION 9.04.	Fees and Expenses	56
	SECTION 9.05.	Successors and Assigns	57
	SECTION 9.06.	GOVERNING LAW	57
	SECTION 9.07.	Jurisdiction	57
	SECTION 9.08.	Counterparts; Effectiveness	57
	SECTION 9.09.	Entire Agreement; No Third Party Beneficiaries	58

SECTION 9.10.	Headings	58
SECTION 9.11.	Severability	58
SECTION 9.12.	Waiver of Jury Trial	58
SECTION 9.13.	Specific Performance	58
SECTION 9.14.	Interpretation	58

iii

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of June 9, 2004 (the "Agreement"), by and among PETRO-CANADA (US) HOLDINGS LTD., a Delaware corporation ("Parent"), RAVEN ACQUISITION CORP., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Subsidiary"), and PRIMA ENERGY CORPORATION, a Delaware corporation (the "Company"). Certain terms used in this Agreement are used as defined in Article VIII.

WHEREAS, the respective Boards of Directors of Parent, Merger Subsidiary and the Company have each approved the acquisition of the Company by Parent on the terms and subject to the conditions set forth in this Agreement.

WHEREAS, Parent proposes to cause Merger Subsidiary to make a tender offer to purchase all of the issued and outstanding shares of common stock, par value $0.015 per share, of the Company (the "Common Shares"), including associated rights ("Rights") to purchase preferred shares issued pursuant to the Rights Agreement (the Common Shares, together with the Rights, are hereinafter referred to individually as a "Share" and collectively, the "Shares"), at a price of $39.50 per Share (such amount, or any greater amount per Share paid pursuant to the Offer being hereinafter referred to as the "Offer Price"), subject to any required withholding of Taxes, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in this Agreement (such tender offer, as it may be amended and supplemented from time to time as permitted under this Agreement, the "Offer").

WHEREAS, after acquiring the Shares pursuant to the Offer, Merger Subsidiary will merge with and into the Company (the "Merger"), whereby each issued and outstanding Share not owned directly or indirectly by Parent or the Company, except as otherwise provided herein, will be converted into the right to receive the Offer Price.

WHEREAS, the Board of Directors of the Company has unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are advisable and fair to, and in the best interests of, the Company and its stockholders, (ii) adopted resolutions approving and declaring advisable this Agreement and the transactions contemplated hereby, including the Offer and the Merger, and (iii) subject to the terms and conditions contained herein, agreed to recommend that the stockholders of the Company accept the Offer, tender their Shares and, if required by applicable law, adopt and approve this Agreement and the transactions contemplated hereby, including the Merger.

WHEREAS, as an inducement to the Parent entering into this Agreement, certain Persons in their capacities as stockholders of the Company are concurrently with the execution and delivery of this Agreement entering into agreements in substantially the form of Exhibit A hereto (the "Stockholder Agreements").

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows:

ARTICLE I
THE OFFER

SECTION 1.01. The Offer.

(a) Subject to the provisions of this Agreement, as promptly as practicable, and in any event no more than ten Business Days, after the date of this Agreement, Merger Subsidiary shall, and Parent shall cause Merger Subsidiary to, commence, within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (together with the rules and regulations thereunder (the "Exchange Act")), the Offer. The obligation of Merger Subsidiary to, and of Parent to cause Merger Subsidiary to, accept for payment and pay for any Shares tendered shall be subject only to the satisfaction of the conditions set forth in Annex A and to the terms and conditions of this Agreement. Parent and Merger Subsidiary expressly reserve the right to waive any of the conditions to the Offer to the extent legally permissible (other than the Minimum Condition (as defined in Annex A), which may not be waived

without the prior written consent of the Company), to increase the price per Share payable in the Offer and to make any other changes in the terms and conditions of the Offer except that, without the prior written consent of the Company, no change may be made to the Offer that would alter form of consideration to be paid, no decrease in the Offer Price or the number of Shares sought in the Offer may be made, no change which imposes additional conditions to the Offer or modifies any of the conditions set forth in Annex A in any manner adverse to the holders of the Shares may be made and neither Parent nor Merger Subsidiary may extend the Offer, except in accordance with Section 1.01(c).

(b) On the date of commencement of the Offer, Parent and Merger Subsidiary shall file with the Securities and Exchange Commission ("SEC") a Tender Offer Statement on Schedule TO (as amended and supplemented from time to time, the "Schedule TO"), which shall comply in all material respects with the provisions of applicable federal securities laws, and shall contain (including as an exhibit) or incorporate by reference the offer to purchase relating to the Offer and forms of the related letter of transmittal and other appropriate documents (which documents, as amended or supplemented from time to time, are referred to herein collectively as the "Offer Documents"). The Parent and the Merger Subsidiary further agree to disseminate the Offer Documents to holders of Shares as and to the extent required by applicable federal securities laws. In conducting the Offer, the Parent and the Merger Subsidiary shall comply in all material respects with the provisions of the Exchange Act and any other applicable laws necessary to be complied with in connection with the Offer. The Company shall promptly furnish to Parent and Merger Subsidiary all information concerning the Company and its Subsidiaries and the Company's stockholders that may be reasonably required or requested in connection with any action contemplated by this Section 1.01. The Company and its counsel shall be given a reasonable opportunity to review and comment on the Offer Documents prior to their filing with the SEC. Parent and Merger Subsidiary agree to provide the Company, and to consult with the Company and its counsel regarding, any comments that may be received from the SEC or its staff (whether written or oral) with respect to the Offer Documents promptly after receipt thereof and any responses thereto. Each of Parent, Merger Subsidiary and the Company agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect, and Parent and Merger Subsidiary further agree to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and be disseminated to holders of Shares, in each case, as and to the extent required by law.

(c) Subject to the terms and conditions hereof, the Offer shall remain open until midnight, New York City time, on the date that is 20 Business Days after the date the Offer is commenced; provided, however, that without the consent of the Company, Parent and Merger Subsidiary shall have the right to extend the Offer (i) from time to time if, at any scheduled expiration date of the Offer, any of the conditions to the Offer set forth in Annex A shall not have been satisfied or earlier waived, until such conditions are satisfied or earlier waived; provided that if only the condition set forth in clause (y) of the first sentence of Annex A hereto is not satisfied or earlier waived, Parent and Merger Subsidiary shall extend the Offer at the request of the Company (but in no event shall Parent and Merger Subsidiary be obligated to extend expiration of the Offer pursuant to this clause (i) beyond September 30, 2004); and provided further that Parent and Merger Subsidiary shall, upon the written request of the Company, extend the Offer for one or more periods not to exceed an aggregate of fifteen Business Days if, as of any expiration date, all of the conditions set forth in clause (z) are not satisfied, but such conditions are reasonably capable of being satisfied in such period, (ii) for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer or any period required by applicable law, (iii) on one or more occasions (all such occasions aggregating not more than ten Business Days) beyond the latest expiration that would otherwise be permitted under clause (i) or (ii) of this sentence, if, on such expiration date, all of the conditions to Merger Subsidiary's obligations to accept for payment Shares are satisfied or earlier waived, but the number of Shares validly tendered (and not withdrawn) pursuant to the Offer, together with Shares then owned by Parent, represents less than 90% of the outstanding Shares on a fully

diluted basis; provided, however, that Parent's decision to extend the Offer in the case of this clause (iii) shall constitute a waiver of the conditions set forth in clauses (d) and (f) (excluding any willful or intentional breach of any material obligation of the Company) on Annex A and of its right to terminate the Agreement under Sections 7.01(b), (d), (k) or (l) and (iv) for one or more subsequent offering periods of up to an additional 20 Business Days in the aggregate (collectively, the "Subsequent Period") pursuant to Rule 14d-11 of the Exchange Act. Notwithstanding the foregoing, Parent and Merger Subsidiary shall also have the right to extend the Offer in accordance with Section 7.01(f).

(d) Subject to the terms and conditions of the Offer and this Agreement, Merger Subsidiary shall, and Parent shall cause Merger Subsidiary to, accept for payment and pay for Shares validly tendered and not withdrawn pursuant to the Offer as soon as practicable after the expiration thereof (but in any event within three Business Days); provided that Merger Subsidiary shall immediately accept and promptly pay for all Shares as they are tendered during any Subsequent Period. Parent shall provide or cause to be provided to Merger Subsidiary on a timely basis the funds necessary to purchase any Shares that Merger Subsidiary becomes obligated to purchase pursuant to the Offer.

SECTION 1.02. Company Actions.

(a) The Company hereby approves of and consents to the Offer and represents and warrants that the Board of Directors of the Company, at a meeting duly called and held prior to the date hereof, at which all of the directors were present, has unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are advisable and fair to, and in the best interests of, the Company and its stockholders, (ii) adopted resolutions approving and adopting and declaring advisable this Agreement and the transactions contemplated hereby, including the Offer and the Merger, (iii) resolved to recommend that the stockholders of the Company accept the Offer, tender their Shares and, if required by applicable law, adopt and approve this Agreement and the transactions contemplated hereby, including the Merger, provided that such recommendation may be withdrawn, modified or amended in accordance with the provisions of Section 5.03, (iv) acknowledged that such approval is effective for purposes of Section 203 of the Delaware General Corporation Law (the "DGCL"), (v) resolved to elect, to the extent permitted by law, not to be subject to any "moratorium," "control share acquisition," "business combination," "fair price" or other form of anti-takeover laws and regulations of any jurisdiction that may purport to be applicable to this Agreement or the Stockholder Agreements and (vi) irrevocably taken all necessary steps to render Section 203 of the DGCL inapplicable to the Merger, Parent, Merger Subsidiary, the acquisition of Shares pursuant to the Offer and the transactions contemplated by the Stockholder Agreements. The Company further represents that Goldman, Sachs & Co. has delivered to the Board of Directors of the Company an opinion to the effect that, as of the date of this Agreement, and subject to the limitations and qualifications set forth therein, the consideration to be received by the holders of Shares (other than Parent and Merger Subsidiary) in the Offer and the Merger is fair from a financial point of view to such holders, and that the Company will deliver to Parent and Merger Subsidiary a true and correct copy of such opinion promptly after its receipt by the Company. The Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Board of Directors of the Company described in the first sentence of this Section 1.02(a), subject to the right of the Company's Board of Directors to withdraw, modify or amend its recommendation in accordance with the provisions of Section 5.03. The Company hereby represents and warrants that it has been advised that each of its directors and executive officers intends to tender pursuant to the Offer any and all Shares they own beneficially or of record.

(b) The Company shall file with the SEC on the date of commencement of the Offer a Solicitation/Recommendation Statement on Schedule 14D-9 (as amended and supplemented from time to time, the "Schedule 14D-9") that shall reflect, subject to the provisions of Section 5.03, the recommendation of the Company's Board of Directors referred to above, and shall disseminate the Schedule 14D-9 to stockholders of the Company as required by Rule 14D-9 promulgated under the

Exchange Act. The Company shall cooperate with Parent and Merger Subsidiary in mailing or otherwise disseminating the Schedule 14D-9 with the appropriate Offer Documents to the Company's stockholders. The Schedule 14D-9 shall comply in all material respects with the provisions of applicable federal securities laws. The Company shall deliver copies of the Schedule 14D-9 to Parent within a reasonable time prior to the filing thereof with the SEC for review and comment by Parent and its counsel (who shall provide any comments thereon as soon as reasonably practicable). The Company agrees to provide Parent, and to consult with Parent and its counsel regarding, any comments that may be received from the SEC or its staff (whether written or oral) with respect to the Schedule 14D-promptly after receipt thereof and any responses thereto. Each of the Company, the Parent and Merger Subsidiary shall promptly correct any information provided by it for use in the Schedule 14D-9 that shall become false or misleading in any material respect, and the Company shall take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to the stockholders of the Company as and to the extent required by applicable laws.

(c) In connection with the Offer, the Company shall promptly furnish Parent and Merger Subsidiary with (or cause Parent and Merger Subsidiary to be furnished with) mailing labels, security position listings and any available listing or computer file containing the names and addresses of the record holders of the Shares as of a recent date, and shall furnish Parent and Merger Subsidiary with such additional information (including, without limitation, updated lists of stockholders, mailing labels and lists of securities positions) and assistance as Parent or Merger Subsidiary or its agents may reasonably request in communicating the Offer to the record and beneficial holders of Shares. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, Parent and Merger Subsidiary shall, and shall cause each of their Affiliates to, hold in confidence the information contained in any of such labels, listings and files, use such information only in connection with the Offer and the Merger, and, if this Agreement is terminated, deliver to the Company all copies of such information or extracts therefrom then in their possession or under their control.

SECTION 1.03. Board Representation.

(a) Subject to applicable law, promptly upon the acceptance for payment of any Shares pursuant to the Offer, and from time to time thereafter as Shares are acquired pursuant to the Offer, Merger Subsidiary shall be entitled to designate such number of directors, rounded up to the next whole number, to serve on the Board of Directors of the Company as will give Merger Subsidiary representation on the Board of Directors of the Company equal to at least that number of directors on the Company's Board of Directors which equals the product of (i) the total number of directors on the Board of Directors (giving effect to the election of any additional directors pursuant to this Section and including current directors serving as officers of the Company) multiplied by (ii) the percentage that the aggregate number of Shares beneficially owned by Parent and/or Merger Subsidiary (including Shares accepted for payment) bears to the number of Shares outstanding. The Company shall take all actions necessary to cause Merger Subsidiary's designees to be elected or appointed to the Company's Board of Directors, including increasing the size of the Board of Directors and/or securing the resignations of incumbent directors (including, if necessary, to ensure that a sufficient number of independent directors are serving on the Board of Directors of the Company in order to satisfy the Nasdaq National Market listing requirements). Subject to applicable law and to the extent permitted by the Nasdaq National Market listing requirements, the Company shall cause individuals designated by Merger Subsidiary to constitute the same percentage as is on the entire Board of Directors of the Company (after giving effect to this Section 1.03(a)) to be on (i) each committee of the Board of Directors of the Company and (ii) each Board of Directors and each committee thereof of each Subsidiary of the Company. The Company's obligations to appoint designees to its Board of Directors shall be subject to compliance with Section 14(f) of the Exchange Act. At the request of Merger Subsidiary, the Company shall promptly take, at its expense, all actions required pursuant to

Section 14(f) and Rule 14f-1 under the Exchange Act in order to fulfill its obligations under this Section 1.03(a) and shall include in the Schedule 14D-9 or otherwise timely mail to its stockholders all necessary information to comply therewith. Merger Subsidiary will supply to the Company, and be solely responsible for, all information with respect to itself and its officers, directors and affiliates required by Section 14(f) and Rule 14f-1 under the Exchange Act.

(b) Notwithstanding the provisions of Section 1.03(a), following the election or appointment of Merger Subsidiary's designees pursuant to Section 1.03(a) and until the Effective Time, the Board of Directors of the Company shall at all times have at least three directors who are directors on the date hereof and who are not employed by the Company and who are not Affiliates, stockholders or employees of Parent or any of its Subsidiaries (the "Independent Directors"); provided that if any Independent Directors cease to be directors for any reason whatsoever, the remaining Independent Directors (or Independent Director, if there is only one remaining) shall be entitled to designate any other Person(s) who shall not be an Affiliate, stockholder or employee of Parent or any of its Subsidiaries to fill such vacancies and such Person(s) shall be deemed to be Independent Director(s) for purposes of this Agreement; provided that the remaining Independent Directors shall fill such vacancies as soon as practicable, but in any event within ten Business Days, and further provided that if no such Independent Director is appointed in such time period, Merger Subsidiary shall designate such Independent Director(s), provided further that if no Independent Director then remains, the other directors shall designate three Persons who shall not be Affiliates, stockholders or employees of Parent or any of its Subsidiaries to fill such vacancies and such Persons shall be deemed to be Independent Directors for purposes of this Agreement. In all cases, the selection of any Independent Directors who are not directors on the date hereof shall be subject to the approval of Merger Subsidiary, not to be unreasonably withheld or delayed.

(c) Following the election or appointment of Merger Subsidiary's designees pursuant to Section 1.03(a) and until the Effective Time, the approval of a majority of the Independent Directors shall be required to authorize (and such authorization shall constitute the authorization of the Board of Directors and no other action on the part of the Company, including any action by any other director of the Company, shall be required to authorize) any termination of this Agreement by the Company, any amendment of this Agreement requiring action by the Board of Directors of the Company, any extension of time for performance of any obligation or action hereunder by Parent or Merger Subsidiary and any enforcement of or any waiver of compliance with any of the agreements or conditions contained herein for the benefit of the Company, any action to seek to enforce any obligations of Parent or Merger Subsidiary under this Agreement or any other action by the Company's Board of Directors under or in connection with this Agreement. The Independent Directors shall have full power solely with respect to the matters set forth in the previous sentence to be approved by the Independent Directors.

SECTION 1.04. Top-Up Option.

(a) The Company hereby grants to Parent and Merger Subsidiary an irrevocable option (the "Top-Up Option") to purchase, at a price per share equal to the Offer Price, a number of shares of Company Common Stock (the "Top-Up Option Shares") that, when added to the number of shares of Company Common Stock owned by Parent or Merger Subsidiary or any wholly-owned Subsidiary of Parent or Merger Subsidiary at the time of exercise of the Top-Up Option, constitutes one share of Company Common Stock more than 90% of the number of shares of Company Common Stock that will be outstanding immediately after the issuance of the Top-Up Option Shares; provided that in no event shall the Top-Up Option be exercisable for more than 2,596,237 shares of Company Common Stock. The Top-Up Option may be exercised by Parent or Merger Subsidiary, in whole or in part, at any time on or after the expiration date of the Offer and on or prior to the tenth Business Day after the later of (i) the expiration date of the Offer or (ii) the expiration of any Subsequent Period; provided, however, that the obligation of the Company to deliver Top-Up Option Shares upon the

exercise of the Top-Up Option is subject to the conditions that (A) no provision of any applicable law and no judgment, injunction, order or decree shall prohibit the exercise of the Top-Up Option or the delivery of the Top-Up Option Shares in respect of such exercise, (B) the issuance of Top-Up Option Shares pursuant to the Top-Up Option would not require approval of the Company's stockholders under applicable law or regulation (including, without limitation, Nasdaq National Market rules and regulations, including Section 4350(i)(1)(D)), (C) upon exercise of the Top-Up Option, the number of shares of Company Common Stock owned by Parent or Merger Subsidiary or any wholly-owned Subsidiary of Parent or Merger Subsidiary constitutes one share of Company Common Stock more than 90% of the number of shares of Company Common Stock that will be outstanding immediately after the issuance of the Top-Up Option Shares, and (D) Merger Subsidiary has accepted for payment and paid for all Shares validly tendered in the Offer and not withdrawn. The parties shall cooperate to ensure that the issuance of the Top-Up Option Shares is accomplished consistent with all applicable legal requirements of any Governmental Entity, including compliance with an applicable exemption from registration of the Top-Up Option Shares under the Securities Act of 1933, as amended (together with the rules and regulations thereunder, the "Securities Act").

(b) In the event Parent or Merger Subsidiary wishes to exercise the Top-Up Option, Parent shall so notify the Company at least one Business Day in advance and shall set forth in such notice (i) the number of shares of Company Common Stock that are expected to be owned by Parent, Merger Subsidiary or any wholly-owned Subsidiary of Parent or Merger Subsidiary immediately preceding the purchase of the Top-Up Option Shares and (ii) a place and time for the closing of the purchase of the Top-Up Option Shares. The Company shall, as soon as practicable following receipt of such notice, notify Parent and Merger Subsidiary of the number of shares of Company Common Stock then outstanding and the number of Top-Up Option Shares. At the closing of the purchase of the Top-Up Option Shares, Parent or Merger Subsidiary, as the case may be, shall pay the Company the aggregate price required to be paid for the Top-Up Option Shares upon issuance, and the Company shall cause to be issued to Parent or Merger Subsidiary a certificate representing the Top-Up Option Shares.

(c) Merger Subsidiary is, or will be upon the purchase of the Top-Up Option Shares, an "accredited investor", as defined in Rule 501 of Regulation D promulgated under the Securities Act. Merger Subsidiary agrees that the Top-Up Option and the Top-Up Option Shares to be acquired upon exercise of the Top-Up Option are being and will be acquired by Merger Subsidiary for the purpose of investment and not with a view to or for resale in connection with any distribution thereof in violation of the Securities Act. Certificates evidencing the Top-Up Option Shares delivered hereunder may, at the Company's election, contain the following legend:

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 OR ANY EXEMPTION THEREFROM."

ARTICLE II
MERGER; CONVERSION OF SECURITIES

SECTION 2.01. The Merger.

(a) Upon the terms and subject to the conditions hereof, and in accordance with the provisions of the DGCL, Merger Subsidiary shall be merged with and into the Company at the Effective Time. Following the Merger, the Company shall continue as the surviving corporation (the "Surviving Corporation") and shall continue its corporate existence under the laws of the State of Delaware, and the separate corporate existence of Merger Subsidiary shall cease.

(b) Subject to the provisions of this Agreement, as soon as practicable following the satisfaction or waiver (by the parties) of the conditions set forth in Article VI, the parties to this Agreement shall cause the Merger to be consummated by filing with the Secretary of State of the State of Delaware (the "Delaware Secretary of State") a certificate of merger (the "Certificate of Merger") in such form as is required by and executed in accordance with Section 251 of the DGCL. The Merger shall become effective when the Certificate of Merger has been filed with the Delaware Secretary of State or at such later time as shall be agreed upon by Parent and the Company and specified in the Certificate of Merger (the "Effective Time").

(c) Notwithstanding anything herein to the contrary, in the event that Merger Subsidiary shall acquire at least 90% of the outstanding Shares, Parent and the Company hereby agree to take all necessary and appropriate action to cause the Merger to become effective, without a meeting of the holders of Shares, in accordance with Section 253 of the DGCL as promptly as practicable.

(d) The Merger shall have the effects specified under the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and Merger Subsidiary shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Subsidiary shall become the debts, liabilities and duties of the Surviving Corporation. As of the Effective Time, the Company shall be a direct or indirect wholly-owned subsidiary of Parent.

SECTION 2.02. Certificate of Incorporation. Unless otherwise determined by Parent or Merger Subsidiary before the Effective Time, at the Effective Time the Certificate of Incorporation of the Company in effect immediately prior to the Effective Time shall be, from and after the Effective Time, the Certificate of Incorporation of the Surviving Corporation (the "Surviving Charter"), until amended as provided in the Surviving Charter or by applicable law.

SECTION 2.03. Bylaws. The Company shall take all requisite action so that the Bylaws of Merger Subsidiary in effect immediately prior to the Effective Time shall be, from and after the Effective Time, the Bylaws of the Surviving Corporation (the "Surviving Bylaws"), until amended in accordance with the Surviving Charter, the Surviving Bylaws or by applicable law.

SECTION 2.04. Directors and Officers.

(a) The Company shall take all requisite action so that the directors of Merger Subsidiary immediately prior to the Effective Time shall be, from and after the Effective Time, the directors of the Surviving Corporation until their successors are duly elected and qualified or until their earlier death, resignation or removal in accordance with the Surviving Charter, the Surviving Bylaws and the DGCL. If, at the Effective Time, a vacancy shall exist on the Board of Directors or in any office of the Surviving Corporation, such vacancy may thereafter be filled in the manner provided by the Surviving Charter, the Surviving Bylaws and applicable law.

(b) The officers of the Company immediately prior to the Effective Time shall be, from and after the Effective Time, the officers of the Surviving Corporation until their successors are duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Charter, the Surviving Bylaws and the DGCL.

SECTION 2.05. Additional Actions. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any further deeds, bills of sale, assignments or assurances in law or any other acts are necessary or desirable to (a) vest, perfect or confirm, of record or otherwise, in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of the Company or (b) otherwise carry out the provisions of this Agreement, the Company and its officers and directors shall be deemed to have granted to the Surviving Corporation an irrevocable power of attorney to execute and deliver all such deeds, bills of sale, assignments or assurances in law and to take all acts necessary, proper or desirable to vest, perfect or confirm title to

and possession of such rights, properties or assets in the Surviving Corporation and otherwise to carry out the provisions of this Agreement, and the officers and directors of the Surviving Corporation are authorized in the name of the Company or otherwise to take any and all such action.

SECTION 2.06. Conversion of Shares. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Subsidiary, the Company or the holders of any of the following securities:

(a) each Share held immediately prior to the Effective Time by the Company or any wholly-owned Subsidiary of the Company and each issued and outstanding Share owned by Parent, Merger Subsidiary or any other Subsidiary of Parent shall be cancelled automatically and retired and shall cease to exist, and no payment or consideration shall be made with respect thereto;

(b) each issued and outstanding Share (other than (i) Shares referred to in Section 2.06(a) and (ii) Dissenting Shares) shall be converted into the right to receive an amount in cash, without interest, equal to the Offer Price (the "Merger Consideration"). At the Effective Time, all such Shares shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such Shares immediately prior to the Effective Time shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration, without interest; and

(c) each share of capital stock of Merger Subsidiary issued and outstanding immediately prior to the Effective Time shall be converted into one fully paid and nonassessable share of common stock, par value $0.015 per share, of the Surviving Corporation with the same rights, powers and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation.

SECTION 2.07. Surrender and Payment.

(a) Prior to the Effective Time, Parent shall appoint a bank or trust company reasonably satisfactory to the Company to act as paying agent (the "Paying Agent") for the payment of Merger Consideration upon surrender of certificates representing the Shares. Prior to the Effective Time, Parent will enter into a paying agent agreement with the Paying Agent, and at such times, and from time to time, as the Paying Agent requires funds to make payment pursuant to Section 2.06(b), Parent shall deposit or cause to be deposited with the Paying Agent cash in an aggregate amount necessary to make the payments pursuant to Section 2.06(b) to holders of Shares (such amounts being hereinafter referred to as the "Exchange Fund"). The Paying Agent shall invest the Exchange Fund as directed by Parent; provided that such investments shall be (i) direct obligations of the United States of America, (ii) obligations for which the full faith and credit of the United States of America is pledged to provide for the payment of principal and interest, or (iii) commercial paper rated the highest quality by either Moody's Investors Services, Inc. or Standard & Poor's Corporation; provided further that no loss thereon or thereof shall affect the amounts payable to holders of Shares pursuant to Section 2.06(b). Any interest and other income resulting from such investment shall become a part of the Exchange Fund, and any amounts in excess of the amounts payable under Section 2.06(b) shall be promptly paid to Parent. To the extent that there are losses with respect to such investments or the funds available diminish for other reasons below the level required to make prompt payments of the Merger Consideration as contemplated hereby, Parent shall promptly replace or restore funds to ensure that the funds available are at a level sufficient to make payments.

(b) The Surviving Corporation shall instruct the Paying Agent to mail promptly after the Effective Time, but in any event no later than the fifth Business Day thereafter, to each person who was a record holder as of the Effective Time of an outstanding certificate or certificates which immediately prior to the Effective Time represented Shares (the "Certificates"), and whose Shares were converted into the right to receive Merger Consideration pursuant to Section 2.06(b), a form of letter of

transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions as are reasonable and customary in transactions such as the Merger) and instructions for use in effecting the surrender of the Certificates in exchange for payment of the Merger Consideration. Upon surrender of a Certificate to the Paying Agent for cancellation, together with such letter of transmittal duly executed and such other documents as may be reasonably required by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration payable in respect of that Certificate, less any required withholding of Taxes, and such Certificate shall forthwith be cancelled. No interest will be paid or accrued on the cash payable upon the surrender of the Certificates.

(c) If payment is to be made to a person other than the person in whose name the Certificate surrendered is registered, it shall be a condition of payment that the Certificate so surrendered be properly endorsed or otherwise be in proper form for transfer and that the person requesting such payment pay any transfer or other Taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered or establish to the satisfaction of the Surviving Corporation that such Tax has been paid or is not applicable.

(d) Until surrendered in accordance with the provisions of this Section 2.07, each Certificate (other than Certificates representing Shares owned by Parent, Merger Subsidiary or any other subsidiary of Parent, Shares held by the Company and Dissenting Shares) shall represent for all purposes, from and after the Effective Time, only the right to receive the applicable Merger Consideration.

(e) At and after the Effective Time, there shall be no registration of transfers of Shares which were outstanding immediately prior to the Effective Time on the stock transfer books of the Surviving Corporation. From and after the Effective Time, the holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided in this Agreement or by applicable law. The Merger Consideration paid upon the surrender of Certificates in accordance with the terms of this Article II shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares previously represented by such Certificates. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, such Certificates shall be cancelled and exchanged for cash as provided in this Article II. At the close of business on the day of the Effective Time the stock ledger of the Company shall be closed.

(f) Any portion of the Merger Consideration made available to the Paying Agent to pay for Shares for which appraisal rights have been perfected shall be returned to Parent upon demand. At any time more than nine months after the Effective Time, the Paying Agent shall upon demand of Parent deliver to it any funds which had been made available to the Paying Agent and not disbursed in exchange for Certificates (including all interest and other income received by the Paying Agent in respect of all such funds). Thereafter, holders of Certificates shall look only to the Surviving Corporation (subject to the terms of this Agreement, abandoned property, escheat and other similar laws) as general creditors thereof with respect to any Merger Consideration that may be payable, without interest, upon due surrender of the Certificates held by them. Any amounts remaining unclaimed immediately prior to such time when such amounts would otherwise escheat or become the property of any governmental unit or agency, shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. Notwithstanding the foregoing, none of Parent, the Company, the Surviving Corporation or the Paying Agent shall be liable to any holder of a Certificate for any Merger Consideration delivered in respect of such Certificate of Shares to a public official pursuant to any abandoned property, escheat or other similar law.

SECTION 2.08. Company Stock Options.

(a) At or immediately prior to the Effective Time, the Company shall cause each outstanding option (whether or not then vested or exercisable) to purchase shares of Company Common Stock (each, a "Company Stock Option") to be cancelled and converted into the right to receive cash, without interest, in an amount (the "Option Consideration") determined by multiplying (x) the excess, if any, of the Merger Consideration over the applicable per share exercise price of such Option by (y) the number of shares of Company Common Stock then covered by the Company Stock Option. The Option Consideration shall be payable by the Company to each holder of a Company Stock Option promptly after the Effective Time, subject to applicable withholding, and only after (i) verification by the Company and Parent of the ownership and terms of the particular Company Stock Option by reference to the Company's records, and (ii) delivery of a written instrument duly executed by the holder of the applicable Company Stock Option, in a form provided by the Company, and acceptable to Parent, setting forth (x) the aggregate number of shares of Company Common Stock issuable under the Company Stock Options owned by such holder and the respective issue dates and exercise prices of the Company Stock Options, (y) a representation by the holder that he or she is the owner of all Company Stock Options described pursuant to clause (x) and that none of those Company Stock Options has expired or ceased to be exercisable, and (z) a confirmation by such holder that the Company Stock Option is no longer in force or effect. Parent will provide funds to the Company sufficient to enable it to pay the Option Consideration. All unexercised Company Stock Options as of the Effective Time that have an exercise price equal to or exceeding the Merger Consideration shall be immediately cancelled and forfeited. Prior to the Effective Date, the Company shall make any amendments to the Company's 1993 Stock Incentive Plan, 2001 Stock Incentive Plan and Non-Employee Directors' Stock Option Plan (collectively, the "Company Option Plans") that are necessary to give effect to the transactions contemplated by this Section 2.08(a).

(b) Prior to the Effective Time, the Board of Directors of the Company, or an appropriate committee of non-employee directors of Parent, shall adopt a resolution consistent with the interpretive guidance of the SEC so that the disposition by any officer or director of the Company who is a covered person of the Company (if any) for purposes of Section 16 under the Exchange Act ("Section 16") of Shares or Company Stock Options pursuant to this Agreement and the Merger shall be an exempt transaction for purposes of Section 16.

SECTION 2.09. Dissenting Shares.

(a) Notwithstanding anything in this Agreement to the contrary, Shares that are held by any record holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal rights in accordance with Section 262 of the DGCL (the "Dissenting Shares") shall not be converted into the right to receive the Merger Consideration but shall become the right to receive such consideration as may be determined to be due in respect of such Dissenting Shares pursuant to the DGCL; provided, however, that any holder of Dissenting Shares who shall have failed to perfect or shall have withdrawn or lost such holder's rights to appraisal of such Dissenting Shares, in each case under the DGCL, shall forfeit the right to appraisal of such Dissenting Shares, and such Dissenting Shares shall be deemed to have been converted into the right to receive, as of the Effective Time, the Merger Consideration without interest. Notwithstanding anything to the contrary contained in this Section 2.09, if the Merger is rescinded or abandoned, then the right of any stockholder to be paid the fair value of such stockholder's Dissenting Shares shall cease. The Surviving Corporation shall comply with all of its obligations under the DGCL with respect to holders of Dissenting Shares.

(b) The Company shall give Parent (i) prompt written notice of any demands for appraisal, any withdrawals of such demands received by the Company and any other related instruments served pursuant to the DGCL and received by the Company, and (ii) the opportunity to direct and participate in all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for appraisal or negotiate, offer to settle or settle any such demands.

SECTION 2.10. Adjustments. If during the period between the date of this Agreement and the Effective Time, any change in the outstanding Shares shall occur, including by reason of any reclassification, recapitalization, stock dividend, stock split or combination, exchange or readjustment of Shares, or any stock dividend thereon with a record date during such period, the Offer Price, the Merger Consideration and any other amounts payable pursuant to this Agreement, as the case may be, shall be appropriately adjusted.

SECTION 2.11. Withholding Rights. Each of the Surviving Corporation and Parent shall be entitled to deduct and withhold, or cause the Paying Agent to deduct and withhold, from the consideration otherwise payable to any Person pursuant to this Article such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign tax law. If the Surviving Corporation or Parent, as the case may be, so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which the Surviving Corporation or Parent, as the case may be, made such deduction and withholding.

SECTION 2.12. Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will pay, in exchange for such affidavit claiming such Certificate is lost, stolen or destroyed, the Merger Consideration to be paid in respect of the Shares represented by such Certificate, as contemplated by this Article.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the corresponding section of the disclosure letter delivered by the Company to Parent and Merger Subsidiary prior to the execution and delivery of this Agreement (the "Company Disclosure Letter"), the Company represents and warrants to Parent and Merger Subsidiary as set forth below. The Company Disclosure Letter with respect to this Article III will be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article III. Any fact or item that is clearly disclosed on any Section of the Company Disclosure Letter in such a way to make its relevance to any representation made elsewhere in this Agreement or to the information called for by any other Section of the Company Disclosure Letter readily apparent on its face shall be deemed to be an exception to such representation or to be disclosed on such other Section of the Company Disclosure Letter, notwithstanding the omission of a reference or cross-reference thereto.

SECTION 3.01. Corporate Existence and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and assets and to carry on its business as presently conducted. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except for those jurisdictions where the failure to be so qualified would not have, individually or in the aggregate, a Company Material Adverse Effect.

SECTION 3.02. Corporate Authorization; Organizational Documents; and Minute Books.

(a) The Company has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to obtaining stockholder approval, if necessary under the DGCL, of the Merger, to consummate the Merger and the other transactions contemplated by this Agreement. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby, have been duly authorized by

all necessary corporate action (including the unanimous vote of the Board of Directors of the Company) on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Merger or the other transactions contemplated by this Agreement (other than, with respect to the Merger, the approval and adoption of this Agreement and the Merger by the affirmative vote of a majority of the voting power of the then outstanding shares of Company Common Stock, if necessary under the DGCL, and the filing and recordation of appropriate merger documents as required by the DGCL). This Agreement has been duly authorized, executed and delivered by the Company and (assuming the valid authorization, execution and delivery of this Agreement by Parent and Merger Subsidiary) constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to the enforcement of creditors' rights generally and (ii) is subject to general principles of equity.

(b) The Company has heretofore furnished to Parent complete and correct copies of the Certificates of Incorporation and the Bylaws or the equivalent organizational documents, in each case as amended or restated to date, of the Company and each of its Subsidiaries.

(c) The Company has made available to Parent correct and complete copies of the minutes of all meetings of the stockholders, the Board of Directors of the Company and each committee of the Boards of Directors of the Company and each of its Subsidiaries since January 1, 1989.

SECTION 3.03. Governmental Authorization. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby do not require any consent, approval, authorization or permit of or other action by, or filing with or notification to, any Governmental Entity, other than (i) as set forth in Section 3.03 of the Company Disclosure Letter, (ii) the filing of appropriate merger documents in accordance with the DGCL, (iii) compliance with any applicable requirements of the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (together with the rules and regulations thereunder, the "HSR Act"), the Exchange Act, the Securities Act and any applicable state securities or "blue sky" laws, (iv) consents, authorizations, permits, actions by, filings or notifications that are customarily obtained or made following the transfer of interests in Oil and Gas Properties whether or not on federal lands, and (v) such other consents, approvals, authorizations, permits, actions, filings or notifications the failure of which to be made or obtained, individually or in the aggregate, would not be expected to have a Company Material Adverse Effect.

SECTION 3.04. Non-Contravention. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) conflict with or result in any violation or breach of any provision of the Certificate of Incorporation, Bylaws or other organizational documents of the Company or any of its Subsidiaries, (ii) assuming compliance with the matters referred to in Section 3.03, conflict in any material respect with or result in a violation or breach in any material respect of any provision of any law or Order binding upon or applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, (iii) require any consent or other action by any Person under, constitute a default under or give rise to a right of termination, cancellation, change any right or obligation or give rise to a right of acceleration of any right or obligation or to the loss of any benefit or adverse modification of the effect (including an increase in the price paid by, or cost to, the Company or any of its Subsidiaries) of, or result in the triggering of any payment or other obligations under, any provision of any agreement or other instrument to which the Company or any of its Subsidiaries is a party or that is binding upon the Company or any of its Subsidiaries or their respective properties or assets or any license, franchise, permit or other similar authorization held by the Company or any of its Subsidiaries, or (iv) result in the creation or imposition of any Lien on any properties or asset of the Company or any of its

Subsidiaries, except for any occurrences or results referred to in clauses (iii) and (iv) that would not have, individually or in the aggregate, a Company Material Adverse Effect.

SECTION 3.05. Capitalization.

(a) The authorized capital stock of the Company consists of (i) 35,000,000 shares of common stock, par value $0.015 per share ("Company Common Stock"), and (ii) 2,000,000 shares of preferred stock, par value $0.015 per share (the "Preferred Stock"). As of the close of business on June 7, 2004, 13,329,598 shares of Company Common Stock were issued and outstanding, 348,406 shares of Company Common Stock were held by the Company, 2,157,150 shares of Company Common Stock were reserved for issuance under the Company Option Plans under which options to purchase 961,650 shares of Company Common Stock are outstanding, and no shares of Preferred Stock were issued and outstanding.

(b) The Company has made available to Parent correct and complete copies of all Company Option Plans and all forms of options issued under those Company Option Plans. Section 3.05 of the Company Disclosure Letter sets forth a correct and complete list, as of the date hereof, of the name of each holder of a Company Stock Option, the number of outstanding Company Stock Options held by such holder, the grant date thereof, the number of Shares such holder is entitled to receive upon exercise thereof, the exercise price, the vesting schedule and whether such person was an employee at the time of grant. All Company Stock Options which are subject to vesting will vest or accelerate as a result of the consummation of the Offer without any action on the part of the Company, Parent, Merger Subsidiary or the holder of any such Company Stock Option. Except as set forth in Section 3.05 of the Company Disclosure Letter, there are no options for, or other rights to purchase, any shares of capital stock of the Company.

(c) All of the outstanding shares of capital stock of the Company have been, and all shares of Company Common Stock that may be issued pursuant to the exercise of Company Stock Options or under the Company Option Plans will be, when issued in accordance with the respective terms thereof, duly authorized, validly issued and fully paid and non-assessable, and have not been (and will not be) issued in violation of (nor are any of the authorized shares of capital stock subject to) any preemptive or similar rights created by statute, the Certificate of Incorporation or By-laws of the Company, or any contract to which the Company is a party or by which its properties or assets are bound.

(d) Since December 31, 2003, no shares of capital stock have been issued by the Company except pursuant to Company Stock Options and for which shares are adequately reserved as described above.

(e) Except for the Company Stock Options outstanding as of the date hereof, there are no (i) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities or ownership interests in the Company, (ii) options (including stock option plans and programs), warrants, rights or other agreements or commitments to acquire from the Company, or obligations of the Company to issue, sell, deliver, exchange, convert, transfer or cause to be issued, sold, delivered, exchanged, converted or transferred, any capital stock, voting securities or other ownership interests in (or securities convertible into or exchangeable for capital stock or voting securities or other ownership interests in) the Company, (iii) obligations of the Company to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment relating to any capital stock, voting securities or other ownership interests in the Company, (iv) bonds, debentures, notes or other Indebtedness of the Company having the right to vote on any matters on which stockholders of the Company may vote or (v) obligations by the Company or any of its Subsidiaries to make any payments based on the price or value of the shares of Company Common Stock. There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any capital stock of the Company or any securities listed in clauses (i), (ii), (iii) and (iv) of the preceding sentence.

(f) There are no voting trusts, proxies or similar agreements or understandings to which the Company or any Subsidiary is a party or to which any of them are bound with respect to the voting of any shares of capital stock of the Company or any Subsidiary and there are no contractual obligations or commitments of any character to which the Company or any Subsidiary is a party restricting the transfer of any shares of capital stock of the Company or any Subsidiary.

(g) There are no outstanding stock appreciation rights or similar derivative securities or rights of the Company or any of its Subsidiaries.

(h) Section 3.05 of the Company Disclosure Letter sets forth as of the close of business on the Business Day immediately preceding the date hereof (i) the aggregate principal amount of all Indebtedness of the Company and its Subsidiaries, provided that with respect to subparagraph (x) of the definition thereof, such Indebtedness may be estimated in good faith, and (ii) the principal amount of each instrument of Indebtedness for borrowed money of the Company or any of its Subsidiaries having an outstanding principal amount in excess of $100,000. With respect to each such instrument of Indebtedness for borrowed money of the Company or any of its Subsidiaries, no condition exists or event has occurred which (whether with or without notice or lapse of time or both, or the happening or occurrence of any other event) would constitute a default or breach by the Company or any of its Subsidiaries or, to the Knowledge of the Company, any other party or parties thereto under any such instrument of Indebtedness.

SECTION 3.06. Subsidiaries.

(a) Each Subsidiary of the Company is a corporation, limited liability company or limited partnership duly incorporated or formed, as the case may be, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation, has all requisite corporate, limited liability company or partnership power and authority to own, lease and operate its properties and to carry on its business substantially as now conducted and is duly qualified to do business as a foreign corporation, limited liability company or limited partnership and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except where failure to be so would not have, individually or in the aggregate, a Company Material Adverse Effect. Section 3.06 of the Company Disclosure Letter sets forth with respect to each Subsidiary of the Company its name and jurisdiction of organization, authorized capital stock or share capital and the number of issued and outstanding shares of capital stock or share capital and the record owner(s) thereof.

(b) Each Subsidiary of the Company is wholly-owned by the Company, directly or indirectly, free and clear of any Lien and free and clear of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests). There are no outstanding (i) securities of the Company or any of its Subsidiaries convertible into or exchangeable for shares of capital stock or other voting securities or ownership interests in any such Subsidiary of the Company, or (ii) options or other rights to acquire from the Company or any of its Subsidiaries, and no other obligation of the Company or any of its Subsidiaries to issue, any capital stock, voting securities or other ownership interests in, or any securities convertible into or exchangeable for any capital stock, voting securities or ownership interests in, any such Subsidiary of the Company (the items in clauses (i) and (ii) being referred to collectively as the "Company Subsidiary Securities"). There are no outstanding obligations of the Company or any of such Subsidiaries to repurchase, redeem or otherwise acquire any outstanding Company Subsidiary Securities.

(c) The Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any Person other than its Subsidiaries.

SECTION 3.07. SEC Reports; Disclosure Controls and Procedures.

(a) Since January 1, 2001, the Company and its Subsidiaries have timely filed all forms, reports, statements and other documents required to be filed with the SEC, including (i) all Annual Reports on Form 10-K, (ii) all Quarterly Reports on Form 10-Q, (iii) all proxy statements relating to meetings of stockholders (whether annual or special), (iv) all Current Reports on Form 8-K and (v) all other reports, schedules, registration statements or other documents (collectively referred to as the "Company Reports"). As of their respective dates, and giving effect to any amendments or supplements thereto filed prior to the date of this Agreement, the Company Reports (including any financial statements or schedules included or incorporated by reference therein) (i) complied in all material respects with the applicable requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act of 2002 (together with any rules and regulations promulgated thereunder, the "Sarbanes-Oxley Act") as the case may be, and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company is not required to file any forms, reports, schedules, statements or other documents with any foreign Governmental Entity that performs a similar function to that of the SEC or any securities exchange or quotation service other than the Nasdaq National Market. No Subsidiary of the Company is subject to the periodic reporting requirements of Section 13 or 15 of the Exchange Act or is otherwise required to file documents with the SEC or any securities exchange or quotation service or any foreign Governmental Entity that performs a similar function to that of the SEC.

(b) The Company Reports disclose the contracts, arrangements, understandings with or similar agreements or other transactions relating to the business or operation of the Company or any of its Subsidiaries that are required to be disclosed pursuant to Item 404 of Regulation S-K of the SEC. Neither the Company nor any of its Subsidiaries has any loans outstanding to any of its directors or officers.

(c) The Company's principal executive officer and its principal financial officer have disclosed, based on their most recent evaluation, to the Company's auditors and the audit committee of the Company's Board of Directors (i) all significant deficiencies in the design or operation of internal controls that could adversely affect the Company's ability to record, process, summarize and report financial data and have identified for the Company's auditors any material weaknesses in internal controls and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls. The Company has established and maintains disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Exchange Act); such disclosure controls and procedures are designed to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the Company's principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared; and, to the Knowledge of the Company, such disclosure controls and procedures are effective in alerting in a timely fashion the Company's principal executive officer and its principal financial officer to material information required to be included in the Company's periodic reports required under the Exchange Act and effectively enable the Company's principal executive officer and its principal financial officer to make all certifications required under the Sarbanes-Oxley Act.

(d) Since January 1, 2001, neither the Company nor any of its Subsidiaries nor, to the Company's Knowledge, any director, officer, employee, auditor, accountant or representative of the Company or any of its Subsidiaries has received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries or their respective internal accounting controls, including any complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices. No attorney

representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Company's Board of Directors or any committee thereof or to any director or officer of the Company.

(e) Since January 1, 2001, neither the Company nor any of its Subsidiaries has received from the SEC or any other Governmental Entity any written comments or questions with respect to any of their Company Reports (including the financial statements or reserve estimates included therein) or any registration statement filed by any of them with the SEC or any notice from the SEC or other Governmental Entity that such Company Reports (including the financial statements or reserve estimates included therein) or registration statements are being reviewed or investigated, and to the Knowledge of the Company, there is not, as of the date of this Agreement, any investigation or review being conducted by the SEC or any other Governmental Entity of any Company Reports (including the financial statements or reserve estimates included therein) or registration statements of the Company or any of its Subsidiaries.

SECTION 3.08. Financial Statements; Undisclosed Liabilities.

(a) The audited consolidated financial statements and unaudited consolidated interim financial statements of the Company and its consolidated Subsidiaries included or incorporated by reference in the Company Reports, including reports on Forms 10-K and 10-Q, as of their respective dates, and giving effect to any amendments or supplements thereto filed prior to the date of this Agreement, comply as to form in all material respects with the then applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, were prepared in accordance with generally accepted accounting principles in the United States ("GAAP") applied on a consistent basis (except as may be indicated in the notes thereto and except in the case of unaudited statements, as permitted by Form 10-Q under the Exchange Act), and fairly present, in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations, changes in stockholders' equity and cash flows for the periods then ended (subject, in the case of any unaudited interim financial statements, to normal year-end adjustments, none of which have been and are reasonably likely to be materially adverse to the Company). The books and records of the Company and its Subsidiaries have been, and are being, maintained in accordance with GAAP and all other legal and accounting requirements. Neither the Company nor any of its Subsidiaries owns or leases any assets in Canada or derives any revenues from Canada.

(b) There are no liabilities or obligations of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable, inchoate or otherwise (collectively, "Liabilities"), other than (i) Liabilities disclosed and provided for in the consolidated balance sheet of the Company as of December 31, 2003 set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2003 or in the notes thereto and (ii) Liabilities incurred since December 31, 2003 in the ordinary course of business that would not have, individually or in the aggregate, a Company Material Adverse Effect.

(c) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for physical assets is compared with the existing physical assets at reasonable intervals and appropriate actions are taken with respect to any differences. Except as disclosed in the Company Reports filed with the SEC between January 1, 2004 and the date hereof, there are no related party transactions or off-balance sheet structures or transactions with respect to the Company or any of its

Subsidiaries that would be required to be reported or set forth in the Company Reports that are not so reported or set forth.

SECTION 3.09. Proxy Statement; Schedule 14D-9; Offer Documents.

(a) Each document required to be filed by the Company with the SEC or required to be distributed or otherwise disseminated to the Company's stockholders in connection with the transactions contemplated by this Agreement (the "Company Disclosure Documents"), including the Schedule 14D-9, the proxy or information statement of the Company (the "Proxy Statement"), if any, to be filed with the SEC in connection with the Merger, and any amendments or supplements thereto, when filed, distributed or disseminated, as applicable, will comply as to form in all material respects with the applicable requirements of the Exchange Act. The representations and warranties contained in this Section 3.09(a) do not apply to statements or omissions included in the Company Disclosure Documents based upon information furnished to the Company by Parent specifically for use therein.

(b) (i) The Proxy Statement, as supplemented or amended, if applicable, at the time such Proxy Statement or any amendment or supplement thereto is first mailed to stockholders of the Company and at the time such stockholders vote on adoption of this Agreement, and (ii) any Company Disclosure Documents (other than the Proxy Statement), at the time of the filing of such Company Disclosure Document or any supplement or amendment thereto and at the time of any distribution or dissemination thereof, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 3.09(b) will not apply to statements or omissions included in the Company Disclosure Documents based upon information furnished to the Company by Parent specifically for use therein.

(c) None of the information with respect to the Company or any of its Subsidiaries or Affiliates that the Company furnishes to Parent for use in the Offer Documents, at the time of the filing thereof, at the time of any distribution or dissemination thereof and at the time of the consummation of the Offer, will contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

SECTION 3.10. Absence of Certain Changes; Conduct of Business.

(a) Since December 31, 2003 (i) the Company and its Subsidiaries have conducted their business in the ordinary course consistent with past practices, (ii) there has not been any fact, event, circumstance or development that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect, (iii) there has not been any damage, destruction or loss (whether or not covered by insurance) with respect to any of the material assets of the Company or any of its Subsidiaries and (iv) neither the Company nor any of its Subsidiaries have taken any action that would have been prohibited had Sections 5.01(a), (b), (c), (d), (f) (h) (with respect to clause (h) only, to the extent that such actions are other than in the ordinary course of business consistent with past practice), (i), (j) (k), (l), (n) (with respect to clause (n) only, without regard to consent and other than in the ordinary course of business consistent with past practice), (p), (q) and (r) been in effect as of December 31, 2003.

(b) The business and operations of the Company and its Subsidiaries are not being conducted in default or violation of any term, condition or provision of (i) their respective Certificates of Incorporation or Bylaws or similar organizational documents, or (ii) any note, bond, mortgage, indenture, contract, lease or other instrument or agreement of any kind to which the Company or any of its Subsidiaries is now a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets may be bound, except, with respect to the foregoing clause (ii), defaults

or violations that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

SECTION 3.11. Litigation. Except as described in Section 3.11 of the Company Disclosure Letter, there is no action, suit, investigation or proceeding (collectively, "Legal Actions") pending against or, to the Company's Knowledge, threatened against the Company or any of its Subsidiaries or any present or former officer, director or other Person for which the Company or any Subsidiary may be liable or to which any of their respective properties, assets or rights are reasonably likely to be subject before any court or arbitrator or any Governmental Entity involving a claim for damages in excess of $250,000 or which would otherwise, individually or in the aggregate, have or reasonably be expected to have, a Company Material Adverse Effect or would reasonably be expected to prohibit or delay the transactions contemplated by this Agreement, nor is there any Order of any court or arbitrator or any Governmental Entity outstanding against the Company or any of its Subsidiaries.

SECTION 3.12. Employee Benefit Plans; Employee Relations.

(a) Section 3.12 of the Company Disclosure Letter contains a true and complete list of each "employee benefit plan" (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), including multiemployer plans within the meaning of ERISA Section 3(37)), and any stock purchase, stock option, stock bonus, phantom stock, severance, retention, employment, consulting, change-in-control, fringe benefit, welfare benefit, collective bargaining, bonus, incentive, deferred compensation, retirement, supplemental retirement, excess benefit, sick leave, vacation, holiday, salary continuance, tuition, post-retirement and all other material compensation or employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the transaction contemplated by this Agreement or otherwise), whether formal or informal, oral or written, which is or has been maintained, sponsored, contributed to or otherwise provided or made by the Company for the benefit of or with any current or former employee or director or under which the Company has any present or future liability or obligation. All such plans, agreements, programs, policies and arrangements shall be collectively referred to as the "Benefit Plans." All references to the "Company" in this Section 3.12 shall be deemed to refer to the Company and any employer that would be considered a single employer with the Company under Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended (together with the rules and regulations thereunder, the "Code") or Section 4001 of ERISA.

(b) The Company has, with respect to each Benefit Plan, if applicable, delivered to Parent true and complete copies of: (i) all Benefit Plan documents (including amendments) and agreements and related trust agreements (or other funding vehicles); (ii) the most recent summary plan descriptions; (iii) the most recent annual report (including all schedules thereto); (iv) the two most recent Form 5500 and attached schedules, annual audited financial statement and actuarial valuation report; (v) if the Benefit Plan is intended to qualify under Code Section 401(a), the most recent determination letter received from the Internal Revenue Service ("IRS"); and (vi) all material communications with any governmental entity or agency (including the Pension Benefit Guaranty Corporation and the IRS) or any current or former employee.

(c) No Benefit Plan is subject to either Code Section 412 or Title IV of ERISA and the Company has not sponsored, maintained or contributed to, or had any obligation to sponsor, maintain or contribute to, any employee benefit plan subject to Title IV of ERISA. The Company has not incurred and could not reasonably be expected to incur any direct or indirect liability (contingent or otherwise) under Title IV of ERISA.

(d) (i) Each Benefit Plan has in all material respects been maintained and administered in accordance with its terms and in compliance with all applicable laws and regulations including ERISA and the Code, (ii) each Benefit Plan which is intended to qualify under Code Section 401(a) is so

qualified and has been issued a favorable determination letter by the IRS and has not been amended in a manner, and no event has occurred since such date, which would cause any such plan to fail to remain so qualified, (iii) each Benefit Plan that requires registration with a relevant government body has been so registered, (iv) there are no Proceedings or claims pending or, to the Company's Knowledge, threatened (other than routine claims for benefits) by, on behalf of or against any Benefit Plan or any trusts related thereto, (v) no Benefit Plan is under audit or, to the Company's Knowledge, investigation by, or is the subject of a Proceeding with respect to the IRS, the Department of Labor or other Governmental Entity and, to the Knowledge of Company, no such audit, investigation or Proceeding is threatened.

(e) Except as may be required under the Consolidated Omnibus Budget Reconciliation Act of 1985 (within the meaning of Code Section 4980B) and at the expense of the employee or former employee, the Company has no obligation to provide or make available post-employment welfare benefits or welfare benefit coverage for any current or former employee or director.

(f) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in combination with another event) (i) entitle any current or former employee or director of the Company to severance pay, unemployment compensation or any similar payment or any forgiveness of Indebtedness, (ii) accelerate the time of payment or vesting, or increase the amount, of any compensation or benefits due to any current or former employee or director of the Company, (iii) give rise to any obligation to fund for any such payment or benefits, (iv) give rise to any limitation on the ability to amend or terminate any Benefit Plan, (v) result in any payment or benefit that constitutes an "excess parachute payment" within the meaning of Section 280G of the Code or (vii) constitute or involve a non-exempt prohibited transaction (as defined in ERISA Section 406 or Code Section 4975) or a breach of fiduciary responsibility within the meaning of ERISA Section 502(l).

(g) The Company has not maintained or contributed to (or had an obligation to contribute to) any "multiemployer plan" or "multiple employer plan" within the meaning of the Code or ERISA or the regulations promulgated thereunder.

(h) The Company's Employee Stock Ownership Plan (the "ESOP") is an "employee stock ownership plan" (within the meaning of Section 4975(e)(7) of the Code). Neither the Company (including any of its Subsidiaries) nor the ESOP has any outstanding Indebtedness in connection with or with respect to the ESOP.

(i) (i) Neither the Company nor any of its Subsidiaries is a party to or bound by any collective bargaining or similar agreement with any union or other labor organization or is engaged in any labor negotiations with any labor union; and (ii) (A) each of the Company and its Subsidiaries is, and has at all times been, in compliance in all material respects with all applicable laws, rules, regulations and orders respecting employment and employment practices, terms and conditions of employment, wages, hours or work and occupational safety and health, and is not engaged in any unfair labor practices as defined in the National Labor Relations Act or other applicable law; (B) there is no arbitration, strike, slowdown, stoppage or lockout pending, or, to the Knowledge of the Company, threatened against or affecting the Company or any of the Subsidiaries; (C) there are no Proceedings pending between the Company or any of its Subsidiaries and any of their respective employees before any Governmental Entity; and (D) to the Knowledge of the Company, there are no activities or proceedings of any labor union to organize any employees of the Company or any of its Subsidiaries.

(j) The Company has not incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act, and the regulations promulgated thereunder (the "WARN Act") that remains unsatisfied or any liability or obligation that is material to the Company and its Subsidiaries, taken as a whole, under any similar state or local law that remains unsatisfied.

(k) Since January 1, 2003, neither the Company nor any Subsidiary has entered into any new, or modified or amended any existing, employment agreement or Benefit Plan and the Company does not have any formal plan or commitment, whether legally binding or not, to create any additional Benefit Plan or to amend or modify any Benefit Plan.

(l) Neither the Company nor any Benefit Plan, nor, to the Company's Knowledge, any "disqualified person" (as defined in Code Section 4975) or any "party in interest" (as defined in ERISA Section 3(18)), has engaged in any prohibited transaction (within the meaning of Code Section 4975 or ERISA Section 406) for which a class exemption is not available. All contributions, premiums, benefits and other payments required to be made to or under, or accrued with respect to, each Benefit Plan with respect to all periods through the Effective Time shall have been made or properly accrued prior to Closing. Each Benefit Plan may be unilaterally terminated and/or amended by the Company at any time without liability, damage or penalty. The Company does not have any unfunded liabilities under any pension plan (within the meaning of Section 3(2) of ERISA) that is not intended to be qualified under Section 401(a) of the Code.

SECTION 3.13. Taxes.

(a) All Tax Returns required to be filed by or with respect to the Company or any of its Subsidiaries have been duly and timely filed. All such Tax Returns are true, correct and complete in all material respects. The Company and its Subsidiaries have fully and timely paid all material Taxes owed by them (whether or not shown on any Tax Return) and the Company and its Subsidiaries have made adequate provision for any Taxes that are not yet due and payable for all taxable periods, or portions thereof, ending on or before the Effective Time.

(b) The Company and its Subsidiaries have made available to Parent true, correct and complete copies of all Tax Returns, examination reports and statements of deficiencies for taxable periods, or transactions consummated, for which the applicable statutory periods of limitations have not expired.

(c) There are no outstanding agreements extending or waiving the statutory period of limitations applicable to any claim for, or the period for the collection, assessment or reassessment of, Taxes due from the Company or any of its Subsidiaries for any taxable period and no request for any such waiver or extension is currently pending. There is no outstanding power of attorney from the Company or any of its Subsidiaries authorizing anyone to act on behalf of the Company or any Subsidiary in connection with any Tax of the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has requested any extension of time within which to file any Tax Return, which Tax Return has since not been filed.

(d) No audit or Proceeding by any Governmental Entity is pending or is in progress with respect to any Taxes due from or with respect to the Company or any of its Subsidiaries. No Governmental Entity has given notice of its intention to audit, commence any Proceeding relating to Taxes or assert any deficiency or claim for additional Taxes against the Company or any of its Subsidiaries. No claim in writing has been made against the Company or any of its Subsidiaries by any Governmental Entity in a jurisdiction where the Company and its Subsidiaries do not file Tax Returns that the Company or any such Subsidiary is or may be subject to taxation by that jurisdiction. All deficiencies for Taxes asserted or assessed in writing against the Company or any of its Subsidiaries have been fully and timely paid, settled or properly reflected in the most recent financial statements contained in the Company Reports filed with SEC prior to the date hereof.

(e) There are no Liens for Taxes upon the assets or properties of the Company or any of its Subsidiaries, except for statutory Liens for current Taxes not yet due.

(f) Neither the Company nor any of its Subsidiaries is a party to any contract, agreement or arrangement relating to the sharing, allocation or indemnification of Taxes or has any liability for Taxes of any Person (other than members of the affiliated group, within the meaning of Section 1504(a) of

the Code, filing consolidated federal income tax returns of which the Company is the common parent) under Treasury Regulation Section 1.1502-6, Treasury Regulation Section 1.1502-78 or any similar state, local or foreign laws, as a transferee or successor, or otherwise.

(g) The Company and its Subsidiaries have each withheld, if required by law, from their respective employees, independent contractors, creditors, stockholders and third parties, and timely paid to the appropriate Governmental Entity, proper and accurate amounts in all material respects in compliance with all Tax withholding and remitting provisions of applicable laws.

(h) Neither the Company nor any of its Subsidiaries has constituted a "distributing corporation" or a "controlled corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of shares qualifying for tax-free treatment under Section 355 of the Code (i) in the two years prior to the date of this Agreement or (ii) in a distribution that could otherwise constitute part of a "plan" or "series of related transactions" (within the meaning of Section 355(e) of the Code) in conjunction with the transactions contemplated by this Agreement.

(i) Any adjustment of Taxes of the Company or any of its Subsidiaries made by the IRS, which adjustment is required to be reported to the appropriate state, local, or foreign Governmental Entities, has been so reported.

(j) Neither the Company nor any of its Subsidiaries has executed or entered into a closing agreement under Section 7121 of the Code or any similar provision of state, local or foreign laws, and neither the Company nor any of its Subsidiaries is subject to any private letter ruling of the IRS or comparable ruling of any other Governmental Entity. Neither the Company nor any of its Subsidiaries has agreed to or is required to make any adjustments pursuant to Section 481 of the Code (or any corresponding provision of applicable law).

(k) There is no contract, plan or arrangement covering any Person that, individually or in the aggregate, could give rise to the payment of any amount that would not be deductible by Parent, the Company or any of their respective Subsidiaries by reason of Section 162(m) of the Code.

(l) There is no contract, agreement, plan or arrangement covering any person that, individually or collectively, could give rise to the payment of any amount that would not be deductible by Parent, the Company or any of its Subsidiaries by reason of Section 280G of the Code.

(m) Neither the Company nor any of its Subsidiaries has entered into any transaction that constitutes (i) a "reportable transaction" within the meaning of Treasury Regulation Section 1.6011-4(b), (ii) a "confidential tax shelter" within the meaning of Treasury Regulation Section 301.6111-2(a)(2) or (iii) a "potentially abusive tax shelter" within the meaning of Treasury Regulation Section 301.6112-1(b).

(n) The Company and its Subsidiaries have no net operating loss carry forwards.

SECTION 3.14. Finders and Investment Bankers. Except for Goldman, Sachs & Co. and Waterous & Co., whose fees will be paid by the Company pursuant to engagement letters, true and complete copies of which have previously been provided to Parent, there is no investment banker, broker or finder which has been retained by or is authorized to act on behalf of the Company or any of its Subsidiaries who might be entitled to fee or commission in connection with the transactions contemplated by this Agreement. Neither the Company nor any of its Subsidiaries has entered into any contract, arrangement or understanding to pay any fee or commission to any investment banker, broker, finder or other intermediary on behalf of any significant stockholders of the Company in their capacity as stockholders of the Company in connection with the transactions contemplated by this Agreement.

SECTION 3.15. Opinion of Financial Advisor. The Board of Directors of the Company has received an oral opinion, such opinion to be confirmed in writing dated the date of the Agreement, of

Goldman, Sachs & Co. to the effect that, as of the date of this Agreement and subject to the limitations and qualifications set forth therein, the consideration to be received in the Offer and the Merger by the holders of Shares (other than Parent or its Affiliates) is fair from a financial point of view to such holders.

SECTION 3.16. Vote Required. The only vote of the holders of any class or series of Company capital stock, if any, necessary to approve or adopt the Merger is the affirmative vote of the holders of a majority of the outstanding Shares and no other vote of the holders of any class or series of the capital stock of the Company is necessary to approve the other transactions contemplated hereby.

SECTION 3.17. Anti-takeover Plan; State Takeover Statutes.

(a) Except for the Rights Agreement, neither the Company nor any Subsidiary of the Company has in effect any stockholder rights plan or similar device or arrangement, commonly or colloquially known as a "poison pill" or "anti-takeover" plan, or any similar plan, device or arrangement and the Board of Directors of the Company has not adopted or authorized the adoption of such a plan, device or arrangement. A correct and complete copy of the Rights Agreement, together with all amendments thereto, as in effect on the date hereof, has been filed with the SEC.

(b) The Board of Directors of the Company has taken all necessary action (including any amendment thereof) under or with respect to the Rights Agreement (without redeeming the Rights) so that (1) none of the execution or delivery of this Agreement or the Stockholder Agreements, the occurrence and announcement of the transactions contemplated hereby, by the Offer Documents and by the Stockholder Agreements and the making or consummation of the Offer (including the acquisition of Shares pursuant to the Offer under this Agreement), the consummation of the Merger or any other transaction contemplated hereby will cause (i) the Rights to become exercisable under the Rights Agreement or to separate from the stock certificates to which they are attached, (ii) a "flip-in" (as referenced in the Rights Agreement) or Share Acquisition Date (as defined in the Rights Plan) to occur, or (iii) Parent, Merger Subsidiary or any of their Affiliates to be deemed an Acquiring Person (as defined in the Rights Agreement) and (2) the announcement of the intention of any Person to commence a tender or exchange offer the consummation of which would result in any Person becoming the "Beneficial Owner" (as defined in the Rights Agreement) of 15% or more of the Company Common Stock would not be deemed a "Distribution Date" (as defined in the Rights Agreement) resulting in the Rights separating from the stock certificates to which they are attached. The Company has taken all action (including amendments thereto) which may be necessary under the Rights Agreement to provide that the moment in time immediately prior to the Effective Time shall be the Final Expiration Date (as defined in the Rights Agreement). The Rights Agreement, as so amended, has not been further amended or modified. None of Parent, Merger Subsidiary or the Company nor any of their respective Affiliates shall have any obligations under the Rights Agreement to any holder or former holder of Rights as of or following the Effective Time.

(c) Prior to the date hereof, the Board of Directors of the Company has taken all necessary action to ensure that the restriction on business combinations contained in Section 203 of the DGCL will not apply to this Agreement, the Offer, the Merger, the Stockholder Agreements or the other transactions contemplated by this Agreement and the Stockholder Agreements. No "moratorium," "control share acquisition," "business combination," "fair price" or other form of anti-takeover laws and regulations applies or purports to apply to the Offer, the Merger, this Agreement, or any of the transactions contemplated by this Agreement.

SECTION 3.18. Environmental Matters.

(a) Except as set forth in the Company Reports filed with the SEC prior to the date of this Agreement or in Section 3.18 of the Company Disclosure Letter:

(i) The Company and each of its Subsidiaries, and, to the Knowledge of the Company, their respective predecessors, if any, have been operated, and are, in compliance in all material respects with all applicable Environmental Laws, including all limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in all applicable Environmental Laws;

(ii) The Company and each of its Subsidiaries have obtained, are in compliance in all material respects with, and have made all appropriate filings for issuance or renewal of, all permits, licenses, authorizations, registrations and other governmental consents required by applicable Environmental Laws ("Environmental Permits"), including those regulating emissions, discharges or Releases of Hazardous Substances, or the use, storage, treatment, transportation, Release, emission and disposal of raw materials, by-products, wastes and other substances used or produced by or otherwise relating to the business of the Company or any of its Subsidiaries;

(iii) To the Knowledge of the Company, none of the Company's and its Subsidiaries' owned or leased real property is contaminated with any Hazardous Substances in concentrations or locations that require reporting or remediation under applicable Environmental Laws;

(iv) There are no claims, notices, civil, criminal or administrative Proceedings or inquiries pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries alleging that the Company or any of its Subsidiaries is in violation in any material respect of or otherwise subject to liability in any material respect under applicable Environmental Laws;

(v) The Company and its Subsidiaries have not been advised by the owner of any contiguous property or by any third party of any objections as to the manner in which the Company and its Subsidiaries or any occupant has used or presently operates the Oil and Gas Interests, or of any environmental contamination emanating from the Oil and Gas Interests, nor has the Company and its Subsidiaries been advised by any third party of its intention to institute a claim or action against the Company and its Subsidiaries with respect to any such alleged environmental contamination;

(vi) There has been no Release into the environment of, nor exposure of any person or property to, Hazardous Substances in connection with the properties and operations of the Company or any of its Subsidiaries that is reasonably likely to give rise to any material claim for remediation, damages or compensation; and

(vii) Except as specifically related to the Company's or any of its Subsidiaries' permitted oil and gas operations or oil and gas field service operations, there are no underground or aboveground storage tanks, incinerators or surface impoundments at, on, or about, under or within any real property owned or operated by the Company or any of its Subsidiaries. Any pit, tank or storage container containing Hydrocarbons or related oil and gas exploration and production waste (including production waters) used in connection with the Company's or any of its Subsidiaries' oil and gas operations in all material respects has been properly permitted with the appropriate Governmental Entities and is not in material violation of applicable Environmental Laws, and neither the Company nor its Subsidiaries has any Knowledge of any spill or Release or leak from such pits, tanks or containers that has not been reported or remediated to the extent required by applicable Environmental Laws.

(b) The Company and each of its Subsidiaries have provided Parent and Merger Subsidiary with copies of correspondence, documents, data and reports relating to:

(i) Any unresolved notices of violation, non-compliance or deficiency issued to the Company or its Subsidiaries under Environmental Laws relating to the operation of the Oil and Gas Interests or the operations of the Company and its Subsidiaries, except to the extent any liability relating thereto is not expected to exceed $50,000 per incident; and

(ii) Releases of Hazardous Substances on any property owned or operated by the Company or its Subsidiaries, where such the investigation, remediation or monitoring of such Release could reasonably be expected to exceed $50,000 per incident.

SECTION 3.19. Real Property; Ownership of Premises.

(a) Except for the Oil and Gas Interests (to which subparagraph (c) of this Section 3.19 and Section 3.29 apply), (i) the Company and its Subsidiaries have good and indefeasible title to, or have a valid and enforceable easement, right of way, license, permit or other right to use or a valid and enforceable leasehold interest in, all real property (including all buildings, fixtures and other improvements thereto) owned, leased or otherwise used or occupied by them in the conduct of their respective businesses as such businesses are now being conducted, except for Permitted Encumbrances, (ii) neither the Company's nor any of its Subsidiaries' ownership of or leasehold, easement, right of way, license, permit or other right or interest in or with respect to any such property is subject to any Lien, except for Permitted Encumbrances, and (iii) all buildings, fixtures and improvements in, on or upon such property are in reasonably adequate condition and repair, normal wear and tear excepted, for the continued conduct of the business of the Company and its Subsidiaries in the manner in which it is currently conducted. All easements, rights of way, leases, licenses, permits and other similar rights held by the Company or any of its Subsidiaries for the use of real property have terms which are reasonably adequate for the Company's and its Subsidiaries' future business operations contemplated at present and such real property and all buildings, fixtures and improvements are in compliance in all material respects with all applicable laws, orders, regulations and insurance requirements.

(b) Except for the Oil and Gas Interests (to which subparagraph (c) of this Section 3.19 and Section 3.29 apply), (i) the Company and its Subsidiaries have good and marketable title to, or in the case of leased property and assets, valid leasehold interests in, all of their tangible personal properties and assets used or held for use in their business, and such properties and assets are free and clear of any Liens, except for Permitted Encumbrances, and (ii) all tangible personal property, fixtures, facilities, machinery and equipment of the Company and its Subsidiaries are in reasonably adequate condition and repair, normal wear and tear excepted, for the continued conduct of the business of the Company and its Subsidiaries in the manner in which it is currently conducted, and none of such tangible personal property, fixtures, facilities, machinery and equipment is in need of maintenance or repairs, except for ordinary, routine maintenance and repairs that are not material in nature or cost.

(c) The Company or its Subsidiaries have Good and Marketable Title to the Oil and Gas Interests, except for failures to have Good and Marketable Title that, in the aggregate, have Title Defect Amounts of less than $3,000,000. The Title Defect Amount shall be considered a materiality qualifier to the foregoing representation and warranty regarding Good and Marketable Title.

(d) The Company has made available to Parent and Merger Subsidiary the following information regarding each Lease: the names of the parties, term, renewal options, termination rights, purchase options, description of the property and any unusual provisions (the "Lease Summary"). The Lease Summary is true, complete and correct in all material respects.

SECTION 3.20. Compliance with Laws; Government Approvals.

(a) The Company and each of its Subsidiaries is, and at all times since January 1, 2001 has been, in compliance in all material respects with, and to the Knowledge of the Company, is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of, any law, Order, permit, license or other governmental authorization or approval applicable to the Company or any of its Subsidiaries or by which any property, asset or operation of the Company or any of its Subsidiaries is bound or effected, except for failures to comply that have not resulted or would not reasonably be expected to result in the imposition of a fine, penalty or sanction against the Company or any of its Subsidiaries or any of their respective officers or directors.

(b) (i) The Company and its Subsidiaries hold all consents, permits, licenses, variances, exemptions, Orders and approvals from Governmental Entities that are necessary or required for the operation of the business as conducted at present of the Company and its Subsidiaries taken as a whole (collectively, the "Company Permits"), (ii) the Company and its Subsidiaries are in compliance in all material respects with the terms of the Company Permits and (iii) no suspension or cancellation of any of the Company Permits is pending or threatened, and no such suspension or cancellation will result from the transactions contemplated by this Agreement.

SECTION 3.21. Insurance. The Company and its Subsidiaries maintain, with financially sound and reputable insurers, insurance in such amounts, including deductible arrangements, and of such a character as is, in the judgment of the Board of Directors of the Company, reasonable in light of the risks faced by the Company and its Subsidiaries in the conduct of their business. All policies of title, fire, liability, casualty, business interruption, workers' compensation and other forms of insurance including, but not limited to, directors and officers insurance, held by the Company and its Subsidiaries, are in full force and effect in accordance with their terms. Neither the Company nor any of its Subsidiaries is in default in any respect under any provisions of any such policy of insurance that has not been remedied. Section 3.21 of the Company Disclosure Letter sets forth a true and complete list of all insurance policies carried by, or covering the Company and its Subsidiaries with respect to their businesses, assets and properties, together with, in respect of each such policy, the name of the insurer, the policy number, the type of policy, the amount of coverage, the deductible and all pending claims thereunder. There is no claim in excess of $100,000 pending under any of such policies as to which coverage has been challenged, reserved, denied or disputed by the underwriters of such policies.

SECTION 3.22. Absence of Sensitive Payments. Neither the Company, nor any Subsidiary or Affiliate or, to the Company's Knowledge, any officer, director, agent, employee or other person associated with any of them, acting alone or together, has performed any of the following acts: (i) the making of any contribution, payment, remuneration, gift or other form of economic benefit (a "Payment") to or for the private use of any governmental official, employee, agent or candidate where the Payment or the purpose of the Payment was illegal under the laws of the United States or the jurisdiction in which such payment was made, (ii) the establishment or maintenance of any unrecorded fund, asset or liability for any purpose or the making of any false or artificial entries on its books or (iii) the making of any Payment to any Person or the receipt of any Payment with the intention or understanding that any part of the Payment was to be used for any purpose other than that described in the documents supporting the Payment.

SECTION 3.23. Contracts.

(a) There is no contract, agreement or understanding that is required to be described in or filed as an exhibit to any Company Report that is not described in or filed as required by the Securities Act or the Exchange Act, as the case may be (any such contract, agreement or understanding, a "Company Material Contract"). Each Company Material Contract is a valid and binding obligation of the Company or one of its Subsidiaries and is in full force and effect and enforceable against the Company or one of its Subsidiaries and, to the Knowledge of the Company, the other party or parties thereto, in each case

in accordance with its terms, other than any Company Material Contract which is by its terms no longer in force or effect and except as enforceability may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to the enforcement of creditors' rights generally and is subject to general principles of equity. Neither the Company nor any Subsidiary is in material violation or breach of or in default under any Company Material Contract nor, to the Company's Knowledge, is any other party to any such contract, agreement or understanding.

(b) Except for documents filed or listed as exhibits to the Company Reports filed with the SEC subsequent to December 31, 2003 and prior to the date hereof, neither the Company nor any of its Subsidiaries is a party to or bound by any (a) contract, agreement or arrangement (including any lease of real property) (i) materially restricting the ability of the Company or any of its Subsidiaries (or after the Merger, Parent or any of its Subsidiaries) to compete in or conduct any line of business or to engage in business in any significant geographic area, except for area of mutual interest agreements entered in connection with prospect reviews and similar arrangements entered into in the ordinary course of business, (ii) relating to Indebtedness, (iii) relating to any material joint venture, partnership, strategic alliance or similar arrangement (other than agreements relating to joint operation, development and exploration entered into in the ordinary course of business), (iv) requiring the Company or any of its Subsidiaries to register for resale under the Securities Act any securities of the Company or any of its Subsidiaries, (v) relating to the disposition or acquisition of material assets not in the ordinary course of business, (vi) containing any so-called "most favored nation" provisions or any similar provision requiring the Company or any Subsidiary (or after the Merger, Parent or any of its Subsidiaries) to offer a third party terms or concessions at least as favorable as offered to one or more other parties, (vii) providing for "performance guarantees" or contingent payments by the Company or any of its Subsidiaries, in each case involving more than $10,000 over the term of the relevant contract or (viii) any other contract, agreement, instrument or commitment involving payments made by or to the Company or any of its Subsidiaries in excess of $100,000 over the term of the relevant contract, or (b) financial derivatives master agreements, confirmation, or futures account opening agreements and/or brokerage statements evidencing financial hedging or other trading activities. The Company has made available to Parent copies of each of the foregoing agreements. Neither the Company nor any Subsidiary is in material violation or breach of or in default under any Company Material Contract nor, to the Company's Knowledge, is any other party to any such contract, agreement or understanding.

(c) The Offer and the Merger, will not have an adverse impact on any hedging or production sales, processing, refining or transportation contracts or agreements to which the Company or any of its Subsidiaries is a party.

SECTION 3.24. Regulation as a Utility.

(a) Neither the Company nor any of its Subsidiaries is subject to regulation as a natural gas distribution utility.

(b) Neither the Company nor any of its Subsidiaries is currently subject to regulation by the Federal Energy Regulatory Commission ("FERC") under the Federal Power Act or as a "natural gas company" under the Natural Gas Policy Act of 1978, as amended (the "NGPA"). Neither the Company nor any "subsidiary company" or "affiliate" (as such terms are defined in the Public Utility Holding Company Act of 1935 (the "1935 Act")) of the Company is subject to regulation as (i) a "holding company," a "public-utility company," a "subsidiary company" or an "affiliate" of a "holding company," within the meaning of Sections 2(a)(7), 2(a)(5), 2(a)(8) or 2(a)(11), respectively, of the 1935 Act, (ii) a "public utility" under the Federal Power Act or (iii) a public utility or public service company (or similar designation) by the federal government of the United States, any state in the United States or any political subdivision thereof, or by any foreign country.

SECTION 3.25. Intellectual Property. The Company and its Subsidiaries own, or otherwise possess the valid right to use, all patents, trademarks, trade names, service marks, Internet domain

names, copyrights, and any applications therefor, technology, know-how, processes and other proprietary intellectual property rights and computer software programs or applications ("Intellectual Property") that are necessary to the conduct of the business of the Company or its Subsidiaries as currently conducted (collectively, the "Company Intellectual Property"). The Company and each of its Subsidiaries have performed all acts to protect and maintain any material Company Intellectual Property, including but not limited to paying all required fees and Taxes to maintain all registrations and applications of such Company Intellectual Property in full force and effect. None of the Company or any of its Subsidiaries has received any notice of infringement of or conflict with (or knows or has known of such infringement of or conflict with) asserted rights of others with respect to the use of the Company Intellectual Property. The conduct of the Company's and its Subsidiaries' business or use of the Company Intellectual Property, products or services does not infringe upon or otherwise violate any Intellectual Property rights any other Person in a manner that would result in a material liability to the Company.

SECTION 3.26. Hedging; Hydrocarbon Sales and Balancing.

(a) Section 3.26 of the Company Disclosure Letter identifies and accurately summarizes in all material respects each Derivative Transaction (including each outstanding Hydrocarbon or financial hedging position attributable to the Hydrocarbon production of the Company and its Subsidiaries) to which the Company or any of its Subsidiaries is a party, or from or under which the Company or any of its Subsidiaries derives any economic benefit or has any economic exposure, in each case as of the date of the Company Disclosure Letter.

(b) (i) No Hydrocarbons attributable to the Oil and Gas Interests are subject to a sales contract (other than division orders, transfer orders or gas sales or purchase contracts (in each case) that is not terminable on 60 days or less notice without payment of penalty or premium), (ii) no Person has a call upon, option to purchase or a similar right with respect to production from the Oil and Gas Interests, (iii) neither the Company nor any of its Subsidiaries has taken or received any material volumes of Hydrocarbons under any gas balancing or similar agreements or arrangements that permit any Person thereafter to receive any portion of the interest of the Company or any of its Subsidiaries in Hydrocarbons to "balance" any disproportionate allocation of Hydrocarbons, and (iv) neither the Company nor any of its Subsidiaries has received or accrued any material prepayment, "take-or-pay," advance or similar payments for future deliveries of Hydrocarbons or in lieu of deliveries of Hydrocarbons that entitle the purchasers to "make up" or otherwise receive deliveries of Hydrocarbons without paying at such time the contract price therefore. With respect to clauses (iii) and (iv) there have been no changes in the Company's or its Subsidiaries' positions between such date or dates and March 31, 2004.

SECTION 3.27. Agreements with Regulatory Agencies. None of the Company or any of its Subsidiaries is subject to any cease-and-desist or other Order issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any Order or directive by, or is a recipient of any extraordinary supervisory letter from, or has adopted any board resolutions at the request of, any Governmental Entity (each, a "Company Regulatory Agreement") that restricts the conduct of its business in any material respect. None of the Company or any of its Subsidiaries has been advised by any Governmental Entity that such Governmental Entity is considering issuing or requesting any Company Regulatory Agreement.

SECTION 3.28. Reserve Report. The Company has furnished to Parent true and complete copies of the Netherland, Sewell & Associates, Inc. reserve report audit letters dated as of February 23, 2004, February 24, 2004, February 25, 2004, February 27, 2004 and April 6, 2004 (collectively the "Reserve Reports"). The Reserve Reports were prepared or reviewed by an independent engineering firm engaged by the Company using registered professional engineers. The Reserve Reports were

prepared in all material respects in accordance with SEC guidelines. All factual, non-interpretative data on which the Reserve Reports were based for purposes of estimating Hydrocarbon reserves was true and correct in all material respects. Except for changes (including changes in Hydrocarbon commodity prices) generally affecting the oil and gas industry and normal depletion by production in the ordinary course of business, there has been no material change in the estimated volumes of Hydrocarbon reserves set forth in the Reserve Reports since the respective dates of the Reserve Reports.

SECTION 3.29. Status and Operation of Oil and Gas Properties.

(a) The Leases that comprise the Oil and Gas Interests are (i) in full force and effect in accordance with their respective terms, (ii) all royalties, rentals and other payments due under the Leases have been properly and timely paid and (iii) there are currently pending no written requests or demands for payments, adjustments of payments or performance pursuant to obligations under the Leases, except where the failure of such Leases to be in full force and effect in accordance with their terms, or the pendency of such requests or demands, individually or in the aggregate, has not had, and would not reasonably be expected to have, a Company Material Adverse Effect. None of the Company or any of its Subsidiaries is, nor to the Company's Knowledge, is any other party, in breach in any material respect of any of its obligations under any Lease.

(b) Except as would not individually or in the aggregate have a Company Material Adverse Effect, the Oil and Gas Contracts of the Company and any of its Subsidiaries are (i) in full force and effect in accordance with their respective terms and (ii) are in form and substance considered conventional within the oil and gas industry. None of the Company or any of its Subsidiaries is in breach in any material respect of any of its obligations under any such Oil and Gas Contract, nor to the Company's Knowledge, is any other party to such Oil and Gas Contract in breach in any material respect of any of its obligations thereunder.

(c) To the Knowledge of the Company, all pipelines, gathering systems, plants or other material facilities owned or leased by the Company or any of its Subsidiaries are located on rights-of-way or on real property, permits or licenses owned or leased by the Company and its Subsidiaries or with respect to which the Company or its Subsidiaries has contractual rights.

(d) To the Knowledge of the Company, no Person has asserted that the Company's or its Subsidiaries' ingress or egress to or from any facility, plant, building or structure that is material to the operation of the Oil and Gas Interests infringes on the property or other rights of such Person.

(e) Every well included in the Oil and Gas Interests has been drilled and completed by the Company or one of its Subsidiaries or, to the Company's Knowledge, by third parties in material compliance with applicable law, and within the boundaries covered by the Oil and Gas Properties or within the limits otherwise permitted by contract, pooling or unit agreement and by law. No well located on the Oil and Gas Properties is subject to penalties on allowables after the date hereof because of any overproduction or any other violation of applicable laws or Orders of any Governmental Entity, which would prevent such well from being entitled to its full legal and regular allowable, from and after the date hereof as prescribed by any Governmental Entity. All producing wells, facilities, tangible personal property, fixtures, machinery and equipment included in the Oil and Gas Interests have been maintained in all material respects in a state of repair so as to be adequate for normal operations.

(f) With respect to all Oil and Gas Interests operated by the Company or its Subsidiaries, no non-operating owners have advised the Company or any of its Subsidiaries in writing of any material objection to the manner in which the Company or its Subsidiaries have operated, or of any non-operating owners' intent to conduct an audit in accordance with applicable Leases or Oil and Gas Contracts, including any joint operating agreement or the accounting procedures attached thereto.

(g) To the extent applicable, (i) the Company and its Subsidiaries have filed with the appropriate state and federal agencies all necessary applications for well determination under the NGPA, (ii) the Company and its Subsidiaries have complied in all material respects with all rules and regulations of FERC, (iii) any such required applications have been approved by the indicated state and federal agency and by FERC, (iv) for any well eligible for tax credits under Section 29 of the Code, the Company and its Subsidiaries have received the appropriate FERC determination and (v) no further applications are required under any FERC regulation, or any state or local governmental regulation to allow the legal sale of all gas produced by the Company and its subsidiaries consistent with past practices.

(h) Except as set forth in Section 3.29(h) of the Company Disclosure Letter, as to oil and gas wells operated by the Company or any of its Subsidiaries, and to the Knowledge of the Company as to oil and gas wells operated by third parties, there are no oil and gas wells that: (i) the Company or any of its Subsidiaries is currently obligated by law or contract to plug and abandon; (ii) are subject to exceptions to a requirement to plug and abandon issued by a Governmental Entity; or (iii) have been plugged and abandoned in a manner that does not comply in all material respects with law.

(i) The Company or its Subsidiaries are currently receiving from all purchasers of production from the Oil and Gas Interests revenues not less than the Required Net Revenue Interest without suspense or any indemnity other than the normal division order warranty of title.

(j) Section 3.29(j) of the Company Disclosure Letter sets forth, as of the date of this Agreement, all currently outstanding and expected internal and third party authorizations for expenditures (commonly known as "AFE's") which require a future expenditure by the Company or any of its Subsidiaries in excess of $50,000.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY

Parent and Merger Subsidiary represent and warrant to the Company that:

SECTION 4.01. Corporate Existence and Power. Each of Parent and Merger Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to own, lease and operate its properties and assets and carry on its business substantially as presently conducted. Merger Subsidiary has not engaged and will not engage in any activities other than in connection with or as contemplated by this Agreement and the transactions contemplated hereby. The copies of the charter and bylaws of the Parent and Merger Subsidiary that have been made available to the Company are complete and correct and in full force and effect.

SECTION 4.02. Corporate Authorization. The execution, delivery and performance by Parent and Merger Subsidiary of this Agreement and the consummation by Parent and Merger Subsidiary of the transactions contemplated hereby are within Parent's and Merger Subsidiary's corporate power and authority and have been duly authorized by all necessary corporate action on the part of Parent and Merger Subsidiary. This Agreement has been duly authorized, executed and delivered by Parent and Merger Subsidiary and (assuming the valid authorization, execution and delivery of this Agreement by the Company) constitutes a legal, valid and binding obligation of Parent and Merger Subsidiary enforceable against Parent and Merger Subsidiary in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to the enforcement of creditors' rights generally and (ii) is subject to general principles of equity. Parent, in its capacity as sole stockholder of Merger Subsidiary, and the Boards of Directors of Parent and Merger Subsidiary have adopted and approved this Agreement and declared the Merger advisable and no further corporate or stockholder action is required on the part of Parent or Merger

Subsidiary in connection with the consummation of the Merger, other than the filing of the Certificate of Merger as contemplated by this Agreement.

SECTION 4.03. Governmental Authorization. The execution, delivery and performance by Parent and Merger Subsidiary of this Agreement and the consummation of the transactions contemplated hereby do not require any consent, approval, authorization or permit of or other action by, or filing with or notification to, any Governmental Entity other than (i) filing of appropriate merger documents in accordance with the DGCL, (ii) compliance with any applicable requirements of the HSR Act, the Exchange Act, the Securities Act and any applicable state securities or "blue sky" laws, (iii) consents, authorizations, permits, actions by, filings or notifications that are customarily obtained or made following the transfer of interests in Oil and Gas Properties and (iv) such other consents, approvals, authorizations, permits, actions, filings or notifications, the failure of which to be made or obtained, individually or in the aggregate, would not be expected to have a Parent Material Adverse Effect.

SECTION 4.04. Non-Contravention. The execution, delivery and performance by Parent and Merger Subsidiary of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) conflict with or result in any violation or breach of any provision of the Certificate of Incorporation or Bylaws of Parent or Merger Subsidiary or other organizational documents of Parent or Merger Subsidiary, (ii) assuming compliance with the matters referred to in Section 4.03, conflict with or result in a violation or breach of any provision of any law or Order binding upon or applicable to Parent or Merger Subsidiary or any of their respective assets, (iii) require any consent or other action by any Person under, constitute a default under or give rise to a right of termination, cancellation or acceleration of any right or obligation or to the loss of any benefit or material adverse modification of the effect (including an increase in the price paid by, or cost to, Parent or Merger Subsidiary) of, or under any provision of any agreement or other instrument to which Parent or Merger Subsidiary is a party or that is binding upon Parent or Merger Subsidiary or their respective properties or assets or any license, franchise, permit or other similar authorization held by Parent or Merger Subsidiary, or (iv) result in the creation or imposition of any Lien on any asset of Parent or Merger Subsidiary, except for any occurrences or results referred to in clauses (ii), (iii) and (iv), that would not have, individually or in the aggregate, a Parent Material Adverse Effect.

SECTION 4.05. Disclosure Documents.

(a) Each of the Offer Documents when filed with the SEC, distributed or disseminated, as applicable, will comply as to form in all material respects with the applicable requirements of the Exchange Act. The representations and warranties contained in this Section 4.05(a) do not apply to statements or omissions included in the Offer Documents based upon information furnished to Parent by the Company specifically for use therein.

(b) The Offer Documents at the time such Offer Documents are filed with the SEC, at the time of any distribution or dissemination thereof and at the time of the consummation of the Offer will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 4.05(b) do not apply to statements or omissions included in the Offer Documents based upon information furnished to Parent by the Company specifically for use therein.

(c) None of the information with respect to Parent or Merger Subsidiary or any of their respective Subsidiaries or Affiliates that Parent furnishes to the Company for use in the Company Disclosure Documents, at the time of the filing thereof, at the time of any distribution or dissemination thereof, at the time of the consummation of the Offer and at the time such stockholders vote on adoption of this Agreement will contain any untrue statement of a material fact or omit to state any

material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

SECTION 4.06. Financing. Parent will have at the Acceptance Date and the Effective Time available to it funds sufficient to (a) pay the Offer Price for Shares pursuant to the Offer and (b) pay the Merger Consideration pursuant to the Merger. Upon consummation of the Offer in accordance with the terms hereof, Parent will make such funds available to the Merger Subsidiary as are necessary to enable the Merger Subsidiary to fulfill its obligations hereunder.

SECTION 4.07. No Ownership of Shares. Neither Parent nor any of its Subsidiaries owns any Shares or other securities convertible into Shares.

ARTICLE V
COVENANTS

SECTION 5.01. Conduct of the Company. Except as expressly contemplated by this Agreement or set forth in Section 5.01 of the Company Disclosure Letter, from the date hereof until the Effective Time, the Company and its Subsidiaries shall conduct their business, including continuing to explore, develop and drill and complete oil and gas wells, in all material respects in the ordinary course consistent with past practice, and shall use their commercially reasonable efforts to preserve intact in all material respects their business organizations and relationships with third parties and to keep available in all material respects the services of their present officers and key employees and comply in all material respects with all laws and regulations applicable to it or any of its properties, assets or business. Except as otherwise expressly approved in writing by Parent, as expressly contemplated or specifically permitted by this Agreement or as set forth in Section 5.01 of the Company Disclosure Letter, and without limiting the generality of the foregoing, from the date hereof until the Effective Time or the date, if any, on which this Agreement is terminated pursuant to Section 7.01:

(a) the Company shall not, and shall not permit any of its Subsidiaries to, adopt or propose any change in its Certificate of Incorporation or Bylaws or comparable charter or other organization documents or the terms of any outstanding security;

(b) the Company shall not, and shall not permit any of its Subsidiaries to, acquire or agree to acquire or lease (i) by merging or consolidating with, purchasing equity securities of, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof or (ii) any assets, other than in the case of clause (ii) in the ordinary course of business consistent with past practice;

(c) the Company shall not, and shall not permit any of its Subsidiaries to, sell, lease, mortgage, farm-out or otherwise encumber or subject to any Lien or otherwise dispose of any properties or assets, or stock or other ownership interests in any of its properties or Subsidiaries other than (i) in the ordinary course of business consistent with past practice, (ii) pursuant to any agreements existing as of the date hereof which are set forth in Section 5.01(c) of the Company Disclosure Letter, (iii) any Liens for Taxes not yet due and payable or being contested in good faith by appropriate proceedings and for which adequate reserves have been established on the Company's books and (iv) such mechanics and similar Liens, if any, as do not materially detract from the value of any of such properties, assets, stock or ownership interests or materially interfere with the present use of any of such properties or assets;

(d) the Company shall not, and shall not permit any of its Subsidiaries to, declare, set aside or pay any dividends or make any distributions on shares of capital stock other than dividends or distributions by any wholly-owned Subsidiary of the Company to the Company or another wholly-owned Subsidiary;

(e) the Company shall not, and shall not permit any of its Subsidiaries to, (i) issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any capital stock of the Company or any Company Subsidiary Securities, or any security convertible into or exercisable for either of the foregoing other than the issuance of Shares upon the exercise of Company Stock Options that have been granted prior to the date of this Agreement, (ii) split, combine or reclassify any capital stock of the Company or any of its Subsidiaries or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of capital stock of the Company or any of its Subsidiaries or (iii) except as disclosed in Section 3.05 of the Company Disclosure Letter, repurchase, redeem or otherwise acquire any shares of capital stock of the Company or any of its Subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities;

(f) the Company shall not, and shall not permit any of its Subsidiaries to, (i) enter into, or amend, modify, or terminate, or make any commitment in respect of, any Company Material Contract, except in the ordinary course of business consistent with past practice, (ii) enter into any new line of business, (iii) enter into any agreement or arrangement that limits or otherwise restrains the Company or any of its Subsidiaries from competing in or conducting any line of business or engaging in business in any significant geographic area, except for area of mutual interest agreements entered in connection with prospect reviews and similar arrangements or (iv) enter into any commitment or transaction material to the Company and its Subsidiaries, taken as a whole;

(g) the Company shall not, and shall not permit any of its Subsidiaries to, (i) incur any Indebtedness in excess of $1,000,000, or guarantee any Indebtedness of another Person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company or any of its Subsidiaries, enter into any "keep well" or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing, except for the endorsement of checks in the normal course of business consistent with past practice, or (ii) make any loans, advances or capital contributions to, or investments in, any other Person, other than to the Company or any direct or indirect wholly-owned Subsidiary of the Company;

(h) except as may be required by applicable law or existing contract set forth in Section 5.01(h) of the Company Disclosure Letter, the Company shall not, and shall not permit any of its Subsidiaries to, (i) increase the compensation payable or to become payable to its officers, directors or key employees, (ii) grant any severance or termination pay to officers, directors or key employees, (iii) enter into, modify or amend any employment, severance or consulting agreement with any stockholder or current or former director, officer or other employee of the Company or any Subsidiary, (iv) establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any current or former director, officer or employee, (v) amend or take any other actions to increase the amount of, or accelerate the payment or vesting of, any benefit or amount under any Benefit Plan, policy or arrangement (including the acceleration of vesting, waiving of performance criteria or the adjustment of awards or providing for compensation or benefits to any former or present director, officer, employee or consultant), or (vi) contribute, transfer or otherwise provide any cash, securities or other property to any grantee, trust, escrow or other arrangement that has the effect of providing or setting aside assets for benefits payable pursuant to any termination, severance, retention or other change in control agreement;

(i) except as may be required as a result of a change in law or in GAAP or a change in order to comply with SEC requirements, the Company shall not, and shall not permit any of its

Subsidiaries to, change any of its accounting policies or its procedures (including procedures with respect to the payment of accounts payable and collection of accounts receivable);

(j) except for existing authorizations for expenditures and capital expenditures approved in the 2004 capital budget approved by the Company's Board of Directors (copies of which authorizations and 2004 capital budget have been provided to Parent), the Company shall not, and shall not permit any of its Subsidiaries to, make or commit to make any capital expenditures in excess of $500,000 in the aggregate, provided that the Company shall give Parent prior written notice once such expenditures in the aggregate exceed $100,000;

(k) the Company shall, and shall cause each of its Subsidiaries to, pay when due (including applicable grace periods) its royalty payment obligations in connection with its Oil and Gas Interests (excluding only failure to make such royalty payments that would, or could reasonably be expected to, result in damages or losses of no more than $1,000,000 in the aggregate);

(l) without the prior written consent of Parent (or the oral consent of one of the Persons listed on Section 5.01(l) of the Company Disclosure Schedule), which shall not be unreasonably withheld or delayed and in which decision reasonability regarding whether or not to withhold consent shall be determined based upon what is in the reasonable best interests of the Company, the Company shall not, and shall not permit any of its Subsidiaries to, enter into any Derivative Transactions or fixed-price commodity sales agreements;

(m) the Company shall use its commercially reasonable efforts to ensure that it and each of its Subsidiaries keep or cause to be kept in force its material insurance policies (or substantial equivalents thereof);

(n) (i) the Company shall not, and shall not permit any of its Subsidiaries to, terminate any existing gas purchase, sale, supply, exchange, processing or transportation contract, or (ii) enter into any new contract (or grant any option, right of first refusal, put, call or other preferential right) for the purchase, sale, supply, transportation, storage, processing or exchange of gas or renew or extend or negotiate any existing contract providing for the same where such contract is not terminable within 30 days without penalty without the prior written consent of Parent, not to be unreasonably withheld or delayed and in which decision reasonability regarding whether or not to withhold consent shall be determined based upon what is in the reasonable best interests of the Company;

(o) the Company and its Subsidiaries will use their respective commercially reasonable efforts, in the ordinary course consistent with past practices, to: (i) develop, maintain and operate the Oil and Gas Interests in material compliance with applicable laws, regulations and Orders of any Governmental Entity, (ii) pay when due (including applicable grace periods) all rents and joint interest and other costs and expenses coming due and payable in connection with the Oil and Gas Interests (excluding only (A) failure to make such payments that would, or could reasonably be expected to, result in damages or losses that, when combined with any damages or losses under clauses (iii) and (iv) of this Section 5.01(o), exceed $1,000,000 in the aggregate and (B) failure to make such payments where there is a bona fide dispute as to such payment if adequate reserves have been accrued on the books and records of the Company with respect to such disputed payment and such Oil and Gas Interest could not be terminated prior to the resolution of such dispute), (iii) perform all of the covenants and conditions contained in the Leases and all Oil and Gas Contracts in a timely manner so as not to be in breach of such Leases and Oil and Gas Contracts (excluding only failure to perform that would, or could reasonably be expected to, result in damages or losses (including damages and losses resulting from termination of such contracts) that, when combined with any damages or losses under clauses (ii) and (iv) of this Section 5.01(o), exceed $1,000,000 in the aggregate), (iv) maintain in full force and effect all Leases and other Oil and Gas Contracts, including any options included within such Contracts (excluding only failure to

maintain that would, or could reasonably be expected to, result in damages or losses (including damages and losses resulting from termination of such Leases and contracts) that, when combined with any damages or losses under clauses (ii) and (iii) of this Section 5.01(o), exceed $1,000,000 in the aggregate), (v) maintain all Company Permits in full force and effect, and (vi) otherwise act with respect to the Oil and Gas Interests in good faith and in accordance with the Company's best business judgment as if the transactions herein were not contemplated by the parties;

(p) except as done in the ordinary course of business, the Company shall not, and shall not permit any of its Subsidiaries to, elect not to participate or waive its right not to participate in any operation on any new or existing oil and gas well under circumstances where the Company or any of its Subsidiaries or any of the Oil and Gas Interests will be subject to any penalty or forfeiture as a result of such non-participation or waiver of the right to participate, in each case without the prior consent of Parent, not to be unreasonably withheld or delayed and in which decision reasonability regarding whether or not to withhold consent shall be determined based upon what is in the reasonable best interests of the Company;

(q) the Company shall not, and shall not permit any of its Subsidiaries to, voluntarily relinquish the Company's or any of its Subsidiaries' position as operator with respect to any Oil and Gas Properties, in each case, without the prior consent of Parent, not to be unreasonably withheld or delayed and in which decision reasonability regarding whether or not to withhold consent shall be determined based upon what is in the reasonable best interests of the Company;

(r) the Company shall not, and shall not permit any of its Subsidiaries to, waive, release, assign, settle or compromise any Legal Actions or other Proceedings not covered by insurance, except to the extent such waivers, releases, assignments, settlements or compromises do not involve the payment of more than $250,000 in the aggregate;

(s) the Company shall not, and shall not permit any of its Subsidiaries to, adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or reorganization;

(t) the Company shall not, and shall not permit any of its Subsidiaries to, engage in any transaction with, or enter into any agreement, arrangement, or understanding with, directly or indirectly, any of their respective Affiliates, including any transactions, agreements, arrangements or understandings with any affiliate or other Person covered under Item 404 of Regulation S-K under the Securities Act, that would be required to be disclosed under Item 404;

(u) the Company shall not, and shall not permit any of its Subsidiaries to, effectuate a "plant closing" or "mass layoff," as those terms are defined in the WARN Act, affecting in whole or in part any site of employment, facility, operating unit or employee of the Company or any of its Subsidiaries;

(v) the Company shall not, and shall not permit any of its Subsidiaries to, agree or commit to do any of the foregoing; and

(w) the Company shall not, and shall not permit any of its Subsidiaries to, take or omit to take any action that would result in any representation and warranty of the Company hereunder being untrue and incorrect in any material respect as of the date when made if such action had then been taken or omitted, or would result in any of the conditions set forth in Annex A hereto or the conditions in Article VI hereof not being satisfied.

Nothing contained in this Agreement shall give Parent, directly or indirectly, rights to control or direct the Company's operations prior to the Effective Time. Prior to the Effective Time, the Company shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision of the Company's and its Subsidiaries' operations.

SECTION 5.02. Access to Information. From the date hereof until the Effective Time (or termination of this Agreement), the Company shall give Parent, its counsel, financial advisors, auditors and other authorized Representatives full access at reasonable times to the offices, properties, permits, files, books and records of the Company and its Subsidiaries, will furnish to Parent, its counsel, financial advisors, auditors and other authorized Representatives such financial and operating data and other information as such Persons may reasonably request and will instruct the Company's employees, counsel and financial advisors to cooperate with Parent in its investigation of the operations, business and/or properties of the Company and its Subsidiaries, including in connection with any environmental assessment or assessments (which may include visual and physical inspections and testing); provided that no investigation pursuant to this Section shall affect any representation or warranty given by the Company to Parent hereunder and nothing herein shall require the Company or any of its Subsidiaries to disclose any information that would cause a violation of law or any confidentiality agreement in effect as of the date of this Agreement. All nonpublic information provided to, or obtained by, Parent in connection with the transactions contemplated hereby shall be "Confidential Information" for purposes of the confidentiality agreement previously executed by or on behalf of Parent and the Company (the "Confidentiality Agreement"); provided, however, that notwithstanding anything to the contrary contained in the Confidentiality Agreement or this Agreement, nothing shall prohibit Parent or Merger Subsidiary from including, after prior consultation with the Company or its Representatives, in the Schedule TO, the Offer to Purchase, the other Offer Documents or the Proxy Statement any information that is required by law to be disclosed therein in connection with the purchase of Shares or the solicitation of proxies in connection with the Offer and the Merger, respectively.

SECTION 5.03. No Solicitation.

(a) From the date of this Agreement until the Effective Time or the termination of this Agreement in accordance with Article VII, except as specifically permitted in Sections 5.03(d), 5.03(f) or 5.03(g), the Company shall not, nor shall it authorize or permit any of its Subsidiaries or its or their Representatives to, directly or indirectly: (i) solicit, initiate, or knowingly induce, entertain or encourage any inquiries, offers or proposals that constitute, or are reasonably likely to lead to, any Acquisition Proposal; (ii) engage in discussions or negotiations with, furnish or disclose any information or data relating to the Company or any of its Subsidiaries to, or in response to a request therefor, give access to the books and records of the Company or its Subsidiaries to, any Person that has made or may be considering making any Acquisition Proposal; (iii) grant any waiver or release under any standstill or similar contract relating to the Shares or the Company or its Subsidiaries to which it or any of its Subsidiaries is a party, including the Rights Agreement, unless the Board of Directors, acting in good faith and by a majority of the members of its entire Board of Directors, has (A) determined, after consultation with its financial advisor, that such waiver or release is reasonably likely to result in a Superior Proposal and (B) determined, after consultation with its outside legal counsel, that the failure to take such action would be reasonably likely to result in a breach of the Board of Directors' fiduciary obligations to the stockholders of the Company under applicable laws; (iv) approve, endorse or recommend any Acquisition Proposal; or (v) enter into any agreement in principle, arrangement, understanding or contract for any Acquisition Proposal.

(b) The Company shall, and shall cause each of its Subsidiaries and instruct its Representatives to, immediately cease any existing solicitations, discussions, negotiations or other activity with any Person being conducted with respect to any Acquisition Proposal on the date hereof. The Company shall promptly inform its Representatives who have been engaged or are otherwise providing assistance in connection with the transactions contemplated by this Agreement of the Company's obligations under this Section 5.03. Without limiting the foregoing, the Company agrees that any breach of the restrictions set forth in this Section 5.03, including any failure of such Representatives to comply with any instructions referred to above, by any of such Representatives or any Affiliate of the Company shall be deemed to be a breach by the Company of this Section 5.03.

(c) The Company shall notify Parent in writing as soon as practicable (but in any event within 24 hours) after receipt of (i) any Acquisition Proposal, discussion, negotiation or indication from any Person that it intends to make, or is considering making, an Acquisition Proposal or (ii) any request for non-public information relating to the Company or any of its Subsidiaries or for access to the books and records of the Company or its Subsidiaries by any Person that the Company reasonably believes is reasonably likely to lead to an Acquisition Proposal. The Company shall promptly provide Parent with the identity of such Person, a description of the terms of such Acquisition Proposal or request and copies of any written materials received by the Company in connection with such Acquisition Proposal, discussion, negotiation or inquiry. The Company shall keep Parent fully informed on a current basis of the status and terms of any such Acquisition Proposal (including amendments or proposed amendments thereto), indication or request.

(d) Notwithstanding the foregoing, prior to the first date on which the Merger Subsidiary purchases any Shares pursuant to the Offer (the "Acceptance Date"), nothing in this Agreement shall prevent the Company or its Board of Directors from:

(i) engaging in discussions or negotiations with, or furnishing or disclosing any information relating to, the Company or any of its Subsidiaries or giving access to the books and records of the Company or any of its Subsidiaries to, any Person who, after the date hereof, makes a bona fide written Acquisition Proposal not solicited after the date hereof in violation of the provisions herein set forth if (x) the Board of Directors, acting in good faith and by a majority of the members of its entire Board of Directors, has (A) determined, after consultation with its financial advisor, that such Acquisition Proposal is reasonably likely to result in a Superior Proposal and (B) determined, after consultation with its outside legal counsel, that the failure to take such action would be reasonably likely to result in a breach of the Board of Directors' fiduciary obligations to the stockholders of the Company under applicable laws (in each case, taking into account any adjustments to the terms and conditions of this Agreement, the Offer or the Merger offered in writing by Parent in response to such Acquisition Proposal), and (y) the Company enters into a confidentiality agreement with such Person, provided that to the extent such Confidentiality Agreement is on terms and conditions materially more favorable to such Person than those contained in the Confidentiality Agreement, the Confidentiality Agreement shall be deemed amended to contain such materially more favorable terms; and

(ii) subject to compliance with Section 5.03(d)(i), entering into a definitive agreement providing for the implementation of or approving, endorsing or recommending an Acquisition Proposal, and, in connection therewith, withdrawing its recommendation of the Offer and the Merger, but only so long as (A) the Board of Directors, acting in good faith and by a majority of the entire Board of Directors, has (1) approved such definitive agreement, (2) determined, after consultation with its financial advisor, that such bona fide written and unsolicited Acquisition Proposal constitutes a Superior Proposal and (3) determined, after consultation with its outside legal counsel, that the failure to take such action would be reasonably likely to result in a breach of the Board of Directors' fiduciary obligations to the stockholders of the Company under applicable laws and (B) the Company terminates this Agreement pursuant to, and after complying with all of the provisions of, Section 7.01(f).

(e) If the Company or any of its Subsidiaries or its or their Representatives receives a request for information from a Person who has made an unsolicited bona fide written Acquisition Proposal involving the Company and the Company is permitted to provide such Person with information pursuant to this Section 5.03, the Company will provide to Parent a copy of the confidentiality agreement with such Person promptly upon its execution and provide to Parent a list of, and copies of, the information provided to such Person promptly after its delivery to such Person and promptly provide Parent with access to all information to which such Person was provided access, in each case only to the extent copies were not previously provided to Parent.

(f) The Board of Directors of the Company shall not (i) approve, endorse or recommend, or propose to approve, endorse or recommend, any Acquisition Proposal or (ii) enter into any agreement in principle or understanding or contract relating to an Acquisition Proposal, unless the Company terminates this Agreement pursuant to, and after complying with all of the provisions of, Section 7.01(f).

(g) Notwithstanding the foregoing, the Board of Directors of the Company shall be permitted to (i) disclose to the stockholders of the Company a position with respect to an Acquisition Proposal required by Rule 14e-2(a), Item 1012(a) of Regulation M-A or Rule 14d-9 promulgated under the Exchange Act and (ii) provide business information in the ordinary course of business consistent with past practice to Persons who have pre-existing contractual obligations (other than confidentiality agreements) with the Company or one of its Subsidiaries.

(h) The Company represents to Parent and Merger Subsidiary that, as of the date hereof, it is not engaged, directly or indirectly, in any negotiations or discussions with any other party with respect to an Acquisition Proposal.

SECTION 5.04. Notices of Certain Events; Consultation.

(a) The Company shall as promptly as reasonably practicable notify Parent of: (i) any notice or other communication of which the Company has Knowledge from any Person alleging that the consent of such Person (or another Person) is or may be required in connection with the transactions contemplated by this Agreement; (ii) any notice or other communication of which the Company has Knowledge from any Governmental Entity in connection with the transactions contemplated by this Agreement; (iii) any Proceedings commenced or, to the Knowledge of the Company, threatened against, relating to or involving or otherwise affecting the Company or any of its Subsidiaries that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 3.11 or which relate to the consummation of the transactions contemplated by this Agreement; and (iv) any fact or occurrence between the date of this Agreement and the Effective Time of which it has Knowledge which makes any of its representations contained in this Agreement untrue in any material respect or causes any material breach of its obligations under this Agreement.

(b) Each of Parent and Merger Subsidiary shall as promptly as reasonably practicable notify the Company of: (i) any notice or other communication of which the Parent has Knowledge from any Person alleging that the consent of such Person (or other Person) is or may be required in connection with the transactions contemplated by this Agreement; (ii) any notice or other communication of which the Parent has Knowledge from any Governmental Entity in connection with the transactions contemplated by this Agreement; (iii) any Proceedings commenced or, to the Knowledge of Parent, threatened in writing which relate to the consummation of the transactions contemplated by this Agreement and (iv) any fact or occurrence between the date of this Agreement and the Effective Time of which it becomes aware which makes any of its representations contained in this Agreement untrue in any material respect or causes any material breach of its obligations under this Agreement.

(c) The Company shall provide to Parent drafts of any Company Reports a reasonable time prior to filing and shall consult with, and provide an opportunity to comment to, Parent prior to filing any Company Report or making its financial results for any period publicly available after the date of this Agreement and prior to filing any Company Reports after the date of this Agreement.

SECTION 5.05. Merger Subsidiary; Actions by Parent. Parent will take all action necessary (a) to cause Merger Subsidiary to perform its obligations under this Agreement and to commence the Offer and consummate the Merger on the terms and conditions set forth in this Agreement (including to the extent permitted under the DGCL, in accordance with Section 253 of the DGCL) as promptly as reasonably practicable following completion of the Offer and (b) to ensure that, prior to the Effective Time, Merger Subsidiary shall not conduct any business or make any investments other than as

specifically contemplated by this Agreement. Parent shall not, and shall not permit Merger Subsidiary to, take any action that would result in the breach of any representation and warranty of Parent hereunder (except for representations and warranties made as of a specific date) such that the Company would have the right to terminate this Agreement pursuant to Section 7.01(d).

SECTION 5.06. Director and Officer Liability. From and after the Effective Time, the Surviving Corporation shall indemnify, defend and hold harmless to the fullest extent permitted by law the present and former officers and directors of the Company and its Subsidiaries against all losses, claims, damages, fines, penalties and liability in respect of acts or omissions occurring at or prior to the Effective Time, including amounts paid in settlement or compromise with the approval of the Parent (which approval shall not be unreasonably withheld), provided that none of the Company, Parent or the Surviving Corporation shall be obligated to pay the fees and disbursements of more than one counsel for all indemnified parties in any single action except to the extent that, in the opinion of counsel for the indemnified parties, two or more of such indemnified parties have conflicting interests in the outcome of such action. Parent and Merger Subsidiary agree that all rights to exculpation and indemnification for acts or omissions occurring prior to the Effective Time now existing in favor of the current and former officers and directors of the Company as provided in the Certificate of Incorporation or Bylaws or any agreement set forth in Schedule 5.06 of the Company Disclosure Letter, in each case in effect as of the date hereof, shall survive the Merger and shall continue in full force and effect in accordance with their terms and without amendment thereof. For at least six years after the Effective Time, the Parent will cause Merger Subsidiary to, and Surviving Corporation will, without any lapse in coverage, provide officers' and directors' liability insurance in respect of acts or omissions occurring prior to the Effective Time covering each such Person currently covered by the Company's officers' and directors' liability insurance policy on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date hereof; provided, however, that if the aggregate annual premiums for such insurance at any time during such period exceed 200% of the per annum rate currently paid by the Company for such insurance on the date of this Agreement (which premium the Company represents is $189,000), then the Surviving Corporation shall be obligated to obtain a policy with the greatest coverage available at an annual premium equal to 200% of such per annum rate as of the date of this Agreement; provided, however, that Parent and the Surviving Corporation may purchase a six-year "tail" with respect to the Company's existing current directors' and officers' liability insurance covering acts or omissions occurring at or prior to the Effective Time with respect to those Persons who are currently (and any additional Persons who prior to the Effective Time become) covered by the Company's directors' and officers' liability insurance policy on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date hereof and provided by a carrier with a credit or insurance rating no less favorable than the current carrier. If the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then and in each such case, proper provision shall be made so that the successors and assigns of the Surviving Corporation, or such successor or assign, as the case may be, assume the obligations set forth in this Section 5.06.

SECTION 5.07. Employee Benefits. From and after the Effective Time, employees of the Company who continue their employment with the Company (the "Continuing Employees") shall, at the option of Parent, either continue to be eligible to participate in the Benefit Plans that are, at the option of Parent, continued by the Company, or alternatively shall be eligible to participate in the same manner as similarly situated employees employed by Parent in the employee benefit plans sponsored or maintained by Parent, as applicable. Without limiting the generality of the foregoing, Parent shall (to the extent permitted under the terms of Parent's existing employee benefit plans), recognize the prior employment with the Company of each of the Continuing Employees in connection with all employee benefit plans of Parent in which employees Continuing Employees are eligible to participate following the Effective Time, for eligibility and vesting purposes (but not for benefit accrual purposes under any defined benefit plans). Nothing herein shall preclude Parent, the Surviving Corporation or any of their Affiliates from having the right to terminate the employment of any employee, with or without cause, or to amend or to terminate any employee benefit plan of Parent established, maintained or contributed to by Parent or any of its Affiliates after the Effective Time.

SECTION 5.08. Taxes. Except where the failure to do so can be cured with minimal cost and penalties to the Company and its Subsidiaries, from the date hereof until the Effective Time, the Company and its Subsidiaries shall:

(a) prepare, in the ordinary course of business and consistent with past practice (except as otherwise required by law), and timely file all Tax Returns required to be filed by it (or them) on or before the Effective Time;

(b) fully and timely pay all Taxes due and payable on or before the Effective Time;

(c) (i) properly reserve (and reflect such reserve in its books and records and financial statements), in accordance with past practice and in the ordinary course of business, for all Taxes that are not yet due and payable for all taxable periods, or portions thereof, ending on or before the Effective Time; (ii) promptly notify Parent of any Proceeding pending against or with respect to the Company or any of its Subsidiaries in respect of any Tax matter, including Tax liabilities and refund claims, and not settle or compromise any such Tax matter or Proceeding without Parent's prior written consent; (iii) not make or revoke any material election with regard to Taxes or file any amended Tax Returns; (iv) not make any significant change in any Tax or accounting methods or systems of internal accounting controls (including procedures with respect to the payment of accounts payable and collection of accounts receivable), except as may be appropriate to conform to changes in Tax laws or regulatory accounting requirements or GAAP; (v) not enter into any closing agreement, surrender any right to claim a Tax refund, consent to the extension or waiver of the limitations period applicable to any Tax claim or assessment, or incur any Taxes other than in the ordinary course and consistent with their prior practices; and (vi) withhold, if required by law, from their respective employees, independent contractors, creditors, stockholders and third parties, and timely pay to the appropriate Governmental Entity, proper and accurate amounts in all material respects for all periods ending on or before the Effective Time in compliance with all Tax withholding and remitting provisions of applicable laws.

SECTION 5.09. Meeting of the Company's Stockholders. If required by applicable law in order to consummate the Merger, the Company acting through its Board of Directors shall take all action necessary in accordance with the DGCL and its Certificate of Incorporation and Bylaws to convene a meeting of the Company's stockholders (the "Stockholders Meeting") as promptly as practicable following the purchase of Shares in the Offer. At the Stockholders Meeting, all of the Shares then owned by Parent, Merger Subsidiary or any other subsidiary of Parent shall be voted to approve the Merger and this Agreement (subject to applicable law). The Board of Directors of the Company shall recommend that the Company's stockholders vote to approve the Merger and this Agreement if such vote is sought, shall use its commercially reasonable efforts to solicit from stockholders of the Company proxies in favor of the Merger if a proxy statement is prepared and sent and shall take all other action in its judgment necessary and appropriate to secure the vote of stockholders required by the DGCL to effect the Merger.

SECTION 5.10. Proxy Statement. If required under applicable law, the Company shall prepare the Proxy Statement, file it with the SEC under the Exchange Act as promptly as practicable after Merger Subsidiary purchases Shares pursuant to the Offer, and use all commercially reasonable efforts to have the Proxy Statement cleared by the SEC. Parent and Merger Subsidiary shall promptly furnish to the Company all information concerning Parent and Merger Subsidiary that may be required or reasonably requested in connection with any action contemplated by this Section 5.10. Parent, Merger Subsidiary and the Company shall cooperate with each other in the preparation of the Proxy Statement, and the Company shall notify Parent of the receipt of any comments of the SEC with respect to the Proxy Statement and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide to Parent promptly copies of all correspondence between the Company or any Representative of the Company and the SEC. The Company shall give Parent and its

counsel a reasonable opportunity to review and comment on the Proxy Statement prior to its being filed with the SEC and shall give Parent and its counsel a reasonable opportunity to review all amendments and supplements to the Proxy Statement and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of the Company, Parent and Merger Subsidiary agrees to use its commercially reasonable efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests by the SEC. As promptly as practicable after the Proxy Statement has been cleared by the SEC, the Company shall mail the Proxy Statement to the stockholders of the Company. The Proxy Statement shall include the recommendation by the Board of Directors of the Company that the Company's stockholders vote to approve the Merger and this Agreement.

SECTION 5.11. Commercially Reasonable Efforts. Subject to the terms and conditions of this Agreement, each party will use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the transactions contemplated by this Agreement.

SECTION 5.12. Public Announcements. So long as this Agreement is in effect, the Company and Parent, will consult with each other before issuing any press release or making any public statement with respect to this Agreement, the Offer or the Merger and, except as may be required by fiduciary duties, applicable law or any listing agreement with the Nasdaq National Market or the New York Stock Exchange will not issue, or permit its Affiliates to issue, any such press release or make any such public statement prior to such consultation.

SECTION 5.13. Customer Notifications. At any time after the Acceptance Date and from time to time thereafter as reasonably requested by Parent, the Company will permit Parent at Parent's expense to insert preprinted single-page customer education materials into billing documentation to be delivered to customers affected by this Agreement; provided, however, that Company has reviewed in advance and consented to the content of such materials, which consent shall not be unreasonably withheld or delayed.

SECTION 5.14. Defense of Litigation. Notwithstanding anything herein to the contrary, the Company shall not settle or offer to settle any Legal Action or other Proceeding against the Company, any of its Subsidiaries or any of their respective directors or officers by any stockholder of the Company arising out of or relating to this Agreement or the transactions contemplated by this Agreement without the prior written consent of Parent. The Company shall not cooperate with any Person that may seek to restrain, enjoin, prohibit or otherwise oppose the transactions contemplated by this Agreement, and the Company shall cooperate with Parent and Merger Subsidiary in resisting any such effort to restrain, enjoin, prohibit or otherwise oppose such transactions.

SECTION 5.15. Anti Takeover Plan; State Takeover Statutes. The Board of Directors of the Company shall take all further action (in addition to that referred to in Section 3.17) requested by Parent in order to render the Rights Agreement inapplicable to the Offer, the Merger and the other transactions contemplated by this Agreement; provided that the Company shall not be required to terminate the Rights Agreement. If any state takeover statute or similar statute or regulation is or becomes applicable to this Agreement, the Offer, the Merger or the transactions contemplated by this Agreement, each of Parent and the Company and their respective Boards of Directors shall take all reasonable actions to (a) ensure that such transactions may be consummated as promptly as practicable upon the terms and subject to the conditions set forth in this Agreement and (b) otherwise act to eliminate or minimize the effects of such takeover statute or similar statute or regulation.

SECTION 5.16. Filings; Other Actions. Subject to the terms and conditions herein provided, the Company and Parent shall use all commercially reasonable efforts to cooperate with one another in (i) determining which filings are required to be made prior to the Acceptance Date, and which consents, approvals, permits or authorizations are required to be obtained prior to the Acceptance

Date from any Governmental Entities in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and (ii) timely making all such filings and timely seeking all such consents, approvals, permits or authorizations; and (b) use all commercially reasonable efforts to take, or cause to be taken, all other action and do, or cause to be done, all other things necessary, proper or appropriate to consummate and make effective the transactions contemplated by this Agreement. Parent and the Company shall promptly (but in no event more than ten Business Days) make their respective filings under the HSR Act with respect to the Offer and the Merger and shall promptly thereafter make any other required submissions under the HSR Act.

SECTION 5.17. Certificate Concerning Real Property Holding Company. On or before the Effective Time, an officer of the Company shall provide a certificate to the Parent, in a form that complies with Treasury Regulation Section 1.897-2(h) and Treasury Regulation Section 1.1445-2(c)(3), that it is not a U.S. real property holding corporation.

ARTICLE VI
CONDITIONS TO THE MERGER

SECTION 6.01. Conditions to the Obligations of Each Party. The obligations of the Company, Parent and Merger Subsidiary to consummate the Merger are subject to the satisfaction of the following conditions:

(a) if approval of the Merger by the holders of Shares is required by applicable law, this Agreement and the Merger shall have been adopted by the requisite vote of the stockholders of the Company in accordance with the DGCL, provided that Parent and Merger Subsidiary shall have voted all of their Shares in favor of the Agreement and the Merger;

(b) no provision of any applicable law or Order of any Governmental Entity of competent jurisdiction which has the effect of making the Merger illegal or shall otherwise restrain or prohibit the consummation of the Merger shall be in effect (each party agreeing to use its commercially reasonable efforts, including appeals to higher courts, to have any Order lifted);

(d) Merger Subsidiary shall have accepted for purchase and paid for the Shares tendered pursuant to the Offer.

ARTICLE VII
TERMINATION

SECTION 7.01. Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time (notwithstanding any approval of this Agreement by the stockholders of the Company or Parent):

(a) by mutual written consent of the Company and Parent;

(b) by either the Company or Parent if the Acceptance Date has not occurred on or before September 30, 2004, provided that the right to terminate this Agreement under this clause (b) shall not be available to any party whose willful failure to fulfill any of its material obligations under this Agreement has been the cause of the failure to consummate the Offer by such date;

(c) by either the Company or Parent if there shall be any applicable law that makes consummation of the Offer or the Merger illegal or otherwise prohibited or if any Order of a court or governmental agency or authority of competent jurisdiction shall restrain or prohibit the consummation of the Offer or the Merger, and such Order shall become final and nonappealable;

provided, that the right to terminate this Agreement under this clause (c) shall not be available to any party who has not used its commercially reasonable efforts to have such Order lifted;

(d) prior to the Acceptance Date by (x) the Company if there has been a breach by Parent of any representation or warranty of Parent contained in this Agreement which would have a Parent Material Adverse Effect, (y) Parent if there has been a breach of the representations and warranties or covenants or agreements of the Company contained in this Agreement such that the condition to the Offer set forth in clause (f) of Annex A would not be satisfied, or (z) by the Company if Parent shall not have performed in all material respects each obligation, agreement and covenant to be performed by it under this Agreement, and in each of clauses (x), (y) and (z) such breach or failure to perform is not curable or, if curable, is not cured within the earlier of (i) ten Business Days after written notice of such breach is given by the terminating party to the other party and (ii) the scheduled expiration of the Offer;

(e) by Parent prior to the Acceptance Date, if, (i) the Board of Directors of the Company shall have failed to recommend, or shall have withdrawn or modified in a manner adverse to Parent, its approval or recommendation of this Agreement, the Offer or the Merger, or shall have recommended, or entered into, or publicly announced its intention to enter into, an agreement or an agreement in principle with respect to a Superior Proposal (or shall have resolved to do any of the foregoing), (ii) the Company shall have breached in any material respect any of its obligations under Section 5.03, (iii) the Board of Directors of the Company shall have refused to affirm its approval or recommendation of this Agreement, the Offer or the Merger within ten Business Days of any written request from Parent, (iv) a competing tender or exchange offer constituting an Acquisition Proposal shall have been commenced and the Company shall not have sent holders of the Shares pursuant to Rule 14e-2 promulgated under the Exchange Act, (within ten Business Days after such tender or exchange offer is first published, sent or given (within the meaning of Rule 14e-2)), a statement disclosing that the Board of Directors of the Company recommends rejection of such Acquisition Proposal, (v) the Board of Directors of the Company shall exempt any other Person from the provisions of Section 203 of the DGCL, (vi) the Board of Directors of the Company exempts any other Person under the Rights Agreement or (vii) the Company or its Board of Directors publicly announces its intention to do any of the foregoing;

(f) by the Company prior to the Acceptance Date, if the Board of Directors of the Company shall approve, subject to complying with the terms of this Agreement, a Superior Proposal in accordance with Section 5.03; provided, however, that the Company may not terminate pursuant to this Section 7.01(f) unless (i) such Superior Proposal did not result from the Company's breach of Section 5.03, (ii) the Company's Board of Directors authorizes the Company, subject to complying with the terms of this Agreement, to enter into a binding written agreement concerning a transaction that constitutes a Superior Proposal and the Company notifies Parent in writing that it intends to enter into such an agreement, attaching the most current version of such agreement to such notice (including any subsequent amendments or modifications), (iii) during the three Business Day period after the Company's notice (the "Negotiation Period"), (x) the Company shall have offered to negotiate with (and, if accepted, negotiate with), and shall have instructed its financial and legal advisors to offer to negotiate with (and if accepted, negotiate with), Parent to attempt to make such adjustments in the terms and conditions of this Agreement as will enable the Company to proceed with this Agreement; provided, that the Company shall not be required to comply with this clause (iii) if the next scheduled expiration date of the Offer is scheduled to expire on or before the third Business Day after the end of the Negotiation Period unless Parent agrees in writing to extend the Offer until 5:00 p.m. New York City time on the third Business Day after the end of the Negotiation Period and (y) the Board of Directors of the Company shall have determined in good faith, after consultation with its independent financial adviser and outside legal counsel and, after considering the results of such negotiations and the revised proposal made by

Parent, if any, that the Superior Proposal giving rise to the Company's notice (including any subsequent amendments or modifications) continues to be a Superior Proposal, (iv) such termination is within three Business Days following the Negotiation Period, if any, and (v) no termination pursuant to this Section 7.01(f) shall be effective unless the Company shall simultaneously make the payment required by Section 9.04 together with a written acknowledgment from each other party to the Superior Proposal that it is aware of the amounts due Parent under Section 9.04 and that such party waives any right it may have to contest any such amounts payable under Section 9.04;

(g) by the Company, if the Offer has not been commenced within ten Business Days following the date of this Agreement (except as a result of any material breach of this Agreement by the Company); provided that such right of termination shall have been exercised by the Company prior to the commencement of the Offer;

(h) by Parent or the Company if as the result of the failure of any of the conditions set forth in Annex A hereto, the Offer shall have terminated or expired in accordance with its terms (including after giving effect to any extensions, if any, pursuant to Section 1.01(c)) without Merger Subsidiary having purchased any Shares pursuant to the Offer; provided, however, that the right to terminate this Agreement pursuant to this Section 7.01(h) shall not be available to any party whose willful failure to fulfill any of its obligations under this Agreement has been the cause of such failure;

(i) by Parent, if, prior to the Acceptance Date, any Person or "group" (as defined in Section 13(d)(3) of the Exchange Act), other than Parent, Merger Subsidiary or any of their Affiliates shall have acquired beneficial ownership (as defined in Section 13(d) of the Exchange Act) of 15% or more of the Shares;

(j) By Parent, prior to the Acceptance Date, if any director or 10% stockholder party to the Stockholder Agreement shall have breached any of its obligations under the Stockholder Agreement and such breach, if curable, is not cured within the earlier of (i) ten Business Days after written notice of such breach is given to the Company and (ii) the scheduled expiration of the Offer;

(k) by Parent if either the Chief Executive Officer or the Chief Financial Officer of the Company fails to provide the certifications required under Section 302 or Section 906 of the Sarbanes-Oxley Act with respect to any Annual Report on Form 10-K or Quarterly Report on Form 10-Q of the Company required to be filed prior to the Acceptance Date at the time such report is required to be filed under the Exchange Act and such failure has or would be reasonably likely to have a Company Material Adverse Effect; or

(l) by Parent if, (i) on or prior to August 9, 2004 or November 9, 2004, as applicable, the Company shall have not publicly filed its Quarterly Report on Form 10-Q for the fiscal quarter ending June 30, 2004 or September 30, 2004, as applicable, (ii) at any time after the date hereof, there is any restatement of the Company's consolidated financial statements, or any material change to the Company's previously announced financial results, or (iii) the Company shall have filed with the SEC, or otherwise announced, one or more amendments to a Company Report in which the Company makes a downward restatement of the aggregate proved Hydrocarbon reserves of the Company and its Subsidiaries, taken as a whole, as of December 31, 2003, and the occurrence of any of the events in clauses (i), (ii) or (iii) has or would be reasonably likely to have a Company Material Adverse Effect.

SECTION 7.02. Effect of Termination. If this Agreement is terminated pursuant to Section 7.01, this Agreement (but not the Confidentiality Agreement) shall become void and of no effect with no liability on the part of any party (or any stockholder or Representative of such party) to the other party

hereto; provided that, if such termination shall result from the willful (i) failure of a party to fulfill a condition to the performance of the obligations of the other parties, (ii) failure of a party to perform a covenant hereof or (iii) breach by a party hereto of any representation or warranty or agreement contained herein, such party shall be fully liable for any and all liabilities and damages incurred or suffered by the other parties as a result of such willful failure or breach; provided further, however, that notwithstanding the foregoing or anything else in this Agreement to the contrary, the provisions of this Section 7.02 and Article IX shall survive any termination hereof.

ARTICLE VIII
DEFINITIONS

SECTION 8.01. Certain Defined Terms. Definitions shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references herein to Articles, Sections, Exhibits, Annexes and Schedules shall be deemed to be references to Articles and Sections of, and Exhibits, Annexes and Schedules to, this Agreement unless the context shall otherwise require. All Exhibits, Annexes and Schedules attached hereto shall be deemed incorporated herein as if set forth in full herein and, unless otherwise defined therein, all terms used in any Exhibit, Annex or Schedule shall have the meaning ascribed to such term in this Agreement. The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise expressly provided herein, any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. For the purposes of this Agreement, the following terms have the following meanings:

"Acquisition Proposal" means any contract, proposal, offer or indication of interest (other than by Parent or one of its Affiliates) (whether or not in writing and whether or not delivered to the stockholders of the Company generally) relating to (i) the acquisition (including any lease, long-term supply agreement, mortgage, pledge or other arrangement having similar economic effect) in any manner, directly or indirectly, of any business or assets of the Company or any of its Subsidiaries (including the capital stock of (or other ownership interest in) any Subsidiary of the Company) (collectively, the "Company Assets") that generated 15% or more of the Company's consolidated net revenues or net income for the year ended December 31, 2003 or the three months ended March 31, 2004 or that constitute more than 15% of the Company's Assets at March 31, 2004, (ii) a direct or indirect purchase of Shares and any other capital stock of (or ownership interest in) the Company (the "Company Securities") in a single transaction or series of related transactions representing 15% or more of the voting power of the capital stock of (or other ownership interest in) the Company or any new class or series of stock that would be entitled to a class or series vote with respect to the Merger, including by way of a tender offer, exchange offer or issuance of any Company Securities in connection with any acquisition by the Company or any of its Subsidiaries or (iii) a merger, business combination, reorganization, recapitalization, liquidation or dissolution of the Company, in each case other than the transactions contemplated by this Agreement.

"Affiliate" (whether or not capitalized) means, when used with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. As used in the definition of "Affiliate," the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

"Board of Directors" means, with respect to any Person, the board of directors of such Person.

"Business Combination" means (a) a merger, consolidation, share exchange, business combination or similar transaction involving the Company as a result of which the Company's stockholders prior to such transaction, in the aggregate, cease to own at least 50.1% of the voting power and at least 50.1% of the aggregate market value of the voting securities of the entity surviving or resulting from such transaction (or the ultimate parent entity thereof), (b) a sale, lease, exchange, transfer or other disposition of more than 30% of the assets of the Company and its Subsidiaries, taken as a whole, in a single transaction or a series of related transactions (other than to customers in the ordinary course of business), or (c) the acquisition by a person (other than Merger Subsidiary or any affiliate thereof) or "group" (as defined under Section 13(d) of the Exchange Act) of "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of Company Common Stock, whether by tender or exchange offer or otherwise.

"Business Day" means any day, other than Saturday, Sunday or a United States or Canadian federal holiday, and shall consist of the time period from 12:01 a.m. through 12:00 midnight Eastern time; provided that for purposes of Article I, "Business Day" as it relates to time periods prescribed under the Securities Act or the Exchange Act shall have the meaning given to such term in Rule 14d-1(g)(3) of the Exchange Act.

"Bylaws" means, with respect to any Person, the by-laws of such Person in effect on the date hereof unless the context otherwise requires.

"Certificate of Incorporation" means, with respect to any Person, the certificate of incorporation or articles of amalgamation, as applicable, of such Person in effect on the date hereof unless the context otherwise requires.

"Company Material Adverse Effect" means any event, change, occurrence, circumstance or development which, individually or together with any one or more other events, changes, occurrences, circumstances or developments (including Title Defect Amounts with respect to any failure to have Good and Marketable Title), has or is reasonably likely to have a material adverse effect on the business, assets, properties, liabilities, results of operations, ability to operate the business in the ordinary course or financial condition of the Company and its Subsidiaries, taken as a whole, or on the ability of the Company to perform its obligations under this Agreement or consummate the transactions contemplated by this Agreement; provided, that in no event shall any of the following constitute a Company Material Adverse Effect: (i) any change or effect resulting from changes in general economic or business conditions in the United States generally or in world capital markets (except for any changes referred to in this subclause which disproportionately impacts the Company and its Subsidiaries taken as a whole), (ii) any change or effect that affects the oil and gas exploration and development industry generally (including changes in commodity prices, general market prices and regulatory changes affecting the oil and gas exploration and development industry generally) (except for any changes referred to in this subclause which disproportionately impacts the Company and its Subsidiaries taken as a whole), (iii) any change or effect resulting directly from the execution and delivery of this Agreement or the announcement thereof or the consummation of the Offer, the Merger or the other transactions contemplated hereby, (iv) changes required by changes in GAAP or (v) any decrease in the market price of Company Common Stock (excluding any change, development or event underlying such decrease to the extent such change, development or event would otherwise constitute or contribute to a Company Material Adverse Effect).

"Derivative Transactions" means any hedge transaction, swap transaction, option, warrant, forward purchase or sale transaction, futures transaction, cap transaction, put or call transaction, floor transaction or collar transaction relating to one or more currencies, commodities (including Hydrocarbons), bonds, equity securities, loans, interest rates, credit-related events or conditions or any indexes, or any other similar transaction or combination of any of these transactions, including

collateralized mortgage obligations or other similar instruments or any debt or equity instruments evidencing or embedding any such types of transactions, and any related credit support, collateral or other similar arrangements related to such transactions; provided that, for the avoidance of doubt, the term "Derivative Transactions" shall not include any Company Stock Options.

"Environmental Laws" means, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section 136 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. Section 1251 et seq., the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 641, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., as any of the above statutes have been or may be amended through the Acceptance Date, all rules and regulations promulgated pursuant to any of the above statutes, and any other foreign, federal, state, provincial or local law, statute, ordinance, rule or regulation governing Environmental Matters, as the same have been or may be amended from time to time, including any common law cause of action providing any right or remedy relating to Environmental Matters, all indemnity agreements and other contractual obligations (including leases, asset purchase and merger agreements) relating to Environmental Matters, and all applicable judicial and administrative decisions, Orders, and decrees relating to Environmental Matters.

"Environmental Matter" means any responsibility, duty, obligation or liability arising out of, relating to, or resulting from pollution, contamination, protection of the environment, human health or safety, health or safety of employees, emissions, discharges, Releases or threatened Releases, of Hazardous Substances into the air (indoor and outdoor), surfacewater, groundwater, soil, land surface or subsurface, buildings, facilities, real or personal property or fixtures or otherwise arising out of, relating to, or resulting from the manufacture, processing, distribution, use, treatment, storage, disposal, transport, handling, Release or threatened Release of Hazardous Substances.

"Expenses" means documented out-of-pocket fees and expenses incurred or paid by or on behalf of Parent in connection with the Merger or the consummation of any of the transactions contemplated by this Agreement, including all HSR Act filing fees, fees and expenses of counsel, commercial banks, investment banking firms, accountants, experts, environmental consultants and other consultants to Parent.

"facilities" means any real property, leaseholds, or other interests currently or formerly owned or operated by the Company or any of its Subsidiaries and any buildings, plants, structures, or equipment (including motor vehicles, tank cars, airplanes and rolling stock) currently or formerly owned or operated by the Company or any of its Subsidiaries.

"Good and Marketable Title" means title in and to the Oil and Gas Interests that, except for the Permitted Encumbrances:

(a) is free and clear of all defects, burdens and Liens;

(b) in the case of each Oil and Gas Property, (i) is filed, recorded or otherwise referenced of record in the records of the applicable county in a manner which under applicable local law constitutes imputed notice of such Oil and Gas Property to third parties acquiring an interest in or an encumbrance against such Oil and Gas Property or (A) in the case of federal Leases, in the records of the applicable office of the Bureau of Land Management, (B) in the case of Indian Leases and mineral development agreements, in the applicable office of the Bureau of Indian Affairs or applicable tribal records, or (C) in the case of state Leases, in the records of the applicable state land office, but only to the extent the records referenced in (A), (B) and

(C) above constitute imputed notice under applicable local law to third parties acquiring an interest in or an encumbrance against such Leases, or (ii) is assignable to the Company or a Subsidiary out of an interest of record (as provided in clause (i) above), but only to the extent that all conditions required to earn an enforceable right to such assignment have been satisfied and the record owner of such interest is ready, willing and able to make such assignment;

(c) in the case of each Oil and Gas Property set forth in the Reserve Reports, entitles the Company or its Subsidiaries to receive and retain, without reduction, suspension or termination and after deduction of all applicable royalties, overriding royalties, production payments or other burdens payable out of production, not less than the percentage set forth in the Reserve Reports as the Company's or its Subsidiaries' "Net Revenue Interest" of all Hydrocarbons produced, saved and marketed from such Oil and Gas Property, through the productive life of such Oil and Gas Property, except for changes or adjustments in such "Net Revenue Interest" after the date hereof and in compliance with the Company's and its Subsidiaries' covenants and agreement under this Agreement that result from the establishment of new units, changes in existing units (or the participating areas therein), the entry into of new pooling or unitization agreements, or an election not to participate in an operation under a joint operating agreement or a unit agreement;

(d) in the case of each Oil and Gas Property set forth in the Reserve Reports, obligates the Company or its Subsidiaries to bear not greater than the percentage set forth in the Reserve Reports as the Company's or its Subsidiaries' "Working Interest" of the costs and expenses relating to the maintenance, development and operation of such Oil and Gas Property (including the plugging and abandonment and site restoration with respect to all existing and future wells located thereon or attributable thereto), through plugging, abandonment and salvage of all wells and related Lease facilities located on such Oil and Gas Property or lands pooled, unitized or otherwise combined therewith, except for changes or adjustments in such "Working Interest" after the date hereof and in compliance with the Company's and its Subsidiaries' covenants and agreement under this Agreement that result from the establishment of new units, changes in existing units (or the participating areas therein), the entry into of new pooling or unitization agreements, or an election by a third party not to participate in an operation under a joint operating agreement or a unit agreement;

(e) in the case of each Oil and Gas Property, reflects that all royalties, rentals, Pugh clause payments, shut in gas payments and other payments due with respect to such Oil and Gas Property have been properly and timely paid, except for payments held in suspense for title or other reasons which are customary in the industry and which will not result in grounds for cancellation of the Company's or its Subsidiaries' rights in such Oil and Gas Property;

(f) in the case of each property of the type described in clause (b) of the definition of Oil and Gas Interests, entitles the Company or its Subsidiaries to an undivided ownership interest in such property which corresponds to the Required Working Interest in the Oil and Gas Property to which such property relates or is attributable; and

(g) reflects that all consents to assignment, notices of assignment or preferential purchase rights which are applicable to or must be complied with in connection with the transaction contemplated by this Agreement, have been obtained and complied with to the extent the failure to obtain or comply with the same could render this transaction (or any right or interest affected thereby) void or voidable or could result in Parent or the Surviving Corporation or its Subsidiaries incurring any liability or loss of title.

"Governmental Entity" means any foreign, federal, state, municipal or other court, administrative agency, commission or other governmental or regulatory body or authority or instrumentality or political subdivision, including tribal bodies, or any official thereof.

"Hazardous Substances" means any pollutants, contaminants, toxic or hazardous or extremely hazardous substances, materials, wastes, constituents, compounds or chemicals that are regulated by, or may form the basis of liability under, any Environmental Laws, including without limitation petroleum and petroleum products.

"Hydrocarbon Properties" means (a) Leases, including the interests and estates in the nature of working or operating interests under Leases, (b) overriding royalties, net profits interests, production payments, carried interests, rights of recoupment and other interests in, under or relating to Leases, (b) fee or mineral interests in Hydrocarbons, (c) royalty interests in Hydrocarbons, (d) any other incorporeal interest in land authorizing the severance and removal of Hydrocarbons, any other interest in Hydrocarbons in place and any other corporeal estate in land with respect to Hydrocarbons, (e) any economic or contractual rights, options or interests in and to any of the foregoing, including any farm-out or farm-in agreement or production payment affecting any interest or estate in Hydrocarbons, and (f) any and all rights and interests attributable or allocable thereto by virtue of any pooling, unitization, communitization, production sharing or similar agreement, order or declaration.

"Hydrocarbons" means any of oil, bitumen and products derived therefrom, synthetic crude oil, petroleum, natural gas, casinghead gas, condensate, natural gas liquids, coal bed methane, and any and all other substances produced in association with any of the foregoing, whether liquid, solid or gaseous, as well as all products and substances extracted, separated or processed therefrom.

"Indebtedness" means, as applied to the Company and its Subsidiaries, and whether recourse is secured by or is otherwise available against all or only a portion of the assets of the Company or any of its Subsidiaries, and whether or not contingent, but without duplication, (i) all obligations for borrowed money, whether current, funded, or secured or unsecured, and every obligation of the Company or any of its Subsidiaries evidenced by bonds, debentures, notes or similar instruments, (ii) all indebtedness for the deferred purchase price of assets or services, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (iv) all indebtedness secured by a purchase money mortgage or other Lien to secure all or part of the purchase price of property subject to such mortgage or lien, (v) all obligations under leases which shall have been or must be, in accordance with GAAP, recorded as capital leases in respect of which such person is liable as lessee and all obligations under any lease of goods or other property, whether real or personal, which is treated as an operating lease under GAAP and as a loan or financing for U.S. income tax purposes, (vi) any liability in respect of banker's acceptances or letters of credit or similar facilities, (vii) all sales by the Company or any of its Subsidiaries of (1) accounts or general intangibles for money due or to become due, (2) chattel paper, instruments or documents creating or evidencing a right to payment of money or (3) other receivables, whether pursuant to a purchase facility or otherwise, other than in connection with the disposition of defaulted receivables for collection and not as a financing arrangement, and together with any obligation of the Company or any of its Subsidiaries to pay any discount, interest, fees, indemnities, penalties, recourse, expenses or other amounts in connection therewith, (viii) every obligation of the Company or its Subsidiaries to purchase, redeem, retire or otherwise acquire for value any equity interests issued by the Company or any of its Subsidiaries or any rights measured by the value of such equity interests, (ix) every obligation of the Company or any Subsidiary under any forward contract, futures contract, swap, option or other financing agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements), the value of which is dependent upon interest rates, currency exchange rates, commodities or other indices, (x) every obligation in respect of Indebtedness of any other entity (including any partnership in which the Company or any of its Subsidiaries is a general partner) to the extent that the Company or such Subsidiary is liable therefor as a result of its ownership interest in or other relationship with such entity, except to the extent that the terms of such Indebtedness provide that the Company or such Subsidiary is not liable therefor and

such terms are enforceable under applicable law, and (xi) all obligations, contingent or otherwise, guaranteeing or having the economic effect of guaranteeing or otherwise acting as surety for, any obligation of the type referred to in clauses (i) through (x) above (the "primary obligation") of another Person (the "primary obligor") in any manner, whether directly or indirectly and including, without limitation, any obligation of the Company or any of its Subsidiaries (1) to purchase or pay (or advance or supply funds for the purchase of) any security for the payment of such primary obligation, (2) to purchase property, securities or services for the purpose of assuring the payment of such primary obligation, or (3) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such primary obligation. For the purposes of Section 3.23(b)(ii), Indebtedness shall not include subparagraph (x) above.

"Knowledge" means the knowledge of the executive officers of the Company and/or its Subsidiaries, after due inquiry of those persons employed by the Company or its Subsidiaries charged with administrative or operational responsibility for such matter.

"law" means any federal, state, local or foreign law, statute, rule, administrative order, decree, regulation or ordinance, including all decisions of courts having the effect of law in each such jurisdiction in effect as of or after the date hereof.

"Lease" means a Hydrocarbon lease or license, permit or other similar agreement or right permitting the owner thereof to explore for, develop, produce, use, sever, process and/or otherwise deal with the Hydrocarbons from, under or attributable to the lands covered thereby or lands pooled, unitized or otherwise combined therewith.

"Lien" means, with respect to any asset or right, any mortgage, lien, pledge, claim, charge, security interest, conditional sale agreement, title exception, encumbrance, option, right of first offer or refusal, lease, license, occupancy arrangement, easement, servitude, transfer restriction or any other right of another to or adverse claim of any kind in respect of such asset or right, including under any stockholder agreement.

"Oil and Gas Contracts" means any farm-out or farm-in agreement, operating agreement, unit agreement, pooling or communitization agreement, declaration or order, joint venture, option or acquisition agreement relating to the Oil and Gas Interests, any Hydrocarbon production, sales, marketing, transportation, exchange and processing contract and agreement, or any other contract affecting or relating to the ownership, exploration, development or operation (including the clean-up, restoration or remediation) of any of the Oil and Gas Properties or the treatment, processing, storage, gathering, transportation, disposition of the Hydrocarbons produced from or attributable to the Oil and Gas Interests.

"Oil and Gas Interests" means: (a) the interests of the Company or any of its Subsidiaries in the Oil and Gas Properties and wells located thereon, together with the interests of the Company or any of its Subsidiaries in and to all property and rights incident thereto, including all rights in respect of any pooled or unitized acreage by virtue of any Oil and Gas Property being a part thereof, all production from the pool or unit allocated to any such Oil and Gas Property and all interests in any wells within the pool or unit associated with the Oil and Gas Properties; and (b) the interests of the Company or any of its Subsidiaries in and to all of the personal property, facilities, fixtures and improvements on such Oil and Gas Properties or appurtenant thereto or used, held or obtained in connection with the Oil and Gas Properties or the production, treatment, sale or disposal of Hydrocarbons or water or other substances produced therefrom or attributable thereto (whether located on or off the Oil and Gas Properties) including all interests in equipment and machinery (including wells, well equipment and machinery, casing, tanks, boilers, generators), Hydrocarbon production, gathering, transmission, treating, processing and storage facilities (including tanks, tank batteries, pipelines, gathering systems, crude oil, condensate or other production in storage or in pipelines, flow lines, tubing, motors and field separators), pumps, water plants, electric plants, gasoline and gas processing plants, refineries, and

other tangible personal property and fixtures associated with, appurtenant to, or necessary for the operation of any of the foregoing, and all other tenements, hereditaments, improvements and appurtenances thereunto belonging, including in the case of clauses (a) and (b), any option to lease any such interests. Oil and Gas Interests shall be deemed to include all direct and indirect interests in and rights with respect to oil, gas, mineral and related properties and assets of any kind and nature, including the Oil and Gas Properties and other nonworking interests and nonoperating interests, the Surface Rights and all of the Company's or any Subsidiary's interests and rights with respect to Hydrocarbons and other minerals or revenues therefrom.

"Oil and Gas Properties" means (a) the Hydrocarbon Properties set forth in the Reserve Reports and (b) all other Hydrocarbon Properties in which the Company or any of its Subsidiaries holds an interest.

"Order" means any award, decision, injunction, arbitration award, decree, stipulation, determination, writ, judgment, order, ruling, subpoena or verdict entered, issued, made, or rendered by any court, administrative agency, other Governmental Entity or arbitrator.

"Parent Material Adverse Effect" means any event, change, occurrence, circumstance or development which, individually or together with anyone or more other events, changes, occurrences, circumstances or developments, has or is reasonably likely to have a material adverse effect on the business, assets, properties, liabilities, results of operations or financial condition of Parent and Merger Subsidiary, taken as a whole, or on the ability of Parent or Merger Subsidiary to perform in a timely manner its obligations under this Agreement or consummate the transactions contemplated by this Agreement.

"Permitted Encumbrances" means with respect to any property or asset, including the Oil and Gas Interests, any and all of the following:

(a) consents to assignment and similar contractual provisions affecting such property or asset (other than real property) with respect to which consents are obtained from appropriate parties, or, in the case of consents of Governmental Entities with respect to the transactions contemplated by this Agreement, if such consents are customarily obtained subsequent to a sale or conveyance;

(b) preferential rights to purchase and similar contractual provisions affecting such property or asset (other than real property) with respect to which waivers are obtained from the appropriate parties or the appropriate time period has expired without an exercise of the rights;

(c) rights reserved to or vested in a Governmental Entity having jurisdiction to control or regulate such property or asset in any manner whatsoever and all laws of such Governmental Entities, except to the extent such rights or laws are exercised to reduce the Required Net Revenue Interest or to increase the Required Working Interest;

(d) easements, rights-of-way, permits, licenses, servitudes, surface leases, sub-surface leases, grazing rights, logging rights, ponds, lakes, waterways, canals, ditches, reservoirs, equipment, pipelines, utility lines, railways, streets, roads and structures on, over or through such property or asset that do not in any material respect interfere with or impair the value, ownership, use or operation of such property or asset;

(e) liens for current Taxes or assessments not yet delinquent;

(f) liens of operators relating to obligations not yet delinquent;

(g) any (i) undetermined or inchoate liens or charges constituting or securing the payment of expenses that were incurred incidental to maintenance, development, production or operation of such property or asset or for the purpose of developing, producing or processing Hydrocarbons therefrom or therein, and (ii) statutory materialman's, mechanics', repairmans', employees', contractors' or other similar liens or charges relating to obligations not yet delinquent;

(h) the terms and conditions of the instruments creating an Oil and Gas Property that do not operate to reduce the Required Net Revenue Interest for such Oil and Gas Property or increase the Required Working Interest for such Oil and Gas Property, without a corresponding increase in the corresponding Requited Net Revenue Interest;

(i) production sales contracts; division orders; contracts for sale, purchase, exchange, refining or processing of Hydrocarbons; farm-out or farm-in agreements; participation agreements; unitization and pooling designations, declarations, orders and agreements; operating agreements; agreements of development; area of mutual interest agreements; gas balancing and deferred production agreements; plant agreements; production handling agreements; processing agreements; pipeline, gathering and transportation agreements; injection, repressuring and recycling agreements; carbon dioxide purchase or sale agreements; and salt water or other disposal agreements, (in each case) to the extent the same (i) are ordinary and customary to the oil, gas and other mineral exploration, development, processing or extraction business and (ii) except in connection with actions taken by the Surviving Corporation or its Subsidiaries after the Effective Time, do not operate to reduce the Required Net Revenue Interest for such property or asset (if any) or increase the Required Working Interest for such property or asset (if any), without a corresponding increase in the corresponding Required Net Revenue Interest; and

(j) all minor defects and irregularities in title to such property or asset that are of the nature customarily accepted by prudent oil and gas purchasers of oil and gas properties and that (i) do not operate to reduce the Required Net Revenue Interest for such property or asset (if any) or increase the Required Working Interest for such property or asset (if any), without a corresponding increase in the corresponding Required Net Revenue Interest, (ii) do not constitute a Lien against such property or asset, and (iii) do not otherwise in any material respect interfere with or impair the ownership, operation, value or use of such property or asset.

"Person" (whether or not capitalized) means any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company or other entity, or any Governmental Entity, or any agency or political subdivision thereof.

"Proceeding" means any action, arbitration, hearing, litigation or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Entity or arbitrator.

"Release" means any pouring, pumping, seeping, spilling, emitting, dumping, burial, or disposal into the environment of any Hazardous Substance.

"Representatives" means, when used with respect to Parent or the Company, the directors, officers, employees, consultants, accountants, legal counsel, financing sources, investment bankers, agents, controlling persons and other representatives of Parent, its Affiliates and its Subsidiaries, or the Company, its Affiliates and its Subsidiaries.

"Required Net Revenue Interest" means the "Net Revenue Interest" referred to in the definition of Good and Marketable Title.

"Required Working Interest" means the "Working Interest" referred to in the definition of Good and Marketable Title.

"Rights Agreement" means the Rights Agreement dated as of May 23, 2001 between the Company and Computershare Trust Company, Inc., as Rights Agreement.

"Subsidiary" means, with respect to any Person, each entity as to which such Person (either alone or through or together with any other Subsidiary) (1) owns beneficially or of record or has the power to vote or control, 50% or more of the voting securities of such entity or of any class of equity interests of such entity the holders of which are ordinarily entitled to vote for the election of the members of

the Board of Directors or other persons performing similar functions, (ii) in the case of partnerships, serves as a general partner, (iii) in the case of a limited liability company, serves as the managing member or owns a majority of the equity interests or (iv) otherwise has the ability to elect a majority of the directors, trustees or managing members thereof.

"Superior Proposal" means a bona fide written Acquisition Proposal made by a third party for at least a majority of the voting power of the Company's then outstanding securities or all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, if the Board of Directors of the Company determines in good faith by a vote of a majority of the entire Board of Directors of the Company (based on, among other things, the advice of its independent financial advisors and outside counsel), taking into account all legal, financial, regulatory and other aspects of the proposal and the Person making such proposal, that such proposal (i) would, if consummated in accordance with its terms, be more favorable, from a financial point of view, to the holders of the Shares than those contemplated by this Agreement (taking into account any adjustments to the terms and conditions of this Agreement, the Offer or the Merger offered in writing by Parent, and any amounts payable pursuant to Section 9.04(b) by the Company), (ii) the conditions to the consummation of which are all reasonably capable of being satisfied in a timely manner, (iii) is not subject to any financing contingency or to the extent financing for such proposal is required, that such financing is then committed, and (iv) which was not made in violation of any standstill or similar agreement to which the Company or any of its Subsidiaries is a party.

"Surface Rights" means any and all surface rights, estates and interests associated with the Oil and Gas Properties and the facilities.

"Tax" or "Taxes" means (i) any and all federal, state, provincial, local, foreign and other taxes, levies, fees, imposts, duties, and similar governmental charges and assessments (including any interest, fines, deficiencies, assessments, penalties or additions to tax imposed in connection therewith or with respect thereto) including (x) taxes imposed on, or measured by, income, franchise, profits or gross receipts, and (y) ad valorem, value added, capital gains, sales, goods and services, use, real or personal property, capital stock, license, branch, payroll, estimated withholding, employment, social security (or similar), unemployment, compensation, utility, severance, production, excise, stamp, occupation, premium, windfall profits, transfer and gains taxes, and customs duties, (ii) any liability for the payment of any amounts of the type described in (i) as a result of being (or ceasing to be) a member of a consolidated, combined, unitary or aggregate group for any Taxable period, and (iii) any liability for the payment of any amounts of the type described in (i) or (ii) as a result of being a transferee or successor to any Person or as a result of any express or implied obligation to indemnify any other Person.

"Tax Returns" means any and all reports, returns, declarations, claims for refund, elections, disclosures, estimates, information reports or returns or statements required to be supplied to a Governmental Entity in connection with Taxes, including any schedule or attachment thereto or amendment thereof.

The term "threatened" when used with respect to a claim, Proceeding, dispute, action, or other matter means if any demand or statement has been made (orally or in writing) or any notice has been received (orally or in writing) or if any other event has occurred or any other circumstance exists, that would lead a director or officer of a company comparable to the Company to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken or otherwise pursued in the future.

"Title Defect Amount" with respect to any Oil and Gas Interest, means the amount by which the value of such Oil and Gas Interest is impaired as a result of the failure of the Company or its

Subsidiaries to have Good and Marketable Title with respect to such Oil and Gas Interest, which amount shall be determined as follows:

(a) the Title Defect Amount with respect to an Oil and Gas Interest in an Oil and Gas Property for which a present value of estimated future net cash flows discounted at 10.0% set forth in the Reserve Reports shall be determined by taking into consideration such present value of estimated future net cash flows of the Oil and Gas Interest subject to such lack of Good and Marketable Title, the portion of the Oil and Gas Interest subject to such lack of Good and Marketable Title, and the legal effect of such lack of Good and Marketable Title on the Oil and Gas Interest affected thereby; provided, however, that: (i) if such lack of Good and Marketable Title is in the nature of the Company's or its Subsidiaries' failure to have the Required Net Revenue Interest in an Oil and Gas Property, then the Title Defect Amount attributable to such lack of Good and Marketable Title shall be an amount equal to such present value of estimated future net cash flows for the relevant Oil and Gas Interest multiplied by the percentage reduction in such Required Net Revenue Interest as a result of such lack of Good and Marketable Title or (ii) if such lack of Good and Marketable Title is in the nature of a Lien, then the Title Defect Amount attributable to such lack of Good and Marketable Title shall be an amount equal to the amount required to fully discharge such Lien; and

(b) If the failure of the Company or its Subsidiaries to have Good and Marketable Title with respect to an Oil and Gas Interest results from any matter not described in clause (a) above, the Title Defect Amount shall be an amount equal to the difference between the value of such Oil and Gas Interest with such lack of Good and Marketable Title and the value of such Oil and Gas Property without regard to such lack of Good and Marketable Title.

"$" means United States of America dollars.

SECTION 8.02. Cross-References. The following terms shall have the meanings ascribed thereto in the Section set forth opposite such term:

Acceptance Date		5.03(d)
Agreement		Preamble
Benefit Plans		3.12(a)
Certificate of Merger		2.01(b)
Certificates		2.07(b)
Code		3.12(a)
Common Shares		Preamble
Company		Preamble
Company Assets		8.01
Company Common Stock		3.05(a)
Company Disclosure Documents		3.09(a)
Company Disclosure Letter		Article III
Company Intellectual Property		3.25
Company Material Contract		3.23(a)
Company Option Plans		2.08(a)
Company Permits		3.20(b)
Company Regulatory Agreement		3.27
Company Reports		3.07(a)
Company Securities		8.01
Company Stock Option		2.08(a)
Company Subsidiary Securities		3.06(b)
Confidentiality Agreement		5.02
Continuing Employees		5.07

DGCL		1.02(a)
Delaware Secretary of State		2.01(b)
Dissenting Shares		2.09(a)
Effective Time		2.01(b)
Environmental Permits		3.18(a)
ERISA		3.12(a)
ESOP		3.12(h)
Exchange Act		1.01(a)
Exchange Fund		2.07(a)
FERC		3.24(b)
GAAP		3.08(a)
HSR Act		3.03
Independent Directors		1.03(b)
Intellectual Property		3.25
IRS		3.12(b)
Lease Summary		3.19(o)
Legal Actions		3.11
Liabilities		3.08(b)
Merger		Preamble
Merger Consideration		2.06(b)
Merger Subsidiary		Preamble
Minimum Condition		Annex A
Negotiation Period		7.01(f)
NGPA		3.24(b)
Offer		Preamble
Offer Documents		1.01(b)
Offer Price		Preamble
Option Consideration		2.08(a)
Parent		Preamble
Paying Agent		2.07(a)
Payment		3.22
Preferred Stock		3.05(a)
Proxy Statement		3.09(a)
Reserve Reports		3.28
Rights		Preamble
Sarbanes-Oxley Act		3.07(a)
Schedule 14D-9		1.02(b)
Schedule TO		1.01(b)
SEC		1.01(b)
Securities Act		1.04(a)
Share or Shares		Preamble
Stockholder Agreements		Preamble
Stockholders Meeting		5.09
Subsequent Period		1.01(c)
Surviving Bylaws		2.03
Surviving Charter		2.02
Surviving Corporation		2.01(a)
Termination Fee		9.04(b)
Top-Up Option		1.04(a)
Top-Up Option Shares		1.04(a)
Trigger Event		2.08(a)
WARN Act		3.12(j)

ARTICLE IX MISCELLANEOUS

SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given,

if to Parent or Merger Subsidiary, to:

Petro-Canada (US) Holdings Ltd.
c/o Corporation Service Company
2711 Centerville Road
Wilmington, Delaware 19808
Telecopy: (302) 636-5454

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

Petro-Canada
150 - 6th Avenue S.W.
Calgary, Alberta
Canada T2P 3E3
Telecopy: (403) 296-4910
Attention: Vice President, General Counsel

and

Fulbright & Jaworski L.L.P.
Market Square
801 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2623
Telecopy: (202) 662-0200
Attention: Marilyn Mooney, Esq.
Roy L. Goldman, Esq.

if to the Company, to:

Prima Energy Corporation
1099 18^th Street
Suite 400
Denver, CO 80202
Telecopy: (303) 297-7708
Attention: President

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

Baker & Hostetler LLP
303 East 17^th Avenue, Suite 1100
Denver, CO 80203-1264
Telecopy: (303) 861-7805
Attention: Tom Maxfield, Esq.

or such other address or telecopy number as such party may hereafter specify for the purpose by notice to the other parties hereto. Each such notice, request or other communication shall be effective when received at the address specified in this Section or on the next Business Day if received after 5:00 p.m. local time on a Business Day or if received on a day that is not a Business Day).

SECTION 9.02. Survival of Representations and Warranties and Agreements. The representations and warranties contained herein and in any certificate or other writing delivered pursuant hereto shall not survive the Effective Time. This Section 9.02 shall not limit any covenant or

agreement of the parties to this Agreement which, by its terms, contemplates performance after the Effective Time.

SECTION 9.03. Amendments; No Waivers.

(a) Any provision of this Agreement may be amended or waived prior to the Effective Time if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Company, Parent and Merger Subsidiary or, in the case of a waiver, by the party against whom the waiver is to be effective; provided that (i) any waiver or amendment shall be effective against a party only if the Board of Directors of such party approves such waiver or amendment and (ii) after the adoption of this Agreement by the stockholders of the Company, no such amendment or waiver shall, without the further approval of such stockholders and each party's Board of Directors, alter or change (x) the amount or kind of consideration to be received in exchange for any shares of capital stock of the Company, (y) any term of the Certificate of Incorporation of the Surviving Corporation or (z) any of the terms or conditions of this Agreement if such alteration or change would adversely affect the holders of any shares of capital stock of the Company. Notwithstanding any provision of this Section 9.03 to the contrary, no provision of this Agreement may be waived by the Company or amended following the purchase by Parent or Merger Subsidiary of Shares pursuant to the Offer unless such amendment or waiver is approved by the affirmative vote of a majority of the Independent Directors.

(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law; provided that subject to Section 7.02, if a Termination Fee is paid pursuant to Section 9.04, the payment thereof shall constitute the sole and exclusive remedy hereunder.

SECTION 9.04. Fees and Expenses.

(a) Except as otherwise provided in this Section, whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.

(b) The Company will pay, or cause to be paid, to Parent by wire transfer of immediately available funds to an account designated by Parent, in accordance with Section 9.04(d), (1) Parent's Expenses (up to a maximum amount not to exceed $2.5 million) if:

(i) this Agreement is terminated pursuant to Section 7.01(d)(y), 7.01(e), 7.01(f) or 7.01(i); or

(ii) this Agreement is terminated pursuant to Section 7.01(b) and at the time of such termination (x) the Minimum Condition has not been satisfied and (y) a bona fide Acquisition Proposal has been previously announced or made known to the Company or an offer commenced;

and (2) $17.9 million (the "Termination Fee") if:

(i) this Agreement is terminated pursuant to Section 7.01(e) or 7.01(f);

(ii) this Agreement is terminated pursuant to Section 7.01(d)(y) or 7.01(i) and, prior to the one year anniversary of such termination, the Company or any of its Subsidiaries (I) consummates any Business Combination or (II) enters into any agreement in principle, arrangement, understanding or contract providing for the implementation of a Business Combination (other than a capital raising transaction by the Company in the form of an underwritten public offering) and shall consummate (whether before or after such one year anniversary) such Business Combination; or

(iii) this Agreement is terminated pursuant to Section 7.01(b) and at the time of such termination (w) the Minimum Condition has not been satisfied, (x) a bona fide Acquisition Proposal has been previously announced or made known to the Company or an offer commenced and, (y) prior to the one year anniversary of such termination, the Company or any of its Subsidiaries (I) consummates any Acquisition Proposal regardless of whether or not such Acquisition Proposal was the same Acquisition Proposal referred to in clause (x) or (II) enters into any agreement in principle, arrangement, understanding or contract providing for the implementation of any Acquisition Proposal (other than a capital raising transaction by the Company in the form of an underwritten public offering) regardless of whether or not such Acquisition Proposal was the same Acquisition Proposal referred to in clause (x) and shall consummate (whether before or after such one year anniversary) such Acquisition Proposal.

(c) Any amounts payable pursuant to Sections 9.04(b)(1) and 9.04(b)(2)(i) shall be payable as promptly as practicable following termination of this Agreement (but no more than three Business Days) and, if the Company is the party seeking to terminate this Agreement, as a condition thereto. Any amounts payable pursuant to Section 9.04(b)(2)(ii) or (iii) shall be paid promptly but in no event later than three Business Days after the consummation of the applicable Business Combination or Acquisition Proposal, as the case may be.

(d) The Company acknowledges that the agreements contained in this Section 9.04 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, Parent and Merger Subsidiary would not have entered into this Agreement. Accordingly, if the Company fails to pay promptly any amounts due pursuant to this Section 9.04, and, in order to obtain such payment, Parent commences a suit which results in a judgment against the Company for the fee or expense reimbursement set forth in this Section 9.04, the Company shall pay to Parent its costs and expenses (including attorneys' fees and expenses) in connection with such suit, together with interest from the date of termination of this Agreement on the amounts so owed at the prime rate as announced in The Wall Street Journal in effect from time to time during such period, plus 4%.

SECTION 9.05. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto (and which transfer shall not relieve Parent and Merger Subsidiary of their obligations hereunder in the event of a breach by their transferee).

SECTION 9.06. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAW.

SECTION 9.07. Jurisdiction. Each party to this Agreement hereby irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement or any agreements or transactions contemplated hereby shall be brought in the state courts of the State of Delaware or the United States District Court for the District of Delaware and hereby expressly submits to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the address set forth or referred to in Section 9.01, such service to become effective ten days after such mailing.

SECTION 9.08. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts (including by facsimile), each of which shall be an original, with the same effect as if the

signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto.

SECTION 9.09. Entire Agreement; No Third Party Beneficiaries. This Agreement, the Company Disclosure Letter and the Confidentiality Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter of this Agreement. No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by either party hereto. Neither this Agreement nor any provision hereof is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder except for the provisions of Article II and Section 5.06, which are intended for the benefit of the Company's stockholders and former and present officers and directors, respectively.

SECTION 9.10. Headings. The table of contents and headings contained in this Agreement are for reference purposes only and shall not in anyway affect the meaning or interpretation of this Agreement.

SECTION 9.11. Severability. If any term or other provision of this Agreement is invalid, illegal or unenforceable, all other terms and provisions of this Agreement shall remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.

SECTION 9.12. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

SECTION 9.13. Specific Performance. The parties hereto agree that irreparable damage would occur in the event any of the provisions of this Agreement were not to be performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof in addition to any other remedies at law or in equity.

SECTION 9.14. Interpretation. The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

		PETRO-CANADA (US) HOLDINGS LTD.
		By:	/s/ KATHLEEN E. SENDALL Name: Kathleen E. Sendall Title: President
		RAVEN ACQUISITION CORP.
		By:	/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President
		PRIMA ENERGY CORPORATION
		By:	/s/ RICHARD H. LEWIS Name: Richard H. Lewis Title: President and Chief Executive Officer

ANNEX A

Notwithstanding any other provision of the Offer, Parent and Merger Subsidiary shall not be required to accept for payment or purchase or pay for any Shares, may postpone the acceptance for payment of Shares tendered pursuant to the Offer, and may terminate the Offer (in each case in accordance with the Agreement), if (x) there shall not have been validly tendered and not withdrawn prior to the expiration of the Offer that number of Shares that would, together with any other shares beneficially owned by Parent and Affiliates, constitute more than 50% of the voting power (determined on a fully diluted basis) on the date of purchase of all the securities of the Company entitled to vote in the election of directors or in a merger (the "Minimum Condition"), (y) the applicable waiting period under the HSR Act shall not have expired or been terminated by the expiration date of the Offer, or (z) if any of the following conditions shall occur and be continuing as of any scheduled expiration date of the Offer:

(a) there shall be enacted, entered, enforced, promulgated or, pursuant to an authoritative interpretation by or on behalf of a Governmental Entity, deemed applicable to the Offer or the Merger any law or Order, other than the routine application of waiting period provisions of the HSR Act, that (i) makes illegal or otherwise directly or indirectly restrains or prohibits the making of the Offer, the acceptance for payment of or payment for some of or all the Shares by Parent or Merger Subsidiary or the consummation of the Merger, (ii) restrains or prohibits Parent's ownership or operation (or that of its respective Subsidiaries or Affiliates) of all or any material portion of the business or assets of the Company and its Subsidiaries, taken as a whole, or of Parent and its Subsidiaries, taken as a whole, or compels Parent or any of its Subsidiaries or Affiliates to dispose of or hold separate all or any material portion of the business or assets of the Company and its Subsidiaries, taken as a whole, or of Parent and its Subsidiaries, taken as a whole, (iii) imposes material limitations on the ability of Parent, Merger Subsidiary or any of Parent's other Subsidiaries or Affiliates effectively to exercise full rights of ownership with respect to the Shares, including the right to vote any Shares acquired or owned by Parent, Merger Subsidiary or any of Parent's other Subsidiaries or Affiliates on all matters properly presented to the Company's stockholders, (iv) requires divestiture by Parent, Merger Subsidiary or any of Parent's other Subsidiaries or Affiliates of any Shares or (v) compels Parent or any of its Subsidiaries and/or the Company or any of its Subsidiaries to dispose of or hold separate any material portion of (A) the business, assets or properties of the Company and its Subsidiaries, taken as a whole, or (B) the business, assets or properties of Parent and its Subsidiaries, taken as a whole; or

(b) (x) there shall be instituted or pending any action or proceeding by any Governmental Entity (i) challenging or seeking to make illegal, to delay materially or otherwise directly or indirectly to restrain or prohibit the making of the Offer, the acceptance for payment of or payment for some of or all the Shares by Parent or Merger Subsidiary or the consummation of the Merger, (ii) seeking to obtain material damages or otherwise directly or indirectly relating to the transactions contemplated by the Offer or the Merger, (iii) seeking to restrain or prohibit Parent's ownership or operation (or that of its respective Subsidiaries or Affiliates) of all or any material portion of the business or assets of the Company and its Subsidiaries, taken as a whole, or of Parent and its Subsidiaries, taken as a whole, (iv) seeking to impose or confirm material limitations on the ability of Parent, Merger Subsidiary or any of Parent's other Subsidiaries or Affiliates effectively to exercise full rights of ownership of the Shares, including the right to vote any Shares acquired or owned by Parent, Merger Subsidiary or any of Parent's other Subsidiaries or Affiliates on all matters properly presented to the Company's stockholders, (v) seeking to require divestiture by Parent, Merger Subsidiary or any of Parent's other Subsidiaries or Affiliates of any Shares, (vi) seeking to compel Parent or any of its Subsidiaries and/or the Company or any of its Subsidiaries to dispose of or hold separate any material portion of (A) the business, assets or properties of the Company and its Subsidiaries, taken as a whole, or (B) the business, assets or properties of Parent and its Subsidiaries, taken as a whole or (vii) that otherwise has or would be reasonably likely to have a Company Material Adverse Effect or a Parent Material

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Adverse Effect or (y) any proposal by any Governmental Entity shall be made that, if enacted, would reasonably be expected to have the effects described in clause (x) above; or

(c) a judgment shall be entered by a Governmental Entity imposing damages on the Company and its Subsidiaries and/or Parent and its Subsidiaries directly or indirectly relating to the transactions contemplated by this Agreement, including the Offer and the Merger, that has or would be reasonably likely to have a Company Material Adverse Effect or a Parent Material Adverse Effect; or

(d) since December 31, 2003 there has been any event, occurrence or development or state of circumstances or facts which, individually or in the aggregate, has had, or is reasonably likely to have, a Company Material Adverse Effect; or

(e) the Board of Directors of the Company shall have failed to recommend, or shall have withdrawn or modified in a manner adverse to Parent, its approval or recommendation of this Agreement, the Offer or the Merger, or shall have recommended, or entered into, or publicly announced its intention to enter into, an agreement or an agreement in principle with respect to a Superior Proposal (or shall have resolved to do any of the foregoing); or

(f) (i) any of the representations and warranties of the Company set forth in this Agreement shall not be true and correct at and as of the expiration of the Offer as if made on such date (other than those representations and warranties that expressly address matters only as of a particular date that are true and correct as of such date), except (A) for changes expressly permitted by this Agreement or (B) where all such failures to be true and correct (without giving effect to any materiality, Company Material Adverse Effect, Knowledge or, in the case of Indebtedness, good faith estimate qualifiers set forth therein) could not reasonably be expected to (x) result in liabilities, losses, damages, claims or expenses that in the aggregate exceed $30,750,000, or (ii) the Company shall not have performed in any material respect its obligations, agreements and covenants to be performed by it under the Agreement; or

(g) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on any national securities exchange or Nasdaq for a continuous period of two days, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or Canada, (iii) any significant limitation (whether or not mandatory) by a Governmental Entity on the extension of credit by banks or other lending institutions, (iv) a commencement of a war or armed hostilities or other national calamity directly involving the United States or Canada and Parent shall have determined that there is a reasonable likelihood that such event would have a material adverse significance to Parent, its Subsidiaries or the Company and its Subsidiaries, (v) any decline of at least 15% in the Dow Jones Average of Industrial Stocks and 15% in the Standard & Poor's 500 Index from the levels thereof as of the last trading day immediately preceding the date of this Agreement or (vi) in the case of any of the foregoing existing at the time of the execution of this Agreement, a material acceleration or worsening thereof; or

(h) any Person or "group" (as defined in Section 13(d)(3) of the Exchange Act), other than Parent, Merger Subsidiary or their Affiliates, shall have acquired beneficial ownership (as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of 15% or more of the Shares;

which, in the reasonable good faith judgment of Parent in any such case of clauses (a) through (h), and regardless of the circumstances giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment.

The foregoing conditions (other than the Minimum Condition) are for the sole benefit of Parent and Merger Subsidiary and may, except as provided otherwise in Section 1.01(a) of the Agreement, be waived by Parent and Merger Subsidiary in whole or in part at any time and from time to time in their discretion. The failure by Parent or Merger Subsidiary at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances, and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time.

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AGREEMENT AND PLAN OF MERGER DATED AS OF JUNE 9, 2004 BY AND AMONG PETRO-CANADA (US) HOLDINGS LTD., RAVEN ACQUISITION CORP. AND PRIMA ENERGY CORPORATION
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
ARTICLE I THE OFFER
ARTICLE II MERGER; CONVERSION OF SECURITIES
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY
ARTICLE V COVENANTS
ARTICLE VI CONDITIONS TO THE MERGER
ARTICLE VII TERMINATION
ARTICLE VIII DEFINITIONS
ARTICLE IX MISCELLANEOUS
ANNEX A
EX-2 3 a2138532zex-2.htm EXHIBIT 2
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Exhibit 2

EXECUTION COPY

STOCKHOLDER AGREEMENT

THIS STOCKHOLDER AGREEMENT (the "Agreement") is entered into as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., a Delaware corporation ("Parent"), Raven Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Subsidiary"), and the stockholder listed on Schedule I hereto (the "Stockholder") of Prima Energy Corporation, a Delaware corporation (the "Company").

RECITALS

WHEREAS, Parent, Merger Subsidiary and the Company are entering into an Agreement and Plan of Merger of even date herewith (the "Merger Agreement") which provides, among other things, that Merger Subsidiary will make a cash tender offer (the "Offer") for all of the issued and outstanding shares of Company Common Stock (as defined below) and, following the consummation of the Offer, will merge with and into the Company (the "Merger"), in each case upon the terms and subject to the conditions set forth in the Merger Agreement.

WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of securities of the Company as indicated on the Schedule I to this Agreement;

WHEREAS, the Company has advised Parent and Merger Subsidiary that the Board of Directors of the Company has unanimously approved the terms of this Agreement, and such approval has not been withdrawn; and

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholder is entering into this Agreement.

NOW, THEREFORE, in contemplation of the foregoing and in consideration of the mutual agreements, covenants, representations and warranties contained herein and intending to be legally bound hereby, the parties hereto agree as follows:

Section 1. Certain Definitions.

For purposes of this Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $0.015 per share, of the Company.

(b) "Expiration Date" shall mean the earliest of:

(i) the date upon which the Merger Agreement is validly terminated pursuant to Section 7.01 thereof;

(ii) the date on which Merger Subsidiary shall have purchased and paid for all of the Subject Securities; and

(iii) the date upon which the Merger becomes effective.

(c) The Stockholder shall be deemed to "Own" or to have acquired "Ownership" of a security if the Stockholder is the record and/or beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such security.

(d) "Person" shall mean any individual, corporation, limited liability company, partnership, trust or other entity, or governmental authority.

(e) "Subject Securities" shall mean: (i) all securities of the Company (including all shares of Company Common Stock and all options and other rights to acquire shares of Company Common Stock and any securities issued or exchanged with respect to such shares of Company Common Stock) Owned by the Stockholder as of the date of this Agreement; and (ii) all additional securities of the Company (including all additional shares of Company Common Stock and all additional options and other rights to acquire shares of Company Common Stock) of which the Stockholder acquires Ownership during the period from the date of this Agreement through the Expiration Date.

(g) A Person shall be deemed to have effected a "Transfer" of a security if such Person directly or indirectly: (i) sells, pledges, encumbers, grants an option with respect to, transfers, distributes or disposes of such security or any interest in such security; (ii) enters into an agreement or commitment contemplating the possible sale of, pledge of, encumbrance of, grant of an option with respect to, transfer of or disposition of such security or any interest therein; (iii) grants any proxy, power-of-attorney or other authorization or consent with respect to any such security or any interest therein; (iv) deposits any such security or any interest therein into a voting trust, or enters into a voting agreement or arrangement with respect to any such security or any interest therein; or (v) takes any other action that would in any way restrict, limit or interfere with the performance of the Stockholder's obligations hereunder or the transactions contemplated hereby.

(h) Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Section 2. Transfer of Subject Securities.

(b) No Transfer of Voting Rights. The Stockholder shall ensure that, during the period from the date of this Agreement through the Expiration Date: (i) none of the Subject Securities Owned by the Stockholder is deposited into a voting trust; and (ii) no proxy is granted (except to consummate the transactions contemplated hereby), and no voting agreement or similar agreement is entered into, with respect to any of the Subject Securities Owned by the Stockholder.

Section 3. Tender of Subject Securities.

The Stockholder agrees:

or instruments required to be delivered pursuant to the terms of the Offer, and/or (y) the delivery of instructions to its broker or such other Person who is the holder of record of any Tendered Shares beneficially owned by the Stockholder to make such delivery to the depositary for the Offer. The Stockholder shall have no obligations or liabilities to Parent or Merger Subsidiary under this Section 3(a) at any time after the Expiration Date. If the Stockholder acquires additional Subject Securities after the date hereof, the Stockholder shall tender (or cause the record holder to tender) such Subject Securities on or before the tenth Business Day following the commencement of the Offer, or, if later, on or before the fifth Business Day after such acquisition but in any event prior to the date of expiration of the Offer. The Stockholder acknowledges and agrees that the obligation of Merger Subsidiary to accept for payment and pay for any Subject Securities in the Offer is subject to the terms and conditions of the Offer (as described in the Merger Agreement). Parent and Merger Subsidiary acknowledge that the Stockholder's obligation to sell any Subject Securities to Merger Subsidiary is expressly conditioned upon Merger Subsidiary's acceptance and payment for the Subject Securities in the Offer pursuant to the terms of the Offer as the same may be amended from time to time, consistent with the terms of this Agreement and the Merger Agreement; and

(b) to permit Parent, Merger Subsidiary and the Company to publish and disclose in the Offer Documents and Schedule 14D-9 and, if approval of the stockholders of the Company is required under applicable law, the Proxy Statement (including all documents and schedules filed with the SEC) and any similar filing required by applicable law in connection with the transactions contemplated by the Offer and Merger Agreement, the Stockholder's identity and ownership of the Subject Securities and the nature of the Stockholder's commitments, arrangements and understandings under this Agreement.

(c) In the event that the Stockholder tenders the Tendered Shares into the Offer and the Merger Agreement is validly terminated pursuant to Section 7.01 thereof, Parent and Merger Subsidiary shall cause the Tendered Shares and related Offer Documents to be returned to the Stockholder in accordance with the terms and conditions of the Offer as described in the Merger Agreement and the Offer Documents.

Section 4. Voting of Subject Securities.

Stockholder Agreement. The Stockholder agrees that, during the period from the date of this Agreement until the Expiration Date:

(a) at any meeting of stockholders of the Company, however called, and at every adjournment or postponement thereof, the Stockholder shall (i) appear at the meeting, or otherwise cause all shares of Company Common Stock Owned by the Stockholder to be counted as present thereat for purposes of establishing a quorum, (ii) vote or cause all shares of Company Common Stock Owned by the Stockholder to be voted in favor of the approval and adoption of the Merger Agreement and the approval of the Merger and (iii) vote or cause all shares of Company Common Stock Owned by the Stockholder to be voted, against (A) any Acquisition Proposal (other than one by Parent or Merger Subsidiary) and (B) any amendment of the Company's Certificate of Incorporation or Bylaws or other proposal, action or transaction involving the Company or any of its Subsidiaries or any of its stockholders, which amendment or other proposal, action or transaction could reasonably be expected to prevent or impede or delay the consummation of the Offer, the Merger or the other transactions contemplated by the Merger Agreement or this Agreement or to deprive Parent or Merger Subsidiary of any material portion of the benefits anticipated by Parent or Merger Subsidiary to be received from the consummation of the Offer, the Merger or the other transactions contemplated by the Merger Agreement or this Agreement, or change in any manner the voting rights of Company Common Stock presented to the stockholders of the Company or in respect of which vote or consent of the stockholders is

requested or sought, unless such transaction has been approved in advance by Parent or Merger Subsidiary; and

(b) in the event written consents are solicited or otherwise sought from stockholders of the Company with respect to the approval or adoption of the Merger Agreement or with respect to the approval of the Merger, the Stockholder shall cause to be validly executed, with respect to all shares of Company Common Stock Owned by the Stockholder as of the record date fixed for the consent to the proposed action, a written consent or written consents to such proposed action.

Section 5. No Solicitation.

During the period from the date of this Stockholder Agreement through the Expiration Date, the Stockholder shall not, nor shall the Stockholder authorize or permit any representative of the Stockholder to, directly or indirectly take any action (including to solicit, initiate or encourage, cooperate with or facilitate, the making, submission or announcement of any Acquisition Proposal or any other sale, transfer, pledge or other disposition or conversion of any of the Subject Securities) prohibited by Section 5.03 of the Merger Agreement. The Stockholder will notify Parent promptly (but in any event within 24 hours after receipt of any Acquisition Proposal) if any party contacts such Stockholder following the date of this Agreement concerning any Acquisition Proposal or any other sale, transfer, pledge or other disposition or conversion of any of the Subject Securities. Nothing contained in this Section 5 shall prevent any person affiliated with the Stockholder who is a director or officer of the Company or designated by the Stockholder as a director of officer of the Company, when acting in his capacity as a director or officer of the Company, from exercising his fiduciary duties as a director or officer of the Company including, without limitation, taking any actions permitted under Section 5.03 of the Merger Agreement. In addition, nothing in this Agreement shall (or require the Stockholder to attempt to) limit or restrict any designee or affiliate of the Stockholder who is a director or officer of the Company from acting in such capacity or voting in such person's sole discretion on any matter (it being understood that this Agreement shall apply to the Stockholder solely in the Stockholder's capacity as a stockholder of the Company). The Stockholder shall have no liability to Parent, Merger Subsidiary or any of their respective affiliates under this Agreement as a result of any action or inaction by any designee or affiliate of Stockholder who is a director or officer of the Company, in either case serving on the Company's board of directors or as an officer of the Company and acting in such person's capacity as a director, officer or fiduciary of the Company.

Section 6. Representations and Warranties of Stockholders.

The Stockholder hereby represents and warrants to Parent and Merger Subsidiary as follows:

(a) Due Organization; Qualification. The Stockholder, if a corporation, limited liability company, limited partnership or other entity, has been duly incorporated, organized or formed and is validly existing and in good standing under the laws of the State of its incorporation, formation or organization. The Stockholder is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except where the failure to so qualify or be licensed would not have a material adverse effect on the Stockholder.

(b) Power; Due Authorization; Binding Agreement. The Stockholder, if an individual, has full legal capacity and, if an entity, full entity power and full entity authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Stockholder and constitutes a legal, valid and binding agreement of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as that enforceability may be subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or other similar

laws affecting or relating to the enforcement of creditors' rights generally and to general principles of equity.

(ii) The execution and delivery of this Agreement by the Stockholder do not, and the performance of this Agreement by the Stockholder will not, require (A) any consent, authorization or permit of, or filing with or notification to, any Governmental Entity, other than any filings required under the Exchange Act, or (B) any consent or approval of any other Person.

(d) Title to Securities. As of the date of this Agreement: (i) the Stockholder has good and marketable title to, and is the sole legal, record and beneficial owner free and clear of any Liens of, the number of outstanding shares of Company Common Stock set forth under the heading "Company Common Stock Owned" on Schedule I hereto; (ii) the Stockholder holds (free and clear of any Liens) the options or other rights to acquire shares of Company Common Stock ("Company Options") set forth under the heading "Company Options" on Schedule I hereto; and (iii) other than the "Company Common Stock Owed" on Schedule I hereto and the Company Options, the Stockholder does not directly or indirectly Own any shares of capital stock or other securities of the Company, or any option, warrant or other right to acquire (by purchase, conversion or otherwise) any shares of capital stock or other securities of the Company.

(e) Absence of Litigation. As of the date hereof, there is no litigation, suit, claim, action, proceeding or investigation pending, or to the knowledge of the Stockholder, threatened against the Stockholder, or any property or asset of the Stockholder, before any Governmental Entity that seeks to delay or prevent the consummation of the transactions contemplated by this Agreement.

(f) Stockholder Has Adequate Information. The Stockholder is a sophisticated seller with respect to the Subject Securities and has adequate information concerning the business and financial condition of the Company to make an informed decision regarding the sale of the Subject Securities and has independently and without reliance upon either Parent or Merger Subsidiary and based on such information as the Stockholder has deemed appropriate, made its own analysis and decision to enter into this Agreement. The Stockholder acknowledges that Parent has not made and does not make any representation or warranty, whether express or implied, of any kind or character except as expressly set forth in this Agreement. The Stockholder acknowledges and confirms that (i) Parent or Merger Subsidiary may possess or hereafter come into possession of certain non-public information concerning the Subject Securities and the Company which is not known to the Stockholder and which may be material to the Stockholder's decision to sell the Subject Securities ("Parent's Excluded Information"), (ii) the Stockholder has requested not to receive Parent's Excluded Information and has determined to sell the Subject Securities notwithstanding its lack of knowledge of Parent's Excluded Information, and (iii) neither Parent

nor Merger Subsidiary shall have any liability or obligation to the Stockholder in connection with, and the Stockholder hereby waives and releases Parent and Merger Subsidiary from, any claims which the Stockholder or its successors and assigns may have against Parent or Merger Subsidiary (whether pursuant to applicable securities laws or otherwise) with respect to the non-disclosure of Parent's Excluded Information.

(g) Accuracy of Representations. The representations and warranties contained in this Agreement are true and correct as of the date of this Agreement and will be true and correct in all material respects at all times until the Expiration Date. Parent and Merger Subsidiary each acknowledges that the Stockholder has not made and does not make any representation or warranty, whether express or implied, of any kind or character except as expressly set forth in this Agreement.

Section 7. Further Assurances.

From time to time the Stockholder, Parent and Merger Subsidiary shall execute and deliver, or cause to be executed and delivered, such additional transfers, assignments, endorsements, proxies, consents and other instruments, and shall take such further actions, as the other parties hereto may reasonably request for the purpose of carrying out and furthering the intent of this Agreement.

Section 8. Miscellaneous.

(a) Specific Performance. The Stockholder agrees that in the event of any breach or threatened breach by the Stockholder of any covenant, obligation or other provision contained in this Agreement, Parent and Merger Subsidiary shall be entitled (in addition to any other remedy that may be available to Parent or Merger Subsidiary) to: (i) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision; and (ii) an injunction restraining such breach or threatened breach. Stockholder further agrees that neither Parent, Merger Subsidiary nor any other Person shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 8(a) and Stockholder irrevocably waives any right such Stockholder may have to require the obtaining, furnishing or posting of any such bond or similar instrument.

(b) Notices. Any notice or other communication required or permitted to be delivered to Parent, Merger Subsidiary or the Stockholder under this Agreement shall be in writing and shall be deemed properly delivered, given and received when delivered to the address or facsimile telephone number set forth beneath the name of such party below (or to such other address or facsimile telephone number as such party shall have specified in a written notice given to the other party):

If to Parent or Merger Subsidiary, to:

Petro-Canada
150 6^th Avenue S.W.
Calgary, Alberta, Canada T2P 3E3
Attention: Hugh Hooker, Associate General Counsel
Telephone: (403) 296-7778
Facsimile: (403) 296-4910

If to the Stockholder: to the address set forth on the signature page hereto.

jurisdiction shall not affect the validity or enforceability of such provision or part thereof under any other circumstances or in any other jurisdiction, and (iii) the invalidity or unenforceability of such provision or part thereof shall not affect the validity or enforceability of the remainder of such provision or the validity or enforceability of any other provision of this Agreement.

(d) Governing Law; Jurisdiction. This Agreement is made under, and shall be construed and enforced in accordance with, the laws of the State of Delaware applicable to agreements made and to be performed solely therein, without giving effect to principles of conflicts of law. In any action between the parties hereto, whether arising out of this Agreement or otherwise: (i) each of the parties irrevocably and unconditionally consents and submits to the jurisdiction and venue of the Chancery or other Courts of the State of Delaware; (ii) if any such action is commenced in a state court, then, subject to applicable law, no party shall object to the removal of such action to any federal court located in Delaware; (iii) each of the parties irrevocably waives the right to trial by jury; and (iv) each of the parties irrevocably consents to service of process by first class certified mail, return receipt requested, postage prepaid, to the address at which such party is to receive notice in accordance with Section 8(b) hereof.

(e) Waiver. No failure of any party to this Agreement to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any such party in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. No party to this Agreement shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered by such person; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

(f) Attorneys' Fees. If any legal action or other legal proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any other party to this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled).

(g) Captions. The captions contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

(h) Entire Agreement. This Agreement sets forth the entire understanding of Parent, Merger Subsidiary and the Stockholder relating to the subject matter hereof and supersedes all other prior agreements and understandings between Parent, Merger Subsidiary and the Stockholder relating to the subject matter hereof.

(i) Non-exclusivity. The rights and remedies of any party to this Agreement are not exclusive of or limited by any other rights or remedies which such party may have, whether at law, in equity, by contract or otherwise, all of which shall be cumulative (and not alternative).

(j) Amendments. This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered on behalf of Parent, Merger Subsidiary and the Stockholder.

and shall inure to the benefit of each party and their successors and assigns. Without limiting any of the restrictions set forth in Section 2 or elsewhere in this Agreement, this Agreement shall be binding upon any Person to whom any Subject Securities are Transferred until such time as is provided in clause (n) below.

(l) No Third Party Beneficiaries. Nothing in this Agreement is intended to confer on any Person (other than Parent, Merger Subsidiary, the Stockholder and their successors and assigns) any rights or remedies of any nature.

(m) Expenses. Except as specifically provided elsewhere in this Agreement, all costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses.

(n) Termination. This Agreement shall automatically terminate and be of no further force and effect on the Expiration Date; provided, however, that the termination of this Agreement shall not relieve any party from any liability for any previous breach of this Agreement by such party.

(o) No Exercise Requirement. Nothing in this Agreement shall obligate the Stockholder to exercise or convert any Company Options that are Owned by the Stockholder. The Stockholder shall not exercise any Company Options prior to the expiration of the Offer unless the Stockholder promptly tenders the Company Common Stock received (in accordance with Section 3(a) hereof) and does not withdraw such Company Common Stock from the Offer; it being expressly understood that this obligation shall cease immediately upon the Expiration Date.

(p) Certain Events. In the event of any stock split, stock dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Company Common Stock or the acquisition of additional Company Common Stock or other securities or rights of the Company by the Stockholder, through the exercise of options or otherwise, the number of Subject Securities shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional Company Common Stock or other securities or rights of the Company issued to or acquired by the Stockholder.

(q) Stockholder Capacity. No person executing this Agreement (including, without limitation, such person's representatives, designees or affiliates) who is or becomes during the term hereof a director or officer of the Company makes any agreement or understanding herein or is obligated hereunder in his capacity as such director or officer. The Stockholder executes this Agreement solely in its capacity as the Owner of Subject Securities (as further set forth on Schedule I hereto), and nothing herein shall limit or affect any actions taken by the Stockholder (including, without limitation, such person's representatives, designees or affiliates) in that person's capacity as an officer or director of the Company.

(r) Independence of Obligations. The covenants and obligations of Stockholder set forth in this Agreement shall be construed as independent of any other agreement or arrangement between such Stockholder, on the one hand, and the Company, Parent or Merger Subsidiary, on the other. The existence of any claim or cause of action by Stockholder against the Company, Parent or Merger Subsidiary shall not constitute a defense to the enforcement of any of such covenants or obligations against such Stockholder.

(s) Stop Transfer Order. In furtherance of this Agreement, concurrently herewith, the Stockholder shall, and hereby does authorize the Company or its counsel to, notify the Company's transfer agent that there is a stop transfer order with respect to all of the Subject Securities (and that this Agreement places limits on the voting and transfer of such shares); provided that, the stop transfer order shall not restrict or prohibit any Transfer of the Subject Securities if such transfer is made pursuant to the Offer or such Transfer is made at any time following the Expiration Date.

(t) Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

(u) Construction.

(i) For purposes of this Agreement, whenever the context requires: the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include masculine and feminine genders.

(ii) The parties agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement.

(iii) As used in this Agreement, the words "include" and "including," and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words "without limitation."

(iv) Except as otherwise indicated, all references in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[The remainder of this page is intentionally blank]

IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholder have caused this Agreement to be executed as of the date first written above.

		PETRO-CANADA (US) HOLDINGS LTD.
		By:		/s/ KATHLEEN E. SENDALL Name: Kathleen E. Sendall Title: President
		RAVEN ACQUISITION CORP.
		By:		/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President
		STOCKHOLDER:
		/s/ JAMES R. CUMMINGS James R. Cummings

Schedule I

Stockholder		Company Common Stock Owned		Company Options Owned
James R. Cummings		2,000		39,375

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STOCKHOLDER AGREEMENT
EX-3 4 a2138532zex-3.htm EXHIBIT 3
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Exhibit 3

EXECUTION COPY

STOCKHOLDER AGREEMENT

RECITALS

WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of securities of the Company as indicated on the Schedule I to this Agreement;

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholder is entering into this Agreement.

Section 1. Certain Definitions.

For purposes of this Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $0.015 per share, of the Company.

(b) "Expiration Date" shall mean the earliest of:

(i) the date upon which the Merger Agreement is validly terminated pursuant to Section 7.01 thereof;

(ii) the date on which Merger Subsidiary shall have purchased and paid for all of the Subject Securities; and

(iii) the date upon which the Merger becomes effective.

(d) "Person" shall mean any individual, corporation, limited liability company, partnership, trust or other entity, or governmental authority.

(h) Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Section 2. Transfer of Subject Securities.

Section 3. Tender of Subject Securities.

The Stockholder agrees:

Section 4. Voting of Subject Securities.

Stockholder Agreement. The Stockholder agrees that, during the period from the date of this Agreement until the Expiration Date:

requested or sought, unless such transaction has been approved in advance by Parent or Merger Subsidiary; and

Section 5. No Solicitation.

Section 6. Representations and Warranties of Stockholders.

The Stockholder hereby represents and warrants to Parent and Merger Subsidiary as follows:

laws affecting or relating to the enforcement of creditors' rights generally and to general principles of equity.

Section 7. Further Assurances.

Section 8. Miscellaneous.

If to Parent or Merger Subsidiary, to:

Petro-Canada
150 6^th Avenue S.W.
Calgary, Alberta, Canada T2P 3E3
Attention: Hugh Hooker, Associate General Counsel
Telephone: (403) 296-7778
Facsimile: (403) 296-4910

If to the Stockholder: to the address set forth on the signature page hereto.

(u) Construction.

(iv) Except as otherwise indicated, all references in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[The remainder of this page is intentionally blank]

IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholder have caused this Agreement to be executed as of the date first written above.

		PETRO-CANADA (US) HOLDINGS LTD.
		By:		/s/ KATHLEEN E. SENDALL Name: Kathleen E. Sendall Title: President
		RAVEN ACQUISITION CORP.
		By:		/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President
		STOCKHOLDER:
		/s/ DOUGLAS J. GUION Douglas J. Guion

Schedule I

Stockholder		Company Common Stock Owned		Company Options Owned
Douglas J. Guion		6,037		21,375

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STOCKHOLDER AGREEMENT
EX-4 5 a2138532zex-4.htm EXHIBIT 4
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Exhibit 4

EXECUTION COPY

STOCKHOLDER AGREEMENT

RECITALS

WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of securities of the Company as indicated on the Schedule I to this Agreement;

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholder is entering into this Agreement.

Section 1. Certain Definitions.

For purposes of this Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $0.015 per share, of the Company.

(b) "Expiration Date" shall mean the earliest of:

(i) the date upon which the Merger Agreement is validly terminated pursuant to Section 7.01 thereof;

(ii) the date on which Merger Subsidiary shall have purchased and paid for all of the Subject Securities; and

(iii) the date upon which the Merger becomes effective.

(d) "Person" shall mean any individual, corporation, limited liability company, partnership, trust or other entity, or governmental authority.

(h) Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Section 2. Transfer of Subject Securities.

Section 3. Tender of Subject Securities.

The Stockholder agrees:

Section 4. Voting of Subject Securities.

Stockholder Agreement. The Stockholder agrees that, during the period from the date of this Agreement until the Expiration Date:

requested or sought, unless such transaction has been approved in advance by Parent or Merger Subsidiary; and

Section 5. No Solicitation.

Section 6. Representations and Warranties of Stockholders.

The Stockholder hereby represents and warrants to Parent and Merger Subsidiary as follows:

laws affecting or relating to the enforcement of creditors' rights generally and to general principles of equity.

Section 7. Further Assurances.

Section 8. Miscellaneous.

If to Parent or Merger Subsidiary, to:

Petro-Canada
150 6^th Avenue S.W.
Calgary, Alberta, Canada T2P 3E3
Attention: Hugh Hooker, Associate General Counsel
Telephone: (403) 296-7778
Facsimile: (403) 296-4910

If to the Stockholder: to the address set forth on the signature page hereto.

(u) Construction.

(iv) Except as otherwise indicated, all references in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[The remainder of this page is intentionally blank]

IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholder have caused this Agreement to be executed as of the date first written above.

		PETRO-CANADA (US) HOLDINGS LTD.
		By:		/s/ KATHLEEN E. SENDALL Name: Kathleen E. Sendall Title: President
		RAVEN ACQUISITION CORP.
		By:		/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President
		STOCKHOLDER:
		/s/ CATHERINE J. PAGLIA Catherine J. Paglia

Schedule I

Stockholder		Company Common Stock Owned		Company Options Owned
Catherine J. Paglia		4,495		45,000

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STOCKHOLDER AGREEMENT
EX-5 6 a2138532zex-5.htm EXHIBIT 5
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Exhibit 5

EXECUTION COPY

STOCKHOLDER AGREEMENT

THIS STOCKHOLDER AGREEMENT (the "Agreement") is entered into as of June 9, 2004, by and among Petro-Canada (US) Holdings Ltd., a Delaware corporation ("Parent"), Raven Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Subsidiary"), and the stockholder listed on Schedule I hereto (the "Stockholder") of Prima Energy Corporation, a Delaware corporation (the "Company").

RECITALS

WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of securities of the Company as indicated on the Schedule I to this Agreement;

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholder is entering into this Agreement.

Section 1. Certain Definitions.

For purposes of this Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $0.015 per share, of the Company.

(b) "Expiration Date" shall mean the earliest of:

(i) the date upon which the Merger Agreement is validly terminated pursuant to Section 7.01 thereof;

(ii) the date on which Merger Subsidiary shall have purchased and paid for all of the Subject Securities; and

(iii) the date upon which the Merger becomes effective.

(d) "Person" shall mean any individual, corporation, limited liability company, partnership, trust or other entity, or governmental authority.

Stock) Owned by the Stockholder as of the date of this Agreement; and (ii) all additional securities of the Company (including all additional shares of Company Common Stock and all additional options and other rights to acquire shares of Company Common Stock) of which the Stockholder acquires Ownership during the period from the date of this Agreement through the Expiration Date.

(h) Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Section 2. Transfer of Subject Securities.

(b) No Transfer of Voting Rights. The Stockholder shall ensure that, during the period from the date of this Agreement through the Expiration Date: (i) none of the Subject Securities Owned by the Stockholder is deposited into a voting trust; and (ii) no proxy is granted (except to consummate the transactions contemplated hereby), and no voting agreement or similar agreement is entered into, with respect to any of the Subject Securities Owned by the Stockholder.

Section 3. Tender of Subject Securities.

The Stockholder agrees:

Offer. The Stockholder shall have no obligations or liabilities to Parent or Merger Subsidiary under this Section 3(a) at any time after the Expiration Date. If the Stockholder acquires additional Subject Securities after the date hereof, the Stockholder shall tender (or cause the record holder to tender) such Subject Securities on or before the tenth Business Day following the commencement of the Offer, or, if later, on or before the fifth Business Day after such acquisition but in any event prior to the date of expiration of the Offer. The Stockholder acknowledges and agrees that the obligation of Merger Subsidiary to accept for payment and pay for any Subject Securities in the Offer is subject to the terms and conditions of the Offer (as described in the Merger Agreement). Parent and Merger Subsidiary acknowledge that the Stockholder's obligation to sell any Subject Securities to Merger Subsidiary is expressly conditioned upon Merger Subsidiary's acceptance and payment for the Subject Securities in the Offer pursuant to the terms of the Offer as the same may be amended from time to time, consistent with the terms of this Agreement and the Merger Agreement; and

Section 4. Voting of Subject Securities.

Stockholder Agreement. The Stockholder agrees that, during the period from the date of this Agreement until the Expiration Date:

Section 5. No Solicitation.

Section 6. Representations and Warranties of Stockholders.

The Stockholder hereby represents and warrants to Parent and Merger Subsidiary as follows:

(b) Power; Due Authorization; Binding Agreement. The Stockholder, if an individual, has full legal capacity and, if an entity, full entity power and full entity authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Stockholder and constitutes a legal, valid and binding agreement of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as that enforceability may be subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting or relating to the enforcement of creditors' rights generally and to general principles of equity.

(d) Title to Securities. As of the date of this Agreement: (i) the Stockholder has good and marketable title to, and is the sole legal, record and beneficial owner free and clear of any Liens of, the number of outstanding shares of Company Common Stock set forth under the heading "Company Common Stock Owned" on Schedule I hereto; (ii) the Stockholder holds (free and clear of any Liens) the options or other rights to acquire shares of Company Common Stock ("Company Options") set forth under the heading "Company Options" on Schedule I hereto; and (iii) other than the "Company Common Stock Owed" on Schedule I hereto and the Company Options, the Stockholder does not directly or indirectly Own any shares of capital stock or other securities of the Company, or any option, warrant or other right to acquire (by purchase, conversion or otherwise) any shares of capital stock or other securities of the Company.

(e) Absence of Litigation. As of the date hereof, there is no litigation, suit, claim, action, proceeding or investigation pending, or to the knowledge of the Stockholder, threatened against the Stockholder, or any property or asset of the Stockholder, before any Governmental Entity that seeks to delay or prevent the consummation of the transactions contemplated by this Agreement.

(f) Stockholder Has Adequate Information. The Stockholder is a sophisticated seller with respect to the Subject Securities and has adequate information concerning the business and financial condition of the Company to make an informed decision regarding the sale of the Subject Securities and has independently and without reliance upon either Parent or Merger Subsidiary and based on such information as the Stockholder has deemed appropriate, made its own analysis and decision to enter into this Agreement. The Stockholder acknowledges that Parent has not made and does not make any representation or warranty, whether express or implied, of any kind or character except as expressly set forth in this Agreement. The Stockholder acknowledges and confirms that (i) Parent or Merger Subsidiary may possess or hereafter come into possession of certain non-public information concerning the Subject Securities and the Company which is not known to the Stockholder and which may be material to the Stockholder's decision to sell the Subject Securities ("Parent's Excluded Information"), (ii) the Stockholder has requested not to receive Parent's Excluded Information and has determined to sell the Subject Securities notwithstanding its lack of knowledge of Parent's Excluded Information, and (iii) neither Parent nor Merger Subsidiary shall have any liability or obligation to the Stockholder in connection with, and the Stockholder hereby waives and releases Parent and Merger Subsidiary from, any claims which the Stockholder or its successors and assigns may have against Parent or Merger Subsidiary

(whether pursuant to applicable securities laws or otherwise) with respect to the non-disclosure of Parent's Excluded Information.

Section 7. Further Assurances.

Section 8. Miscellaneous.

If to Parent or Merger Subsidiary, to:

Petro-Canada
150 6^th Avenue S.W.
Calgary, Alberta, Canada T2P 3E3
Attention: Hugh Hooker, Associate General Counsel
Telephone: (403) 296-7778
Facsimile: (403) 296-4910

If to the Stockholder: to the address set forth on the signature page hereto.

(c) Severability. If any provision of this Agreement or any part of any such provision is held under any circumstances to be invalid or unenforceable in any jurisdiction, then (i) such provision or part thereof shall, with respect to such circumstances and in such jurisdiction, be deemed amended to conform to applicable laws so as to be valid and enforceable to the fullest possible extent, (ii) the invalidity or unenforceability of such provision or part thereof under such circumstances and in such jurisdiction shall not affect the validity or enforceability of such provision or part thereof under any other circumstances or in any other jurisdiction, and (iii) the invalidity or unenforceability of such

provision or part thereof shall not affect the validity or enforceability of the remainder of such provision or the validity or enforceability of any other provision of this Agreement.

(f) Attorneys' Fees. If any legal action or other legal proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any other party to this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled).

(g) Captions. The captions contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

(h) Entire Agreement. This Agreement sets forth the entire understanding of Parent, Merger Subsidiary and the Stockholder relating to the subject matter hereof and supersedes all other prior agreements and understandings between Parent, Merger Subsidiary and the Stockholder relating to the subject matter hereof.

(i) Non-exclusivity. The rights and remedies of any party to this Agreement are not exclusive of or limited by any other rights or remedies which such party may have, whether at law, in equity, by contract or otherwise, all of which shall be cumulative (and not alternative).

(k) Assignment; Binding Effect. Neither this Agreement nor any of the interests or obligations hereunder may be assigned or delegated by any party hereto without the prior written consent of the other parties, and any attempted or purported assignment or delegation of any of such interests or obligations without such consent shall be void. Subject to the preceding sentence, this Agreement shall be binding upon each party's heirs, estate, executors, personal representatives, successors and assigns, and shall inure to the benefit of each party and their successors and assigns. Without limiting any of the restrictions set forth in Section 2 or elsewhere in this Agreement, this Agreement shall be binding

upon any Person to whom any Subject Securities are Transferred until such time as is provided in clause (n) below.

(l) No Third Party Beneficiaries. Nothing in this Agreement is intended to confer on any Person (other than Parent, Merger Subsidiary, the Stockholder and their successors and assigns) any rights or remedies of any nature.

(m) Expenses. Except as specifically provided elsewhere in this Agreement, all costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses.

(n) Termination. This Agreement shall automatically terminate and be of no further force and effect on the Expiration Date; provided, however, that the termination of this Agreement shall not relieve any party from any liability for any previous breach of this Agreement by such party.

(p) Certain Events. In the event of any stock split, stock dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Company Common Stock or the acquisition of additional Company Common Stock or other securities or rights of the Company by the Stockholder, through the exercise of options or otherwise, the number of Subject Securities shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional Company Common Stock or other securities or rights of the Company issued to or acquired by the Stockholder.

(r) Independence of Obligations. The covenants and obligations of Stockholder set forth in this Agreement shall be construed as independent of any other agreement or arrangement between such Stockholder, on the one hand, and the Company, Parent or Merger Subsidiary, on the other. The existence of any claim or cause of action by Stockholder against the Company, Parent or Merger Subsidiary shall not constitute a defense to the enforcement of any of such covenants or obligations against such Stockholder.

(s) Stop Transfer Order. In furtherance of this Agreement, concurrently herewith, the Stockholder shall, and hereby does authorize the Company or its counsel to, notify the Company's transfer agent that there is a stop transfer order with respect to all of the Subject Securities (and that this Agreement places limits on the voting and transfer of such shares); provided that, the stop transfer order shall not restrict or prohibit any Transfer of the Subject Securities if such transfer is made pursuant to the Offer or such Transfer is made at any time following the Expiration Date.

(t) Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

(u) Construction.

(iv) Except as otherwise indicated, all references in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[The remainder of this page is intentionally blank]

IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholder have caused this Agreement to be executed as of the date first written above.

		PETRO-CANADA (US) HOLDINGS LTD.
		By:		/s/ KATHLEEN E. SENDALL Name: Kathleen E. Sendall Title: President
		RAVEN ACQUISITION CORP.
		By:		/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President
		STOCKHOLDER:
		/s/ GEORGE L. SEWARD George L. Seward

Schedule I

Stockholder		Company Common Stock Owned		Company Options Owned
George L. Seward		285,693		50,625

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STOCKHOLDER AGREEMENT
EX-6 7 a2138532zex-6.htm EXHIBIT 6
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Exhibit 6

EXECUTION COPY

STOCKHOLDER AGREEMENT

RECITALS

WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of securities of the Company as indicated on the Schedule I to this Agreement;

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholder is entering into this Agreement.

Section 1. Certain Definitions.

For purposes of this Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $0.015 per share, of the Company.

(b) "Expiration Date" shall mean the earliest of:

(i) the date upon which the Merger Agreement is validly terminated pursuant to Section 7.01 thereof;

(ii) the date on which Merger Subsidiary shall have purchased and paid for all of the Subject Securities; and

(iii) the date upon which the Merger becomes effective.

(d) "Person" shall mean any individual, corporation, limited liability company, partnership, trust or other entity, or governmental authority.

(h) Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Section 2. Transfer of Subject Securities.

Section 3. Tender of Subject Securities.

The Stockholder agrees:

Section 4. Voting of Subject Securities.

Stockholder Agreement. The Stockholder agrees that, during the period from the date of this Agreement until the Expiration Date:

requested or sought, unless such transaction has been approved in advance by Parent or Merger Subsidiary; and

Section 5. No Solicitation.

Section 6. Representations and Warranties of Stockholders.

The Stockholder hereby represents and warrants to Parent and Merger Subsidiary as follows:

laws affecting or relating to the enforcement of creditors' rights generally and to general principles of equity.

Section 7. Further Assurances.

Section 8. Miscellaneous.

If to Parent or Merger Subsidiary, to:

Petro-Canada
150 6^th Avenue S.W.
Calgary, Alberta, Canada T2P 3E3
Attention: Hugh Hooker, Associate General Counsel
Telephone: (403) 296-7778
Facsimile: (403) 296-4910

If to the Stockholder: to the address set forth on the signature page hereto.

(q) Stockholder Capacity. No person executing this Agreement (including, without limitation, such person's representatives, designees or affiliates) who is or becomes during the term hereof a director or officer of the Company makes any agreement or understanding herein or is obligated hereunder in his capacity as such director or officer. The Stockholder executes this Agreement solely in its capacity as the Owner of Subject Securities (as further set forth on Schedule I hereto), and nothing herein shall limit or affect any actions taken by the Stockholder (including, without limitation, such person's representatives, designees or affiliates) in that person's capacity as an officer or director of the Company.

(u) Construction.

(iv) Except as otherwise indicated, all references in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[The remainder of this page is intentionally blank]

IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholder have caused this Agreement to be executed as of the date first written above.

		PETRO-CANADA (US) HOLDINGS LTD.
		By:		/s/ KATHLEEN E. SENDALL Name: Kathleen E. Sendall Title: President
		RAVEN ACQUISITION CORP.
		By:		/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President
		STOCKHOLDER:
		/s/ NEIL L. STENBUCK Neil L. Stenbuck

Schedule I

Stockholder		Company Common Stock Owned		Company Options Owned
Neil L. Stenbuck		None		83,000

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STOCKHOLDER AGREEMENT
EX-7 8 a2138532zex-7.htm EXHIBIT 7
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Exhibit 7

EXECUTION COPY

STOCKHOLDER AGREEMENT

RECITALS

WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of securities of the Company as indicated on the Schedule I to this Agreement;

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholder is entering into this Agreement.

Section 1. Certain Definitions.

For purposes of this Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $0.015 per share, of the Company.

(b) "Expiration Date" shall mean the earliest of:

(i) the date upon which the Merger Agreement is validly terminated pursuant to Section 7.01 thereof;

(ii) the date on which Merger Subsidiary shall have purchased and paid for all of the Subject Securities; and

(iii) the date upon which the Merger becomes effective.

(d) "Person" shall mean any individual, corporation, limited liability company, partnership, trust or other entity, or governmental authority.

(h) Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Section 2. Transfer of Subject Securities.

Section 3. Tender of Subject Securities.

The Stockholder agrees:

Section 4. Voting of Subject Securities.

Stockholder Agreement. The Stockholder agrees that, during the period from the date of this Agreement until the Expiration Date:

requested or sought, unless such transaction has been approved in advance by Parent or Merger Subsidiary; and

Section 5. No Solicitation.

Section 6. Representations and Warranties of Stockholders.

The Stockholder hereby represents and warrants to Parent and Merger Subsidiary as follows:

laws affecting or relating to the enforcement of creditors' rights generally and to general principles of equity.

Section 7. Further Assurances.

Section 8. Miscellaneous.

If to Parent or Merger Subsidiary, to:

Petro-Canada
150 6^th Avenue S.W.
Calgary, Alberta, Canada T2P 3E3
Attention: Hugh Hooker, Associate General Counsel
Telephone: (403) 296-7778
Facsimile: (403) 296-4910

If to the Stockholder: to the address set forth on the signature page hereto.

(u) Construction.

(iv) Except as otherwise indicated, all references in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[The remainder of this page is intentionally blank]

IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholder have caused this Agreement to be executed as of the date first written above.

		PETRO-CANADA (US) HOLDINGS LTD.
		By:		/s/ KATHLEEN E. SENDALL Name: Kathleen E. Sendall Title: President
		RAVEN ACQUISITION CORP.
		By:		/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President
		STOCKHOLDER:
		/s/ MICHAEL R. KENNEDY Michael R. Kennedy

Schedule I

Stockholder		Company Common Stock Owned		Company Options Owned
Michael R. Kennedy		None		29,000

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STOCKHOLDER AGREEMENT
EX-8 9 a2138532zex-8.htm EXHIBIT 8
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Exhibit 8

EXECUTION COPY

STOCKHOLDER AGREEMENT

RECITALS

WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of securities of the Company as indicated on the Schedule I to this Agreement;

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholder is entering into this Agreement.

Section 1. Certain Definitions.

For purposes of this Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $0.015 per share, of the Company.

(b) "Expiration Date" shall mean the earliest of:

(i) the date upon which the Merger Agreement is validly terminated pursuant to Section 7.01 thereof;

(ii) the date on which Merger Subsidiary shall have purchased and paid for all of the Subject Securities; and

(iii) the date upon which the Merger becomes effective.

(d) "Person" shall mean any individual, corporation, limited liability company, partnership, trust or other entity, or governmental authority.

(h) Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Section 2. Transfer of Subject Securities.

Section 3. Tender of Subject Securities.

The Stockholder agrees:

Section 4. Voting of Subject Securities.

Stockholder Agreement. The Stockholder agrees that, during the period from the date of this Agreement until the Expiration Date:

requested or sought, unless such transaction has been approved in advance by Parent or Merger Subsidiary; and

Section 5. No Solicitation.

Section 6. Representations and Warranties of Stockholders.

The Stockholder hereby represents and warrants to Parent and Merger Subsidiary as follows:

laws affecting or relating to the enforcement of creditors' rights generally and to general principles of equity.

Section 7. Further Assurances.

Section 8. Miscellaneous.

If to Parent or Merger Subsidiary, to:

Petro-Canada
150 6^th Avenue S.W.
Calgary, Alberta, Canada T2P 3E3
Attention: Hugh Hooker, Associate General Counsel
Telephone: (403) 296-7778
Facsimile: (403) 296-4910

If to the Stockholder: to the address set forth on the signature page hereto.

(u) Construction.

(iv) Except as otherwise indicated, all references in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[The remainder of this page is intentionally blank]

IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholder have caused this Agreement to be executed as of the date first written above.

		PETRO-CANADA (US) HOLDINGS LTD.
		By:		/s/ KATHLEEN E. SENDALL Name: Kathleen E. Sendall Title: President
		RAVEN ACQUISITION CORP.
		By:		/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President
		STOCKHOLDER:
		/s/ MICHAEL J. MCGUIRE Michael J. McGuire

Schedule I

Stockholder		Company Common Stock Owned		Company Options Owned
Michael J. McGuire		None		19,000

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STOCKHOLDER AGREEMENT
EX-9 10 a2138532zex-9.htm EXHIBIT 9
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Exhibit 9

EXECUTION COPY

STOCKHOLDER AGREEMENT

RECITALS

WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of securities of the Company as indicated on the Schedule I to this Agreement;

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholder is entering into this Agreement.

Section 1. Certain Definitions.

For purposes of this Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $0.015 per share, of the Company.

(b) "Expiration Date" shall mean the earliest of:

(i) the date upon which the Merger Agreement is validly terminated pursuant to Section 7.01 thereof;

(ii) the date on which Merger Subsidiary shall have purchased and paid for all of the Subject Securities; and

(iii) the date upon which the Merger becomes effective.

(d) "Person" shall mean any individual, corporation, limited liability company, partnership, trust or other entity, or governmental authority.

(h) Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Section 2. Transfer of Subject Securities.

Section 3. Tender of Subject Securities.

The Stockholder agrees:

Section 4. Voting of Subject Securities.

Stockholder Agreement. The Stockholder agrees that, during the period from the date of this Agreement until the Expiration Date:

requested or sought, unless such transaction has been approved in advance by Parent or Merger Subsidiary; and

Section 5. No Solicitation.

Section 6. Representations and Warranties of Stockholders.

The Stockholder hereby represents and warrants to Parent and Merger Subsidiary as follows:

laws affecting or relating to the enforcement of creditors' rights generally and to general principles of equity.

Section 7. Further Assurances.

Section 8. Miscellaneous.

If to Parent or Merger Subsidiary, to:

Petro-Canada
150 6^th Avenue S.W.
Calgary, Alberta, Canada T2P 3E3
Attention: Hugh Hooker, Associate General Counsel
Telephone: (403) 296-7778
Facsimile: (403) 296-4910

If to the Stockholder: to the address set forth on the signature page hereto.

(u) Construction.

(iv) Except as otherwise indicated, all references in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[The remainder of this page is intentionally blank]

IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholder have caused this Agreement to be executed as of the date first written above.

		PETRO-CANADA (US) HOLDINGS LTD.
		By:		/s/ KATHLEEN E. SENDALL Name: Kathleen E. Sendall Title: President
		RAVEN ACQUISITION CORP.
		By:		/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President
		STOCKHOLDER:
		/s/ JOHN H. CARPENTER John H. Carpenter

Schedule I

Stockholder		Company Common Stock Owned		Company Options Owned
John H. Carpenter		None		9,500

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STOCKHOLDER AGREEMENT
EX-10 11 a2138532zex-10.htm EXHIBIT 10
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Exhibit 10

EXECUTION COPY

STOCKHOLDER AGREEMENT

RECITALS

WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of securities of the Company as indicated on the Schedule I to this Agreement;

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholder is entering into this Agreement.

Section 1. Certain Definitions.

For purposes of this Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $0.015 per share, of the Company.

(b) "Expiration Date" shall mean the earliest of:

(i) the date upon which the Merger Agreement is validly terminated pursuant to Section 7.01 thereof;

(ii) the date on which Merger Subsidiary shall have purchased and paid for all of the Subject Securities; and

(iii) the date upon which the Merger becomes effective.

(d) "Person" shall mean any individual, corporation, limited liability company, partnership, trust or other entity, or governmental authority.

(h) Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Section 2. Transfer of Subject Securities.

Section 3. Tender of Subject Securities.

The Stockholder agrees:

Section 4. Voting of Subject Securities.

Stockholder Agreement. The Stockholder agrees that, during the period from the date of this Agreement until the Expiration Date:

requested or sought, unless such transaction has been approved in advance by Parent or Merger Subsidiary; and

Section 5. No Solicitation.

Section 6. Representations and Warranties of Stockholders.

The Stockholder hereby represents and warrants to Parent and Merger Subsidiary as follows:

laws affecting or relating to the enforcement of creditors' rights generally and to general principles of equity.

Section 7. Further Assurances.

Section 8. Miscellaneous.

If to Parent or Merger Subsidiary, to:

Petro-Canada
150 6^th Avenue S.W.
Calgary, Alberta, Canada T2P 3E3
Attention: Hugh Hooker, Associate General Counsel
Telephone: (403) 296-7778
Facsimile: (403) 296-4910

If to the Stockholder: to the address set forth on the signature page hereto.

(u) Construction.

(iv) Except as otherwise indicated, all references in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[The remainder of his page is intentionally blank]

IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholder have caused this Agreement to be executed as of the date first written above.

		PETRO-CANADA (US) HOLDINGS LTD.
		By:		/s/ KATHLEEN E. SENDALL Name: Kathleen E. Sendall Title: President
		RAVEN ACQUISITION CORP.
		By:		/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President
		STOCKHOLDER:
		/s/ SANDRA J. IRLANDO Sandra J. Irlando

Schedule I

Stockholder		Company Common Stock Owned		Company Options Owned
Sandra J. Irlando		None		16,500

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STOCKHOLDER AGREEMENT
EX-11 12 a2138532zex-11.htm EXHIBIT 11
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Exhibit 11

EXECUTION COPY

STOCKHOLDER AGREEMENT

RECITALS

WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of securities of the Company as indicated on the Schedule I to this Agreement;

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholder is entering into this Agreement.

Section 1. Certain Definitions.

For purposes of this Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $0.015 per share, of the Company.

(b) "Expiration Date" shall mean the earliest of:

(i) the date upon which the Merger Agreement is validly terminated pursuant to Section 7.01 thereof;

(ii) the date on which Merger Subsidiary shall have purchased and paid for all of the Subject Securities; and

(iii) the date upon which the Merger becomes effective.

(d) "Person" shall mean any individual, corporation, limited liability company, partnership, trust or other entity, or governmental authority.

(h) Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Section 2. Transfer of Subject Securities.

Section 3. Tender of Subject Securities.

The Stockholder agrees:

Section 4. Voting of Subject Securities.

Stockholder Agreement. The Stockholder agrees that, during the period from the date of this Agreement until the Expiration Date:

requested or sought, unless such transaction has been approved in advance by Parent or Merger Subsidiary; and

Section 5. No Solicitation.

Section 6. Representations and Warranties of Stockholders.

The Stockholder hereby represents and warrants to Parent and Merger Subsidiary as follows:

laws affecting or relating to the enforcement of creditors' rights generally and to general principles of equity.

Section 7. Further Assurances.

Section 8. Miscellaneous.

If to Parent or Merger Subsidiary, to:

Petro-Canada
150 6^th Avenue S.W.
Calgary, Alberta, Canada T2P 3E3
Attention: Hugh Hooker, Associate General Counsel
Telephone: (403) 296-7778
Facsimile: (403) 296-4910

If to the Stockholder: to the address set forth on the signature page hereto.

(u) Construction.

(iv) Except as otherwise indicated, all references in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[The remainder of this page is intentionally blank]

IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholder have caused this Agreement to be executed as of the date first written above.

		PETRO-CANADA (US) HOLDINGS LTD.
		By:		/s/ KATHLEEN E. SENDALL Name: Kathleen E. Sendall Title: President
		RAVEN ACQUISITION CORP.
		By:		/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President
		STOCKHOLDER:
		/s/ EDWARD L. MCLAUGHLIN Edward L. McLaughlin

Schedule I

Stockholder		Company Common Stock Owned		Company Options Owned
Edward L. McLaughlin		None		30,000

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STOCKHOLDER AGREEMENT
EX-12 13 a2138532zex-12.htm EXHIBIT 12
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Exhibit 12

EXECUTION COPY

STOCKHOLDER AGREEMENT

RECITALS

WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of securities of the Company as indicated on the Schedule I to this Agreement;

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholder is entering into this Agreement.

Section 1. Certain Definitions.

For purposes of this Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $0.015 per share, of the Company.

(b) "Expiration Date" shall mean the earliest of:

(i) the date upon which the Merger Agreement is validly terminated pursuant to Section 7.01 thereof;

(ii) the date on which Merger Subsidiary shall have purchased and paid for all of the Subject Securities; and

(iii) the date upon which the Merger becomes effective.

(d) "Person" shall mean any individual, corporation, limited liability company, partnership, trust or other entity, or governmental authority.

(h) Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Section 2. Transfer of Subject Securities.

(a) Transferee of Subject Securities to be Bound by this Agreement. The Stockholder agrees that, except as may be provided herein, during the period from the date of this Agreement through the Expiration Date, the Stockholder shall not cause or permit any Transfer of any of the Subject Securities to be effected; provided, that nothing in this Agreement shall prohibit the Stockholder from Transferring Subject Securities to Merger Subsidiary pursuant to Section 3 hereof. Parent and Merger Subsidiary acknowledge that Stockholder, in connection with a loan, has previously pledged certain Subject Securities, as detailed on Schedule I hereto, to Citigroup Global Markets Inc. ("CGMI") pursuant to a pledge security agreement, margin agreement, and account control agreement previously entered into by such parties (such documents and all other documents evidencing or securing such loan, and any and all other documents providing for the refinancing or replacing of any or all of such indebtedness being called the "Loan Documents," and the holder of the lender's rights under the Loan Documents being called the "Lender") and that the existence of such Loan Documents and the continuing compliance by the parties thereto with such Loan Documents shall not be deemed a Transfer in contravention of this Section 2(a); provided, however, that notwithstanding the foregoing no Transfer shall be permitted under such Loan Documents if such Transfer would adversely affect the right and power of the Stockholder to tender the agreement previously entered into by such parties and that the existence of such pledge agreement and the continuing compliance by the parties thereto with such agreement shall not be deemed a Transfer in contravention of this Section 2(a); provided, however, that notwithstanding the foregoing no Transfer shall be permitted under such agreement if such Transfer would adversely affect the right and power of the Stockholder to tender the Subject Securities in the Offer or otherwise comply with its obligations under this Agreement unless the transferee in any such Transfer shall (i) execute a counterpart of this Agreement and (ii) agree to hold such Subject Securities subject to all the terms and provisions of this Agreement and be treated as a Stockholder hereunder.

Section 3. Tender of Subject Securities.

The Stockholder agrees:

(a) (i) to tender the Company Common Stock Owned by the Stockholder into the Offer (the "Tendered Shares") promptly, and in any event no later than the tenth Business Day following the commencement of the Offer, or, if the Stockholder has not received the Offer Documents by such time, within five Business Days following receipt of such documents but in any event prior to the date of expiration of such Offer, in each case free and clear of any liens, claims, options, rights of first refusal, co-sale rights, charges or other encumbrances (collectively, "Liens") other than the Lien of the Lender which shall be released upon payment by Parent or Merger Subsidiary of a portion of the Offer Price to be identified by Stockholder and confirmed by the Lender in Stockholder's letter of transmittal accompanying tendered Subject Securities (it being agreed that the Stockholder will cause such Lien upon payment for the Subject Securities to be released) and (ii) not to withdraw any Company Common Stock so tendered so long as there is no decrease in the Offer Price and the Offer Price is payable in cash. The Stockholder shall make such tender of the Tendered Shares into the Offer pursuant to the terms and conditions of the Offer including without limitation (x) the delivery to the depositary for the Offer (1) a completed and executed letter of transmittal in customary form with respect to the Tendered Shares complying with the terms of the Offer, (2) certificates representing the Tendered Shares and (3) any other documents or instruments required to be delivered pursuant to the terms of the Offer, and/or (y) the delivery of instructions to its broker or such other Person who is the holder of record of any Tendered Shares beneficially owned by the Stockholder to make such delivery to the depositary for the Offer. The Stockholder shall have no obligations or liabilities to Parent or Merger Subsidiary under this Section 3(a) at any time after the Expiration Date. If the Stockholder acquires additional Subject Securities after the date hereof, the Stockholder shall tender (or cause the record holder to tender), as provided above, such Subject Securities on or before the tenth Business Day following the commencement of the Offer, or, if later, on or before the fifth Business Day after such acquisition but in any event prior to the date of expiration of the Offer. The Stockholder acknowledges and agrees that the obligation of Merger Subsidiary to accept for payment and pay for any Subject Securities in the Offer is subject to the terms and conditions of the Offer (as described in the Merger Agreement). Parent and Merger Subsidiary acknowledge that the Stockholder's obligation to sell any Subject Securities to Merger Subsidiary and the release of the Lien of the Lender is expressly conditioned upon Merger Subsidiary's acceptance and payment for the Subject Securities in the Offer pursuant to the terms of the Offer as the same may be amended from time to time, consistent with the terms of this Agreement and the Merger Agreement; and

(c) In the event that the Stockholder tenders the Tendered Shares into the Offer and the Merger Agreement is validly terminated pursuant to Section 7.01 thereof, Parent and Merger Subsidiary shall cause the Tendered Shares and related Offer Documents to be returned to the Stockholder (or, at the request of the Stockholder, the Lender) in accordance with the terms and conditions of the Offer as described in the Merger Agreement and the Offer Documents.

Section 4. Voting of Subject Securities.

Stockholder Agreement. The Stockholder agrees that, during the period from the date of this Agreement until the Expiration Date:

(a) at any meeting of stockholders of the Company, however called, and at every adjournment or postponement thereof, the Stockholder shall (i) appear at the meeting or deliver a proxy in accordance with this Agreement, or otherwise cause all shares of Company Common Stock Owned by the Stockholder to be counted as present thereat for purposes of establishing a quorum, (ii) vote or cause all shares of Company Common Stock Owned by the Stockholder to be voted in favor of the approval and adoption of the Merger Agreement and the approval of the Merger and (iii) vote or cause all shares of Company Common Stock Owned by the Stockholder to be voted, against (A) any Acquisition Proposal (other than one by Parent or Merger Subsidiary) and (B) any amendment of the Company's Certificate of Incorporation or Bylaws or other proposal, action or transaction involving the Company or any of its Subsidiaries or any of its stockholders, which amendment or other proposal, action or transaction could reasonably be expected to prevent or impede or delay the consummation of the Offer, the Merger or the other transactions contemplated by the Merger Agreement or this Agreement or to deprive Parent or Merger Subsidiary of any material portion of the benefits anticipated by Parent or Merger Subsidiary to be received from the consummation of the Offer, the Merger or the other transactions contemplated by the Merger Agreement or this Agreement, or change in any manner the voting rights of Company Common Stock presented to the stockholders of the Company or in respect of which vote or consent of the stockholders is requested or sought, unless such transaction has been approved in advance by Parent or Merger Subsidiary; and

Section 5. No Solicitation.

Company, in either case serving on the Company's board of directors or as an officer of the Company and acting in such person's capacity as a director, officer or fiduciary of the Company.

Section 6. Representations and Warranties of Stockholders.

The Stockholder hereby represents and warrants to Parent and Merger Subsidiary as follows:

(a) Due Organization; Qualification. The Stockholder, if a corporation, limited liability company, limited partnership or other entity, has been duly incorporated, organized or formed and is validly existing and in good standing under the laws of the State of its incorporation, formation or organization. The Stockholder, if a corporation, limited liability company, limited partnership or other entity, is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except where the failure to so qualify or be licensed would not have a material adverse effect on the Stockholder.

(i) The execution and delivery of this Agreement by the Stockholder do not, and the performance of this Agreement by the Stockholder will not: (A) conflict with or violate any certificate of incorporation or bylaws or equivalent organizational documents of the Stockholder, (B) conflict with or violate any law, rule, regulation, order, decree or judgment applicable to the Stockholder or by which the Stockholder or any of the Stockholder's properties or assets is or may be bound or affected; or (C) result in or constitute (with or without notice or lapse of time) any breach of or default under, or give to any other Person (with or without notice or lapse of time) any right of termination, amendment, acceleration or cancellation of, or result (with or without notice or lapse of time) in the creation of any Lien on any of the Subject Securities pursuant to, any contract, agreement or understanding to which the Stockholder is a party or by which the Stockholder or any of the Stockholder's affiliates or properties is or may be bound or affected except that the consent of the Lender is required for both any Transfer, including the execution of this Agreement, and the performance of certain other obligations under this Agreement (provided that the Stockholder agrees, within 10 business days of the date of this Agreement, to obtain the consent of the Lender thereto, or to refinance the indebtedness under the Loan Documents and then to deliver the consent of the lender holding the refinanced indebtedness, or to prepay the indebtedness under the Loan Documents; provided further that Stockholder represents and warrants that he has the ability to so refinance or prepay such indebtedness).

(ii) Except for the consent of the Lender (subject to the obligations of the Stockholder pursuant to the preceding paragraph) the execution and delivery of this Agreement by the Stockholder do not, and the performance of this Agreement by the Stockholder will not, require (A) any consent, authorization or permit of, or filing with or notification to, any Governmental Entity, other than any filings required under the Exchange Act, or (B) any consent or approval of any other Person.

(d) Title to Securities. As of the date of this Agreement: (i) except for the Lien in favor of the Lender, the Stockholder has good and marketable title to, and is the sole legal, record and beneficial owner free and clear of any Liens of, the number of outstanding shares of Company Common Stock set forth under the heading "Company Common Stock Owned" on Schedule I hereto; (ii) the Stockholder holds (free and clear of any Liens) the options or other rights to acquire shares of Company Common Stock ("Company Options") set forth under the heading "Company Options" on Schedule I hereto; and (iii) other than the "Company Common Stock Owed" on Schedule I hereto and the Company Options, the Stockholder does not directly or indirectly Own any shares of capital stock or other securities of the Company, or any option, warrant or other right to acquire (by purchase, conversion or otherwise) any shares of capital stock or other securities of the Company.

Section 7. Further Assurances.

Section 8. Miscellaneous.

If to Parent or Merger Subsidiary, to:

Petro-Canada
150 6^th Avenue S.W.
Calgary, Alberta, Canada T2P 3E3
Attention: Hugh Hooker, Associate General Counsel
Telephone: (403) 296-7778
Facsimile: (403) 296-4910

If to the Stockholder: to the address set forth on the signature page hereto.

privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. No party to this Agreement shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered by such person; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

(n) Termination. This Agreement shall automatically terminate and be of no further force and effect on the Expiration Date; provided, however, that the termination of this Agreement prior to consummation of the Merger shall not relieve any party from any liability for any previous breach of this Agreement by such party.

tenders the Company Common Stock received pursuant to such Company Options (in accordance with Section 3(a) hereof) and does not withdraw such Company Common Stock from the Offer; it being expressly understood that this obligation shall cease immediately upon the Expiration Date.

(s) Stop Transfer Order. In furtherance of this Agreement, concurrently herewith, the Stockholder shall, and hereby does authorize the Company or its counsel to, notify the Company's transfer agent that there is a stop transfer order with respect to all of the Subject Securities (and that this Agreement places limits on the voting and transfer of such shares); provided that, the stop transfer order shall not restrict or prohibit any Transfer of the Subject Securities if such transfer is made pursuant to the Offer or this Agreement or such Transfer is made at any time following the Expiration Date.

(u) Construction.

(iv) Except as otherwise indicated, all references in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[The remainder of this page is intentionally blank]

IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholder have caused this Agreement to be executed as of the date first written above.

		PETRO-CANADA (US) HOLDINGS LTD.
		By:		/s/ KATHLEEN E. SENDALL Name: Kathleen E. Sendall Title: President
		RAVEN ACQUISITION CORP.
		By:		/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President
		STOCKHOLDER:
		/s/ RICHARD H. LEWIS Richard H. Lewis

Schedule I

Stockholder		Company Common Stock Owned		Company Options Owned
Richard H. Lewis		970,288		541,250

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STOCKHOLDER AGREEMENT
EX-13 14 a2138532zex-13.htm EXHIBIT 13
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Exhibit 13

EXECUTION COPY

STOCKHOLDER AGREEMENT

RECITALS

WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of securities of the Company as indicated on the Schedule I to this Agreement;

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholder is entering into this Agreement.

Section 1. Certain Definitions.

For purposes of this Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $0.015 per share, of the Company.

(b) "Expiration Date" shall mean the earliest of:

(i) the date upon which the Merger Agreement is validly terminated pursuant to Section 7.01 thereof;

(ii) the date on which Merger Subsidiary shall have purchased and paid for all of the Subject Securities; and

(iii) the date upon which the Merger becomes effective.

(d) "Person" shall mean any individual, corporation, limited liability company, partnership, trust or other entity, or governmental authority.

(h) Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Section 2. Transfer of Subject Securities.

Section 3. Tender of Subject Securities.

The Stockholder agrees:

Section 4. Voting of Subject Securities.

Stockholder Agreement. The Stockholder agrees that, during the period from the date of this Agreement until the Expiration Date:

requested or sought, unless such transaction has been approved in advance by Parent or Merger Subsidiary; and

Section 5. No Solicitation.

Section 6. Representations and Warranties of Stockholders.

The Stockholder hereby represents and warrants to Parent and Merger Subsidiary as follows:

laws affecting or relating to the enforcement of creditors' rights generally and to general principles of equity.

Section 7. Further Assurances.

Section 8. Miscellaneous.

If to Parent or Merger Subsidiary, to:

Petro-Canada
150 6^th Avenue S.W.
Calgary, Alberta, Canada T2P 3E3
Attention: Hugh Hooker, Associate General Counsel
Telephone: (403) 296-7778
Facsimile: (403) 296-4910

If to the Stockholder: to the address set forth on the signature page hereto.

(u) Construction.

(iv) Except as otherwise indicated, all references in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[The remainder of this page is intentionally blank]

IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholder have caused this Agreement to be executed as of the date first written above.

		PETRO-CANADA (US) HOLDINGS LTD.
		By:		/s/ KATHLEEN E. SENDALL Name: Kathleen E. Sendall Title: President
		RAVEN ACQUISITION CORP.
		By:		/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President
		STOCKHOLDER:
		BRAKEMAKA LLLP
		By:		/s/ RICHARD H. LEWIS Richard H. Lewis General Partner

Schedule I

Stockholder		Company Common Stock Owned		Company Options Owned
BRAKEMAKA LLLP		180,027		None

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STOCKHOLDER AGREEMENT
EX-14 15 a2138532zex-14.htm EXHIBIT 14
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Exhibit 14

EXECUTION COPY

STOCKHOLDER AGREEMENT

RECITALS

WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of securities of the Company as indicated on the Schedule I to this Agreement;

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholder is entering into this Agreement.

Section 1. Certain Definitions.

For purposes of this Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $0.015 per share, of the Company.

(b) "Expiration Date" shall mean the earliest of:

(i) the date upon which the Merger Agreement is validly terminated pursuant to Section 7.01 thereof;

(ii) the date on which Merger Subsidiary shall have purchased and paid for all of the Subject Securities; and

(iii) the date upon which the Merger becomes effective.

(d) "Person" shall mean any individual, corporation, limited liability company, partnership, trust or other entity, or governmental authority.

(h) Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Section 2. Transfer of Subject Securities.

(a) Transferee of Subject Securities to be Bound by this Agreement. The Stockholder agrees that, except as may be provided herein, during the period from the date of this Agreement through the Expiration Date, the Stockholder shall not cause or permit any Transfer of any of the Subject Securities to be effected; provided, that nothing in this Agreement shall prohibit the Stockholder from Transferring Subject Securities to Merger Subsidiary pursuant to Section 3 hereof. Parent and Merger Subsidiary acknowledge that Stockholder, in connection with a loan, has previously pledged certain Subject Securities, as detailed on Schedule I hereto, to HSBC Bank USA ("HSBC") pursuant to a pledge security agreement, margin agreement, and account control agreement previously entered into by such parties (such documents and all other documents evidencing or securing such loan, and any and all other documents providing for the refinancing or replacing of any or all of such indebtedness being called the "Loan Documents," and the holder of the lender's rights under the Loan Documents being called the "Lender") and that the existence of such Loan Documents and the continuing compliance by the parties thereto with such Loan Documents shall not be deemed a Transfer in contravention of this Section 2(a); provided, however, that notwithstanding the foregoing no Transfer shall be permitted under such Loan Documents if such Transfer would adversely affect the right and power of the Stockholder to tender the Subject Securities in the Offer or otherwise comply with its obligations under this Agreement unless the transferee in any such Transfer shall (i) execute a counterpart of this Agreement and (ii) agree to hold such Subject Securities subject to all the terms and provisions of this Agreement and be treated as a Stockholder hereunder.

Section 3. Tender of Subject Securities.

The Stockholder agrees:

(c) In the event that the Stockholder tenders the Tendered Shares into the Offer and the Merger Agreement is validly terminated pursuant to Section 7.01 thereof, Parent and Merger Subsidiary shall cause the Tendered Shares and related Offer Documents to be returned to the Stockholder (or, at the request of the Stockholder, the Lender) in accordance with the terms and conditions of the Offer as described in the Merger Agreement and the Offer Documents.

Section 4. Voting of Subject Securities.

Stockholder Agreement. The Stockholder agrees that, during the period from the date of this Agreement until the Expiration Date:

Section 5. No Solicitation.

Company, in either case serving on the Company's board of directors or as an officer of the Company and acting in such person's capacity as a director, officer or fiduciary of the Company.

Section 6. Representations and Warranties of Stockholders.

The Stockholder hereby represents and warrants to Parent and Merger Subsidiary as follows:

(a) Due Organization; Qualification. The Stockholder, if a corporation, limited liability company, limited partnership or other entity, has been duly incorporated, organized or formed and is validly existing and in good standing under the laws of the State of its incorporation, formation or organization. The Stockholder, if a corporation, limited liability company, limited partnership or other entity, is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except where the failure to so qualify or be licensed would not have a material adverse effect on the Stockholder.

(d) Title to Securities. As of the date of this Agreement: (i) except for the Lien in favor of the Lender, the Stockholder has good and marketable title to, and is the sole legal, record and beneficial owner free and clear of any Liens of, the number of outstanding shares of Company Common Stock set forth under the heading "Company Common Stock Owned" on Schedule I hereto; (ii) the Stockholder holds (free and clear of any Liens) the options or other rights to acquire shares of Company Common Stock ("Company Options") set forth under the heading "Company Options" on Schedule I hereto; and (iii) other than the "Company Common Stock Owed" on Schedule I hereto and the Company Options, the Stockholder does not directly or indirectly Own any shares of capital stock or other securities of the Company, or any option, warrant or other right to acquire (by purchase, conversion or otherwise) any shares of capital stock or other securities of the Company.

Section 7. Further Assurances.

Section 8. Miscellaneous.

If to Parent or Merger Subsidiary, to:

Petro-Canada
150 6^th Avenue S.W.
Calgary, Alberta, Canada T2P 3E3
Attention: Hugh Hooker, Associate General Counsel
Telephone: (403) 296-7778
Facsimile: (403) 296-4910

If to the Stockholder: to the address set forth on the signature page hereto.

(k) Assignment; Binding Effect. Neither this Agreement nor any of the interests or obligations hereunder may be assigned or delegated by any party hereto without the prior written consent of the other parties, and any attempted or purported assignment or delegation of any of such interests or obligations without such consent shall be void. Subject to the preceding sentence, this Agreement shall be binding upon each party's heirs, estate, executors, personal representatives, successors and assigns, and shall inure to the benefit of each party and their successors and assigns. Without limiting any of the restrictions set forth in Section 2 or elsewhere in this Agreement, this Agreement shall be binding upon any Person to whom any Subject Securities are Transferred until such time as is provided in clause (n) below.

(n) Termination. This Agreement shall automatically terminate and be of no further force and effect on the Expiration Date; provided, however, that the termination of this Agreement prior to consummation of the Merger shall not relieve any party from any liability for any previous breach of this Agreement by such party.

(s) Stop Transfer Order. In furtherance of this Agreement, concurrently herewith, the Stockholder shall, and hereby does authorize the Company or its counsel to, notify the Company's transfer agent that there is a stop transfer order with respect to all of the Subject Securities (and that this Agreement places limits on the voting and transfer of such shares); provided that, the stop transfer order shall not restrict or prohibit any Transfer of the Subject Securities if such transfer is made pursuant to the Offer or this Agreement or such Transfer is made at any time following the Expiration Date.

(u) Construction.

(iv) Except as otherwise indicated, all references in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[The remainder of this page is intentionally blank]

IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholder have caused this Agreement to be executed as of the date first written above.

		PETRO-CANADA (US) HOLDINGS LTD.
		By:		/s/ KATHLEEN E. SENDALL Name: Kathleen E. Sendall Title: President
		RAVEN ACQUISITION CORP.
		By:		/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President
		STOCKHOLDER:
		/s/ ROBERT G. JAMES Robert G. James

Schedule I

Stockholder		Company Common Stock Owned		Company Options Owned
Robert G. James		1,244,363		None

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STOCKHOLDER AGREEMENT
EX-15 16 a2138532zex-15.htm EXHIBIT 15
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Exhibit 15

EXECUTION COPY

STOCKHOLDER AGREEMENT

RECITALS

WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of securities of the Company as indicated on the Schedule I to this Agreement;

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholder is entering into this Agreement.

Section 1. Certain Definitions.

For purposes of this Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $0.015 per share, of the Company.

(b) "Expiration Date" shall mean the earliest of:

(i) the date upon which the Merger Agreement is validly terminated pursuant to Section 7.01 thereof;

(ii) the date on which Merger Subsidiary shall have purchased and paid for all of the Subject Securities; and

(iii) the date upon which the Merger becomes effective.

(d) "Person" shall mean any individual, corporation, limited liability company, partnership, trust or other entity, or governmental authority.

(h) Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Section 2. Transfer of Subject Securities.

Section 3. Tender of Subject Securities.

The Stockholder agrees:

Section 4. Voting of Subject Securities.

Stockholder Agreement. The Stockholder agrees that, during the period from the date of this Agreement until the Expiration Date:

requested or sought, unless such transaction has been approved in advance by Parent or Merger Subsidiary; and

Section 5. No Solicitation.

Section 6. Representations and Warranties of Stockholders.

The Stockholder hereby represents and warrants to Parent and Merger Subsidiary as follows:

laws affecting or relating to the enforcement of creditors' rights generally and to general principles of equity.

Section 7. Further Assurances.

Section 8. Miscellaneous.

If to Parent or Merger Subsidiary, to:

Petro-Canada
150 6^th Avenue S.W.
Calgary, Alberta, Canada T2P 3E3
Attention: Hugh Hooker, Associate General Counsel
Telephone: (403) 296-7778
Facsimile: (403) 296-4910

If to the Stockholder: to the address set forth on the signature page hereto.

(u) Construction.

(iv) Except as otherwise indicated, all references in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[The remainder of this page is intentionally blank]

IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholder have caused this Agreement to be executed as of the date first written above.

		PETRO-CANADA (US) HOLDINGS LTD.
		By:		/s/ KATHLEEN E. SENDALL Name: Kathleen E. Sendall Title: President
		RAVEN ACQUISITION CORP.
		By:		/s/ HUGH L. HOOKER Name: Hugh L. Hooker Title: President
		STOCKHOLDER:
		ROBERT & ARDIS JAMES FOUNDATION
		By:		/s/ CATHERINE JAMES PAGLIA Name: Catherine James Paglia Title: Trustee

Schedule I

Stockholder		Company Common Stock Owned		Company Options Owned
Robert & Ardis James Foundation		59,608		None

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STOCKHOLDER AGREEMENT
EX-16 17 a2138532zex-16.htm EXHIBIT 16
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Exhibit 16

EXECUTION COPY

STOCKHOLDER AGREEMENT

RECITALS

WHEREAS the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such number of securities of the Company as indicated on the Schedule I to this Agreement;

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholder is entering into this Agreement.

Section 1. Certain Definitions.

For purposes of this Agreement:

(a) "Company Common Stock" shall mean the common stock, par value $0.015 per share, of the Company.

(b) "Expiration Date" shall mean the earliest of:

(i) the date upon which the Merger Agreement is validly terminated pursuant to Section 7.01 thereof;

(ii) the date on which Merger Subsidiary shall have purchased and paid for all of the Subject Securities; and

(iii) the date upon which the Merger becomes effective.

(d) "Person" shall mean any individual, corporation, limited liability company, partnership, trust or other entity, or governmental authority.

securities of the Company (including all additional shares of Company Common Stock and all additional options and other rights to acquire shares of Company Common Stock) of which the Stockholder acquires Ownership during the period from the date of this Agreement through the Expiration Date.

(h) Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Section 2. Transfer of Subject Securities.

Section 3. Tender of Subject Securities.

The Stockholder agrees:

under this Section 3(a) at any time after the Expiration Date. If the Stockholder acquires additional Subject Securities after the date hereof, the Stockholder shall tender (or cause the record holder to tender) such Subject Securities on or before the tenth Business Day following the commencement of the Offer, or, if later, on or before the fifth Business Day after such acquisition but in any event prior to the date of expiration of the Offer. The Stockholder acknowledges and agrees that the obligation of Merger Subsidiary to accept for payment and pay for any Subject Securities in the Offer is subject to the terms and conditions of the Offer (as described in the Merger Agreement). Parent and Merger Subsidiary acknowledge that the Stockholder's obligation to sell any Subject Securities to Merger Subsidiary is expressly conditioned upon Merger Subsidiary's acceptance and payment for the Subject Securities in the Offer pursuant to the terms of the Offer as the same may be amended from time to time, consistent with the terms of this Agreement and the Merger Agreement; and

Section 4. Voting of Subject Securities.

Stockholder Agreement. The Stockholder agrees that, during the period from the date of this Agreement until the Expiration Date:

Section 5. No Solicitation.

Section 6. Representations and Warranties of Stockholders.

The Stockholder hereby represents and warrants to Parent and Merger Subsidiary as follows:

which the Stockholder or its successors and assigns may have against Parent or Merger Subsidiary (whether pursuant to applicable securities laws or otherwise) with respect to the non-disclosure of Parent's Excluded Information.

Section 7. Further Assurances.

Section 8. Miscellaneous.

If to Parent or Merger Subsidiary, to:

Petro-Canada
150 6^th Avenue S.W.
Calgary, Alberta, Canada T2P 3E3
Attention: Hugh Hooker, Associate General Counsel
Telephone: (403) 296-7778
Facsimile: (403) 296-4910

If to the Stockholder: to the address set forth on the signature page hereto.

circumstances and in such jurisdiction shall not affect the validity or enforceability of such provision or part thereof under any other circumstances or in any other jurisdiction, and (iii) the invalidity or unenforceability of such provision or part thereof shall not affect the validity or enforceability of the remainder of such provision or the validity or enforceability of any other provision of this Agreement.

Agreement shall be binding upon each party's heirs, estate, executors, personal representatives, successors and assigns, and shall inure to the benefit of each party and their successors and assigns. Without limiting any of the restrictions set forth in Section 2 or elsewhere in this Agreement, this Agreement shall be binding upon any Person to whom any Subject Securities are Transferred until such time as is provided in clause (n) below.

transfer is made pursuant to the Offer or such Transfer is made at any time following the Expiration Date.

(u) Construction.

(iv) Except as otherwise indicated, all references in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[The remainder of this page is intentionally blank]

IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholder have caused this Agreement to be executed as of the date first written above.

	PETRO-CANADA (US) HOLDINGS LTD.
	By:	/s/ FRANCOIS LANGLOIS
	Name:	Francois Langlois
	Title:	Vice President
	RAVEN ACQUISITION CORP.
	By:	/s/ HUGH L. HOOKER
	Name:	Hugh L. Hooker
	Title:	President
	STOCKHOLDER:
	ROBERT G. JAMES IRA ROLLOVER ACCOUNT
	By: JP Morgan Chase Bank, Custodian, solely for the purposes of acknowledging receipt of this Agreement and authorizing Robert G. James, the sole account holder of the Robert G. James IRA Rollover Account, to enter into this Agreement and perform the obligations as the Stockholder thereunder.
	By:	/s/ MORGAN A. LUM
	Name:	Morgan A. Lum
	Title:	Vice President
	Address:	JP Morgan Private Bank 1211 Avenue of the Americas 36^th Floor New York, New York 10036
	By:	/s/ ROBERT G. JAMES
	Name:	Robert G. James, sole account holder of the Robert G. James IRA Rollover Account
	Address:	c/o Enterprise Asset Management, Inc. 12^th Floor 475 Fifth Avenue N.Y., N.Y. 10017

Schedule I

Stockholder		Company Common Stock Owned		Company Options Owned
The Robert G. James IRA Rollover Account, JPMorgan Chase Bank, Custodian, and Robert G. James, sole account holder		95,104		None

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STOCKHOLDER AGREEMENT
RECITALS
EX-17 18 a2138532zex-17.htm EXHIBIT 17
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Exhibit 17

[Letterhead of BMO Nesbitt Burns]

June 4, 2004

Petro-Canada
150 - 6th Avenue SW
Calgary, AB
T2P 3E3

Attention: Mr. D. Fraser, Treasurer:

Dear Sirs:

Petro-Canada (the "Company" or "you") has asked Bank of Montreal (the "Agent") to assist in financing your offer for the acquisition of Raven (the "Target"). We are pleased to inform you that the Agent hereby commits to provide a loan of up to U.S. $400 million (the "Facility") on the basis of the terms and conditions summarized in the attached Summary of Committed Terms and Conditions (the "Term Sheet"). The Agent's commitment herein is subject to the Company's execution of this letter (the "Commitment Letter") and the fee letter of even date herewith (the "Fee Letter"). Capitalized terms which are not otherwise defined in this Commitment Letter shall have the meanings ascribed thereto in the Term Sheet.

Syndication:

The Agent intends to syndicate a portion of its commitment in respect of the Facility to one or more financial institutions that will become parties to the final definitive documentation (the "Lenders") pursuant to a syndication to be managed by the Agent. The selection of such financial institutions shall be mutually acceptable to the Company and the Agent.

The Agent will manage all aspects of the syndication, in consultation with the Company, acting reasonably, including the list of all potential Lenders, the timing of all offers to potential Lenders, the acceptance of commitments, and the determination of the amounts offered, all within the compensation to be paid by the Company to the Agent.

You agree to take all action as the Agent may reasonably request to assist them in forming a syndicate acceptable to the Agent and the Company; make senior management and representatives of the Company available to participate in information meetings with potential Lenders at such times and places as the Agent may reasonably request; use your best efforts to ensure a successful syndication; and provide all information reasonably deemed necessary by the Agent to successfully complete the syndication.

Conditions

The commitment and undertaking of the Agent hereunder are subject to the conditions outlined in the Term Sheet and, without limitation thereof: (i) satisfactory execution of a credit agreement and related documentation, incorporating the terms and conditions of the Term Sheet; (ii) the accuracy and completeness of all representations that you make to us and all information that you furnish to us and your compliance with the terms of this Commitment Letter; (iii) the receipt of all required approvals by the Company and its subsidiaries, as required, and appropriate legal opinions, in form and substance satisfactory to the Agent acting reasonably; (iv) absence of (A) a material adverse change in the business condition (financial or otherwise), operations, performance or properties of the Company, or (B) any change in loan syndication, financial or capital market conditions generally that, in the Agent's reasonable judgment, would materially impair syndication of the Facility; (v) payment in full of all fees and expenses and other amounts payable under the Fee Letter when due.

Indemnity

You agree to indemnify and hold harmless the Agent, each Lender and each of their affiliates and each of their respective officers, directors, employees, advisors, agents and representatives (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including without limitation, fees and disbursements of counsel), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with (or relating to any investigation, litigation or proceeding, or the preparation of any defense with respect thereto) this Commitment Letter or the documentation relating to the Term Sheet or the transaction contemplated hereby or thereby or any use made or proposed to be made with the proceeds of the Facility, whether or not such investigation, litigation or proceeding is brought by the Company, any of its shareholders or creditors, an Indemnified Party or any other person, or an Indemnified Party is otherwise a party thereto and whether or not the transaction contemplated hereby is consummated, except to the extent such claim, damage, loss, liability or expense resulted from such Indemnified Party's negligence or willful misconduct.

You agree that no Indemnified Party shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Company or any of its shareholders or creditors for or in connection with the transactions contemplated hereby, except to the extent such liability resulted from such Indemnified Party's negligence or willful misconduct.

Confidentiality

By accepting delivery of this Commitment Letter and the Fee Letter, you agree that the Commitment and Fee Letters are for your confidential use only and that, without the Agent's prior consent, neither its existence nor the terms hereof will be disclosed by you to any person other than your officers, directors, employees, accountants, lawyers and other advisors, and the Target's officers, lawyers and advisors, and then only on a "need to know" basis in connection with the transaction contemplated hereby and on a confidential basis. Notwithstanding the foregoing, following your acceptance of the provisions hereof and your return of an executed counterpart of this Commitment Letter to us as provided below, you may make public disclosure of the existence and the total amount of the commitment provided by the Agent and you may make other public disclosures of the terms and conditions hereof as you are required by law, in the opinion of your legal counsel, to make, and you agree to forthwith advise us of such public disclosure.

Please indicate your acceptance of our commitment and your agreement to the terms and conditions hereof by signing the enclosed duplicate copy of this Commitment Letter and returning signed originals to the undersigned. Please be advised that this offer is open for acceptance until 5pm MST on June 9, 2004, after which the commitment herein shall terminate. Should you have any questions regarding the foregoing, please contact me at 416-867-6573.

Yours very truly,

BANK OF MONTREAL

/s/ R. HEINRICHS

R. Heinrichs
Vice-President

Accepted and Agreed
this 8^th day of June, 2004
Petro-Canada

By:
	/s/ D. FRASER
Name:	D. Fraser
Title:	Treasurer

Attachment

c.c.: Phil Lunn
Yuki Sanda

Summary of Committed Terms and Conditions

This Summary of Committed Terms and Conditions ("Summary") is for convenience of reference only and shall not be considered to be exhaustive as to the final terms and conditions which govern the financing. In the event of a conflict between the provisions of this Summary and the Credit Agreement, the latter shall govern.

Currency:	All amounts are shown in U.S. dollars unless otherwise noted.
Borrower:	Petro-Canada ("Petro-Canada") and/or such other wholly owned subsidiary of Petro-Canada, provided such subsidiary's obligations under the Facility herein are guaranteed by Petro-Canada and such subsidiary is satisfactory to the Agent acting reasonably (the " Borrower").
Facility and Amount:	Up to $400 million (the "Amount") committed, non-revolving, bridge facility (the "Facility"), available in the U.S. on a withholding tax free basis.
Lead Arranger:	BMO Nesbitt Burns (the "Lead Arranger")
Administrative Agent:	Bank of Montreal (the "Agent" or "BMO") shall underwrite the full amount of the Facility herein and reserves the right to syndicate all or any part of the Facility, in consultation with Petro-Canada, at any time to other financial institutions which qualify as U.S. resident lenders for tax purposes (collectively with BMO, the "Lenders").
Purpose:	The Facility will be used to fund the "friendly" acquisition (the "Acquisition") of all of the common shares of Raven (the "Target") acquired on the terms and conditions set forth in the take-over bid and related documents (together, the "Acquisition Documents"):
	(a)	pursuant to a tender offer to be made in respect of the Target; and
	(b)	pursuant to any statutory right of compulsory acquisition after successful completion of a tender offer, or pursuant to any second stage amalgamation or arrangement or similar going private transaction after successful completion of the tender offer; and
	(c)	to pay fees and related transaction expenses.
Availability:	The Facility will be non-revolving and will be freely available for drawdown in U.S. dollars for 120 days after the initial borrowing and after such date all undrawn amounts will be automatically cancelled.
	The initial borrowing shall be made no later than 120 days after the date on which the commitment of the Lead Arranger to provide the Facility has been accepted by Petro-Canada, failing which the Facility shall expire.
	The Facility shall be available in U.S. dollars by way of LIBOR advances and U.S. Prime Rate advances.
	U.S. Prime Rate means the higher of the Agent's prime rate in the U.S. and the federal funds rate +0.50%.
	Determination of LIBOR shall be as determined by reference to the "LIBOR 01 Page" of Reuters Monitor Money Rates Service plus any reserve requirements required by the Federal Reserve or any other government authority.

Mandatory Prepayments:	Subject to the prior repayment obligations under the April 10, 2002 Credit Agreement between the Borrower, a syndicate of lenders and Royal Bank of Canada, as agent, net proceeds of capital market issuances shall be used to repay the Facility.
Maturity Date:	The Facility shall be repaid in full 18 months following the execution of the Credit Agreement ("Closing").
Interest Rates, Utilization Fees and Standby Fees:	Interest rates, utilization fees and standby fees as set out in Appendix I.
Conditions Precedent to Initial Disbursement:	Usual and customary for transactions of this type, all of which must be fulfilled to the satisfaction of the Lead Arranger. The conditions precedent shall include, without limitation, the accuracy of representations and warranties; absence of material adverse litigation; absence of defaults; evidence of authority; satisfactory legal opinions; compliance with applicable laws, rules, statues and regulations; and receipt of necessary consents and approvals and shall also include, in respect of the initial borrowing, without limitation:
	(a)	execution of the Credit Agreement, other credit documents and receipt and review of legal opinions;
	(b)	completion of business, environmental, tax and legal due diligence with respect to the Acquisition and the Facility, including review of the all Acquisition Documents and related material agreements, and confirmation that all relevant filings have been made in respect of the Acquisition; and
	(c)	receipt of all fees and reimbursable expenses when due.
Documentation:	Credit Agreement and all other certificates and documents delivered in connection with the Facility (collectively the "Documents"), each in form and substance satisfactory to the Lead Arranger and Lenders' counsel, acting reasonably. The Credit Agreement and the provisions thereof as set out herein (including, without limitation, representations and warranties, covenants and events of default) are subject to such changes and additions thereto as are reasonably necessary to reflect the nature and residency of the Borrower and the Acquisition and as are reasonably required by the Agent on the advice of U.S. counsel to the Lead Arranger.
Representations and Warranties	Usual and customary for a transaction of this nature, including, without limitation, with respect to Petro-Canada, the Borrower and its Designated Subsidiaries, and the Acquisition;
	(a)	corporate and/or partnership existence; power to carry on business and carry out the Acquisition;
	(b)	due authorization, execution, delivery and enforceability of the Documents;
	(c)	all necessary consents, governmental or otherwise, obtained with regard to the Documents and the Acquisition;
	(d)	execution of Documents and consummation of the Acquisition does not violate other material agreements;

	(e)	financial information fairly presents, as of the dates referred to in such financial information, the financial condition of the Petro-Canada on a consolidated basis, and has been, unless otherwise indicated, prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP");
	(f)	compliance with all laws, including environmental laws and regulations, except to the extent failure to do so would not have a Material Adverse Effect;
	(g)	no litigation which would reasonably be expected to have a Material Adverse Effect;
	(h)	payment of taxes (subject to good faith contestations and except to the extent failure to do so would not have a Material Adverse Effect);
	(i)	no event has occurred and is continuing which constitutes an Event of Default and no event has occurred and is continuing which would constitute an Event of Default but for the requirement that notice be given or time elapse or both (a "Default");
	(j)	ownership of the Designated Subsidiaries;
	(k)	ranking of Borrowings with other unsecured and unsubordinated indebtedness for borrowed money of Petro-Canada and the Borrower; and
	(l)	title to material assets (subject to permitted encumbrances) and insurance with respect thereto, in each case except to the extent that absence thereof would not have a Material Adverse Effect. Representations and warranties will be repeated on each drawdown, except in the case of a rollover and conversion.
Covenants:	Usual and customary for a transaction of this nature including, without limitation, with respect to Petro-Canada, the Borrower and its Designated Subsidiaries:
	*Affirmative Covenants*
	(a)	Petro-Canada and the Borrower shall provide to the Agent its annual audited year-end financial statements, unaudited quarterly financial statements and all material filings with securities regulatory authorities, or, in the case of Petro-Canada, shall notify the Agent that such statements or filings have been posted on SEDAR, together (in the case of the annual audited statements) with appropriate certificates; provided that each Lender agrees to keep confidential any information which has not yet been disclosed to the general public;
	(b)	punctually pay all sums when due hereunder;
	(c)	maintenance of existence, conduct of business in a proper and prudent manner and in accordance with good oilfield practice including obtaining and maintaining all licenses, permits, and regulatory approvals, except in each case to the extent failure to do so would not have a Material Adverse Effect;

(d)	any availment under the Facility will rank pari passu with all other senior unsecured indebtedness for borrowed money of Petro-Canada and the Borrower;
(e)	provide prompt notice of any Default or Event of Default;
(f)	notice of environmental damage and additional environmental information, except that notice will not be required with respect to matters that would not reasonably be expected to have a Material Adverse Effect;
(g)	notice of litigation, except that notice will not be required with respect to litigation that would not reasonably be expected to have a Material Adverse Effect;
(h)	maintenance of books and records;
(i)	payment of other obligations, including taxes, except to the extent failure to do so would not have a Material Adverse Effect;
(j)	make all regulatory filings required by governmental and regulatory authorities including material change reports, except to the extent failure to do so would not have a Material Adverse Effect and shall provide to the Agent, or shall notify the Agent of, such filings if and as required by affirmative covenant (a);
(k)	compliance with all applicable laws including without limitation, all environmental laws and obtain and maintain all necessary environmental permits, except to the extent failure to do so would not have a Material Adverse Effect;
(l)	maintain insurance in amounts, terms and coverage in accordance with prudent industry practice, except to the extent failure to do so would not have a Material Adverse Effect;
(m)	promptly advise the Agent of any change, discontinuance, suspension or review for potential downgrade of any rating in respect of Petro-Canada's long term unsecured and unsubordinated debt;
(n)	use all funds advanced solely for the purposes provided for herein;
(o)	provide additional information as reasonably requested; and
(p)	provide all such further assurances as may reasonably be requested by the Agent.
*Negative Covenants*
(a)	except for usual and permitted liens customary for corporations similar in size and creditworthiness to Petro-Canada, not to grant, create, assume or suffer to exist any lien affecting any of its properties, assets or other rights except for:
	(i)	Non-recourse Debt;
	(ii)	risk management liens not exceeding Cdn. $75 million;
	(iii)	purchase money obligations not exceeding Cdn. $250 million; and

		(iv)	other liens not to exceed an amount equal to 10% of Consolidated Net Tangible Assets;
		unless Borrowings under the Facility share the benefit of such lien on a rateable and pari passu basis;
	(b)	not to merge, amalgamate, consolidate or otherwise enter into any other similar form of business combination (including, without limitation, a sale of all or substantially all of its assets) with any other person, other than with a consolidated subsidiary, without the consent of the Lenders, not to be unreasonably withheld, provided that no such consent will be required if:
		(i)	the resulting entity is bound by the provisions of the Credit Agreement;
		(ii)	the resulting entity has a credit rating equal to or greater than Baa3 by Moody's or BBB- by S&P; and
		(iii)	no Default or Event of Default will result therefrom or remain outstanding thereafter.
		Designated Subsidiaries, the Borrower and Petro-Canada may merge, amalgamate, consolidate or enter into a similar form of business combination with each other and/or with any consolidated subsidiary of Petro-Canada from time to time without the consent of the Lenders provided no Default or Event of Default will result therefrom or remain outstanding thereafter;
	(c)	not to make any change whereby the nature of the business carried on by Petro-Canada (taken on a consolidated basis) would thereafter not consist primarily of businesses forming part of the Core Business;
	(d)	not to enter into swaps for speculative purposes provided, however, that Petro-Canada shall be considered in compliance with this covenant so long as Petro-Canada has in place formal policies prohibiting entering into swaps for speculative purposes and takes commercially reasonable steps to enforce such policies; and
	(e)	not permit, for a period of more than 60 days after the end of any fiscal quarter, the assets of Petro-Canada and its Designated Subsidiaries to be less than 70% of Consolidated Net Tangible Assets.
	*Financial Covenant*
	Debt to Capitalization not to exceed 60%.
Events of Default:	With respect to Petro-Canada, the Borrower and its Designated Subsidiaries:
	(a)	non-payment when due of principal or failure to pay within three (3) Business Days of the due date of any interest or any other amounts due under the Credit Agreement;
	(b)	breach by Petro-Canada of Negative Covenant (e);
	(c)	breach by Petro-Canada or the Borrower of any other provisions of the Credit Agreement subject to materiality and reasonable cure periods;

	(d)	representations or warranties false in any material respect when made subject, if curable, to reasonable cure period;
	(e)	cross default to other indebtedness of Petro-Canada, the Borrower or Designated Subsidiaries (to include indebtedness for borrowed money, letters of credit or treasury contracts, but to exclude Non-recourse Debt) where the aggregate amount of such indebtedness is in excess, in aggregate, of the greater of Cdn. $75 million and 2% of Shareholders' Equity;
	(f)	Petro-Canada, the Borrower or Designated Subsidiary ceases to carry on any part of its business if to do so would have a Material Adverse Effect;
	(g)	invalidity of Documents;
	(h)	a writ, execution or attachment or similar process is issued or levied against the property of Petro-Canada, the Borrower or a Designated Subsidiary (other than in respect of Non-Recourse Debt or, subject to paragraph (j), as a result of any expropriation proceedings commenced by any governmental authority) in connection with any judgment against it in an amount which exceeds, in aggregate, the greater of Cdn. $75 million and 2% of Shareholders' Equity, and such writ, execution, attachment or similar process is not released, satisfied, discharged or stayed within 30 days;
	(i)	encumbrancers or lienors take possession of property of Petro-Canada, the Borrower or a Designated Subsidiary (other than property in which a holder of Non-Recourse Debt of Petro-Canada, the Borrower or a Designated Subsidiary has a security interest or, subject to paragraph (j), property which is the subject of expropriation proceedings) where such property has a fair market value in excess, in aggregate, of the greater of Cdn. $75 million and 2% of Shareholders' Equity and such taking of possession continues for 30 days;
	(j)	expropriation proceedings are commenced by any governmental authority in respect of any property of Petro-Canada, the Borrower or any Designated Subsidiary, the result of which would reasonably be expected to have a Material Adverse Effect; and
	(k)	insolvency and bankruptcy related events of Petro-Canada, the Borrower or Designated Subsidiaries.
Assignment by Lenders:	The Lenders may from time to time, assign and sell participations in their rights and obligations under the Credit Agreement to any other financial institution in minimum amounts of $10,000,000 and in $1,000,000 increments, provided that:
	(a)	the Borrower and the Agent shall have consented to such assignment, such consent not to be unreasonably withheld;
	(b)	the Borrower shall not be under any obligation to pay by way of withholding tax or otherwise any greater amount than it would have been obliged to pay if the assignee were a U.S. resident Lender for tax purposes;

	(c)	no Lender, after giving effect to a partial assignment, shall hold less than $10,000,000; and
	(d)	an assignment fee of $3,500 will be payable by the assignor to the Agent.
Majority Lenders:	Lenders whose commitments exceed 51% of the aggregate amount of the Facility.
Waivers and Amendments:	The consent of all Lenders shall be required for any amendment or waiver relating to:
	(a)	decreases in rates/margin or fees or payments other than as provided for herein;
	(b)	the amount of the Facility applicable to any Lender other than as provided for herein;
	(c)	increases in the term of the Facility;
	(d)	a change of the Borrower or an assignment or transfer of its rights or obligations under the Facility;
	(e)	a change in the Financial Covenant;
	(f)	the types of Borrowings available; and
	(g)	a change in the definition of Majority Lenders.
	If any Lender refuses to provide consent to any amendment or waiver requiring unanimous consent, such Lender may be replaced, at the option of Petro-Canada, by one or more Lenders satisfactory to Petro-Canada and the Agent, or the Borrower may prepay the amount owing to such Lender, upon which there shall be a corresponding reduction in the Facility; provided all such Lenders are dealt with in an equivalent manner.
	All other matters will be decided upon by the Majority Lenders, other than as specified herein and administrative matters as determined by the Agent.
Taxes:	Except as provided under paragraph (b) of Assignment by Lenders, all payments by the Borrower will be made free and clear of all present and future taxes, with no withholdings or deductions whatsoever and the Borrower will provide the appropriate indemnity in this regard.
Increased Costs:	Documentation will include usual and customary provisions requiring the Borrower to reimburse the Lenders (on a non-discriminatory basis) for any increased costs (including costs of complying with capital adequacy guidelines), which are incurred as a result of regulatory changes announced subsequent to the signing date of the Credit Agreement, subject to timely notification and the Borrower's right to substitute or prepay notifying Lenders.
Indemnity:	Standard indemnification by Petro-Canada and the Borrower of the Lead Arranger and Agent and the Lenders and their respective affiliates and their respective directors, officers, employees, attorneys, agents and controlling persons (collectively the "Indemnified Persons") against any loss, liability, cost or expense arising out of the Credit Agreement, except if resulting from negligence or wilful misconduct.

Cancellation:		Without penalty, the Borrower may cancel any undrawn portion of the Facility prior to the end of the Availability period after a standard notice period. Amounts canceled may not be reborrowed.
Voluntary Prepayment:		The Borrower may prepay and cancel at any time advances under the Facility, without premium or penalty, subject to a minimum amount, usual notice requirements and break funding costs, if any.
Governing Law:		Province of Alberta, or such other law as mutually agreed by the Borrower and the Agent.

APPENDIX 1—FEES AND INTEREST RATES


Standby Fees:		For all Lenders, commencing on the date of execution of the Credit Agreement, calculated on the unutilized, uncancelled amount of the Facility, at the per annum rate of 10 bps, on a 365 day basis, payable monthly in arrears.
Interest Rates, Margins and Utilization Fees:		The Margins will be determined based on the senior unsecured debt ratings of Petro-Canada as assigned by Moody's and S&P as outlined below which are denoted in basis points (bp):

Moody's/S&P	Level 1 A3/A- or higher	Level 2 Baa1/BBB+	Level 3 Baa2/BBB	Level 4 Baa3/BBB-	Level 5 Lower than: Baa3/BBB-, or unrated
LIBOR Spread	45.0	50.0	60.0	95.0	120.0
U.S. Prime	nil	nil	nil	nil	20.0

* In the case of a split rating, the higher of the two ratings; if two or more rating differences, the average of the two ratings.


		During any period where utilization under the Facility exceeds 33% of the total Facility, the Margins set out in the grid above shall increase by 10 bps for so long as such is the case.
		The Margins will increase by 25 bps on each of the first anniversary and 15 month anniversary of Closing.
Overdue Payments:		Past due payments shall accrue interest at the per annum interest rate for U.S. Prime Loans plus 1.00%.

APPENDIX II—DEFINITIONS

"Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in New York are required to be closed and, if the applicable Business Day relates to dealings in the LIBOR market, such day will also include a day in London, England.

"Capitalization" means at the end of the Fiscal Quarter, and as determined in accordance with GAAP on a consolidated basis for Petro-Canada, the aggregate of Shareholder's Equity and Debt of Petro-Canada.

"Consolidated Net Tangible Assets" means the total amount of assets as shown on the most recent annual audited or quarterly unaudited consolidated balance sheet of Petro-Canada and computed in accordance with GAAP, including investments in unconsolidated subsidiaries, after deducting therefrom:

(a): all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other similar intangibles; and
(b): appropriate adjustments on account of minority interests of other persons holding stock of a subsidiary.

"Core Business" means, in respect of Petro-Canada on a consolidated basis, the business of exploring for, developing and producing petroleum and natural gas in all areas of the world, including in offshore areas and from in situ and other bitumen reserves, and refining, extracting, fractionating, transporting, storing and marketing petroleum and natural gas products, including retail marketing of such products and ancillary retail marketing.

"Debt" means, at the end of the Fiscal Quarter and as determined in accordance with GAAP on a consolidated basis for Petro-Canada, all indebtedness for money borrowed (including contingent obligations for borrowed money, capitalized amounts of leases, Non-recourse Debt and guarantees of the Debt of others).

"Debt to Capitalization" means, as of the last day of the Fiscal Quarter, the ratio of Debt at such date to Capitalization.

"Designated Subsidiary" means, at any time:

(a): any wholly-owned subsidiary of Petro-Canada which has greater than 10% of the consolidated assets of Petro-Canada; and
(b): any subsidiary of Petro-Canada which has been designated as a Designated Subsidiary by Petro-Canada.

Petro-Canada shall be entitled to undesignate a Designated Subsidiary which is not otherwise a Designated Subsidiary under paragraph (a) so long as following any such undesignation no Default or Event of Default will then exist.

"Material Adverse Effect" means a material adverse effect on the ability of Petro-Canada (including by reason of a material adverse change in the financial condition of a Designated Subsidiary) to perform any of its financial obligations hereunder.

"Moody's" means Moody's Investors Service, Inc. and its successors.

"Non-recourse Debt" means in respect of Petro-Canada or any subsidiary;

(a): indebtedness for borrowed money incurred by Petro-Canada or any subsidiary to finance the acquisition, construction or exploitation of property or assets of Petro-Canada or any such subsidiary; or
(b): proceeds received by Petro-Canada or any subsidiary under a production payment;

in each case where the recourse of the lender thereof or purchaser thereunder, is limited in all circumstances to the assets acquired, constructed or exploited or to which the production payment relates in respect of which such indebtedness or obligation under such production payment has been incurred, other than recourse (which shall be on an unsecured basis) against the other assets or property of Petro-Canada or any such subsidiary for a breach of representations and warranties or non-financial covenants made or given by such person in connection with such indebtedness or production payments to the extent such representations and warranties or non-financial covenants are customarily given in similar types of financings;

"S&P" means Standard & Poor's Corp. and its successors.

"Shareholders' Equity" means an amount equal to the amount of shareholders' equity as shown on the consolidated balance sheet of Petro-Canada.

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Summary of Committed Terms and Conditions
APPENDIX 1—FEES AND INTEREST RATES
APPENDIX II—DEFINITIONS
EX-18 19 a2138532zex-18.htm EXHIBIT 18
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Exhibit 18

CREDIT AGREEMENT
(CANADA)

BETWEEN:

PETRO-CANADA
(AS BORROWER)

–AND–

THE FINANCIAL INSTITUTIONS SIGNATORY HERETO
(AS LENDERS)

–AND–

BANK OF MONTREAL
(AS ADMINISTRATIVE AGENT)

–WITH–

BMO NESBITT BURNS
(AS LEAD ARRANGER AND BOOKRUNNER)

–AND–

RBC CAPITAL MARKETS AND SCOTIA CAPITAL
(AS CO-SYNDICATION AGENTS)

MARCH 18, 2004

BURNET, DUCKWORTH & PALMER LLP
FRASER MILNER CASGRAIN LLP

TABLE OF CONTENTS

			Page
ARTICLE 1 INTERPRETATION
	1.1	Definitions	1
	1.2	Headings and Table of Contents	22
	1.3	References	22
	1.4	Rules of Interpretation	22
	1.5	Generally Accepted Accounting Principles	23
	1.6	Time	23
	1.7	Payment for Value	23
	1.8	Incorporation of Schedules	23
ARTICLE 2 REPRESENTATIONS AND WARRANTIES
	2.1	Representations and Warranties	23
	2.2	Deemed Representation and Warranty	26
ARTICLE 3 THE CREDIT FACILITY
	3.1	Obligations of Each Lender	26
	3.2	Re-Allocation	27
	3.3	Purpose	28
	3.4	Takeover Notification	28
	3.5	Borrowings	29
	3.6	Selection of Libor Interest Periods	30
	3.7	Conditions Applicable to Bankers' Acceptances and BA Equivalent Advances	30
	3.8	Agent's Duties re Bankers' Acceptances and BA Equivalent Advances	34
	3.9	Letters of Credit	35
	3.10	Direct Letter of Credit Payments	39
	3.11	Fronted Letter of Credit Payments	40
	3.12	Obligations Absolute re Letters of Credit	41
	3.13	Expenses re Letters of Credit	43
	3.14	Indemnification; Nature of Lender's Duties	43
	3.15	Repayments re Letters of Credit	44
	3.16	Notice of Repayment	45
	3.17	Pro-Rata Treatment of Borrowings	45
	3.18	Conversions	46
	3.19	Rollovers	47
	3.20	Notices Irrevocable	47
	3.21	Extension of Term Date	47
	3.22	Increase of Total Commitment	49
ARTICLE 4 REPAYMENT AND PREPAYMENT
	4.1	Reduction of Commitment and Repayment of Borrowings	50
	4.2	Repayment of Borrowings due to Exchange Rate Fluctuations	50
	4.3	Cancellation and Prepayment	50
	4.4	Cancellation or Transfer of a Lender's Commitment	51
	4.5	Early Repayment	52
	4.6	Evidence of Indebtedness	52
ARTICLE 5 PAYMENT OF INTEREST AND FEES
	5.1	Interest on Cdn. Prime Loans	53
	5.2	Interest on U.S. Base Rate Loans	53
	5.3	Interest on Libor Loans	53
	5.4	Bankers' Acceptance Fees	54
	5.5	Letter of Credit Fees	54
	5.6	Utilization Fees	55

	5.7	Interest on Overdue Amounts	55
	5.8	Standby Fees	55
	5.9	Agent's Fees	56
	5.10	Maximum Rate Permitted by Law	56
	5.11	Waiver	56
	5.12	Interest and Fee Adjustment	56
ARTICLE 6 PAYMENT AND TAXES
	6.1	Time, Place and Currency of Payment	57
	6.2	Application of Payments Prior to an Event of Default	57
	6.3	Taxes	57
ARTICLE 7 CONDITIONS PRECEDENT TO DISBURSEMENT OF THE BORROWINGS
	7.1	Conditions Precedent	59
	7.2	Continuing Conditions Precedent	61
	7.3	Waiver of a Condition Precedent	61
ARTICLE 8 COVENANTS OF THE BORROWER
	8.1	Covenants of the Borrower	61
	8.2	Financial Covenants	67
	8.3	Designation of Designated Subsidiaries	67
ARTICLE 9 EVENTS OF DEFAULT
	9.1	Events of Default	67
	9.2	Acceleration and Demand	70
	9.3	Waiver of Default	70
	9.4	Application of Payments Following Demand and Acceleration	71
	9.5	Remedies Cumulative	71
	9.6	Set-Off	72
	9.7	Cash Collateral Accounts	72
	9.8	Lenders May Perform Covenants	72
ARTICLE 10 EXPENSES AND INDEMNITIES
	10.1	Reimbursement of Expenses and Indemnity	72
	10.2	Increased Cost	73
	10.3	Illegality	74
	10.4	Substitute Basis of Borrowing	74
	10.5	Funding Indemnity	75
	10.6	General Indemnity	76
ARTICLE 11 THE AGENT AND THE LENDERS
	11.1	Authorization	77
	11.2	Responsibility of Agent	77
	11.3	Acknowledgement of Lenders	77
	11.4	Rights and Obligations of Each Lender	78
	11.5	Determinations by Lenders	78
	11.6	Notices between the Lenders, the Agent and the Borrower	78
	11.7	Agent's Duty to Deliver Documents Obtained from the Borrower	78
	11.8	Arrangements for Borrowings	79
	11.9	Arrangements for Repayment of Borrowings	79
	11.10	Repayment by Lenders to Agent	80
	11.11	Adjustments Among Lenders	80
	11.12	Lenders' Consents to Waivers, Amendments, etc.	81

	11.13	Reimbursement of Agent's Expenses	82
	11.14	Reliance by Agent on Notices, etc.	82
	11.15	Relations with Borrower	82
	11.16	Sharing of Information	83
	11.17	Successor Agent	83
	11.18	Dealing with the Agent	83
	11.19	Indemnity of Agent	83
ARTICLE 12 SUCCESSORS AND ASSIGNS AND JUDGMENT CURRENCY
	12.1	Successors and Assigns	84
	12.2	Exchange and Confidentiality of Information	85
	12.3	Judgment Currency	86
ARTICLE 13 MISCELLANEOUS
	13.1	Severability	86
	13.2	Survival of Undertakings	86
	13.3	Failure to Act	86
	13.4	Waivers	87
	13.5	Amendments	87
	13.6	Notice	87
	13.7	Further Assurances	87
	13.8	Governing Law	87
	13.9	Whole Agreement	87
	13.10	Term of Agreement	88
	13.11	Time of Essence	88
	13.12	Jurisdiction	88
	13.13	Counterpart Execution	89

*SCHEDULES*
Schedule A		Notice of Borrowing, Repayment, Prepayment or Cancellation of Commitment
Schedule B		Notice of Borrowing by way of Bankers' Acceptances
Schedule C		Conversion Notice
Schedule D		Rollover Notice
Schedule E		Compliance Certificate
Schedule F		Lender Assignment Agreement
Schedule G		Request for Offer of Extension
Schedule H		Power of Attorney Terms—Bankers' Acceptances
Schedule I		Form of Direct Letter of Credit
Schedule J		Reallocation Request

iii

THIS CREDIT AGREEMENT is dated as of March 18, 2004.

BETWEEN:

PETRO-CANADA, a corporation incorporated under the laws of Canada, having an office in Calgary, Alberta

OF THE FIRST PART

AND

EACH OF THE FINANCIAL INSTITUTIONS NAMED ON THE SIGNATURE PAGES HERETO OR AS FROM TIME TO TIME BECOME LENDERS HEREUNDER, in their capacities as Lenders

OF THE SECOND PART

AND

BANK OF MONTREAL, a Canadian chartered bank having a branch in Toronto, Ontario, in its capacity as Agent

OF THE THIRD PART

WHEREAS

1. the Borrower has requested the Lenders to provide the Borrower with a credit facility in an amount not exceeding Cdn. $850,000,000; and

2. the Agent, the Lenders and the Borrower wish to enter into this Agreement to provide the credit facility referred to in paragraph 1 to the Borrower on the terms and conditions of this Agreement;

NOW THEREFORE, in consideration of the premises, the covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the parties hereto, the parties agree as follows:

ARTICLE 1
INTERPRETATION

1.1 Definitions

In this Agreement and the Schedules hereto and in all notices pursuant to this Agreement, unless something in the subject matter or context is inconsistent therewith, the following words and phrases shall have the following meanings:

"Acceleration Notice" means a written notice delivered by the Agent to the Borrower pursuant to Section 9.2 declaring all indebtedness and liabilities of the Borrower outstanding to the Lenders hereunder to be immediately due and payable;

"Acceptance Fees" has the meaning given to it in Section 5.4;

"Accommodations" means the advance of Loans by the Lenders, the acceptance of Bankers' Acceptances or, if applicable, the advance of BA Equivalent Advances by the Lenders and the issuing of Letters of Credit executed by the Agent as attorney for and on behalf of the Lenders or issued by a Fronting Lender for the account of the Lenders;

"Accounts" means the accounts and records established by the Agent pursuant to Section 4.6 to record the Borrower's liability to each of the Lenders in respect of the Borrowings and other amounts outstanding by the Borrower to each of the Lenders hereunder;

"Additional Compensation" has the meaning given to it in Section 10.2;

"Affected Lender" has the meaning given to it in Section 4.4;

"Affiliate" means any person which, directly or indirectly, controls, is controlled by or is under common control with another person; and for the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" or "under common control with") means the power to direct or cause the direction of the management and policies of any person, whether through the ownership of Voting Shares or by contract or otherwise;

"Agent" means BMO when acting in its capacity as Agent hereunder and includes any successor agent appointed pursuant to Section 11.17;

"Agent's Account for Payments" means with respect to payments made by the Borrower or a Lender, such accounts maintained by the Agent at the Agent's Branch of Account referred to in the definition thereof as the Agent may from time to time advise the Borrower or the Lenders, as applicable, in writing;

"Agent's Branch of Account" means with respect to Accommodations and Borrowings, the principal office of the Agent in Toronto, Ontario or such other office or branch of the Agent in Canada as the Agent and the Borrower, each acting reasonably, may agree upon from time to time and as advised to the Lenders in writing;

"Agreeing Lender" has the meaning given to it in Section 3.21(b);

"Agreement" means this agreement, all Schedules attached hereto and any future amendments, variations or supplements thereto;

"BA Equivalent Advance" means an advance made in Canadian Dollars by a Non-Acceptance Lender as part of an Accommodation by way of Bankers' Acceptances;

"Bankers' Acceptances" means bankers' acceptances denominated in Canadian Dollars in the form of either a depository bill, as defined in the Depository Bills and Notes Act (Canada), or a blank non-interest bearing bill of exchange, as defined in the Bills of Exchange Act (Canada), in either case drawn by the Borrower and accepted and, if applicable, purchased by the Lenders at the request of the Borrower pursuant to either Section 3.5 or 3.18;

"BMO" means Bank of Montreal and its successors and permitted assigns;

"Borrower" means Petro-Canada, a corporation incorporated under the laws of Canada, having its principal office in Calgary, Alberta, Canada;

"Borrowings" means, at any time, the principal amount outstanding by way of Loans together with the face amount outstanding of Bankers' Acceptances (and, if applicable, any related BA Equivalent Advances) issued by the Borrower and accepted and, if applicable, purchased by the Lenders and the undrawn amount of all outstanding Letters of Credit issued by the Agent and the Fronting Lenders for and on behalf of the Lenders;

"bps" means one one-hundredth of one percent (.01%);

"Branch of Account" means, with respect to each Lender, the branch or office of such Lender at the address set out opposite such Lender's name on the signature pages of this Agreement or in the Lender Assignment Agreement or such other branch or office in Canada as such Lender may from time to time advise the Borrower and the Agent in writing; but, for purposes of delivery of any notice required to be delivered by the Agent to a Lender pursuant to Section 11.8 and for the purposes of effecting any payments to a Lender in connection with this Agreement, a Lender may specify by notice in writing to the Borrower and the Agent any other branch or office of such Lender in Canada and such branch or office shall thereafter be the Branch of Account of such Lender for such purpose;

"Business Day" means a day, excluding Saturday and Sunday, on which banking institutions are open for business in Calgary, Alberta and Toronto, Ontario and:

(a): in respect of any matters hereunder relating to U.S. Dollars, a day on which banking institutions are also open for business in New York, New York;
(b): in respect of any matters hereunder relating to determining Libor for any Libor Interest Period on Libor Loans denominated in Canadian Dollars, U.S. Dollars or Pounds Sterling, as applicable, a day on which dealings in Canadian Dollars, U.S. Dollars or Pounds Sterling, as applicable, by and between banks in the London, England interbank market may be conducted; and
(c): in respect of any matters hereunder relating to Euros, a day on which the Trans-European Automated Real-time Gross Settlement Express Transfer System (or any successor system) is operating;

"Canadian Dollars", "Cdn. Dollars" and the symbol "Cdn. $" each means lawful money of Canada;

"Capital Adequacy Guidelines" means Guideline A, Part I, dated January 2001, entitled "Capital Adequacy Requirements" and Guideline A, Part II, dated November 1997, entitled "Capital Adequacy Requirements—Market Risk" each issued by the Office of the Superintendent of Financial Institutions Canada (which encompass the guidelines contained in the report dated July 1998 and entitled "International Convergence of Capital Measurement and Capital Standards" released by the Basel Committee on Banking Regulations and Supervisory Practices of the Bank for International Settlements) and all other guidelines or requirements relating to capital adequacy issued by the Office of the Superintendent of Financial Institutions of Canada or any other governmental or regulatory authority in Canada regulating or having jurisdiction with respect to any Lender, as amended, modified, supplemented, reissued or replaced from time to time;

"Capital Lease" means any lease or charter of property, real or personal, which would, in accordance with Generally Accepted Accounting Principles, be required to be classified and accounted for as a capital lease on a balance sheet of a lessee, where the lessee is the Borrower or a Subsidiary;

"Capitalized Lease Obligation" means, at any time, the amount of any obligation which would, in accordance with Generally Accepted Accounting Principles, be required to be classified and accounted for as a Capital Lease on the consolidated balance sheet of the Borrower and its Subsidiaries;

"Cdn. Prime Loans" means the advances in Canadian Dollars made available by the Lenders to the Borrower pursuant to either Section 3.5 or 3.18 and on which the Borrower has agreed to pay interest in accordance with Section 5.1;

"Cdn. Prime Rate" means, with respect to Cdn. Prime Loans, the greater of:

(a): the annual rate of interest announced from time to time by the Agent as being its reference rate then in effect for determining interest rates on Canadian Dollar denominated commercial loans made by the Agent in Canada; and
(b): a rate of interest per three hundred and sixty-five (365) day period equal to the One Month BA Rate plus three quarters of one percent (³/4%);

provided that, if the rates of interest in (a) and (b) above are equal, then the "Cdn. Prime Rate" shall be the rate specified in (a) above;

"CDOR Rate" means, on any day:

(a): for Bankers' Acceptances which have a Standard Term, the per annum rate of interest which is the rate determined as being the arithmetic average of the rates per annum (calculated on the basis of a year of three hundred and sixty-five (365) days) applicable to Canadian Dollar bankers'

acceptances having identical issue and comparable maturity dates as the Bankers' Acceptances proposed to be issued by the Borrower displayed and identified as such on the display referred to as the "CDOR Page" (or any display substituted therefor) of Reuter Monitor Money Rates Service as at approximately 8:00 a.m. (Calgary time) on such day (as adjusted by the Agent in good faith after 8:00 a.m. (Calgary time) to reflect any error in a posted rate of interest or in the posted average annual rate of interest); and

(b): for Bankers' Acceptance which do not have a Standard Term, the arithmetic average of the discount rate quoted by each Schedule I Reference Lender (determined by the Agent as of 8:00 a.m. (Calgary time) on such day) which would be applicable in respect of an issue of bankers' acceptances in a comparable amount and with identical maturity dates to the Bankers' Acceptances proposed to be issued by the Borrower on such day;

"Claim" has the meaning given to it in Section 10.6;

"Commitment" means each Lender's obligation hereunder to make Loans and BA Equivalent Advances available to, and accept and, if applicable, purchase Bankers' Acceptances from, and issue Letters of Credit for the account of, the Borrower in an aggregate principal amount in Cdn. Dollars or the Equivalent Amount thereof in U.S. Dollars, Euros or Pounds Sterling or any combination thereof, as applicable, in the amount set forth opposite such Lender's name on the signature pages hereto or in a Lender Assignment Agreement as such Lender's Commitment, as such amount may hereafter be increased, decreased, cancelled or terminated from time to time pursuant to this Agreement;

"Compliance Certificate" means a compliance certificate substantially in the form attached hereto as Schedule E executed on behalf of the Borrower by any of the Chairman, the President, the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, any Vice-President, the Treasurer or the Corporate Secretary of the Borrower;

"Conflicted Lender" has the meaning given to it in Section 3.4(b);

"Consolidated Capitalization" means, at any time and as determined in accordance with GAAP on a consolidated basis and without duplication, the aggregate of Consolidated Shareholders' Equity and Consolidated Debt;

"Consolidated Debt" means, at any time and as determined in accordance with GAAP on a consolidated basis and without duplication, an amount equal to the aggregate of:

(a)

the aggregate amount of all obligations, liabilities and indebtedness of the Borrower and its Subsidiaries which would be classified as Indebtedness for Borrowed Money upon a consolidated balance sheet of the Borrower and its Subsidiaries; and

(b)

to the extent, if any, not included in paragraph (a) of this definition:

(i)

Guarantees by the Borrower or any Subsidiary of the Indebtedness for Borrowed Money of any other person; provided that any such Indebtedness for Borrowed Money of such other person shall for purposes of this clause include obligations of the kind described in paragraphs (i) through (vii) inclusive of this paragraph (b) of this definition of Consolidated Debt;

(ii)

reimbursement obligations of the Borrower or any Subsidiary in respect of letters of credit and letters of guarantee issued in respect of or to secure Indebtedness for Borrowed Money or any pension obligations of the Borrower;

(iii)

obligations of the Borrower or any Subsidiary:

(A): to purchase Indebtedness for Borrowed Money or to advance or supply funds for the payment or purchase of such indebtedness of a person, including by way of the purchase of debt securities, other similar obligations or shares; or

(B): to make any payment, loan, advance, capital contribution or other investment in or to a person or become or be bound by any agreement to do so, for the purpose of assuring a minimum equity, an asset base, a working capital or other balance sheet test or condition for any date or to provide funds for the payment of any debt liability, dividend or share liquidation payment, or otherwise to supply funds to or in any manner invest in a person if, in any such case, the purpose thereof may reasonably be considered to be to provide an assurance of payment of the Indebtedness for Borrowed Money of such person;

other than where such person is the Borrower or a Subsidiary and provided that a Dealer Repurchase Agreement shall not constitute Consolidated Debt unless included therein by virtue of paragraph (a) of this definition;

(iv): obligations of the Borrower or any Subsidiary with respect to Production Payments and deferred revenues relating to third party obligations;
(v): Capitalized Lease Obligations;
(vi): Purchase Money Obligations; and
(vii): Non-Recourse Debt;

but shall exclude:

(viii): any particular obligation, liability or indebtedness of the Borrower or any Subsidiary if, upon or prior to the maturity thereof, there shall have been irrevocably deposited with the proper depositary in trust the necessary funds (or evidences of indebtedness) for the payment, redemption or satisfaction of such obligation, liability or indebtedness, and thereafter such funds and evidences of such obligation, liability or indebtedness or other security so deposited are not included in any computation of the assets of such person in accordance with GAAP; and
(ix): any indebtedness of the Borrower or any Subsidiary which is expressed to be subordinate in all respects (including in right of payment) to Borrowings and all other amounts owing hereunder upon the occurrence of an Event of Default, provided that any maturity date in respect of any such indebtedness is after the Maturity Date of any Lender;

"Consolidated Debt to Capitalization Ratio" means, as of the last day of a Fiscal Quarter, the ratio of Consolidated Debt to Consolidated Capitalization;

"Consolidated Net Tangible Assets" means the total amount of assets as shown on the most recent annual audited or quarterly unaudited consolidated balance sheet of the Borrower and computed in accordance with GAAP, including investments in unconsolidated Subsidiaries, after deducting therefrom:

(a): all amounts attributable to goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other similar intangibles; and
(b): appropriate adjustments on account of minority interests of other persons holding stock of a Subsidiary;

"Consolidated Shareholders' Equity" means, at any time and as determined in accordance with GAAP, the consolidated shareholders' equity of the Borrower;

"Conversion" means a conversion of one type of Borrowing into another type of Borrowing pursuant to Section 3.18;

"Conversion Date" means a Business Day that the Borrower has notified the Agent at the Agent's Branch of Account as the date on which a Conversion is to take effect pursuant to Section 3.18;

"Conversion Notice" means a notice of a Conversion, substantially in the form of Schedule C hereto;

"Core Business" means, in respect of the Borrower on a consolidated basis, the business of exploring for, developing and producing petroleum and natural gas in all areas of the world, including in offshore areas and from in situ and other bitumen reserves, and refining, extracting, fractionating, transporting, storing and marketing petroleum and natural gas products, including retail marketing of such products and ancillary retail marketing;

"Credit Facility" means the credit facility made available hereunder by the Lenders and represented by each Lender's Commitment;

"Damages" has the meaning given to it in Section 10.6;

"Dealer Repurchase Agreement" means any arrangement between the Borrower and any Subsidiary, on the one hand, and any lender to a person who operates a retail establishment or wholesale business at or from which products of the Borrower or such Subsidiary are sold, on the other hand, pursuant to which the Borrower or such Subsidiary agrees to purchase from such person or lender all or a portion of the inventory of such person at a fixed or determinable price upon the occurrence of certain stated events;

"Default" means any event or circumstance which, with the giving of notice or lapse of time, would constitute an Event of Default;

"Default Rate" means the applicable rate of interest set forth in Section 5.7;

"Designated Subsidiary" means, at any time:

(a): any wholly-owned Subsidiary of the Borrower which owns greater than 10% of Consolidated Net Tangible Assets; and
(b): each Subsidiary of the Borrower which the Borrower has designated as a Designated Subsidiary under Section 8.3 and in respect of which such designation has not been revoked under Section 8.3;

provided that for the purposes of this definition a Subsidiary that becomes a Designated Subsidiary pursuant to paragraph (a) of this definition shall continue to be a Designated Subsidiary notwithstanding that at a later date it is no longer wholly-owned by the Borrower unless and until such designation is validly revoked pursuant to Section 8.3(b) hereof;

"Direct Letter of Credit" means any Letter of Credit executed by the Agent in the name and on behalf of, and as attorney-in-fact for, the Lenders;

"Discount Proceeds" means, in respect of any Bankers' Acceptance required to be purchased by a Lender pursuant to Sections 3.7(a) or 3.7(h), an amount (rounded to the nearest whole cent with one-half of one cent being rounded-up) determined as of the applicable Drawdown Date, Conversion Date or Rollover Date which is equal to:

Face Amount × Price

where "Face Amount" is the face amount of such Bankers' Acceptance and "Price" is equal to:

1
1+(Rate × Term)

where the "Rate" is the applicable Discount Rate (or, as applicable, Non-Acceptance Discount Rate) expressed as a decimal on the Drawdown Date, Conversion Date or Rollover Date, as the case may be; the "Term" is the term of such Bankers' Acceptance expressed as a number of days divided by three hundred and sixty-five (365); the Price as so determined is rounded up or down to the fifth decimal

place with .000005 being rounded-up; and the annual rate of interest to which the "Rate" used in the foregoing determination of Discount Proceeds is equal, is the "Rate" multiplied by the actual number of days in a period of one (1) year commencing on the day such Discount Proceeds are determined and divided by three hundred and sixty-five (365);

"Discount Rate" means on any day:

(a): with respect to an issue of Bankers' Acceptances issued by a Schedule I Lender, the CDOR Rate on such day; and
(b): with respect to an issue of Bankers' Acceptances issued by a Schedule II Lender, the lesser of (i) the rate set out in paragraph (a) of this definition plus seven (7) bps, and (ii) the average of the rates on such day, at or about 8:00 a.m. (Calgary time) on such day, quoted by each Schedule II Reference Lender as being the discount rate (expressed as a rate per annum based on a year of three hundred and sixty-five (365) days) at which such Schedule II Reference Lender is offering at such time on such day for the purchase of Bankers' Acceptances denominated in Canadian Dollars having a comparable face value and identical issue and maturity dates to the face value and issue and maturity date of the Bankers' Acceptances proposed to be issued by the Borrower and accepted by such Schedule II Reference Lender on such day;

"Drawdown" means an advance of Borrowings hereunder but does not include a Rollover or Conversion;

"Drawdown Date" means a Business Day on which the Borrower has requested Borrowings pursuant to Section 3.5;

"Drawdown Notice" means a notice of Drawdown substantially in the form of Schedule A hereto;

"Effective Date" has the meaning given to it in Section 7.1;

"EMU" means economic monetary union as contemplated in the Treaty on European Union;

"EMU Legislation" means legislative measures of the European Council for the introduction of, change over to or operation of a single or unified European currency (whether known as the Euro or otherwise), being in part the implementation of the third stage of EMU;

"Environmental Laws" means any and all federal, provincial, local and foreign statutes, laws, regulations, ordinances, rules, decrees or other governmental restrictions relating to the environment, to the release of any materials into the environment or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals, industrial substances, toxic substances, hazardous substances or wastes but only to the extent such Environmental Laws are legally applicable to the Borrower or any of its Subsidiaries;

"Environmental Liabilities" means, in respect of the Borrower or any Subsidiary, any and all legal obligations and liabilities for any Release, any environmental damage, any contamination or any other environmental problem caused by the Borrower or such Subsidiary and which adversely impacts any person, property or the environment as a result of any Release or the condition of any property or asset having a significant adverse impact on the environment, whether or not caused by a breach of any applicable laws (including, but not limited to, any Environmental Laws), including, without limitation, all obligations and liabilities arising from or related to: any surface, underground, air, ground water, or surface water contamination; the abandonment or plugging of any well; restorations and reclamations; the removal of or failure to remove any foundations, structures or equipment; the cleaning up or reclamation of storage sites; violation of pollution standards; and personal injury (including sickness, disease or death) and property damage arising from the foregoing;

"Equivalent Amount" in one currency (the "First Currency") of an amount in another currency (the "Other Currency") means, as of the date of determination, the amount of the First Currency

which would be required to purchase such amount of the Other Currency at the Bank of Canada noon (Toronto time) rate for such currencies on such date of determination (as quoted or published from time to time by the Bank of Canada) or, if such date of determination is not a Business Day, on the Business Day immediately preceding such date of determination, or at such other rate as may have been agreed to by the Borrower and the Agent;

"Euro" means the single currency of Participating Member States of the European Union;

"Event of Default" means any of the events or circumstances specified in Section 9.1;

"Excluded Taxes" means Taxes imposed by Canada or any political subdivision thereof with respect to payments made by a Lender hereunder where:

(a): such Taxes are imposed on or are measured by reference to or in respect of the overall net income, gains or capital of a Lender; or
(b): such Taxes are imposed pursuant to a Part XIII.1 or Part XIV of the Income Tax Act (Canada) or are in the nature of franchise taxes;
(c): such Taxes are imposed by reason of a Lender being (or being deemed to be) a non-resident of Canada for the purposes of Part XIII of the Income Tax Act (Canada); or
(d): the representation and warranty set out in Section 6.3(d) is in fact not true in respect of a Lender, regardless of whether such representation and warranty has been or is required to be made by any such Lender;

"Exempt Lenders" means a Lender which is not subject to the U.S. Economic Sanctions;

"Extending Lenders" has the meaning given to it in Section 3.21(e);

"Fed Funds Rate" means, on any day, the rate of interest per annum for that day set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (the "H.15(519)") opposite the caption "Federal Funds (Effective)" and, if on any day such rate is not yet published in H.15(519), the rate for such day shall be the rate set forth in the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, for such day published by the Federal Reserve Board (the "Composite 3:30 p.m. Quotations") under the caption "Federal Funds Effective Rate"; provided that if such rate is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, such rate shall be the average of the interest rates per annum quoted for such day on overnight Federal funds (such words to have the meaning generally given to them by money market brokers of recognized standing doing business in the United States of America) transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent, acting reasonably;

"Fiscal Quarter" means the three month period commencing on the first day of each Fiscal Year and each successive three month period thereafter during such Fiscal Year;

"Fiscal Year" means the Borrower's fiscal year which at present commences on January 1 of each year and ends on December 31 of such year;

"Forms" has the meaning given to it in Section 6.3(b);

"Fronted LC Commitment" means each Fronting Lender's obligation hereunder to issue Fronted Letters of Credit for the account of the Borrower in an aggregate principal amount in Cdn. Dollars (or the Equivalent Amount in U.S. Dollars, Euros or Pounds Sterling) equal to the amount set forth opposite such Fronting Lender's name on the signature pages hereto or in a Lender Assignment Agreement as such Fronting Lender's Fronted LC Commitment or in an agreement between the Borrower and such Lender of which the Agent has received a copy, in any case, as such amount may

hereafter be increased, decreased, cancelled or terminated from time to time pursuant to this Agreement;

"Fronted Letter of Credit" means a Letter of Credit issued by a Fronting Lender for the account of the Lenders;

"Fronting Fee" has the meaning given to it in Section 5.5(b);

"Fronting Fee Rate" means the per annum fee of 12¹/2 bps to be charged by a Fronting Lender for the issuance of Fronted Letters of Credit by such Fronting Lender;

"Fronting Lender" means each Lender who from time to time agrees with the Borrower to issue Fronted Letters of Credit for so long as such Lender has a Fronting LC Commitment hereunder or has issued Fronted Letters of Credit hereunder which remain outstanding;

"Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles which are in effect from time to time in Canada;

"Guarantee" means any undertaking to assume, guarantee, endorse (other than the routine endorsement of cheques in the ordinary course of business), contingently agree to purchase or to provide funds for the payment of, or otherwise become liable in respect of, any obligation of any person;

"Indebtedness for Borrowed Money" means all obligations for money borrowed including reimbursement obligations in respect of bankers' acceptances and note purchase facilities and obligations evidenced by a note, bond, debenture, acceptance or other similar instrument;

"Indemnified Party" has the meaning given to it in Section 10.6;

"Information" has the meaning given to it in Section 12.2;

"Interest Date" means the last day of each month;

"Interest Determination Date" means, with respect to a Libor Loan, the date which is two (2) Business Days prior to the first day of the Libor Interest Period applicable to such Libor Loan;

"International Credit Facility" means the credit facility, in the initial amount of Cdn. $300,000,000, to be made available to the Borrower pursuant to the provisions of the Credit Agreement (International) made as of March 18, 2004 between the Borrower, the financial institutions signatory thereto and the Bank of Montreal as Administrative Agent;

"Issue Date" means as to any Letter of Credit the date on which such Letter of Credit is issued;

"Judgment Currency" has the meaning given to it in Section 12.3;

"LC Application" means an application on the Agent's or a Fronting Lender's, as applicable, standard form of letter of credit application submitted to the Agent or such Fronting Lender by the Borrower requesting the Agent or such Fronting Lender to issue a Letter of Credit hereunder subject to such changes thereto as are requested by the Borrower and agreed to by the Agent or such Fronting Lender, acting reasonably, and in any event consistent with the terms of this Agreement;

"LC Disbursement" means any payment by a Lender or, if applicable, a Fronting Lender under a Letter of Credit plus all taxes and reasonable and customary fees, charges and other costs and expenses incurred by such Lender or, if applicable, a Fronting Lender in connection with such payment;

"LC Expenses" has the meaning given to it in Section 3.13(a);

"LC Fees" has the meaning given to it in Section 5.5(a);

"LC Obligations" means the obligation of the Borrower at any time for an amount equal to the aggregate face amount of all undrawn and unexpired Letters of Credit then outstanding;

"Lender Assignment Agreement" means an agreement substantially in the form of Schedule F with the blanks completed;

"Lenders" means each of the financial institutions named on the signature pages hereto as Lenders and each financial institution which has entered into a Lender Assignment Agreement and including BMO in its capacity as Lender but excluding BMO in its capacity as Agent, and "Lender" means any one of them;

"Letter of Credit" means any letter of credit or bank letter of guarantee issued by the Agent for and on behalf of the Lenders or by a Fronting Lender, in each case as the same may be amended, supplemented, extended or otherwise modified from time to time in accordance with the terms hereof and thereof. Each such Letter of Credit shall be designated pursuant to Section 3.9(b)(i)(B) as either:

(a): a standby letter of credit (a "Standby LC"), if it serves as a direct credit substitute of the Borrower's financial obligations for purposes of the Capital Adequacy Guidelines; or
(b): a performance letter of credit (a "Performance LC"), if it does not constitute a direct credit substitute for the purposes of the Capital Adequacy Guidelines;

but does not include any documentary letter of credit and "Letters of Credit" shall refer collectively to all Letters of Credit outstanding at any time;

"Libor" means, with respect to any Libor Interest Period applicable to a Libor Loan, the per annum rate of interest determined by the Agent, based on a three hundred sixty (360) day year in the case of Canadian Dollars, U.S. Dollars or Euros and a three hundred sixty-five (365) day year in the case of Pounds Sterling, rounded upwards, if necessary, to the nearest whole multiple of one-sixteenth of one percent (1/16th%), as the average of the offered quotations appearing on the display referred to as the "LIBOR 01 Page" (or any display substituted therefor) of Reuter Monitor Money Rates Service or, if such "LIBOR 01 Page" shall not be available, the average of the offered quotations appearing on page 3740 of the AP/Dow Jones Telerate Systems Monitor (or any page substituted therefor) for deposits in Canadian Dollars and on page 3750 of the AP/Dow Jones Telerate Systems Monitor (or any page substituted therefor) for deposits in U.S. Dollars, Euros or Pounds Sterling, as applicable, for a period equal to the number of days in the applicable Libor Interest Period, at or about 11:00 a.m. (London, England time) on the second Business Day prior to the first day of such Libor Interest Period; provided, however, that the Agent and the Borrower may from time to time, each acting reasonably, jointly determine to use a different quotation page provided by Reuter Monitor Money Rates Service or the AP/Dow Jones Telerate Systems Monitor or by any other generally accepted provider of similar services for purposes of determining Libor in respect of Euros, and the Agent shall give prior written notice of such determination to the Lenders. If neither such "LIBOR 01 Page" nor such page 3740 or 3750, as applicable, is available, or in the event the Agent and the Borrower have determined to use an alternate page in respect of Euros and such alternate page is not available, then "Libor" shall mean, with respect to any such Libor Interest Period, the per annum rate of interest, based on a three hundred sixty (360) day year in the case of Canadian Dollars, U.S. Dollars or Euros and a three hundred sixty-five (365) day year in the case of Pounds Sterling, (rounded upwards, if necessary, to the nearest one-sixteenth of one percent (1/16th%)) determined by the Agent at approximately 11:00 a.m. (London, England time) (or so soon thereafter as practicable) on the second Business Day prior to the first day of such Libor Interest Period offered to the Agent by leading banks in the London interbank market for the placing of Canadian Dollar, U.S. Dollar, Euro or Pounds Sterling deposits, as applicable, with the Agent having a term comparable to such Libor Interest Period and in an amount comparable to the principal amount of the Pro-Rata Share of the Agent in respect of the applicable Libor Loan;

"Libor Interest Date" means the date falling on the last day of each Libor Interest Period; provided that if the Borrower selects a Libor Interest Period for a period longer than three (3) months, the Libor Interest Date shall be each date falling every three (3) months after the beginning of such Libor Interest Period and the date falling on the last day of such Libor Interest Period;

"Libor Interest Period" means, with respect to each Libor Loan, the initial period (subject to availability) of approximately one (1) month, two (2) months, three (3) months or six (6) months (as selected by the Borrower and notified to the Agent pursuant to Section 3.6) commencing on and including the Drawdown Date or Conversion Date, as the case may be, applicable to such Libor Loan and ending on and including the last day of such initial period, and thereafter, each successive period (subject to availability) of approximately one (1) month, two (2) months, three (3) months or six (6) months (as selected by the Borrower and notified to the Agent pursuant to Section 3.6) commencing on and including the last day of the prior Libor Interest Period;

"Libor Loans" means the advances in Canadian Dollars, U.S. Dollars, Euros or Pounds Sterling made available by the Lenders to the Borrower pursuant to Sections 3.5, 3.18 or 3.19 and on which the Borrower has agreed to pay interest in accordance with Section 5.3;

"Loan Documents" means this Agreement and all other certificates, instruments and documents delivered from time to time by or on behalf of the Borrower in connection herewith;

"Loans" means Cdn. Prime Loans, Libor Loans and U.S. Base Rate Loans;

"Majority Lenders" means, prior to the occurrence of an Event of Default, any Lender or group of Lenders having Pro-Rata Shares, in aggregate, of fifty-one (51%) or more and, after the occurrence of an Event of Default, any Lender or group of Lenders having the Equivalent Amount in Canadian Dollars of Borrowings, in aggregate, of fifty-one percent (51%) or more of the Equivalent Amount in Canadian Dollars of the total Borrowings then outstanding;

"Margin" means, at any time, a margin, expressed as a per annum rate of interest based on a year of three hundred and sixty-five (365) days or, in the case of Libor Loans denominated in Canadian Dollars, U.S. Dollars or Euros, of three hundred and sixty (360) days, payable to the Lenders with respect to Loans and Bankers' Acceptances equal to the rate set out in the following table opposite the applicable rating category assigned by the applicable Rating Agency to the long term senior unsecured and unsubordinated debt of the Borrower from time to time:

Rating Category (Moody's/S&P)		One A3/A- or higher		Two Baa1/BBB+		Three Baa2/BBB		Four Baa3/BBB-		Five Lower than Baa3/BBB- or unrated
Libor Loans/Bankers' Acceptances/Standby Letters of Credit		45 bps		50 bps		60 bps		95 bps		120 bps
Cdn. Prime Loans/U.S. Base Rate Loans		nil		nil		nil		nil		20 bps

provided that:

(a): if at any time the long term senior unsecured and unsubordinated debt of the Borrower is rated by each Rating Agency and the rating so assigned by one Rating Agency is in a category which is one category higher than the rating assigned by the other Rating Agency, then the Margin shall be the rate opposite the higher of the categories so assigned and if the rating so assigned by one Rating Agency is in a category which is more than one category higher than the rating assigned by the other Rating Agency, then the Margin shall be the average of the rates opposite each such category so assigned; and

(b): the Margin in respect of each Lender shall increase from and after the Term Date of such Lender by 15 bps for any period during which the long term senior unsecured and unsubordinated debt of the Borrower is in rating category One, Two or Three and by 25 bps for any period during which the long term senior unsecured and unsubordinated debt of the Borrower is in Rating Category Four or Five, subject to adjustment to take into account the circumstances described in paragraph (a) above; and
(c): for a Letter of Credit which is a Performance LC, the Margin shall be 50% of the Margin applicable to a Standby LC;

"Material Adverse Effect" means a material adverse effect on the ability of the Borrower (including by reason of a material adverse change in the financial condition of a Designated Subsidiary) to perform any of its financial obligations hereunder;

"Maturity Date" means, in respect of a Lender, the date which is two (2) years after the Term Date of such Lender;

"Miscellaneous Encumbrances" means Security Interests on property of the Borrower or any Designated Subsidiary which are not otherwise Permitted Encumbrances described in paragraphs (a) through (v) of the definition of Permitted Encumbrances and, if so described in paragraphs (m) or (v) of such definition and notwithstanding the threshold amount attributable thereto is exceeded, the Security Interest described in paragraphs (m) or (v) of such definition; provided that the aggregate amount of indebtedness and liabilities or other obligations secured by all such Security Interests, exclusive of such threshold amounts, is not at any time in excess of 10% of Consolidated Net Tangible Assets and that such Security Interests do not attach generally to all or substantially all of the property of the Borrower or any Designated Subsidiary, as the case may be, such as a floating charge or similar type Security Interest on all or substantially all of the assets of the Borrower or any Designated Subsidiary;

"Moody's" means Moody's Investors Service Inc. and its successors;

"Non-Acceptance Discount Rate" means, for any day, the Discount Rate in paragraph (b) of such definition, provided, however, that if there are no Schedule II Lenders to act as Reference Lenders for purposes of the determination required by paragraph (b) of the definition of Discount Rate, then the rate determined pursuant to such paragraph (b) shall be the percentage discount rate (expressed to 5 decimal places) quoted to the Agent as at approximately 8:00 a.m. (Calgary time) on such day by the Non-Acceptance Lender (or, if on such day there are two or more Non-Acceptance Lenders, by the Non-Acceptance Lender agreed to by the Borrower and the Agent from time to time) at which it would issue and sell a non-interest bearing promissory note having an identical issue and maturity date and principal amount as the BA Equivalent Advance to be made by such Non-Acceptance Lender on such day;

"Non-Acceptance Lenders" means a Lender which is not a Schedule I Lender or a Schedule II Lender;

"Non-Agreeing Lender" has the meaning given to it in Section 3.21(b);

"Non-Conflicted Lender" has the meaning given to it in Section 3.4(b);

"Non-Recourse Debt" means, at any particular time, in respect of any person:

(a): Indebtedness for Borrowed Money incurred by the person to finance all or part of the costs of acquisition, development, construction, exploitation, improvement or operation of any property or assets of the person; or
(b): proceeds received by the person under a Production Payment;

in each case where at such particular time the recourse of the lender thereof or purchaser thereunder, as the case may be, or any agent, trustee, receiver or other person acting on behalf of the lender or purchaser, as the case may be, in respect of such indebtedness, obligation or Production Payment or any judgment in respect thereof is limited in all circumstances to (i) the property or assets acquired, developed, constructed, exploited, improved or operated or to which the Production Payment relates and in respect of which such indebtedness, obligation or Production Payment has been incurred, (ii) any and all facilities relating to such other property or assets and forming an integral and direct part of the same project, venture or other arrangement of which such property or assets forms an integral and direct part, whether or not such facilities are in whole or in part located (or from time to time located) at or on any such property and (iii) the receivables, inventory, equipment, chattel payables, contracts, intangibles and other assets, rights or collateral directly connected with such property or assets and the proceeds thereof, other than recourse (which shall be on an unsecured basis) against the other property or assets of the person for a breach of representations and warranties or non-financial covenants made by such person in connection with such indebtedness, obligation or Production Payment to the extent such representations and warranties or non-financial covenants are customarily given in similar type financings;

"Old System Issuer" means a Lender who is not able to issue Bankers' Acceptances as depository bills under the Depository Bills and Notes Act (Canada);

"One Month BA Rate" means, on any day, the per annum rate of interest determined as being the arithmetic average of the "BA 1 month" rate applicable to Canadian Dollar Bankers' Acceptances for Schedule I banks under the Bank Act (Canada) displayed and identified as such on the display referred to as the "CDOR Page" (or any display substituted therefor) of Reuter Monitor Money Rates Service as at approximately 8:00 a.m. (Calgary time) on such day, or if such day is not a Business Day, then on the immediately preceding Business Day (as adjusted by the Agent in good faith as soon after 8:00 a.m. (Calgary time) on such Business Day as practicable to reflect any error in a posted rate of interest or in the posted average annual rate of interest); provided, however, if such a rate does not appear on such CDOR Page as contemplated, the "One Month B/A Rate" on any day shall be the thirty (30) day discount rate of the Agent (determined as at approximately 8:00 a.m. (Calgary time) on such day) which would be applicable in respect of an issuance of Bankers' Acceptances with a term to maturity of one month in an aggregate amount of Cdn. $10,000,000 issued on such day, or if such day is not a Business Day, then on the immediately preceding Business Day;

"Participating Member State" means each such state so described in any EMU Legislation;

"Permitted Assignee" has the meaning given to it in Section 12.1;

"Permitted Encumbrances" means any of the following:

(a): Security Interests for taxes, assessments or governmental charges which are not due or delinquent, or the validity of which the Borrower or any Designated Subsidiary is contesting in good faith, provided that the Borrower has established adequate reserves in accordance with GAAP for the payment of any such amount if and to the extent required by GAAP;
(b): the Security Interests of any judgment rendered, or claim filed, against the Borrower or any Designated Subsidiary which the Borrower or any such Designated Subsidiary is contesting in good faith, provided that the Borrower has established adequate reserves in accordance with GAAP for the payment of any such amount if and to the extent required by GAAP;
(c): Security Interests imposed or permitted by law such as carriers' liens, builders' liens, materialmens' liens and other liens, privileges or other charges of a similar nature which relate to obligations not due or delinquent or, if due or delinquent, any lien, privilege or charge which the Borrower or any Designated Subsidiary is contesting in good faith, provided that the Borrower has established

adequate reserves in accordance with GAAP for the payment of any such amount if and to the extent required by GAAP;

(d): Security Interests arising in the ordinary course of and incidental to construction or current operations which have not been filed pursuant to law against the Borrower or any Designated Subsidiary or in respect of which no steps or proceedings to enforce such Security Interests have been initiated or which relate to obligations which are not due or delinquent or, if due or delinquent or if a filing or proceeding in respect thereof has been made or initiated, any Security Interest which the Borrower or such Designated Subsidiary is contesting in good faith, provided that the Borrower has established adequate reserves in accordance with GAAP for the payment of any such amount if and to the extent required by GAAP;
(e): Security Interests incurred or created in the ordinary course of business and in accordance with sound oil and gas industry practice in the jurisdiction in which the business is being conducted in respect of the joint operation of oil and gas properties or related production or processing facilities as security in favour of any other person conducting or liable for the development, operation, abandonment or reclamation of the property to which such liens relate, for the Borrower's or any Designated Subsidiary's portion of the costs and expenses of such development, operation, abandonment or reclamation, provided that such costs or expenses are not due or delinquent or, if due or delinquent, any Security Interests which the Borrower or any such Designated Subsidiary shall be contesting in good faith, provided that the Borrower has established adequate reserves in accordance with GAAP for the payment of any such amount if and to the extent required by GAAP;
(f): overriding royalty interests, net profit interests, reversionary interests and carried interests or other similar burdens on production in respect of the Borrower's or any Designated Subsidiary's oil and gas properties (including Crown royalties whether imposed by law or granted by contract) that are entered into with or granted to arm's length third parties or to the Borrower or any Designated Subsidiary in the ordinary course of business and in accordance with sound oil and gas industry practice in the jurisdiction in which the business is being conducted;
(g): Security Interests for penalties arising under non-participation provisions of operating agreements in respect of the Borrower's or any Designated Subsidiary's oil and gas properties if such Security Interests would not reasonably be expected to have a Material Adverse Effect;
(h): easements, rights-of-way, servitudes, zoning or other similar rights or restrictions in respect of land held by the Borrower or any Designated Subsidiary (including, without limitation, rights-of-way and servitudes for railways, sewers, drains, pipe lines, gas and water mains, electric light and power and telephone or telegraph or cable television conduits, poles, wires and cables) which, either alone or in the aggregate, would not reasonably be expected to have a Material Adverse Effect;
(i): Security Interests arising in connection with workers' compensation, unemployment insurance, pension and employment or similar laws or regulations;
(j): Security Interests in favour of a public utility or any municipality or governmental or other public authority when required by such public utility or municipality or other governmental authority in the ordinary course of the business of the Borrower or any Designated Subsidiary in connection with operations of the Borrower or any such Designated Subsidiary which, either alone or in the aggregate, would not reasonably be expected to have a Material Adverse Effect;
(k): the right reserved to or vested in any governmental body by the terms of any lease, license, grant or permit or by any statutory or regulatory provision to terminate any such lease, license, grant or permit or to require annual or other periodic payments as a condition of the continuance thereof;

(l): all reservations in the original grant from the Crown or any other governmental body of any lands and premises or any interests therein and all statutory exceptions, qualifications and reservations in respect of title;
(m): Risk Management Liens in an amount not exceeding in the aggregate Cdn. $75,000,000 or the Equivalent Amount in any other currency;
(n): Security Interests in cash or marketable securities of the Borrower or any Designated Subsidiary granted in favour of any exchange recognized for the purposes of the Securities Act (Alberta) pursuant to the normal requirements of such exchange;
(o): Security Interests existing on any property or assets owned by a Subsidiary at the time such Subsidiary becomes a Designated Subsidiary, provided such Security Interests (i) existed prior to the Subsidiary becoming a Designated Subsidiary, (ii) are not created in contemplation of the Subsidiary becoming a Designated Subsidiary, (iii) do not extend or attach to any assets of the Borrower or any other Designated Subsidiary, and (iv) are released in their entirety within 180 days of the Subsidiary becoming a Designated Subsidiary or, if not so released, otherwise constitute a Permitted Encumbrance;
(p): Security Interests existing on any property or assets owned by a person at the time such person becomes a Subsidiary, provided such Security Interests (i) existed prior to the person becoming a Subsidiary, (ii) are not created in contemplation of the person becoming a Subsidiary, and (iii) do not extend or attach to any assets of the Borrower or any other Subsidiary;
(q): rights of first refusal (to the extent the same constitute a Security Interest) in favour of any person granted in the ordinary course of business with respect to all or any of the oil and gas properties of the Borrower or any Designated Subsidiary;
(r): Security Interests the satisfaction of which has been provided for by deposit with the Agent of cash or a surety bond or other security satisfactory to the Agent in an amount sufficient to pay such portion of the liability secured by such Security Interests as the Agent may reasonably require;
(s): Security Interests in respect of Non-Recourse Debt of the Borrower or any Designated Subsidiary;
(t): any amounts deposited in trust as described in the exclusion set forth in paragraph (viii) of the definition of Consolidated Debt;
(u): undetermined or inchoate liens, privileges, preferences and charges incidental to current operations which have not at such time been filed pursuant to law against such person's property or assets or which relate to obligations not due or delinquent;
(v): Purchase Money Mortgages, provided that the Purchase Money Obligations (other than those which are Non-Recourse Debt) secured thereby do not exceed, in the aggregate, Cdn.$250,000,000 or the Equivalent Amount in any other currency;
(w): Miscellaneous Encumbrances;
(x): Security Interests in favour of the Borrower, any Designated Subsidiary provided by other than the Borrower or the Agent in its capacity as such hereunder;
(y): an extension, renewal or replacement of any Security Interest permitted under paragraphs (a) to (t) hereof or of any indebtedness secured thereby, provided that any such extension, renewal or replacement Security Interest does not secure repayment of an amount in excess of any principal amount of indebtedness outstanding with respect thereto immediately prior to such extension, renewal or replacement and that such extension, renewal or replacement is limited to all or a part of the property which was subject to the Security Interest so extended, renewed or replaced and the proceeds thereof; and

(z): any Security Interest from time to time disclosed by the Borrower or any Designated Subsidiary to the Agent and which is consented to by the Majority Lenders;

provided that nothing in this definition shall, in and of itself, constitute or be deemed to constitute an agreement or acknowledgment by the Agent or any Lender that the indebtedness subject to or secured by any such Permitted Encumbrance ranks (apart from the effect of any Security Interest included in or inherent in any such Permitted Encumbrance) in priority to the indebtedness of the Borrower hereunder;

"Permitted Title Defects" means, in respect of any asset or property of the Borrower or any Designated Subsidiary, the following defects in its title thereto:

(a): Permitted Encumbrances;
(b): title defects or irregularities which impair the use of the asset or property for the purposes for which it is held, or impair its saleability, or cause a disruption or reduction in the production or cash flow (if any) associated therewith; provided that, in the aggregate, such title defects or irregularities do not have or would not reasonably be expected to have a Material Adverse Effect; and
(c): title defects which are disclosed to and expressly consented to by the Majority Lenders as constituting Permitted Title Defects hereunder, such consent not to be unreasonably withheld;

"Pounds Sterling" and the symbol "£" each means lawful money of the United Kingdom;

"Pro-Rata Share" means, for each Lender, the proportion that such Lender's Commitment bears to the Total Commitment and, where applicable in circumstances where there are Lenders with different Maturity Dates, the proportion that any such Lender's Commitment bears to the aggregate Commitment of all Lenders having the same Maturity Date as such Lender;

"Production Payment" means:

(a): the sale or other transfer of any petroleum substances, whether in place or when produced, for a period of time until, or of an amount such that, the purchaser will realize therefrom a specified amount of money (however determined, including by reference to interest rates or other factors which may not be fixed) or a specified amount of such products; or
(b): any other interest in property of the character commonly referred to as a "production payment";

"Purchase Money Mortgage" means a Security Interest created, issued or assumed by the Borrower or a Subsidiary which secures a Purchase Money Obligation, provided that such Security Interest is limited to the property and assets (including the rights associated therewith and any proceeds thereof) acquired, constructed, installed or improved in connection with such Purchase Money Obligation and any Security Interest existing on any property or assets at the time such property or assets are acquired by the Borrower or any Subsidiary;

"Purchase Money Obligation" means indebtedness of the Borrower or a Subsidiary incurred or assumed to finance the purchase, in whole or in part, of any property or incurred to finance the cost, in whole or in part, of construction or installation of, or improvement to any property, provided, however, that such indebtedness is incurred or assumed at the time of or within one hundred and eighty (180) days after the purchase of such property or the completion of such construction, installation or improvement, as the case may be, and includes any extension, renewal or refinancing of any such indebtedness so long as the principal amount thereof outstanding at the date of such extension, renewal or refinancing is not increased but excludes obligations under Capital Leases and operating leases;

"Rating Agency" means either of Moody's or S&P;

"Reallocation Request" means a request from the Borrower in the form attached as Schedule J;

"Release" means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, leeching or migration of any contaminant in or into the indoor or outdoor environment (including the abandonment or disposal of any barrels, tanks, containers or receptacles containing any contaminant), or in, into or out of any vessel or facility, including the movement of any contaminant through the air, soil, subsoil, surface, water, ground water, rock formation or otherwise;

"Remaining Lenders" has the meaning given to it in Section 11.17;

"Request for an Offer of Extension" means a request substantially in the form of Schedule G requesting an offer of extension of the Term Date pursuant to Section 3.21;

"Requested Lenders" has the meaning given to it in Section 3.21(a);

"Risk Management Liens" means any Security Interest on cash or marketable securities of the Borrower or a Designated Subsidiary granted in connection with any foreign exchange, interest rate or commodity price risk management agreements, including Swaps, or in connection with physical delivery commodity price risk management agreements provided that:

(a): if such Security Interest is granted in connection with any foreign exchange, interest rate or commodity price risk management agreements, including Swaps, such Security Interest only secures such foreign exchange, interest rate or commodity price risk management agreements, or if such Security Interest is granted in connection with such physical delivery commodity price risk management agreements, such Security Interest only secures the obligations of the Borrower or a Designated Subsidiary to deliver the subject commodity or to make a payment at a future date pursuant to such arrangements and the Borrower reasonably expects the Borrower or such Designated Subsidiary to produce sufficient commodities in the ordinary course of business equal to or greater than the amount of production subject to such physical delivery price risk management arrangements; and
(b): the obligations secured by such Security Interest are not due or delinquent or, if due or delinquent, the Borrower or such Designated Subsidiary is contesting payment of such obligations in good faith;

"Rollover" means a confirmation of a Libor Loan for a new Libor Interest Period pursuant to Section 3.19, the issuance of new Bankers' Acceptances (subject to the provisions hereof) in respect of all or a portion of Bankers' Acceptances which are maturing or the extension of the expiry date of an outstanding Letter of Credit;

"Rollover Date" means a Business Day that the Borrower has notified the Agent at the Agent's Branch of Account as the date on which a Rollover will take effect;

"Rollover Notice" means a notice of a Rollover substantially in the form of Schedule D;

"S&P" means Standard & Poor's, a division of McGraw-Hill Companies, Inc., and its successors;

"Schedule I Lender" means a Lender which is a Canadian chartered bank listed on Schedule I to the Bank Act (Canada);

"Schedule I Reference Lender" means initially, BMO and one other Schedule I Lender agreed to by the Borrower and the Agent, each acting reasonably, and thereafter means such other Schedule I Lenders as are agreed to from time to time by the Borrower and the Agent, each acting reasonably; provided that there shall be no more than two Schedule I Reference Lenders at any one time;

"Schedule II Lender" means a Lender which is a financial institution listed on Schedule II to the Bank Act (Canada) or a financial institution listed on Schedule III to the Bank Act (Canada) that is not subject to the restrictions and requirements referred to in Section 524(2) of the Bank Act (Canada);

"Schedule II Reference Lender" means such Schedule II Lenders as are agreed to from time to time by the Borrower and the Agent, each acting reasonably; provided that there shall be no more than two Schedule II Reference Lenders at any one time;

"Security Interest" means any assignment, mortgage, charge, pledge, lien, encumbrance, title retention agreement (excluding Capital Leases and operating leases) or any other security interest whatsoever, howsoever created or arising, whether fixed or floating, legal or equitable, perfected or not;

"Standard Term" means the term to maturity of a Bankers' Acceptance for which a quote is available in respect of such Bankers' Acceptance on the display referred to as the "CDOR Page" (or any display substituted therefor) of Reuter Monitor Money Rates Service provided such term to maturity is not less than one (1) month and not greater than six (6) months;

"Standby Fee Rate" means, at any time, the rate, expressed as a rate per annum based on a year of three hundred and sixty five (365) days, as set out in the following table opposite the applicable rating category assigned by the applicable Rating Agency to the long term unsecured and unsubordinated debt of the Borrower from time to time:

Rating Category (Moody's/S&P)		Standby Fee Rate
A3/A- or higher		11.5 bps
Baa1/BBB+		12.5 bps
Baa2/BBB		12.5 bps
Baa3/BBB-		17.5 bps
Less than Baa3/BBB- or unrated		20 bps

provided that if at any time the long term senior unsecured and unsubordinated debt of the Borrower is rated by each Rating Agency and the rating so assigned by one Rating Agency is in a category which is one category higher than the rating assigned by the other Rating Agency, then the Standby Fee Rate shall be the rate opposite the higher of the categories so assigned and if the rating as assigned by one Rating Agency is in a category which is more than one category higher than the rating assigned by the other, then the Standby Fee Rate shall be the average of the rates opposite each such category so assigned;

"Subsidiary" means:

(a): a corporation of which another person alone or in conjunction with its other Subsidiaries owns an aggregate number of Voting Shares sufficient to enable the election of a majority of the directors regardless of the manner in which other Voting Shares are voted;
(b): a corporation of which another person alone or in conjunction with its other Subsidiaries has, through the operation of any agreement or otherwise, the ability to elect or cause the election of a majority of the directors or otherwise exercise control over the management and policies of such corporation; and
(c): any partnership of which at least a majority of the outstanding income or capital interests and at least a majority of the voting interests are owned by a person alone or in conjunction with its other Subsidiaries;

and shall include any person in like relation to a Subsidiary. Unless otherwise specifically indicated herein, "Subsidiary" refers to a Subsidiary of the Borrower and includes, for greater certainty, each Designated Subsidiary;

"Successor" has the meaning given to it in Section 8.1(x);

"Swaps" means any transaction which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index

option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option, forward sale, exchange traded futures contract or any other similar transaction (including any option with respect to any of these transactions or any combination of these transactions);

"Takeover" has the meaning given to it in Section 3.4;

"Takeover Loan" has the meaning given to it in Section 3.4(c);

"Target" has the meaning given to it in Section 3.4;

"Tax Refund" has the meaning given to it in Section 6.3(b);

"Taxes" means all taxes, rates, levies, imposts, assessments, dues, government fees, stamp taxes, deductions, charges or withholdings, and all liabilities with respect thereto and any interest, additions to tax and penalties imposed with respect thereto other than, in the case of a Lender, Excluded Taxes imposed on such Lender;

"Term Date" means in respect of each Lender:

(a): March 16, 2005; or
(b): if such date is extended by such Lender pursuant to Section 3.21, the date to which it has been extended;

"Term Period" means, for each Lender, the period commencing on such Lender's Term Date and ending on such Lender's Maturity Date;

"Total Commitment" means the aggregate of the Commitments of each of the Lenders, as hereafter increased, decreased, cancelled or terminated from time to time pursuant to this Agreement, not to exceed Cdn. $850,000,000 except in the circumstances described in Section 3.22;

"Transaction" has the meaning given to it in Section 8.1(x);

"Treaty on European Union" means the Treaty of Rome of March 25, 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992, and came into force on November 1, 1993) and as it may be further amended from time to time;

"Uniform Customs" the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended, supplemented or replaced from time to time;

"U.S. Base Rate" means, with respect to U.S. Base Rate Loans, the greater of:

(a): the annual rate of interest announced from time to time by the Agent as being its reference rate then in effect for determining interest rates on U.S. Dollar denominated commercial loans made by the Agent in Canada; and
(b): a rate of interest per three hundred sixty-five (365) day period equal to the Fed Funds Rate plus three-quarters of one percent (³/4%);

provided that, if the rates of interest in (a) and (b) above are equal, then the "U.S. Base Rate" shall be the rate specified in (a) above;

"U.S. Base Rate Loans" means the advances in U.S. Dollars made available by the Lenders to the Borrower pursuant to either Section 3.5 or 3.18 and on which the Borrower has agreed to pay interest in accordance with Section 5.2;

"U.S. Dollars" and the symbol "U.S. $" each means lawful money of the United States of America;

"U.S. Economic Sanctions" means the restrictions with respect to funding operations, or financing investments, in any country, or making payments to any country or person, targeted by any of the economic sanctions of the United States administered by the United States Treasury Department's Office of Foreign Assets Control or contained in the United States' Iran and Libya Sanctions Act of 1996, as amended by the ILSA Extension Act of 2001;

"Utilization Fees" has the meaning given to it in Section 5.6; and

"Voting Shares" means capital stock of any class of any corporation which carries voting rights to elect the board of directors under all circumstances.

1.2 Headings and Table of Contents

The headings, the table of contents and the Article and Section titles are inserted for convenience of reference only and shall not affect the construction or interpretation of this Agreement.

1.3 References

Unless something in the subject matter or context is inconsistent therewith, all references to Sections, Articles and Schedules are to Sections, Articles and Schedules to this Agreement. The words "hereto", "herein", "hereof", "hereunder" and similar expressions mean and refer to this Agreement.

1.4 Rules of Interpretation

In this Agreement, unless otherwise specifically provided, the singular includes the plural and vice versa, "month" means calendar month, "quarter" means calendar quarter, "person" includes any individual, firm, partnership, company, trust, corporation, government, governmental body, agency or instrumentality, unincorporated body of persons or association, "includes" and "including" mean "includes (or including) without limitation", "in writing" or "written" includes printing, typewriting, or any electronic means of communication capable of being visibly reproduced at the point of reception, including telex, facsimile, telegraph or electronic mail and "financial institution" includes any commercial or investment bank, trust company, insurance company, credit union, savings and loan association and any government-owned entity (such as Alberta Treasury Branches and Export Development Canada) which from time to time extends credit on terms and conditions similar to any of the foregoing but excludes any loan fund or similar investment fund or entity formed to invest in loans, however organized, including any fund or entity having as an investment objective the acquisition of debt, the payment of which is in default unless such fund or entity is an Affiliate of a Lender.

1.5 Generally Accepted Accounting Principles

All financial statements required to be furnished by the Borrower to the Lenders hereunder shall be prepared in accordance with Generally Accepted Accounting Principles consistently applied. Each accounting term used in this Agreement, unless otherwise defined herein, has the meaning assigned to it under Generally Accepted Accounting Principles consistently applied and reference to any balance sheet item, statement of income and retained earnings item or statement of cash flows or changes in cash position item means such item as computed from the applicable financial statement prepared in accordance with Generally Accepted Accounting Principles consistently applied.

1.6 Time

Unless otherwise provided herein, all references to a time in this Agreement shall mean local time in Calgary, Alberta.

1.7 Payment for Value

All payments required to be made hereunder shall be made for value on the required day in same day immediately available funds.

1.8 Incorporation of Schedules

The following schedules are attached to this Agreement and shall, for all purposes of this Agreement, form an integral part of it:

Schedule A		Notice of Borrowing, Repayment, Prepayment or Cancellation of Commitment
Schedule B		Notice of Borrowing by way of Bankers' Acceptances
Schedule C		Conversion Notice
Schedule D		Rollover Notice
Schedule E		Compliance Certificate
Schedule F		Lender Assignment Agreement
Schedule G		Request for Offer of Extension
Schedule H		Power of Attorney Terms—Bankers' Acceptances
Schedule I		Form of Direct Letter of Credit
Schedule J		Reallocation Request

ARTICLE 2
REPRESENTATIONS AND WARRANTIES

2.1 Representations and Warranties

The Borrower represents and warrants to each of the Lenders and the Agent, all of which representations and warranties shall survive the execution and delivery of this Agreement, that as of the date hereof but subject to Sections 2.2 and 7.2:

(a)

Corporate Existence of the Borrower: the Borrower is a corporation duly incorporated, validly subsisting and in good standing with respect to the filing of annual returns under the laws of Canada and is duly registered and qualified as a corporation authorized to carry on business under the laws of each jurisdiction in which the nature of any material business conducted by it or the character of any material property and assets owned or leased by it requires such registration and qualification except where failure to obtain and maintain such registration or qualification would not reasonably be expected to have a Material Adverse Effect;

(b)

Corporate Existence of Designated Subsidiaries: each Designated Subsidiary is a corporation or partnership duly incorporated or created, as applicable, validly subsisting under the laws of its jurisdiction of incorporation or creation, as applicable, and is duly registered and qualified as a corporation or partnership authorized to carry on business under the laws of each jurisdiction by which the nature of any material business conducted by it or the character of any material properties or assets owned or leased by it requires such registration and qualification except where failure to obtain and maintain such registration or qualification would not reasonably be expected to have a Material Adverse Effect;

(c)

Power to Carry on Business: the Borrower and each Designated Subsidiary has full corporate or partnership power and capacity to own its properties and assets and conduct its business as presently conducted;

(d)

Authority: the execution and delivery by the Borrower of each Loan Document:

(i): has been or will be, when executed and delivered, duly authorized by all necessary corporate action;

(ii): is within its corporate power and capacity;
(iii): will not violate any provision of law or of its constitutional documents or by-laws;
(iv): will not result in the breach of or constitute a default or require any consent under, or result in the creation of any Security Interest (other than a Permitted Encumbrance) upon any of its property or assets, pursuant to any indenture or other agreement or instrument to which it is a party or by which it or its property or assets may be bound or affected; and
(v): does not require any material license, consent or approval of or advance notice to or advance filing with any governmental agency or regulatory authority other than those which have already been obtained and are in full force and effect;

(e)

Execution and Delivery of Documents: each Loan Document has been or will be, when executed and delivered, duly executed and delivered by the Borrower;

(f)

Enforceability: each Loan Document is, or will be when executed and delivered, a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, subject only to the discretion that a court may exercise in granting of equitable remedies and any limitation under laws relating to bankruptcy, insolvency, reorganization or other laws affecting creditors' rights generally and by moratorium laws from time to time in effect;

(g)

Financial Condition: the most recent audited consolidated financial statements of the Borrower provided to the Agent (being on the Effective Date those for the Fiscal Year ended December 31, 2002) as required pursuant to Section 8.1(m);

(i): fairly present in all material respects the financial condition of the Borrower on a consolidated basis as at the date thereof and the results of its operations for the period covered thereby; and
(ii): have been prepared in accordance with Generally Accepted Accounting Principles consistently applied;

(h)

Litigation: there are no suits or proceedings (including proceedings by or before any arbitrator, government commission, board, bureau or other administrative agency) pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Designated Subsidiary which would reasonably be expected to have a Material Adverse Effect;

(i)

Compliance with Laws and Contracts: the Borrower and each Designated Subsidiary is in compliance with all federal, provincial, state and local laws, statutes and regulations applicable to them and all contracts, agreements and employee benefit plans to which they are respectively a party except, in each case, to the extent failure to so comply does not and would not reasonably be expected to have a Material Adverse Effect;

(j)

Environmental Matters: the Borrower and each Designated Subsidiary has obtained all permits, licenses and other authorizations which are required under Environmental Laws in order to own, lease or operate its properties and assets as presently owned, leased or operated by it and to conduct its business as presently conducted by it, except to the extent failure to have any such permit, license or authorization has not had and would not reasonably be expected to have a Material Adverse Effect; and the Borrower and each such Designated Subsidiary is in compliance with all Environmental Laws and all terms and conditions of all such permits, licenses and authorizations except to the extent failure to be in compliance has not had and would not reasonably be expected to have a Material Adverse Effect;

(k)

Events of Default: no Default or Event of Default has occurred which is continuing;

(l): Title to Assets: subject only to Permitted Title Defects, the Borrower and each Designated Subsidiary has good and marketable title to all assets and properties owned or purported to be owned by it, except to the extent that the absence thereof would not reasonably be expected to have a Material Adverse Effect, and, except for Permitted Encumbrances, such assets and properties are not subject to any Security Interest;
(m): Taxes: the Borrower and each Designated Subsidiary has filed all income tax returns which were required to be filed by it, has paid or made provision for payment of all amounts in respect of Taxes (including interest and penalties), except to the extent failure to do so would not have a Material Adverse Effect, and, to the extent payment of any such Taxes is being contested by it, has established adequate reserves in accordance with GAAP for the payment of any such Tax, if, and to the extent, required by GAAP;
(n): Insurance: the Borrower or the applicable Designated Subsidiary has in full force and effect such policies of insurance in such amounts issued by insurers of recognized standing covering the material properties and operations of the Borrower and each such Designated Subsidiary including, without limitation, their respective oil and gas properties and related production facilities, as are available to the Borrower or the applicable Designated Subsidiary on commercially reasonable terms and are customarily maintained by persons of comparable size and financial standing to the Borrower and its Designated Subsidiaries engaged in the same or similar business in the localities where their properties and operations are located except to the extent failure to have such policies of insurance in place would not reasonably be expected to have a Material Adverse Effect;
(o): Ownership: as at the date hereof, the Borrower (or one or more Subsidiaries of the Borrower of which the Borrower owns, directly or indirectly, all of the share capital, partnership interests or other equity interests, as the case may be) owns all of the share capital, partnership interests or other equity interests, as the case may be, of each Designated Subsidiary;
(p): Ranking with Other Debt: all payment obligations of the Borrower hereunder rank at least pari passu in right of payment with the other most senior unsecured and unsubordinated Indebtedness for Borrowed Money of the Borrower; and
(q): U.S. Economic Sanctions: the Borrower has implemented procedures and controls sufficient to ensure that the Borrowings hereunder are used only for the purposes provided for herein.

2.2 Deemed Representation and Warranty

Each request by the Borrower for Borrowings shall be deemed to be a representation and warranty by the Borrower to the Lenders that the representations and warranties referred to in Section 7.2(a)(ii) are, as of the date of such request, and will be, as of the applicable Drawdown Date, true and correct in all respects as of such date and that as of the date of such request and as of the applicable Drawdown Date, there exists no Default or Event of Default, in each case except to the extent that the Borrower discloses otherwise to the Lenders in writing at the time of making such request.

ARTICLE 3
THE CREDIT FACILITY

3.1 Obligations of Each Lender

Relying on each of the representations and warranties set out in Article 2 and subject to the terms and conditions of this Agreement, each Lender agrees to make Accommodations available to the

Borrower up to the amount of its Commitment, in each case commencing on the Effective Date and ending on the Maturity Date applicable to such Lender or sooner as herein provided, by way of:

(a)

the advance of Loans by each such Lender;

(b)

either:

(i): the acceptance of Bankers' Acceptances or the making of a BA Equivalent Advance by such Lender and the delivery of the discounted proceeds of sale received by such Lender or the amount of BA Equivalent Advance (less the applicable Acceptance Fees payable by the Borrower to such Lender) in respect thereof for the account of the Borrower through the Agent at the Agent's Account for Payments; or
(ii): the purchase of Bankers' Acceptances or the making of a BA Equivalent Advance by such Lender and the delivery of the Discount Proceeds in respect of such Bankers' Acceptances or BA Equivalent Advance (less the applicable Acceptance Fees payable by the Borrower to such Lender) for the account of the Borrower through the Agent at the Agent's Account for Payments; and

(c)

the issuance of Letters of Credit by the Agent or the Fronting Lenders for and on behalf of the Lenders through the Agent at the Agent's Branch of Account.

The Credit Facility is a revolving credit facility and prior to the Term Date of each Lender, the Borrower may increase or decrease Borrowings from each such Lender by obtaining Loans or Bankers' Acceptances and BA Equivalent Advances, as applicable, or Letters of Credit, and by making repayments in respect thereof. From and after the Term Date of each Lender, the credit facility represented by the Commitment of such Lender shall cease to be a revolving credit facility and shall be converted into a non-revolving term credit facility and the Borrower may effect Conversions and Rollovers thereunder as provided for herein but may not obtain further advances or increase Borrowings from such Lender during the Term Period of such Lender.

A Lender shall not have any obligation to make any Loans or accept Bankers' Acceptances or make BA Equivalent Advances or become liable under a Letter of Credit at any time if, after giving effect thereto, the Equivalent Amount in Canadian Dollars of Borrowings from such Lender would exceed the Commitment of such Lender.

3.2 Re-Allocation

The Borrower shall be entitled from time to time to cancel all or any portion of the unutilized Commitment of each Exempt Lender (a "Switching Exempt Lender" and collectively, the "Switching Exempt Lenders") in respect of whom the Term Period has not yet commenced (collectively, the "Cancelled Canadian Commitment") provided that concurrently therewith the Borrower increases the "Total Commitment" and the "Commitment" of such Switching Exempt Lenders under the International Credit Facility by an equal amount. In order to give effect to any such cancellation, the Borrower shall deliver a Reallocation Request to each of the Agent and the "Agent" under the International Credit Facility provided that:

(a): the Reallocation Request shall be given at least ten (10) Business Days prior to it becoming effective;
(b): at the time the Reallocation Request becomes effective, no Default or Event of Default has occurred and is continuing and no "Default" or "Event of Default" has occurred and is continuing under the International Credit Facility;
(c): the Cancelled Canadian Commitment shall be in a minimum amount of Cdn. $50,000,000 and shall be made on a pro-rata basis among the Switching Exempt Lenders based upon the Pro-Rata Share of each such Switching Exempt Lender and the aggregate of the Commitments of such Switching Exempt Lenders;

(d): the Agent and the Lenders shall take all such steps as are reasonably necessary to ensure that after giving effect to any such cancellation Borrowings are outstanding on a Pro-Rata Share based on the revised Total Commitment and Commitment of each Switching Exempt Lender as soon as reasonably possible given the nature of the Borrowings then outstanding and, until such time, the Lenders acknowledge and agree that Borrowings will not be outstanding on the basis of the Pro-Rata Shares after giving effect to such cancellation; and
(e): a Reallocation Request shall not be given more than two (2) times in any calendar year.

The Agent and the Lenders acknowledge that under the International Credit Facility the Borrower has the same rights it has hereunder to provide the "Agent" thereunder and the Agent with a "Reallocation Request" whereby the Commitment of the Exempt Lenders hereunder in respect of whom the Term Period has not commenced, and correspondingly the Total Commitment, will be increased by the same amount as the "Total Commitment" under the International Credit Facility is being concurrently cancelled. Accordingly, in such circumstances, the Agent and Lender acknowledge that Borrowings will not be outstanding in accordance with the revised Pro-Rata Share of each Lender and the Agent shall take all such steps as are reasonably necessary to ensure that after giving effect to any such increases, Borrowings are outstanding on a Pro-Rata Share based on the revised Total Commitment and Commitment of each Lender which is a "Switching Exempt Lender" under the International Credit Facility as soon as reasonably possible given the nature of the Borrowings then outstanding.

3.3 Purpose

Borrowings shall only be used by the Borrower for general corporate purposes (including, without limiting the generality of the foregoing, capital expenditures, acquisitions, liquidity support for a commercial paper program of the Borrower and repayment of indebtedness). Notwithstanding the foregoing or anything else contained herein, no Borrowings shall be used to fund operations, or finance investments, in any country targeted by the U.S. Economic Sanctions or to make payments to any country or any person targeted by the U.S. Economic Sanctions.

3.4 Takeover Notification

Terms defined in the Securities Act (Alberta) are used with the same meaning in this Section 3.4. In the event the Borrower wishes to utilize Borrowings to, or to provide funds to any Subsidiary to, offer to acquire outstanding securities of any person (other than a private company or a corporation whose shares are directly or indirectly held by one person and associates of such person) (the "Target") where, as of the date of the offer to acquire, the securities that are subject to the offer to acquire, together with the securities of such person that are beneficially owned, or over which control or direction is exercised, by the Borrower and its Subsidiaries and any person acting jointly or in concert with any thereof on the date that the offer to acquire is made, constitute in the aggregate the lesser of such percentage of outstanding securities as is considered to be a "takeover bid" under any law or regulation applicable to the Target and twenty percent (20%) or more of all of the outstanding securities of that class of securities of the person (a "Takeover") except where such Takeover is made pursuant to exemptions from formal takeover bid requirements under applicable securities legislation or any order of any applicable securities regulatory authority, then either:

(a): Agreement of the Target Entity: the Borrower shall provide to the Agent evidence satisfactory to the Agent of the agreement of the board of directors or like body of the Target approving the Takeover; or

(b)

No Conflict by Lenders: the following steps shall be followed:

(i): no later than the close of business (Calgary time) on the fifth Business Day prior to the delivery of any notice to the Agent pursuant to Section 3.5 requesting Accommodations intended to be utilized for such Takeover, the President, Chief Financial Officer or Treasurer of the Borrower (or such other senior officer of the Borrower as may be designated by any such officer of the Borrower from time to time) shall notify the Agent of the particulars of such Takeover in sufficient detail to enable each Lender to determine whether it is a Conflicted Lender;
(ii): within one Business Day of being so notified, the Agent shall notify a Vice President or more senior officer of each Lender (or such other senior officer of such Lender as may be designated by such Lender from time to time) from whom Accommodations will be requested to fund such Takeover of the particulars of such Takeover;
(iii): no later than the third Business Day following the day on which notice is given by the Borrower to the Agent pursuant to Section 3.4(b)(i) each Lender which determines that it is a Conflicted Lender shall notify the Agent of its determination, acting reasonably, and as to whether it wishes to waive its status as a Conflicted Lender; and
(iv): the Agent shall promptly notify the President, Chief Financial Officer, Treasurer or other applicable senior officer of the Borrower of such Conflicted Lender's determination.

In the event that any Lender is a Conflicted Lender and has not waived its status as such pursuant to Section 3.4(b)(iii), then upon the Agent so notifying the Borrower, such Lender shall have no obligation to provide Accommodations for such Takeover notwithstanding any other provision of this Agreement to the contrary; provided, however, that each other Lender (a "Non-Conflicted Lender") shall have an obligation, up to the amount of its Commitment to provide Accommodations for such Takeover, and any such Accommodations for such Takeover shall be provided by each Non-Conflicted Lender in accordance with the ratio that its Pro-Rata Share bears to the aggregate of the Pro-Rata Shares of all the Non-Conflicted Lenders.

For the purposes of this Section 3.4, a Lender shall be a "Conflicted Lender" only if such Lender:

(A): has existing commitments (whether funded or unfunded) to provide credit to the person subject to the Takeover (including the Target);
(B): is providing financial advisory or other similar services to the person subject to the Takeover (including the Target);
(C): has other established business relationships with the person subject to the Takeover (including the Target); or
(D): has advised the Borrower of other circumstances which would make such Lender a Conflicted Lender and the Borrower, acting reasonably, has agreed such is the case.

(c): Adjustment: If Accommodations are utilized for the purposes of a Takeover (a "Takeover Loan") and there are Conflicted Lenders, the Pro-Rata Share in respect of each Non-Conflicted Lender shall be temporarily adjusted in accordance with Section 3.4(b) and subsequent Accommodations shall be funded firstly by Conflicted Lenders and subsequent repayments shall be applied firstly to amounts owed to Non-Conflicted Lenders, in each case, until such time as the Pro-Rata Share in respect of each Non-Conflicted Lender and Conflicted Lender is equal to such Pro-Rata Share in effect immediately prior to the advance of the Takeover Loan.

3.5 Borrowings

Subject to the provisions of this Agreement, the Borrower may borrow by way of Accommodations from each Lender up to such Lender's Commitment and may repay and reborrow such Accommodations:

(a): Cdn. Prime Loans: by way of Cdn. Prime Loans from the Lenders in minimum aggregate amounts of at least Cdn. $5,000,000 and in multiples of Cdn. $1,000,000 thereafter upon same day prior written notice for amounts less than or equal to Cdn. $10,000,000 and upon at least one (1) Business Day prior written notice for amounts greater than Cdn. $10,000,000;
(b): U.S. Base Rate Loans: by way of U.S. Base Rate Loans from the Lenders in minimum aggregate amounts of at least U.S. $5,000,000 and in multiples of U.S. $1,000,000 thereafter upon same day prior written notice for amounts less than or equal to U.S. $10,000,000 and upon at least one (1) Business Day prior written notice for amounts greater than U.S. $10,000,000;
(c): Libor Loans: by way of Libor Loans from the Lenders in minimum aggregate amounts of at least Cdn. $10,000,000 or the same amount in U.S. Dollars, Euros or Pounds Sterling and multiples of Cdn. $1,000,000 or the same amount in U.S. Dollars, Euros or Pounds Sterling thereafter upon at least three (3) Business Days prior written notice;
(d): Bankers' Acceptances: by way of Bankers' Acceptances accepted by the Lenders (or by way of BA Equivalent Advances) in minimum aggregate amounts of at least Cdn. $10,000,000 and in multiples of Cdn. $1,000,000 thereafter upon at least two (2) Business Days prior written notice; and
(e): Letters of Credit: by way of Letters of Credit in Canadian Dollars, U.S. Dollars, Euros or Pounds Sterling issued by the Agent or a Fronting Lender, for and on behalf of the Lenders, upon at least two (2) Business Days' prior written notice;

each such notice to be given to the Agent at the Agent's Branch of Account by 10:00 a.m. (Calgary time) on the day such notice is to be given and to be substantially in the form of Schedule A hereto, except where no more than same day prior written notice is required to be given in which case notice must be given by 9:00 a.m. (Calgary time).

3.6 Selection of Libor Interest Periods

If the Borrower elects to borrow by way of a Libor Loan pursuant to Section 3.5, elects to convert a Borrowing into a Libor Loan pursuant to Section 3.18 or elects to Rollover a Libor Loan pursuant to Section 3.19, the Borrower shall, prior to the beginning of the Libor Interest Period applicable to such Libor Loan, in accordance with the same period of notice required for the initial drawdown of a Libor Loan as set forth in Section 3.5, select and notify the Agent at the Agent's Branch of Account in writing, of the Libor Interest Period (which shall begin and end on a Business Day) applicable to such Libor Loan.

3.7 Conditions Applicable to Bankers' Acceptances and BA Equivalent Advances

(a): Acceptance of Bankers' Acceptances: Subject to the terms and conditions of this Agreement, each Lender hereby agrees to accept its Pro-Rata Share of Bankers' Acceptances issued by the Borrower pursuant to Sections 3.5 and 3.18. The Lenders shall purchase all Bankers' Acceptances accepted by such Lenders at the applicable Discount Rate and provide to the Agent for the account of the Borrower the Discount Proceeds less the applicable Acceptance Fees payable by the Borrower to such Lender unless the Borrower elects, pursuant to Section 3.7(h), to market on its own all Bankers' Acceptances accepted by such Lenders (except for Old System Issuers which shall in all instances purchase the Bankers' Acceptances accepted by them). Notwithstanding that the Borrower has elected to market on its own the Bankers' Acceptances issued by it, the Borrower

may request that any Lender quote for the purchase of Bankers' Acceptances accepted by any such Lender and any such Lender may or may not so quote; provided that in such circumstances nothing herein shall obligate any such Lender to purchase Bankers' Acceptances or require the Borrower to sell Bankers' Acceptances to any such Lender. Any Lender may at any time and from time to time hold, sell, rediscount or otherwise dispose of any or all Bankers' Acceptances purchased by it.

(b)

Delivery of Notice: If the Borrower has elected to market on its own Bankers' Acceptances to be issued by it, the Borrower shall, at or prior to 8:30 a.m. (Calgary time) on the Drawdown Date, Conversion Date or Rollover Date relating to any Bankers' Acceptances to be issued hereunder, deliver to the Agent at the Agent's Branch of Account written notice with respect to such Bankers' Acceptances substantially in the form of Schedule B hereto.

(c)

Payment to Borrower: On the Drawdown Date, Conversion Date or Rollover Date relating to any issue of Bankers' Acceptances:

(i)

on any Drawdown Date, each Lender shall:

(A): if the Borrower has elected to market on its own such Bankers' Acceptances pursuant to Section 3.7(h), deliver the discounted proceeds of the sale of such Bankers' Acceptances received by it (less the applicable Acceptance Fees payable to such Lender in respect thereof), for the account of the Borrower through the Agent at the Agent's Account for Payments; and
(B): if the Borrower has not elected to market on its own such Bankers' Acceptances on its own pursuant to Section 3.7(h), deliver the Discount Proceeds of Bankers' Acceptances purchased by it (less the applicable Acceptance Fees payable to such Lender in respect thereof), for the account of the Borrower through the Agent at the Agent's Account for Payments;

(ii)

on any Rollover Date relating to any Rollover of Bankers' Acceptances, the Borrower shall be liable to each Lender for the principal amount of maturing Bankers' Acceptances accepted by such Lender; in order to satisfy the continuing liability of the Borrower to each Lender for the principal amount of the maturing Bankers' Acceptances, each Lender shall receive and retain for its own account the discounted proceeds of sale of such new Bankers' Acceptances or the Discount Proceeds from the purchase by such Lender of such Bankers' Acceptances, as applicable, and the Borrower shall on the maturity date of the maturing Bankers' Acceptances pay to each Lender, through the Agent at the Agent's Account for Payments, an amount equal to the difference between the principal amount of the maturing Bankers' Acceptances and the discounted proceeds of sale or the Discount Proceeds, as applicable, from the new Bankers' Acceptances together with the applicable Acceptance Fee to which each Lender is entitled; and

(iii)

on any Conversion Date relating to Bankers' Acceptances:

(A): in the case of a Conversion from a Cdn. Prime Loan into Bankers' Acceptances, in order to satisfy the continuing liability of the Borrower to each Lender for the amount of the converted Borrowing, each Lender shall receive for its own account the discounted proceeds of sale of the Bankers' Acceptances or the Discount Proceeds from the purchase by such Lender of such Bankers' Acceptances, as applicable, and the Borrower shall on the Conversion Date pay to each Lender, through the Agent at the Agent's Account for Payments, the difference between the principal amount of the converted Borrowing and the discounted proceeds of sale or the Discount Proceeds, as applicable, from such Bankers' Acceptances together with the applicable Acceptance Fee to which each Lender is entitled;

(B): in the case of a Conversion from a Libor Loan or U.S. Base Rate Loan into a Bankers' Acceptance, the Borrower shall be responsible for the payment to each Lender of the Libor Loan or U.S. Base Rate Loan being converted and may use the discounted proceeds of sale of such Bankers' Acceptances or the Discount Proceeds from the purchase by such Lender for such Bankers' Acceptances, as applicable, less any Acceptance Fees to which such Lender is entitled, to purchase U.S. Dollars, Euros or Pounds Sterling, as applicable, in order to make such payment; and
(C): in the case of a Conversion of Bankers' Acceptances, in order to satisfy the continuing liability of the Borrower to each Lender for an amount equal to the face amount of such Bankers' Acceptances, the Agent and each Lender shall record the obligation of the Borrower to each Lender as a Borrowing of the type into which the maturing Bankers' Acceptance has been converted; provided that in the case of a conversion into U.S. Dollars, Euros or Pounds Sterling, the Borrower shall be responsible for payment to each Lender of an amount in Canadian Dollars equal to the principal amount of the Bankers' Acceptance being converted.

(d)

Waiver of Presentment and Other Conditions: The Borrower waives presentment for payment and, except to the extent of the gross negligence or wilful misconduct of the Lenders referred to in the Power of Attorney Terms—Bankers' Acceptances as outlined in Schedule H hereto, any other defence to payment of any amounts due to a Lender in respect of a Bankers' Acceptance accepted and, if applicable, purchased by it pursuant to this Agreement which might exist solely by reason of such Bankers' Acceptance being held, at the maturity thereof, by such Lender in its own right and the Borrower agrees not to claim any days of grace if such Lender as holder sues the Borrower on the Bankers' Acceptance for payment of the amount payable by the Borrower thereunder. On the specified maturity date of a Bankers' Acceptance, or such earlier date as may be required or permitted pursuant to the provisions of this Agreement, the Borrower shall pay the Agent on behalf of the Lender that has accepted such Bankers' Acceptance, the full face amount of such Bankers' Acceptance or, if applicable, shall effect a Conversion or Rollover of such Bankers' Acceptance and make such additional payments, if any, as are required pursuant to Section 3.7(c).

(e)

Terms of Each Bankers' Acceptance: Each Bankers' Acceptance shall:

(i): have a maturity date which shall be on a Business Day;
(ii): subject to availability, have a Standard Term or, with respect to up to two Drawdowns only in any month, a term of seven (7) or fourteen (14) days (in each case excluding days of grace) or, with the consent of all of the Lenders such consent not to be unreasonably withheld, and subject to availability, have any other term which is not a Standard Term;
(iii): be denominated in the amount of Cdn. $100,000 and whole multiples thereof; and
(iv): shall be in the standard form of each Lender.

It is the intention of the parties that pursuant to the Depository Bills and Notes Act (Canada) ("DBNA"), all Bankers' Acceptances accepted by the Lenders (other than the Old System Issuers) under this Agreement shall be issued in the form of a "depository bill" (as defined in the DBNA), deposited with the Canadian Depository for Securities Ltd. ("CDS") and will be made payable to CDS & Co. In order to give effect to the foregoing, the Agent for the Lenders (other than the Old System Issuers) shall, subject to the approval of the Borrower and such Lenders, establish and notify the Borrower and such Lenders of any additional procedures, consistent with the terms of this Agreement, as are reasonably necessary to accomplish such intention, including, without limitation:

(A): any instrument held by the Agent for the purposes of Bankers' Acceptances shall have marked prominently and legibly on its face and within its text, at or before the time of

issue, the words "This is a depository bill subject to the Depository Bills and Notes Act (Canada)";

(B): any reference to the authentication of the Bankers' Acceptance will be removed; and
(C): any reference to "bearer" will be removed and such Bankers' Acceptance shall not be marked with any words prohibiting negotiation, transfer or assignment of it or of an interest in it.

(f): Grant of Power of Attorney: As a condition precedent to each Lender's obligation to accept and, if applicable, purchase Bankers' Acceptances hereunder, the Borrower hereby agrees to the Power of Attorney Terms—Bankers' Acceptances set out in Schedule H hereto and hereby grants to each applicable Lender a power of attorney on the terms set out in such Schedule H; provided that if the Borrower revokes such power of attorney, it shall not be entitled to issue Bankers' Acceptances hereunder unless the Borrower, the Agent and all of the Lenders have agreed on amendments to this Agreement which would allow the Borrower to again issue Bankers' Acceptances;
(g): Failure to Give Notice of Repayment: If the Borrower fails to give notice to the Agent at the Agent's Branch of Account of the method of repayment of a Bankers' Acceptance prior to the date of maturity of such Bankers' Acceptance in accordance with the same period of notice required for the original acceptance of such Bankers' Acceptance as set forth in Section 3.5, the face amount of such Bankers' Acceptance shall be converted on its maturity to a Cdn. Prime Loan pursuant to Section 3.18.
(h): Lenders Not to Purchase: The Borrower shall be entitled to elect to market on its own all, but not less than all, of any Bankers' Acceptances issued by the Borrower and accepted by each such Lender and forming a part of the same issue of Bankers' Acceptances by advising the Agent of such election in any written notice of Borrowing by way of Bankers' Acceptances in the form of Schedule A, in a Conversion Notice or in a Rollover Notice; provided that each Old System Issuer shall purchase all Bankers' Acceptances accepted by it. If the Borrower fails to advise the Lenders of any such election in any such written notice, it shall be deemed to have elected to have the Lenders purchase such Bankers' Acceptances.
(i): BA Equivalent Advances: Notwithstanding the foregoing provisions of this Section 3.7, a Non-Acceptance Lender shall, in lieu of accepting and, if applicable, purchasing, Bankers' Acceptances, make a BA Equivalent Advance. The amount of each BA Equivalent Advance shall be equal to the Discount Proceeds which would be realized from a hypothetical sale of those Bankers' Acceptances on the basis the Borrower was purchasing such Bankers' Acceptances and which, but for this Section 3.7(i), such Non-Acceptance Lender would otherwise be required to accept and purchase as part of such a Borrowing by way of Bankers' Acceptances. To determine the amount of such Discount Proceeds, the hypothetical sale shall be deemed to take place at the Non-Acceptance Discount Rate. Any BA Equivalent Advance shall be made on the relevant Drawdown Date, Conversion Date or Rollover Date, as the case may be, and shall remain outstanding for the term of the Bankers' Acceptances issued concurrently therewith. Concurrent with the making of a BA Equivalent Advance, a Non-Acceptance Lender shall be entitled to deduct therefrom an amount equal to the applicable Acceptance Fee which, but for this Section 3.7(i), such Non-Acceptance Lender would otherwise be entitled to receive as part of such issue of Bankers' Acceptances. The BA Equivalent Advance shall accrue interest at a rate per annum equal to the Non-Acceptance Discount Rate for such Bankers' Acceptance for the term of such BA Equivalent Advance. Upon the maturity date for such Bankers' Acceptances, the Borrower shall pay to each Non-Acceptance Lender, in satisfaction of the BA Equivalent Advance and interest accrued thereon, an amount equal to the face amount of the Bankers' Acceptance which, but for this Section 3.7(i), such Lender would otherwise have been required to accept as

part of such Accommodation by way of Bankers' Acceptance, failing which such amount shall be converted to a Cdn. Prime Loan.

All BA Equivalent Advances made by a Non-Acceptance Lender shall, if necessary, be evidenced by promissory notes of the Borrower in a form satisfactory to the Borrower and such Non-Acceptance Lender, each acting reasonably.

All references in this Agreement to "Bankers' Acceptances" shall, unless otherwise expressly provided herein or unless the context otherwise requires, be deemed to include BA Equivalent Advances made by a Non-Acceptance Lender as part of an Accommodation by way of Bankers' Acceptances.

3.8 Agent's Duties re Bankers' Acceptances and BA Equivalent Advances

(a)

Advice to the Lenders: The Agent, promptly following receipt of a notice of Borrowing by way of Bankers' Acceptance in the form of Schedule A or of a Conversion Notice or of a Rollover Notice, shall:

(i): advise the Borrower and the Lenders of the allocation of Bankers' Acceptances and, if applicable, BA Equivalent Advances to each such Lender such that the aggregate amount of Bankers' Acceptances required to be accepted or BA Equivalent Advances required to be made by such Lender hereunder is in a whole multiple of Cdn. $100,000; or
(ii): if the Borrower has elected not to market on its own such Bankers' Acceptances pursuant to Section 3.7(h), advise each such Lender of the face amount of each Bankers' Acceptance to be purchased by it and the term thereof which term shall be identical for all such Lenders. By no later than 8:00 a.m. (Calgary time), on each Drawdown Date, Conversion Date or Rollover Date, as the case may be, on which such Lenders are required to purchase Bankers' Acceptances hereunder, each Schedule I Reference Lender (in the case of Bankers' Acceptances which do not have a Standard Term) and each Schedule II Reference Lender shall notify the Agent and the Borrower of the applicable rate (as contemplated in the definition of Discount Rate) to be used by the Agent in the calculation of the Discount Rate in respect of the issuance and purchase of such Bankers' Acceptances.

(b)

Bankers' Acceptances Not Being Purchased: If the Borrower has elected to market on its own Bankers' Acceptances issued by it hereunder, the Agent, promptly following receipt of a notice of Borrowing by way of Bankers' Acceptance in the form of Schedule B and in any event prior to 9:30 a.m. (Calgary time), shall provide either written notice or telephone advice with respect to such Bankers' Acceptances to each such Lender of the amount of each issue of Bankers' Acceptances to be accepted by it or BA Equivalent Advance to be made by it, the face amount of each Bankers' Acceptance, the discounted proceeds of sale deliverable in respect thereof or the amount of the BA Equivalent Advance, the person to whom the Bankers' Acceptances have been sold and from whom the discounted proceeds of sale in respect thereof should be received, and the term thereof, which term shall be identical for all such Lenders. Such advice, if provided by telephone, shall be confirmed in writing prior to 2:30 p.m. (Calgary time) on the applicable Drawdown Date, Conversion Date or Rollover Date, as the case may be, by delivery by the Agent to each such Lender of a written confirmation.

(c)

Bankers' Acceptances Being Purchased: If the Borrower has not elected to market on its own Bankers' Acceptances issued by it pursuant to Section 3.7(h), then on or prior to 9:30 a.m. (Calgary time) on the Drawdown Date, Conversion Date or Rollover Date relating to all Bankers' Acceptances to be purchased by such Lenders on such date, the Agent shall provide either written notice or telephone notice with respect to such Bankers' Acceptances to the Borrower and each Lender confirming the particulars with respect to such Bankers' Acceptances and related BA

Equivalent Advances. Such advice, if provided by telephone, shall be confirmed in writing prior to 2:30 p.m. (Calgary time) on the applicable Drawdown Date, Conversion Date or Rollover Date, as the case may be, by delivery by the Agent to each such Lender of a written confirmation.

(d): Completion of Bankers' Acceptance When Not Being Purchased: Upon receipt of notice pursuant to Section 3.8(b), each Lender is thereupon authorized to complete and sign bankers' acceptances on behalf of the Borrower in accordance with the Power of Attorney Terms—Bankers' Acceptances and the particulars advised by the Agent. Such Lenders shall then deliver such Bankers' Acceptances to the person designated to receive such Bankers' Acceptances upon receipt by each such Lender of the discounted proceeds of sale payable in respect thereof, in accordance with the particulars so advised by the Agent.
(e): Completion of Bankers' Acceptance When Being Purchased: Upon receipt of notice pursuant to Section 3.8(c), each Lender is thereupon authorized to complete and sign Bankers' Acceptances on behalf of the Borrower in accordance with the Power of Attorney Terms—Bankers' Acceptances and the particulars advised by the Agent.

3.9 Letters of Credit

(a)

Issuance: Subject to the terms and conditions set forth herein, the Agent shall issue, on behalf of the Lenders, each as to their Pro-Rata Share, Direct Letters of Credit for the account of the Borrower upon receiving an LC Application for the issuance thereof on any day on or after the Effective Date and before the last Term Date to occur. If, pursuant to an LC Application, the Borrower has requested a Fronted Letter of Credit from a Fronting Lender, such Fronting Lender shall, subject to the terms of this Agreement, issue such Fronted Letter of Credit for the account of the Borrower on any day on or after the Effective Date and before the last Term Date to occur. No Letter of Credit shall be issued (which shall include any extension of the expiry date of a then outstanding Letter of Credit) on behalf of any Lender in the case of a Direct Letter of Credit or, in the case of a Fronted Letter of Credit, by any Fronting Lender where a Lender has liability in respect thereof:

(i): if the Term Period of any such Lender has commenced except in the case of a Rollover of a Letter of Credit in place at the commencement of such Lender's Term Period where such Rollover does not extend the expiry date of such Letter of Credit beyond six (6) years from the Term Date of such Lender;
(ii): that expires more than six (6) years from the Issue Date thereof; and
(iii): if after giving effect thereto the amount of the LC Obligations under Fronted Letters of Credit issued by a Fronting Lender exceeds the Fronted LC Commitment of such Fronting Lender.

Each Direct Letter of Credit shall be substantially in the form of Schedule I and each Fronted Letter of Credit shall be substantially in the applicable Fronting Lender's standard form with modifications thereto consistent with the applicable provisions of Schedule I, in each case with any such changes to such form as:

(iv): the Agent or, if applicable, such Fronting Lender shall determine in good faith and on a commercially reasonable basis does not materially increase the obligations, or diminish the rights, of any Lender relative to such form; or
(v): the Lenders, acting reasonably, shall approve;

provided that, without the prior consent of each Lender, no Direct Letter of Credit may be issued that would vary the several and not joint nature of the obligations of the Lenders thereunder as provided in the next following sentence. Each Direct Letter of Credit shall be issued by the Agent on behalf of all

Lenders as a single multi-Lender letter of credit, but the obligation of each such Lender thereunder shall be several and not joint, based upon its Pro-Rata Share in effect on the Issue Date of such Direct Letter of Credit, subject to any change thereto as provided for therein.

(b)

Conditions Precedent: The Agent and the Lenders and, if applicable, any Fronting Lender, shall not be required to issue any Letter of Credit if on the Issue Date for such Letter of Credit the Agent determines that any of the following conditions has not been satisfied:

(i)

the Agent shall have received a Notice of Borrowing requesting that a Letter of Credit be issued, such Notice of Borrowing to be accompanied by an originally executed LC Application satisfactory to the Agent and, in the case of Fronted Letters of Credit, the applicable Fronting Lender, specifying:

(A): the proposed Issue Date (which shall be a Business Day at least two (2) Business Days following the date of such request);
(B): the purpose for which such Letter of Credit is to be used, and, if the Agent, acting reasonably, determines that the requested Letter of Credit will constitute a Standby LC, the Borrower has agreed with such characterization, failing which such Letter of Credit shall not be issued;
(C): the expiry date which shall not be more than six (6) years from the Issue Date;
(D): the name and address of the beneficiary;
(E): the face amount and currency of such Letter of Credit; and
(F): the terms and conditions of the requested Letter of Credit and other relevant details (provided that no Letter of Credit that provides for the automatic extension thereof unless notice is given to the beneficiary thereof shall be issued which requires that notice of the non-extension of the expiry date thereof be given more than 30 days prior to the scheduled expiry thereof); and

(ii)

the Agent shall have received such other customary administrative documents as it, any Lender or, if applicable, the applicable Fronting Lender, through the Agent, shall have reasonably requested as a condition to the issuance of such Letter of Credit; provided that in the event of any conflict between the terms of such other documents and this Agreement, the terms of this Agreement shall prevail and further provided that the Borrower's obligations in respect of Letters of Credit shall be determined solely by reference to the provisions of this Agreement.

(c)

Notice to Lenders: Promptly upon its receipt of an LC Application for a Letter of Credit, the Agent shall notify each Lender and, if applicable, the applicable Fronting Lender, thereof, which notice shall also specify each Lender's share of the amount of such Letter of Credit based upon such Lender's Pro-Rata Share. If the Agent or, if applicable, a Fronting Lender determines not to issue such Letter of Credit by reason of the failure to satisfy the conditions specified in Section 3.9(b)):

(i): the Agent shall give prompt notice thereof to the Borrower and each Lender (in the case of a Direct Letter of Credit); or
(ii): the Fronting Lender shall give prompt notice thereof to the Agent (in the case of a Fronted Letter of Credit) and in turn the Agent shall provide notice thereof to the Borrower and each Lender.

(d)

Direct Letters of Credit: Each Direct Letter of Credit shall be executed and delivered by the Agent in the name and on behalf of, and as attorney-in-fact for, each Lender party to such Letter of Credit. The Agent shall act under each Direct Letter of Credit as the agent of each Lender to:

(i): receive drafts, other demands for payment and other documents presented by the beneficiary under such Direct Letter of Credit;
(ii): determine whether such drafts, demands and documents are in compliance with the terms and conditions of such Direct Letter of Credit; and
(iii): notify such Lender and the Borrower that a valid drawing has been made and the date that the related LC Disbursement is to be made; provided that the Agent (in such capacity) shall have no obligation or liability for any LC Disbursement under any Direct Letter of Credit and each Direct Letter of Credit shall expressly so provide.

Each Lender hereby irrevocably appoints and designates the Agent as its attorney-in-fact, acting through any duly authorized officer of the Agent, to execute and deliver in the name and on behalf of such Lender each Direct Letter of Credit to be issued by such Lender hereunder. Promptly upon the request of the Agent, each Lender will furnish to the Agent such powers of attorney or other evidence as any beneficiary of any Direct Letter of Credit may reasonably request in order to demonstrate that the Agent has the power to act as attorney-in-fact for such Lender to execute and deliver such Direct Letter of Credit. The Borrower, the Agent and the Lenders agree that each Direct Letter of Credit shall provide that all drafts and other documents presented thereunder shall be delivered to the Agent and that all payments thereunder shall be made by the Lenders obligated thereon through the Agent at the Agent's Branch of Account. Each Lender shall be severally liable under each Direct Letter of Credit in proportion to its Pro-Rata Share on the Issue Date of such Direct Letter of Credit and each Direct Letter of Credit shall specify each Lender's share of the amount payable thereunder.

(e)

Fronted Letters of Credit: Each Fronting Lender will exercise and give the same care and attention to each Fronted Letter of Credit issued by it hereunder as it gives to its other letters of credit and similar obligations, and such Fronting Lender's sole liability to each Lender shall be to promptly return to the Agent for the account of the Lenders, each Lender's Pro-Rata Share of any payments made to such Fronting Lender by the Borrower hereunder, excluding the Fronting Fee. Each Lender agrees that, in paying any drawing under a Fronted Letter of Credit, the applicable Fronting Lender shall not have any responsibility to obtain any document (other than as expressly required by such Fronted Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of any person delivering any such document. Neither any Fronting Lender nor any of its representatives, officers, employees or agents shall be liable to any Lender for:

(i): any action taken or omitted to be taken in connection herewith at the request or with the approval of the Lenders;
(ii): any action taken or omitted to be taken in connection with any Fronted Letter of Credit in the absence of negligence or wilful misconduct; or
(iii): the execution, effectiveness, genuineness, validity, or enforceability of any Fronted Letter of Credit or any other document contemplated thereby.

No Fronting Lender shall incur any liability by acting in reliance upon any notice, consent, certificate, statement or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper Person.

(f): Records: The Agent and, if applicable, the applicable Fronting Lender in the case of a Fronted Letter of Credit, shall maintain records showing the undrawn and unexpired amount of each

Letter of Credit outstanding hereunder and each Lender's share of such amount and showing for each Letter of Credit issued hereunder:

(i): the Issue Date and expiration date thereof;
(ii): the amount thereof; and
(iii): the date and amount of all payments made thereunder.

With respect to any Letter of Credit issued hereunder, the Agent and, if applicable, the applicable Fronting Lender, shall make copies of such records available to the Borrower or any Lender party to that Letter of Credit upon its request.

3.10 Direct Letter of Credit Payments

(a)

Loans: The Borrower and each Lender agree that each LC Disbursement made by a Lender under any Direct Letter of Credit shall constitute a Cdn. Prime Loan in the case of Direct Letters of Credit in Canadian Dollars, Euros or Pounds Sterling (based upon the Equivalent Amount in Canadian Dollars of any LC Disbursement made in Euros or Pounds Sterling on the date of such LC Disbursement), and a U.S. Base Rate Loan in the case of Direct Letters of Credit in U.S. Dollars, even if any condition precedent to the making of such a Loan shall not have been satisfied, in each case on the date each LC Disbursement is made by a Lender.

(b)

LC Drawdown: The Borrower and each Lender hereby authorize the Agent to review on behalf of each Lender each draft and other document presented under each Direct Letter of Credit. The determination of the Agent as to the conformity of any documents presented under a Direct Letter of Credit to the requirements of such Direct Letter of Credit shall, in the absence of the Agent's negligence or wilful misconduct, be conclusive and binding on the Borrower and each Lender. The Agent shall, within a reasonable time following its receipt thereof, examine all documents purporting to represent a demand for payment under any Direct Letter of Credit. The Agent shall promptly after such examination:

(i): notify each of the Lenders obligated under such Direct Letter of Credit and the Borrower by telephone (confirmed in writing) of such demand for payment and of each Lender's share of such payment;
(ii): deliver to each such Lender a copy of each document purporting to represent a demand for payment under such Direct Letter of Credit; and
(iii): notify each Lender and the Borrower whether said demand for payment was properly made under such Direct Letter of Credit.

(c)

LC Disbursement: With respect to any drawing determined by the Agent to have been properly made under a Direct Letter of Credit, each Lender will make an LC Disbursement in respect of such Direct Letter of Credit in accordance with its liability under such Direct Letter of Credit and this Agreement, such LC Disbursement to be made to the Agent's Branch of Account or such other account of the Agent as shall have been most recently designated by it for such purpose by notice to such Lenders. With respect to a LC Disbursement where the corresponding Letter of Credit was issued in Euros or Pounds Sterling, each Lender shall provide the Agent with an amount in Canadian Dollars sufficient to enable the Agent to purchase the necessary Euros or Pounds Sterling based on the exchange rate utilized by the Agent in accordance with its usual practices to purchase Euros or Pounds Sterling on the date such LC Disbursement is made by the Agent on behalf of such Lender. The Agent will make any such LC Disbursement available to the beneficiary of such Direct Letter of Credit by promptly remitting the amounts so received, in like funds, to the account identified by such beneficiary in connection with such demand for payment. Promptly following any LC Disbursement by any Lender in respect of any Direct Letter of Credit,

the Agent will notify the Borrower of such LC Disbursement; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligations hereunder to the Lenders with respect to any such LC Disbursement. The responsibility of the Agent in connection with any draft presented for payment under any Direct Letter of Credit shall, in addition to any payment obligation expressly provided for in such Direct Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Direct Letter of Credit. The Agent shall not be required to make any payment under a Direct Letter of Credit in excess of the amount received by it from the Lenders for such payment.

3.11 Fronted Letter of Credit Payments

(a)

LC Drawdown: The Borrower and each Lender hereby authorize each Fronting Lender to review on behalf of each Lender each draft and other document presented under each Fronted Letter of Credit. The determination of a Fronting Lender as to the conformity of any documents presented under a Fronted Letter of Credit to the requirements of such Fronted Letter of Credit shall, in the absence of such Fronting Lender's negligence or wilful misconduct, be conclusive and binding on the Borrower and each Lender. Each Fronting Lender shall, within a reasonable time following its receipt thereof, examine all documents purporting to represent a demand for payment under any Fronted Letter of Credit. Such Fronting Lender shall promptly after such examination:

(i): notify the Agent and the Borrower by telephone (confirmed in writing) of such demand for payment;
(ii): deliver to the Agent a copy of each document purporting to represent a demand for payment under such Fronted Letter of Credit; and
(iii): notify the Agent and the Borrower whether said demand for payment was properly made under such Fronted Letter of Credit.

(b)

LC Disbursement: In the event that any LC Disbursement shall be made under any Fronted Letter of Credit (the date any such LC Disbursement is made being the "Participation Date"):

(i): the applicable Fronting Lender shall promptly notify the Agent who shall promptly notify the Borrower of such payment and of the amount thereof;
(ii): each LC Disbursement shall constitute the making of a Cdn. Prime Loan in the case of a Fronted Letter of Credit in Canadian Dollars, Euros or Pounds Sterling (based upon the amount of Canadian Dollars utilized by the Agent in accordance with its usual practices to purchase Euros or Pounds Sterling, as applicable, on the date of any LC Disbursement to fund any LC Disbursement made in Euros or Pounds Sterling), or U.S. Base Rate Loan in the case of a Fronting Letter of Credit in U.S. Dollars, as applicable, to the Borrower by the applicable Fronting Lender on the Participation Date (without limiting each Lender's obligations hereunder to such Fronting Lender in respect of any such Loan and notwithstanding the otherwise pro-rata nature of Accommodations hereunder), even if any condition precedent to the making of such a Loan shall not have been satisfied;
(iii): the Agent shall notify each applicable Lender by facsimile or by telephone (confirmed by facsimile) of such disbursement and the amount payable by such Lender to the Agent for the account of such Fronting Lender based on the applicable Lender's Pro-Rata Share; and
(iv): immediately upon receipt of such notice, each applicable Lender shall make its Pro-Rata Share of such Loan in Cdn. Dollars or U.S. Dollars, as applicable, available to the Agent for the account of such Fronting Lender by wire transfer of immediately available funds to the Agent's Branch of Account for the account of such Fronting Lender.

(c)

Lenders' Participation: Each Fronting Lender irrevocably grants, and, in order to induce each Fronting Lender to issue its Fronted Letters of Credit hereunder, each Lender irrevocably accepts and hereby purchases from such Fronting Lender on the terms and conditions hereinafter stated, for its own account and risk, an undivided interest (equal to each Lender's Pro-Rata Share) in such Fronting Lender's obligations and rights under each Fronted Letter of Credit issued by it and the amount of each draft paid by such Fronting Lender thereunder and the deemed Canadian Prime Loan or U.S. Base Rate Loan made hereunder to the Borrower on the Participation Date. Each Lender unconditionally and irrevocably agrees with such Fronting Lender that, on or before the close of business on each Participation Date, such Lender will pay to the Agent for the account of such Fronting Lender at the Agent's Branch of Account the applicable Lender's Pro-Rata Share of any Canadian Prime Loan or U.S. Base Rate Loan deemed to be made to the Borrower by such Fronting Lender on the Participation Date. If any Lender fails to make any such payment on the Participation Date, then interest shall accrue and be payable by such Lender on such Lender's obligation to make such payment during the period from such Business Day to the day such Lender makes such payment at the Default Rate.

(d)

Absolute Obligation: Each Lender acknowledges that its obligations to each Fronting Lender in respect of any Fronted Letter of Credit issued by it, including the obligation to purchase and fund a participation in the obligations and rights of a Fronting Lender under each Fronted Letter of Credit and any drafts paid by it and the deemed Cdn. Prime Loan or U.S. Base Rate Loan made hereunder by such Fronting Lender on the Participation Date, are absolute and unconditional and shall not be affected by any circumstance whatsoever, including:

(i): the occurrence and continuance of any Default or Event of Default;
(ii): any failure or inability of any other Lender to purchase or fund such a participation hereunder; or
(iii): any other failure by any other Lender to fulfil its obligations hereunder.

Each payment by a Lender to a Fronting Lender shall be made, without any offset, compensation, abatement, withholding or reduction whatsoever.

3.12 Obligations Absolute re Letters of Credit

(a)

Absolute Obligation: The obligations of the Borrower under this Agreement in respect of Letters of Credit shall be absolute, unconditional and irrevocable under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which any person may have or have had against the Agent, any Lender, any Fronting Lender or any beneficiary of a Letter of Credit.

(b)

No Defences: The Borrower agrees with the Agent, each Lender and each Fronting Lender that the obligations of the Borrower in respect of Letters of Credit shall not be affected by:

(i): any lack of validity or enforceability of any Letter of Credit;
(ii): any draft, demand, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect;
(iii): a Default or an Event of Default that has occurred and is continuing.
(iv): any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred;
(v): any claims, compensation, set-off, defence or other right whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee;

(vi): payment under a Letter of Credit against presentation of a draft or other document that does not comply strictly with the terms of such Letter of Credit;
(vii): the non-perfection of any Lien granted to, or in favor of, the Agent, any of the Lenders or Fronting Lenders as security for any of the reimbursement obligations referred to in Section 3.10 or 3.11;
(viii): the existence of any proceedings of the type described in Section 9.1(c) or 9.1(d) with respect to the Borrower; or
(ix): any other event or circumstance whatsoever that might, but for the provisions of this Section 3.12(b), constitute a legal or equitable discharge of the obligations of the Borrower hereunder or in respect of any Letter of Credit;

save and except only for payment under a Letter of Credit other than in substantial compliance with the terms thereof or other than as a result of the Agent's or, if applicable, the applicable Fronting Lender's negligence or wilful misconduct.

(c)

Notice Delays: None of the Agent, any Lender or any Fronting Lender shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except, as to any such person, for errors or omissions caused by such Person's negligence or wilful misconduct.

(d)

Action Binding: The Borrower agrees that any action taken or omitted by the Agent or any Lender or, if applicable, any Fronting Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of negligence or wilful misconduct and in accordance with the standards of care specified in the Uniform Customs, shall be binding on the Borrower and shall not result in any liability of the Agent or any Lender or, if applicable, any Fronting Lender to the Borrower.

(e)

General: Without limiting the generality of the foregoing, the parties hereto agree that:

(i): the Agent and, if applicable, a Fronting Lender may accept documents that appear on their face to be in substantial compliance with the terms of a Letter of Credit without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Letter of Credit;
(ii): the Agent and, if applicable, a Fronting Lender shall have the right, in its discretion acting reasonably, to decline to accept such documents and to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit;
(iii): this sentence, together with Sections 3.10 and 3.11, shall establish the standard of care to be exercised by the Agent and each Lender and, if applicable, each Fronting Lender when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof (and the parties hereto hereby waive, to the extent permitted by applicable law, any standard of care inconsistent with the foregoing);
(iv): in the event of any conflict or inconsistency between the provision of any LC Application and this Agreement, the provisions of this Agreement shall prevail.

(f)

Consequential Damages: Notwithstanding anything to the contrary contained herein, none of the Agent, any Lender or any Fronting Lender shall be liable to the Borrower for any consequential, indirect, punitive or exemplary damages with respect to action taken or omitted to be taken by it under any Letter of Credit.

3.13 Expenses re Letters of Credit

(a)

LC Expenses: The Borrower shall pay and reimburse the Agent, each Fronting Lender and each Lender for all Taxes (other than Taxes imposed on or measured by reference to or in respect of overall net income, gains or capital of the applicable party) and reasonable and customary fees, charges and other costs and expenses (other than LC Fees and Fronting Fees) incurred by the Agent, such Lender or such Fronting Lender in connection with any LC Disbursement ("LC Expenses"), as notified by the Agent (on its own behalf and on behalf of the Lenders) or a Fronting Lender to the Borrower through the Agent. Each payment in respect of LC Expenses shall be due and payable within ten (10) Business Days after the date on which the Agent notifies the Borrower of the amount of such LC Expenses and shall accrue interest if not paid on such date at the Default Rate.

(b)

Other Costs: The Borrower shall pay to the Agent, each Fronting Lender and each Lender its:

(i): set-up fees, cable charges and other customary miscellaneous charges in respect of the issue of Letters of Credit and upon the amendment or transfer of each Letter of Credit and each drawing made thereunder; and
(ii): documentary and administrative charges for amending, transferring or drawing under, as the case may be, Letters of Credit of a similar amount, term and risks.

3.14 Indemnification; Nature of Lender's Duties

(a)

Indemnity: In addition to amounts payable as elsewhere provided for in this Article 3, the Borrower hereby agrees to protect, indemnify, pay and save each Lender harmless from and against any and all claims or losses (including reasonable legal fees and expenses) which such Lender may incur or be subject to as a consequence, direct or indirect, of:

(i): the application for or issuance of or drawing under any Letter of Credit, other than as a result of the negligence or wilful misconduct of such Lender as determined by a court of competent jurisdiction, provided that such Lender acts in good faith; or
(ii): the failure of such Lender to honour a drawing under any Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority prohibiting the payment of such drawing (all such acts or omissions herein called "Government Acts").

(b)

Misuse: As between the Borrower and each Lender, the Borrower assumes all risks of the acts and omissions of, or misuse of any Letter of Credit by, the beneficiary of such Letter of Credit. Except to ensure compliance with the applicable Letter of Credit, the Lenders shall not have any responsibility for:

(i): the form, validity, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for, issuance of or drawing under any Letter of Credit (even if it should in fact prove to be in any or all respects invalid, inaccurate, fraudulent or forged);
(ii): the validity or sufficiency of any instrument transferring or assigning (or purporting to transfer or assign) any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason;
(iii): errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph or otherwise (whether or not they are in cipher);
(iv): errors in interpretation of technical terms;

(v): any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit or of the proceeds thereof;
(vi): the misapplication by the beneficiary of any Letter of Credit or of the proceeds of any drawing under such Letter of Credit; and
(vii): any consequences arising from causes beyond the control of the Lenders, including any Government Acts.

None of the above shall affect, impair, or prevent the vesting of any of the Lenders' powers hereunder. Any action taken or omitted by any Lender under or in connection with any Letter of Credit issued by it or the related certificates if taken or omitted in good faith, shall not put such Lender under any resulting liability to the Borrower provided that such Lender acts without negligence and has not engaged in wilful misconduct.

(c): No Liability: The Borrower shall have no obligation to indemnify a Lender in respect of any liability incurred by such Lender arising out of the gross negligence or wilful misconduct of such Lender as determined by a court of competent jurisdiction, or out of the wrongful dishonour by such Lender of a proper demand for payment made under any Letter of Credit issued by it.

3.15 Repayments re Letters of Credit

If:

(a): the Agent delivers an Acceleration Notice or an Event of Default occurs under Section 9.1(c) or 9.1(d);
(b): the Borrower shall be required to repay Borrowings to a Lender pursuant to Article 4; or
(c): any Letter of Credit is the subject matter of any order, judgement, injunction or other such determination (a "Judicial Order") restricting payment under and in accordance with such Letter of Credit or extending the Lender's or Fronting Lender's liability, as the case may be, beyond the expiration date stated in such Letter of Credit;

then the Borrower shall pay to the Agent an amount, in the currency in which the Letter of Credit is denominated, equal to the maximum amount available to be drawn under any unexpired Letter of Credit in respect of all of the Lenders in the case of paragraphs (a) and (c) and in respect of each Lender whose Borrowings are required to be repaid in accordance with Article 4 in the case of paragraph (b). Any such amounts paid by the Borrower to the Agent shall be held by the Agent in interest bearing cash collateral accounts (with interest payable for the account of the Borrower at the rates and in accordance with the then prevailing practices of the Agent for accounts of such type) as continuing collateral security for the obligations of the Borrower to reimburse the Lenders for LC Disbursements made in respect of any such Letter of Credit. Such cash collateral accounts shall be assigned to the Agent as security for the obligations of the Borrower in relation to such Letters of Credit and the Security Interest of the Agent thereby created in such cash collateral shall rank in priority to all other Security Interests and adverse claims against such cash collateral. Such cash collateral shall be applied to satisfy the obligations of the Borrower for such Letters of Credit as LC Disbursements are made thereunder. Amounts held in such cash collateral accounts may not be withdrawn by the Borrower; however, interest on such deposited amounts (at the rates and in accordance with the then prevailing practices of the Agent for accounts of such type) shall be for the account of the Borrower and may be withdrawn by the Borrower from time to time so long as no Event of Default is then continuing.

The Agent shall release to the Borrower any amount remaining in the cash collateral accounts after applying the amounts necessary to discharge all obligations of the Borrower relating to such Letters of Credit, upon the later of:

(d)

the date on which any final and non-appealable order, judgement or other determination has been rendered or issued either terminating any applicable Judicial Order or permanently enjoining the Lenders or the Fronting Lender, as the case may be, from paying under such Letter of Credit;

(e)

the earlier of:

(i): the date on which either the original counterpart of such Letter of Credit is returned to the Agent or the Fronting Lender, as the case may be, for cancellation or the Lenders or the Fronting Lender, as the case may be, are or is released by the beneficiary thereof from any other obligation in respect of such Letter of Credit; and
(ii): the expiry of such Letter of Credit; and

(f)

if an Event of Default has occurred, the payment and satisfaction of all indebtedness and liabilities of the Borrower hereunder and cancellation or termination of the Credit Facility.

3.16 Notice of Repayment

The Borrower shall give the Agent, at the Agent's Branch of Account, prior written notice of each repayment of Borrowings in accordance with the same period of notice required pursuant to Section 3.5 for the initial drawdown of the basis of Borrowing being repaid, such notice to be substantially in the form of Schedule A. Notwithstanding the foregoing, a Bankers' Acceptance and a BA Equivalent Advance shall, subject to Section 4.5, only be repaid on its maturity date and a Libor Loan shall, subject to Section 10.5, only be repaid on the last day of the Libor Interest Period related thereto.

3.17 Pro-Rata Treatment of Borrowings

(a)

Pro-Rata Borrowings: Subject to Section 3.2, Section 3.4(c), Section 3.9(a)(i), Section 3.18(b) and this Section 3.17(a) and that there may be Lenders whose Commitment is a revolving credit facility and Lenders whose Commitment is no longer a revolving credit facility, each Accommodation shall be made available by each Lender and all repayments and reductions in respect thereof shall be made and applied in a manner so that the proportion of Borrowings outstanding to each Lender will, to the extent possible, thereafter be in the same proportion as the Pro-Rata Share of such Lender. The Agent is authorized by the Borrower and each Lender to determine, in its discretion, acting reasonably, the amount of Borrowings to be made available by each Lender and the application of repayments and reductions of Borrowings to give effect to the provisions of this Section 3.17(a) and Section 6.2; provided that no Lender shall, as a result of any such determination, have Borrowings outstanding (determined with reference to the Equivalent Amount thereof in Canadian Dollars) in an amount which is in excess of the amount of its Commitment.

(b)

Agent's Discretion on Allocation: In the event it is not practicable to:

(i): allocate each basis of Borrowing in accordance with Section 3.17(a) by reason of the occurrence of circumstances described in Section 10.2 or Section 10.3; or
(ii): allocate Bankers' Acceptances and BA Equivalent Advances to each Lender in accordance with Section 3.17(a) such that the aggregate amount of Bankers' Acceptances required to be accepted or purchased or BA Equivalent Advances required to be made by such Lender hereunder is in a whole multiple of Cdn. $100,000;

the Agent is authorized by the Borrower and each such Lender to make such allocation as the Agent determines in its discretion, acting reasonably, may be equitable in the circumstances but no Lender shall, as a result of any such allocation, have Borrowings outstanding (determined as the Equivalent Amount thereof in Canadian Dollars) in an amount which is in excess of the amount of its Commitment.

(c): Further Assurances by Borrower: To the extent reasonably possible, the Borrower and each Lender agrees to be bound by and to do all things necessary or appropriate to give effect to the provisions of this Section 3.17.

3.18 Conversions

The Borrower may, during the term of this Agreement, upon giving the Agent at the Agent's Branch of Account a Conversion Notice in accordance with the period of prior notice and other requirements set out in Section 3.5 (other than delivery of a notice in the form of Schedule A) in respect of the basis of Borrowing to which any Borrowing is being converted, convert any Borrowing to another basis of Borrowing. Notwithstanding the foregoing, a Bankers' Acceptance may only be converted on its maturity date and a Libor Loan may only be converted on the last day of the Libor Interest Period applicable to such Libor Loan or on any other day if the Borrower pays all amounts payable in respect thereof pursuant to Sections 4.5 or 10.5, respectively. A Letter of Credit may not be converted. If the requested conversion is either from or into Libor Loans or Bankers' Acceptances, then:

(a): if a Default has occurred and is continuing, the Borrower, without limiting its rights to convert any Borrowing into a Cdn. Prime Loan or a U.S. Base Rate Loan, as applicable, shall only be entitled to request a conversion into a Libor Loan with a Libor Interest Period of one (1) month or into a Bankers' Acceptance with a term to maturity of one (1) month or less as provided for herein unless the Agent, in its discretion acting reasonably, otherwise permits; and
(b): if an Event of Default has occurred and is continuing, such conversion shall not be permitted unless the Agent in its discretion otherwise agrees and all Libor Loans in respect of which any such conversion has been requested shall be converted to a Cdn. Prime Loan in the case of Libor Loans denominated in Canadian Dollars, Euros or Pounds Sterling or to a U.S. Base Rate Loan in the case of Libor Loans denominated in U.S. Dollars, in each case on the last day of the Libor Interest Period applicable thereto and all Bankers' Acceptances in respect of which any such conversion has been requested shall be converted to a Cdn. Prime Loan on the maturity of such Bankers' Acceptances.

On each Conversion Date, the Borrower, subject to Section 3.7(c), shall be required to repay to the Agent the basis of Borrowing which is being converted and, subject to the provisions of this Agreement, the Lenders shall be required to make available to the Borrower the Borrowings into which such basis of Borrowing is being converted.

3.19 Rollovers

The Borrower may, during the term of this Agreement, rollover all or any portion of a Bankers' Acceptance on its maturity date or all or any portion of a Libor Loan for an additional Libor Interest Period subsequent to the initial or any subsequent Libor Interest Period or extend the expiry date of a Letter of Credit, upon giving the Agent at the Agent's Branch of Account a Rollover Notice in accordance with the period of notice and other requirements set out in Section 3.5 applicable to Bankers' Acceptances or Libor Loans or Letters of Credit (other than delivery of a notice in the form of Schedule A), unless immediately prior to the issuance of any Bankers' Acceptances or Letter of Credit or the commencement of any subsequent Libor Interest Period, a Default or an Event of Default shall have occurred and be continuing, in which event the Borrower shall not be entitled to

Rollover such Letter of Credit and, in the case of a Default, shall only be entitled to request a Bankers' Acceptance with a term to maturity of one (1) month or less as provided for herein or a Libor Interest Period of one (1) month unless the Agent, in its discretion acting reasonably, otherwise permits and, in the case of an Event of Default, shall be deemed to have converted any Bankers' Acceptance to a Cdn. Prime Loan and any such Libor Loan which is denominated in Canadian Dollars, Euros or Pounds Sterling to a Cdn. Prime Loan and any such Libor Loan which is denominated in U.S. Dollars to U.S. Base Rate Loan, in each case pursuant to Section 3.18 on the maturity date of the Bankers' Acceptance or the last day of the Libor Interest Period applicable thereto, in each case unless the Agent in its discretion acting reasonably, otherwise permits. In the event a Rollover Notice in respect of an existing Bankers' Acceptance or Libor Loan is not given pursuant to this Section 3.19 or a Conversion Notice in respect of such existing Bankers' Acceptance or Libor Loan is not given pursuant to Section 3.18, any such Bankers' Acceptance shall be converted to a Cdn. Prime Loan on the maturity date of such Bankers' Acceptance and any such Libor Loan which is denominated in Canadian Dollars, Euros or Pounds Sterling shall be converted to a Cdn. Prime Loan and any such Libor Loan which is denominated in U.S. Dollars shall be converted to a U.S. Base Rate Loan, in each case on the last day of the Libor Interest Period applicable to such existing Libor Loan and the provisions of the last sentence of Section 3.10 shall apply to any such conversion.

3.20 Notices Irrevocable

All notices delivered by the Borrower hereunder shall be irrevocable and shall oblige the Borrower, the Agent and the Lenders to take the action contemplated on the date specified therein.

3.21 Extension of Term Date

(a)

Request for an Offer of Extension: The Borrower may from time to time request an offer to extend the Term Date of each Lender whose Term Period has not yet commenced (each, a "Requested Lender") by sending to the Agent a Request for an Offer of Extension not later than forty-five (45) days prior to the then current Term Date and not earlier than ninety (90) days prior to the then current Term Date, and the Agent shall forthwith, and in any event within two (2) Business Days, notify each Requested Lender of such request. Each Requested Lender shall advise the Agent as to whether it agrees to make an offer to the Borrower to extend the Term Date in accordance with any such Request for an Offer of Extension within thirty (30) days of the delivery by the Borrower to the Agent of the Request for an Offer of Extension, provided that in the event any such Requested Lender does not so advise the Agent within such thirty (30) day period, such Requested Lender shall be deemed to have advised the Agent that it is not prepared to make an offer to the Borrower to extend the Term Date. Forthwith and in any event within two (2) Business Days of the Agent receiving from each Requested Lender its decision with respect to making an offer to the Borrower to extend the Term Date, the Agent shall, subject to Section 3.21(c), provide the Borrower with an offer to extend the Term Date in accordance with Section 3.21(d) or 3.21(e), as the case may be, and the Borrower, subject to Section 3.21(g), shall be entitled to accept any such offer at any time up to and including the last Business Day preceding the then current Term Date by written notice to the Agent of such acceptance.

(b)

Payment or Replacement by Borrower: Subject to Section 3.21(c), if a Requested Lender does not agree to make an offer to extend the Term Date (such Requested Lender being a "Non-Agreeing Lender" and any Requested Lender agreeing to make an offer to extend the Term Date applicable to it being an "Agreeing Lender") the Borrower may, but is not obligated, to:

(i): so long as there exists no Default or Event of Default and subject to Section 10.5, repay all Borrowings and other amounts owing hereunder to any Non-Agreeing Lender on or prior to the then current Term Date and upon such payment any Non-Agreeing Lender shall cease to

be a Lender hereunder and each such Non-Agreeing Lender's Commitment shall be terminated and the Total Commitment reduced accordingly; or

(ii): arrange for a replacement lender or lenders (which may be one or more of the Lenders) to replace each Non-Agreeing Lender's Borrowings and its Commitment provided that any such replacement lender (if it is not a Lender) shall have been approved by the Agent and each Fronting Lender (such approval not to be unreasonably withheld or delayed) and shall be novated into the Loan Documents in the place and stead of the Non-Agreeing Lender by execution of all necessary documentation on or prior to the then current Term Date and in respect of which the Lenders shall do all things and make all such adjustments as are reasonably necessary to give effect to any such replacement.

(c)

Non-Extension: The Agent shall not provide the Borrower with an offer to extend the Term Date in accordance with Section 3.21(a) if Requested Lenders holding more than thirty-three and one third percent (33¹/3%) of the aggregate of the Commitments of all Requested Lenders do not agree or are deemed not to agree to make an offer to the Borrower to extend the Term Date pursuant to the Request for an Offer of Extension. In any such case, the Term Date of each Requested Lender shall not be extended and the Term Period shall commence for all Requested Lenders on the then current Term Date.

(d)

Extension for all Requested Lenders: If all Requested Lenders agree to make an offer to the Borrower to extend the Term Date pursuant to a Request for an Offer of Extension and the Borrower accepts the applicable offer in accordance with Section 3.21(a), then the Term Date of each Requested Lender shall be extended for a period of three hundred and sixty-four (364) days from the date of the acceptance by the Borrower of the offer made to it to extend the Term Date by the Agent on behalf of such Requested Lenders.

(e)

Partial Extension: If, with respect to any Request for an Offer of Extension, the provisions of Section 3.21(c) or 3.21(d) are not applicable and there are Non-Agreeing Lenders under Section 3.21(b), then:

(i): the Term Date for all Agreeing Lenders in respect of whom the Borrower has accepted the offer made by them to extend the Term Date (such Agreeing Lenders being "Extending Lenders"), shall be extended for a period of three hundred and sixty-four (364) days from the date of the acceptance by the Borrower of the offer made to it to extend the Term Date by the Agent on behalf of such Lenders; and
(ii): the Term Date for each such Non-Agreeing Lender shall not be extended and the Term Period of each such Non-Agreeing Lender shall commence on the then current Term Date.

(f)

Independent Decision: The Borrower understands that consideration of any Request for an Offer of Extension constitutes an independent credit decision which each Requested Lender retains the absolute and unfettered discretion to make and that no commitment in this regard is hereby given by any Requested Lender.

(g)

Default or Event of Default: Notwithstanding the foregoing, the Borrower shall not be entitled to provide to the Agent a Request for an Offer of Extension if an Event of Default has occurred and is then continuing and shall not be entitled to accept any offer made by the Agent on behalf of the Agreeing Lenders to extend the Term Date if a Default or Event of Default has occurred and is continuing at the time of purported acceptance unless either the Default was subsisting at the time any Request for an Offer of Extension was made by the Borrower and the Borrower had advised the Agent thereof or, in any other case, such Default or Event of Default is waived by all of the Agreeing Lenders; provided that any such waiver shall be effective only for the purposes of this Section 3.21 unless otherwise specified by the Agreeing Lenders but any such specification shall not bind any Lenders who are not Agreeing Lenders.

3.22 Increase of Total Commitment

The Borrower may at any time and from time to time and provided the Term Period has not commenced for any Lender, add additional financial institutions hereunder as Lenders or, with the consent of the applicable Lender, increase the Commitment of a Lender and thereby increase the Total Commitment provided that at the time of any such addition:

(a): no Default or Event of Default has occurred and is continuing;
(b): the aggregate of the Total Commitment hereunder and the "Total Commitment" under the International Credit Facility does not exceed Cdn. $1,500,000,000;
(c): the Agent and each Fronting Lender has consented to such financial institution becoming a Lender, if it is not already a Lender, such consent not to be unreasonably withheld or delayed;
(d): concurrently with the addition of a financial institution as an additional Lender or the increase of a Lender's Commitment, such financial institution or Lender, as the case may be, shall purchase from each Lender such portion of the Borrowings of each such Lender as is necessary to ensure that all Borrowings of all Lenders in respect of whom the Term Period has not yet commenced and including therein such additional financial institution, are in accordance with the Pro-Rata Share of all such Lenders (including the new financial institution) and such financial institution shall execute such documentation as is required by the Agent, acting reasonably, to novate such financial institution as a Lender hereunder; and
(e): the Borrower has provided to the Agent a certified copy of a directors' resolution of the Borrower authorizing any such increase in the Total Commitment (which may be the original directors' resolution authorizing the Credit Facility) together with a legal opinion with respect thereto in substantially the same form as the opinion of the Borrower's counsel delivered in connection with the closing of the Credit Facility.

ARTICLE 4
REPAYMENT AND PREPAYMENT

4.1 Reduction of Commitment and Repayment of Borrowings

On the Term Date of each Lender, the Commitment of such Lender shall become equal to the lesser of the Equivalent Amount in Canadian Dollars of the Borrowings outstanding to such Lender on such Term Date and the Commitment of such Lender on such Term Date and, to the extent that the Equivalent Amount in Canadian Dollars of the Borrowings on such Term Date is in excess of such Commitment after giving effect to the foregoing, the Borrower shall, within five (5) Business Days, repay such excess. On the Maturity Date of each Lender, the Borrower shall repay all Borrowings then outstanding to such Lender (including, without limitation, posting cash collateral with respect to Letters of Credit as required by Section 3.15(a)) and the Commitment of such Lender shall be reduced to zero. The Borrower shall ensure that all Libor Loans and Bankers' Acceptances and BA Equivalent Advances forming a part of Borrowings of such Lender mature on or before the Maturity Date of such Lender.

4.2 Repayment of Borrowings due to Exchange Rate Fluctuations

If, due to exchange rate fluctuations, the amount of Borrowings (determined in Canadian Dollars with all Borrowings denominated in U.S. Dollars, Euros and Pounds Sterling being converted to the Equivalent Amount in Canadian Dollars) outstanding on any Business Day to any Lender exceeds the amount of such Lender's Commitment:

(a): by more than five percent (5%) on a day other than a Drawdown Date, Conversion Date or Rollover Date, the Agent shall advise the Borrower in writing of the amount of such excess and

the Borrower shall, within five (5) Business Days thereafter, repay, provide cash cover to be held by the Agent on behalf of such Lender in the manner provided for in Section 9.7 or otherwise reduce a portion of such Borrowings to the extent of the amount of the excess then subsisting; or

(b): by any amount on a Drawdown Date, Conversion Date or Rollover Date, the Borrower shall as part of such drawdown, Rollover or Conversion reduce or eliminate such excess on such date.

4.3 Cancellation and Prepayment

The Borrower may, without penalty or premium, at any time during the term of this Agreement upon three (3) Business Days prior written notice substantially in the form of Schedule A, cancel all or any portion of the Total Commitment or the Fronted LC Commitment of any Fronting Lender, as determined by the Borrower in its discretion, in each case in minimum amounts equal to the lesser of Cdn. $5,000,000 and the remaining balance of such Total Commitment or Fronted LC Commitment, as applicable, and multiples of Cdn. $5,000,000 thereafter if, on or prior to the last day of such notice period, the Borrower has:

(a): in the case of a cancellation of the Total Commitment, prepaid or otherwise reduced Borrowings outstanding to each Lender in an amount equal to the amount by which Borrowings outstanding to such Lender would otherwise be in excess of such Lender's Commitment immediately after the reduction of the Total Commitment provided for in such notice; and
(b): in the event such cancellation is in respect of all of the Total Commitment or the Fronted LC Commitment, as applicable, paid all accrued interest and other charges and fees in respect of the Borrowings or Fronted LC Commitment being repaid or reduced as aforesaid; and
(c): in the case of the cancellation of the entire Fronted LC Commitment of any Fronting Lender, the Borrower has, on or prior to the effective date of any such cancellation, returned to the Fronting Lender for cancellation all Fronted Letters of Credit issued by such Fronting Lender.

Any such notice of cancellation shall be irrevocable and the amount of the Total Commitment and the Commitment or the Fronted LC Commitment, as applicable, of each Lender or Fronting Lender, as applicable, so cancelled and reduced shall not be reinstated hereunder.

4.4 Cancellation or Transfer of a Lender's Commitment

If:

(a): any payment is required to be made by the Borrower to a Lender or Lenders (but not to all of the Lenders) pursuant to Section 6.3;
(b): any Lender or Lenders give(s) notice to the Borrower that Additional Compensation is payable by the Borrower to such Lender or Lenders (but not to all of the Lenders) pursuant to Section 10.2;
(c): a Lender (or Lenders) is (are) affected by the provisions of Section 10.3 or Section 10.4 but not all Lenders are so affected;
(d): a Lender does not provide its consent or agreement to a request by the Borrower for a waiver or amendment which requires the consent of all of the Lenders as provided for in Section 11.12(a);
(e): a Conflicted Lender does not waive its status as such pursuant to Section 3.4(b)(iii);
(f): a Fronting Lender does not consent on a timely basis to a new or replacement Lender becoming a Lender pursuant to Section 3.21, 3.22 or this Section 4.4;
(g): the Commitment of a Lender and its Affiliates is less than Cdn. $10,000,000; or

(h): a Lender fails to provide an Accommodation or Borrowing as and when required hereunder and such failure remains uncured for a period of two (2) Business Days after notice thereof by the Borrower to such Lender;

(any such Lender being called herein the "Affected Lender")

then the Borrower may so long as no Default or Event of Default has occurred and is continuing and without regard to Section 4.3:

(i): upon at least five (5) Business Days prior written notice to the Agent (other than in the case of Section 4.4(h) in which case written notice may be effective immediately), irrevocably cancel all but not part of the Affected Lender's Commitment (which shall include its Fronted LC Commitment, if any) if on or prior to the last day of such notice period the Borrower has prepaid or otherwise reduced all Borrowings outstanding to such Affected Lender, and paid all accrued interest and other charges and fees in respect of such Borrowings and Fronted Letters of Credit and, if such Lender is a Fronting Lender, returned to such Fronting Lender all Fronted Letters of Credit issued by it for cancellation; or
(j): within sixty (60) days of a Lender becoming an Affected Lender, arrange for a replacement lender or lenders (provided that such lender or lenders, if not a Lender, shall be approved by the Agent and each Fronting Lender, such approval not to be unreasonably withheld or delayed) to replace the Affected Lender's Commitment and any such replacement lender shall be novated into this Agreement in the place and stead of the Affected Lender upon payment to the Affected Lender of the amounts referred to in Section 4.4(i) hereof.

provided that, notwithstanding the foregoing, the Borrower may exercise its rights under either Section 4.4(i) and 4.4(j) pursuant to Section 4.4(d) if a Default has occurred and is continuing provided that all Lenders other than the Affected Lender have provided the consent or agreement required pursuant to Section 11.12(a) and that by exercising such rights the Default is cured or waived by all Lenders after giving effect to any such cancellation or replacement, as the case may be. If, in any circumstance, there is more than one Affected Lender, the Borrower shall deal with all such Affected Lenders in an equivalent manner.

4.5 Early Repayment

The Borrower shall not cancel all or any portion of the Total Commitment pursuant to Sections 4.3 or 4.4 if the Borrowings required to be repaid to a Lender as a result thereof include Libor Loans with a Libor Interest Period ending subsequent to the date of such cancellation or Bankers' Acceptances with a maturity date falling subsequent to the date of such cancellation or Letters of Credit with an expiry date ending subsequent to the date of such cancellation unless, on the date of such cancellation, the Borrower pays to the Agent at the Agent's Account for Payments, for the account of such Lender in respect of Libor Loans, the amount required to be paid pursuant to Section 10.5 and, in respect of Bankers' Acceptances, the face amount of any such Bankers' Acceptance (in which case the Agent shall pay to the Borrower its then current best rate for deposits of equal amounts for a term equal to the remaining term of such Bankers' Acceptance) and, in respect of Letters of Credit, an amount equal to the undrawn amount of all such outstanding Letters of Credit in accordance with Section 3.15(a).

4.6 Evidence of Indebtedness

The Agent shall open and maintain on the books of the Agent's Branch of Account, accounts and records evidencing the Borrowings and other amounts owing by the Borrower to the Agent and each Lender under this Agreement. The Agent shall debit therein the amount of such Borrowings and shall enter therein each payment of the Borrowings and interest thereon and fees and other amounts payable pursuant to this Agreement and shall record the Bankers' Acceptances accepted by each Lender and all other amounts becoming due to the Agent and each Lender under this Agreement. The Accounts constitute, in the absence of manifest error, prima facie evidence of the indebtedness of the Borrower to the Agent and each Lender pursuant to this Agreement, the date each Lender made each Borrowing available to the Borrower and the amounts the Borrower has paid from time to time on account of the Borrowings and interest thereon and fees payable pursuant to this Agreement and other amounts owing hereunder.

ARTICLE 5
PAYMENT OF INTEREST AND FEES

5.1 Interest on Cdn. Prime Loans

The Borrower shall pay interest in Canadian Dollars to the Agent on behalf of each Lender on each Cdn. Prime Loan made by each Lender at a rate per three hundred sixty-five (365) day period or three hundred sixty-six (366) day period, as the case may be, equal to the Cdn. Prime Rate plus the applicable Margin. A change in the Cdn. Prime Rate or the Margin will, in accordance with Section 5.12, simultaneously cause a corresponding change in the interest payable for a Cdn. Prime Loan. Such interest is payable monthly in arrears on the first Business Day following each Interest Date for the period commencing on and including the day after the immediately prior Interest Date up to and including the Interest Date and shall be calculated on a daily basis and on the basis of the actual number of days elapsed in a year of three hundred sixty-five (365) days or three hundred sixty-six (366) days, as applicable. The annual rates of interest to which the rates determined in accordance with the foregoing provisions of this Section are equivalent, are the rates so determined multiplied by the actual number of days in a period of one (1) year commencing on the first day of the period for which such interest is payable and divided by three hundred sixty-five (365) or three hundred sixty-six (366), as applicable.

5.2 Interest on U.S. Base Rate Loans

The Borrower shall pay interest in U.S. Dollars to the Agent on behalf of each Lender on each U.S. Base Rate Loan made by each Lender at a rate per three hundred sixty-five (365) day period or three hundred sixty-six (366) day period, as the case may be, equal to the U.S. Base Rate plus the applicable Margin. A change in the U.S. Base Rate or the Margin will, in accordance with Section 5.12, simultaneously cause a corresponding change in the interest payable for a U.S. Base Rate Loan. Such interest is payable monthly in arrears on the first Business Day following each Interest Date for the period commencing on and including the day after the immediately prior Interest Date up to and including the Interest Date and shall be calculated on a daily basis and on the basis of the actual number of days elapsed in a year of three hundred sixty-five (365) days or three hundred sixty-six (366) days, as applicable. The annual rates of interest to which the rates determined in accordance with the foregoing provisions of this Section 5.2 are equivalent, are the rates so determined multiplied by the actual number of days in a period of one (1) year commencing on the first day of the period for which such interest is payable and divided by three hundred sixty-five (365) or three hundred sixty-six (366), as applicable.

5.3 Interest on Libor Loans

The Borrower shall pay interest in Canadian Dollars, U.S. Dollars, Euros or Pounds Sterling, as applicable, to the Agent on behalf of each Lender on each Libor Loan made by each Lender for the period commencing on and including the first day of the Libor Interest Period applicable to such Libor Loan up to but not including the last day of such Libor Interest Period at a rate per three hundred sixty (360) day period for Libor Loans denominated in Canadian Dollars, U.S. Dollars and Euros and per three hundred sixty-five (365) day period for Libor Loans denominated in Pounds Sterling, equal to the sum of Libor plus the applicable Margin. A change in the Margin will, in accordance with Section 5.12, simultaneously cause a corresponding change in the interest payable for a Libor Loan. Such interest shall be payable on each Libor Interest Date applicable to such Libor Interest Period and shall be calculated on a daily basis and on the basis of the actual number of days elapsed in the period for which such interest is payable (including the first day of such period but excluding the date on which such interest is payable) divided by three hundred sixty (360). The annual rates of interest to which the rates determined in accordance with the foregoing provisions of this Section 5.3 are equivalent, are the rates so determined multiplied by the actual number of days in a period of one (1) year commencing on the first day of the period for which such interest is payable and divided by three hundred sixty (360) or three hundred sixty-five (365), as applicable.

5.4 Bankers' Acceptance Fees

The Borrower shall pay a fee in Canadian Dollars to the Agent on behalf of each Lender on each Bankers' Acceptance accepted by such Lender ("Acceptance Fees"). Such Acceptance Fees are payable forthwith upon the acceptance of each Bankers' Acceptance issued by the Borrower at a rate per three hundred and sixty-five (365) days equal to the Margin in effect on the acceptance of such Bankers' Acceptance calculated on the face amount of such Bankers' Acceptance and on the basis of the number of days in the term of such Bankers Acceptance divided by three hundred and sixty-five (365). The annual rate of fees to which the Acceptance Fees are equivalent, are the fees so determined multiplied by the actual number of days in a period of one (1) year commencing on the first day of the period for which such fee is payable and divided by three hundred and sixty-five (365). Acceptance Fees payable to the Lenders pursuant to this Section 5.4 shall be paid in the manner specified in Section 3.7. All Acceptance Fees payable on any date in respect of any issuance of Bankers' Acceptances shall be calculated by the Agent and payable by the Borrower based on the Margin in effect on such date; provided that if during the term of any such Bankers' Acceptance a change in the Margin occurs, the fees paid by the Borrower in respect of such Bankers' Acceptance shall be adjusted to reflect the Margin for the remaining term of the Bankers' Acceptance and the Borrower, in the case of an increase in the Margin, shall forthwith after receipt of a notice from the Agent make such payments to the Agent for the account of the Lenders as are necessary to reflect such change and the Lenders, in the case of a decrease in the Margin, shall forthwith credit any amount which would otherwise be refundable to the Borrower against amounts in respect of interest or fees accruing hereunder.

5.5 Letter of Credit Fees

(a): LC Fees: In consideration of each Lender's commitment to issue Direct Letters of Credit under this Agreement or be liable for its Pro-Rata Share of Fronted Letters of Credit under this Agreement, the Borrower hereby agrees to pay to the Agent, for the rateable account of each Lender (in proportion to such Lender's share of the undrawn and unexpired amounts of all outstanding Letters of Credit), a letter of credit fee (the "LC Fees") computed at the Margin multiplied by the average daily aggregate then undrawn and unexpired amount of the Letters of Credit outstanding during the period (or any portion thereof) for which payment is being made, payable quarterly in arrears for the Fiscal Quarter or portion thereof then ended on the first Business Day of the following calendar quarter and, as to each Lender, on the Maturity Date

applicable to such Lender, as applicable, and thereafter where a Letter of Credit remains outstanding after the Maturity Date of a Lender, on the first Business Day of each Fiscal Quarter occurring after the Maturity Date and on the expiry date of such Letter of Credit. The LC Fees shall be calculated on the basis of the actual number of days elapsed in a year of three hundred sixty-five (365) days.

(b): Fronting Fees: In consideration of each Fronting Lender agreeing to issue Fronted Letters of Credit under this Agreement, the Borrower hereby agrees to pay directly to such Fronting Lender, a fronting fee (the "Fronting Fee") computed at the Fronting Fee Rate multiplied by the average daily aggregate then undrawn and unexpired amount of the Fronted Letters of Credit issued by such Fronting Lender outstanding during the period (or any portion thereof) for which payment is being made, payable quarterly in arrears on the first Business Day of the following calendar quarter and on the Maturity Date and thereafter where a Letter of Credit remains outstanding after the Maturity Date of such Fronting Lender, on the first Business Day after each Fiscal Quarter occurring after the Maturity Date and on the expiry date of such Letter of Credit. The Fronting Fees shall be calculated on the basis of the actual number of days elapsed in a year of three hundred sixty-five (365) days.

5.6 Utilization Fees

The Borrower agrees that it shall pay to the Agent, for the benefit of the Lenders, a utilization fee ("Utilization Fees") in Canadian Dollars, in addition to the Margin, on Borrowings if at any time the aggregate of the Equivalent Amount in Canadian Dollars of all Borrowings hereunder is greater than 33% of the Total Commitment and for so long as such is the case (the "Utilization Fee Period"). The utilization fee shall be 10 bps and shall be calculated on the Equivalent Amount in Canadian Dollars of all Borrowings outstanding at the commencement of the Utilization Fee Period and on the Equivalent Amount in Canadian Dollars of all Borrowings made during the Utilization Fee Period. The utilization fee shall be payable quarterly in arrears by the Borrower on the first Business Day of each calendar quarter and on the Maturity Dates of the respective Lenders. Each payment of utilization fees shall be calculated for the period commencing on and including the first day of the immediately prior calendar quarter or the date of this Agreement, as the case may be, up to and including the last day of such immediately prior calendar quarter or the Maturity Date, as applicable, but only for each Utilization Fee Period in any such period. Such utilization fees shall be calculated on a daily basis on the basis of the actual number of days elapsed in a year of three hundred sixty-five (365) days. For the purposes of calculating whether utilization fees are payable pursuant to this Section 5.6, the amount of all Borrowings outstanding on each day in U.S. Dollars, Euros and Pounds Sterling shall be notionally converted to the Equivalent Amount in Canadian Dollars at the rate of exchange in effect for the purposes of determining an Equivalent Amount on such day.

5.7 Interest on Overdue Amounts

The Borrower shall, on demand, pay to the Agent on behalf of each Lender interest on all overdue payments in connection with this Agreement from the date any such payment becomes overdue and for so long as such amount remains unpaid at a rate per annum which is equal to:

(a): the Cdn. Prime Rate plus one percent (1%) in respect of all amounts due in Canadian Dollars; and
(b): the U.S. Base Rate plus one percent (1%) in respect of all amounts due in U.S. Dollars, Euros and Pounds Sterling.

Such interest on overdue amounts shall be computed daily, compounded monthly and shall be payable both before and after default, maturity and judgment.

5.8 Standby Fees

The Borrower shall pay standby fees to each Lender in Canadian Dollars to the Agent on behalf of each Lender quarterly in arrears on the first Business Day of each calendar quarter in each year during the term of this Agreement commencing with the first Business Day of the calendar quarter occurring after the date hereof. Each payment of standby fees shall be calculated for the period commencing on and including the date hereof or the last date for which such standby fees were payable hereunder, as the case may be, up to and including the last day of the calendar quarter for which such standby fees are to be paid or the Term Date applicable to each Lender (as applicable and whichever is earlier) and shall be in an amount equal to the Standby Fee Rate in effect on each day during such period calculated on the amount, if any, of the difference obtained by subtracting the Borrowings outstanding from such Lender during such period from the amount of such Lender's Commitment in effect during such period. For purposes of calculating standby fees payable pursuant to this Section 5.8, the amount of Borrowings outstanding from time to time in U.S. Dollars, Euros or Pounds Sterling, as applicable, on each day during the period for which such standby fees are payable shall be notionally converted to the Equivalent Amount in Canadian Dollars at the rate of exchange in effect for purposes of determining an Equivalent Amount on the first day of each month for such month or portion thereof in the calculation period. Such standby fees shall be calculated on a daily basis and on the basis of the actual number of days elapsed in a year of three hundred sixty-five (365) days or three hundred sixty-six (366) days, as the case may be.

5.9 Agent's Fees

The Borrower shall pay agency fees to the Agent for the Agent's sole account at the Agent's Account for Payments at the time or times and in the amount agreed to in writing by the Borrower and the Agent and such fees shall, for purposes of this Agreement, be deemed to be an amount payable pursuant to this Agreement.

5.10 Maximum Rate Permitted by Law

Under no circumstances shall a Lender be entitled to receive nor shall it in fact receive a payment or partial payment of interest, fees or other amounts under this Agreement at a rate that is prohibited by applicable law. Accordingly, notwithstanding anything herein or elsewhere contained, if and to the extent that under any circumstances, the effective annual rate of "interest" (as defined in Section 347 of the Criminal Code of Canada) received or to be received by a Lender (determined in accordance with such section) on any amount of "credit advanced" (as defined in that section) pursuant to this Agreement or any agreement or arrangement collateral hereto entered into in consequence or implementation hereof would, but for this Section 5.10, be a rate that is prohibited by applicable law, then the effective annual rate of interest, as so determined, received or to be received by the Lender on such amount of credit advanced shall be and be deemed to be adjusted to a rate that is one whole percentage point less than the lowest effective annual rate of interest that is so prohibited (the "adjusted rate"); and, if the Lender has received a payment or partial payment which would, but for this Section 5.10, be so prohibited then any amount or amounts so received by the Lender in excess of the adjusted rate shall and shall comprise and be deemed to have comprised a credit to be applied (together with interest thereon at the adjusted rate from the date of receipt of any such amount by the Lender to the date of its application as hereinafter provided) to subsequent payments on account of interest, fees or other amounts due to the Lender at the adjusted rate.

5.11 Waiver

To the extent permitted by law, any provision of the Judgment Interest Act (Alberta) and the Interest Act (Canada) which restricts the rate of interest on any judgment debt shall be inapplicable to this Agreement and is hereby waived by the Borrower.

5.12 Interest and Fee Adjustment

All interest and fees payable pursuant to Sections 5.1, 5.2, 5.3, 5.4, 5.5, 5.6 and 5.8 which are to be adjusted as a result of a change in the rating by any Rating Agency of the long term senior unsecured and unsubordinated debt of the Borrower and a corresponding change in the Margin, shall be adjusted effective on the date of such change in such rating and the Borrower and the Lenders shall make all adjustments as are necessary to give effect to any such change.

ARTICLE 6
PAYMENT AND TAXES

6.1 Time, Place and Currency of Payment

Each payment of principal, interest, fees and all other amounts payable by the Borrower pursuant to this Agreement shall be paid in the currency in which it is denominated for value on the day such amount is due failing which such payment shall be deemed to be received on the next following Business Day. If any day on which any amounts are payable hereunder is not a Business Day, such amount shall be deemed for all purposes of this Agreement to be due on the Business Day next following such day and such extension of time shall in such case be included in the computation of the payment of any interest or fees payable under this Agreement. Unless otherwise specifically provided for herein, all payments required to be made by the Borrower or a Lender shall be made to the Agent's Account for Payments. Receipt by the Agent from the Borrower of funds pursuant to this Agreement, as principal, interest, fees or otherwise, shall be deemed to be receipt of such funds by the Agent or Lenders, as the case may be.

6.2 Application of Payments Prior to an Event of Default

Except as otherwise agreed to by all of the Lenders in their sole discretion, all payments made by or on behalf of the Borrower pursuant to this Agreement prior to the delivery of an Acceleration Notice or the occurrence of an Event of Default specified in Section 9.1(c) or Section 9.1(d) shall (subject to Section 3.4(c) or Section 4.4(i)) be applied rateably among the Lenders and the Agent in accordance with amounts owed to such Lenders and the Agent in respect of each category of amounts set forth below, each such application to be made to the category or categories specified by the Borrower or, failing such direction, shall be made in the following order with the balance remaining after application in respect of each category to be applied to the next succeeding category:

(a): in payment of any amounts due and payable as and by way of recoverable expenses hereunder;
(b): in payment of any amounts due and payable as and by way of the Agent's fees referred to in Section 5.9;
(c): in payment of any amounts due and payable as and by way of the standby fees referred to in Section 5.8;
(d): in payment of any amounts due and payable as and by way of interest on Borrowings pursuant to Sections 5.1, 5.2 and 5.3, Acceptance Fees pursuant to Section 5.4, LC Fees pursuant to Section 5.5, Utilization Fees pursuant to Section 5.6 and interest on overdue amounts pursuant to Section 5.7; and
(e): in payment of any amounts (other than Borrowings) then due and payable by the Borrower hereunder other than amounts hereinbefore referred to in this Section 6.2;

with the balance to be applied to repay or otherwise reduce Borrowings in a manner so that the Borrowings and each basis of Borrowing outstanding hereunder to each Lender will, to the extent possible, be in the same proportion as the Pro-Rata Share of such Lender in respect of such Borrowings.

6.3 Taxes

(a)

Withholding: The Borrower agrees that any and all payments by the Borrower to or for the benefit of the Lenders under this Agreement shall be, except as required by applicable law or expressly provided in this Section 6.3(a) and Section 12.1, free and clear of and without set off, counterclaim, reduction or deduction for any and all present or future Taxes imposed by or on behalf of Canada or any political subdivision thereof, other than Excluded Taxes. If the Borrower shall be required to deduct or withhold any Taxes (other than Excluded Taxes) from or in respect of any sum payable hereunder to any Lender:

(i): the sum payable shall be increased as may be necessary so that, after making all required deductions or withholdings (including deductions applicable to additional sums payable under this Section 6.3(a)), such Lender has received an amount equal to the sum it would have received had no such deductions or withholdings been made and the Borrower hereby agrees to indemnify each Lender, as applicable, on an after-tax basis for any additional taxes on net income that such Lender may be obliged to pay as a result of the receipt of any such additional sums under this Section 6.3(a)(i);
(ii): the Borrower shall make such deductions or withholdings; and
(iii): the Borrower shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law and shall provide the Agent with copies of official receipts or other documentation evidencing such payment within a reasonable period of time from receipt by it of such receipts or other documentation.

If the Borrower is required by law to withhold, deduct or otherwise reduce or set-off amounts from any payments hereunder, but the Borrower is not required to make a corresponding increase in the sum payable pursuant to clause 6.3(a)(i) above, the Borrower shall notify the Agent in writing of the amount it has withheld, or intends to withhold, from any payment hereunder in respect of such legal requirement or, if the Agent and the Borrower so agree, the Agent may make or confirm such calculations as may be requisite to determine the amount of the required withholding and notify the Borrower thereof in writing. Provided that the amount stated by the Borrower in any such notice given by it was determined by the Borrower in good faith, the Borrower shall not be considered to be in default hereunder, or to have failed to make any required payment hereunder, for any purpose if the Borrower withholds from any such payment the amount set forth in any such notice.

(b): Refunds: If any Taxes (other than Excluded Taxes) are imposed on or with respect to any payment on or under this Agreement, in consequence of which the Borrower is required to make any additional payment to any Lender under Section 6.3(a), and if such Lender is entitled to a cash refund or to a credit which is applied against Taxes otherwise payable in a taxation year of a Lender and in either case which is both identifiable and quantifiable by such Lender as being attributable to the imposition of such Taxes (a "Tax Refund"), and such Tax Refund may be obtained without increased liability to such Lender by filing one or more forms, certificates, documents, applications or returns (collectively, the "Forms"), then such Lender shall notify the Borrower and shall, if requested by the Borrower, file such Forms in a timely fashion. If such Lender subsequently receives a Tax Refund, and such Lender is able to identify the Tax Refund as being attributable, in whole or in part, to the Tax with respect to which such additional payment was made, then such Lender shall promptly reimburse the Borrower such amount as such Lender shall determine acting reasonably and in good faith to be the proportion of the Tax Refund, together with any interest received thereon, attributable to such additional payment as will leave such Lender after the reimbursement in the same position as it would have been if the additional payment had not been required; provided that, if any Tax Refund reimbursed by a Lender to the Borrower is subsequently disallowed, the Borrower shall repay such Lender such amount (together

with interest and, if such refund resulted from a request by the Borrower, any applicable penalty payable by such Lender to the relevant taxing authority) promptly after receipt of notice by such Lender of such disallowance. The Borrower agrees to reimburse each such Lender for such Lender's reasonable out-of-pocket expenses, if any, incurred in complying with any request hereunder and agrees that all costs incurred by such Lender in respect of this Section 6.3(b) may be deducted from the amount of any reimbursement to the Borrower in respect of any Tax Refund pursuant to this Section 6.3(b).

(c)

Cooperation: In the event that the Borrower makes any indemnification payment to a Lender under Section 6.3 and in the event the Borrower determines in its good faith judgment that the Lender is not liable for the Taxes for which such indemnification payment was made, such Lender agrees to use reasonable efforts to cooperate with the Borrower in contesting the liability for such Taxes; provided that, the Borrower shall reimburse such Lender for any reasonable out-of-pocket costs and expenses incurred in providing such cooperation and shall indemnify and hold such Lender harmless from and against any liabilities incurred as a result of such Lender providing such cooperation or contesting such liability, and provided further that no such cooperation shall be required if such contest shall in such Lender's good faith judgment subject it to any liability not covered by such indemnity.

(d)

Representations of Schedule III Lenders: By its execution hereof, each Lender that is not listed on Schedule I or Schedule II to the Bank Act (Canada) represents and warrants to the Borrower, each of the other Lenders and the Agent, which representation and warranty shall survive the execution of this Agreement, that either:

(i): it is listed on Schedule III to the Bank Act (Canada), is not subject to the restrictions and requirements referred to in Section 524(2) of the Bank Act (Canada) and is resident, or deemed to be resident, in Canada for purposes of Part XIII of the Income Tax Act (Canada) and any amounts paid or credited to the Lender under the terms of this Agreement will be paid or credited to such Lender in respect of its Canadian banking business; or
(ii): it is an entity organized in Canada, wholly owned by a Canadian federal or provincial government, and resident in Canada for purposes of the Income Tax Act (Canada).

ARTICLE 7
CONDITIONS PRECEDENT TO DISBURSEMENT OF THE BORROWINGS

7.1 Conditions Precedent

This Agreement shall become effective on the date (the "Effective Date") each of the following conditions precedent are satisfied or waived by the Lenders hereunder:

(a)

as of the Effective Date, there exists no Default or Event of Default and the Agent has received a certificate of the Borrower certifying the same;

(b)

the representations and warranties contained in Article 2 are true and correct as of the Effective Date and the Agent has received a certificate of the Borrower certifying the same;

(c)

the Agent has received, in sufficient numbers for distribution to itself and each of the Lenders, the following:

(i): a duly executed copy of this Agreement;
(ii): a written instrument executed by the Borrower listing the Subsidiaries which are being designated as Designated Subsidiaries;

(iii): certificates of status in respect of the Borrower issued under the laws of Canada and the Provinces of Alberta, British Columbia and Saskatchewan and of any other jurisdiction referred to in Section 2.1(a) which the Agent requests, acting reasonably;
(iv): a certified copy of the constitutional documents and by-laws of the Borrower certified as of the Effective Date;
(v): a certified copy of a resolution of the board of directors of the Borrower relating to its authority to execute, deliver and perform its obligations under the Loan Documents and the manner in which and by whom the foregoing documents are to be executed and delivered, certified as of the Effective Date;
(vi): a certificate of the Borrower dated as of the Effective Date setting forth specimen signatures of the individuals who will be executing the Loan Documents on its behalf;
(vii): a certificate of the Borrower certifying as of the Effective Date the current rating provided by each of Moody's and S&P to the long term senior unsecured and unsubordinated debt of the Borrower;
(viii): a duly executed and completed certificate of the Borrower as at December 31, 2003 certifying as to the Consolidated Debt to Capitalization Ratio as at such date and as to the test set forth in Section 8.1(y) as at such date on the assumption that the Designated Subsidiaries as of such date were the Subsidiaries designated pursuant to Section 7.1(c)(ii);
(ix): evidence of repayment and cancellation of Tranche A under the syndicated credit agreement dated April 10, 2002 between the Borrower, a syndicate of lenders and Royal Bank of Canada, as agent;
(x): evidence of concurrent closing of the International Credit Facility;
(xi): an opinion of Messrs. Fraser Milner Casgrain LLP, counsel to the Borrower, addressed to the Agent and each Lender with respect to the Borrower, in form and substance satisfactory to the Lenders, acting reasonably;
(xii): an opinion of Messrs. Burnet, Duckworth & Palmer LLP, counsel to the Agent and the Lenders, addressed to the Agent and each Lender with respect to the transactions provided for herein, in form and substance satisfactory to the Lenders, acting reasonably;
(xiii): evidence satisfactory to the Lenders, acting reasonably, that the funding of the Borrowings for the purposes set out herein should not violate any of the U.S. Economic Sanctions or Canadian economic sanctions; and
(xiv): such other closing documents and documentation as the Agent may reasonably request for delivery on the Effective Date;

(d): the Lenders, acting reasonably, are satisfied that the Borrower has implemented procedures and controls sufficient to ensure that the Borrowings are to be used only for the purposes provided for herein and that none of such Borrowings will be used to fund operations, or finance investments, in any country targeted by the U.S. Economic Sanctions or to make payments to any country or person targeted by the U.S. Economic Sanctions;
(e): the Agent and the Lenders shall have received all fees and expenses due under the Loan Documents on the Effective Date as agreed to with the Borrower; and
(f): the Agent has received, in form and substance satisfactory to the Agent, a duly executed agreement between the Borrower and the Agent with respect to fees payable pursuant to Section 5.9.

7.2 Continuing Conditions Precedent

(a)

The obligation of each Lender to make available any Borrowings (except by way of Conversion or Rollover) after the Effective Date is subject to and conditional upon satisfaction of the conditions precedent set forth in Section 7.1 on the Effective Date and that on each Drawdown Date:

(i): there exists no Default or Event of Default and the Agent has received a certificate of the Borrower certifying the same; and
(ii): the representations and warranties referred to in Section 2.1 are true and correct in all respects with the same effect as if made as of that Drawdown Date and will be true and correct after giving effect to the Borrowing and the Agent has received a certificate of the Borrower certifying the same.

(b)

If on any Conversion Date or Rollover Date, as applicable, there exists a Default or Event of Default, the Borrower shall so advise the Agent but shall nonetheless be entitled to a Conversion or Rollover in accordance with the terms of Section 3.18 or 3.19, as applicable.

7.3 Waiver of a Condition Precedent

The terms and conditions of Sections 7.1 and 7.2 are inserted for the sole benefit of the Agent and the Lenders and may be waived by the Agent by or with the prior consent of all of the Lenders in whole or in part with or without terms or conditions, in respect of all or any portion of the Borrowings, without affecting the right of the Lenders to assert such terms and conditions in whole or in part in respect of any other Borrowing.

ARTICLE 8
COVENANTS OF THE BORROWER

8.1 Covenants of the Borrower

During the term of this Agreement, the Borrower covenants with each of the Lenders and the Agent that:

(a): Payment and Performance: the Borrower shall duly and punctually pay all sums of money payable by it hereunder as and when due and the Borrower shall and shall cause each Subsidiary to perform all other obligations on its part to be performed under the terms of the Loan Documents at the times and places and in the manner provided for therein;
(b): Corporate Existence: subject to Section 8.1(x), the Borrower shall maintain its corporate existence in good standing under the laws of Canada and register and qualify and remain registered and qualified as a corporation authorized to carry on business under the laws of each jurisdiction in which the nature of any material business conducted by it or the character of any material properties and assets owned or leased by it requires such registration and qualification except where failure to obtain and maintain such registration or qualification would not reasonably be expected to have a Material Adverse Effect;
(c): Existence of Designated Subsidiaries: subject to Section 8.1(x), the Borrower shall cause each Designated Subsidiary to maintain its corporate or partnership existence in good standing under the laws of the jurisdiction of incorporation or creation, as applicable, and shall cause each Designated Subsidiary to duly register and qualify and remain duly registered and qualified as a corporation or partnership authorized to carry on business under the laws of each jurisdiction in which the nature of any material business transacted by it or the character of any material properties and assets owned or leased by it requires such registration and qualification except where failure to obtain and maintain such registration or qualification would not reasonably be expected to have a Material Adverse Effect;

(d)

Maintenance of Properties: the Borrower shall and shall cause each Designated Subsidiary to maintain and operate all of its material properties and assets, including, without limitation, its oil and gas properties and related production facilities, in a good and workmanlike manner and in accordance with good business practice and, to the extent applicable, good oilfield practice except where the failure to do so would not reasonably be expected to have a Material Adverse Effect;

(e)

Insurance: the Borrower shall, or shall cause the applicable Designated Subsidiary to, maintain in full force and effect such policies of insurance in such amounts issued by insurers of recognized standing covering the properties and operations of the Borrower and the Designated Subsidiaries including, without limitation, their respective oil and gas properties and related production facilities, as is customarily maintained by persons of comparable size and financial standing to the Borrower and its Designated Subsidiaries engaged in the same or similar business in the localities where their properties and operations are located except where the failure to have such policies of insurance in place would not reasonably be expected to have a Material Averse Effect;

(f)

Compliance With Laws and Regulations: the Borrower shall and shall cause each Designated Subsidiary to:

(i): comply in all respects with all applicable laws, rules, regulations and orders of governmental authorities, including, without limitation, Environmental Laws; and
(ii): observe and conform in all respects to all valid requirements of any governmental authority relative to any of its assets and all covenants, terms and conditions of all agreements upon or under which any of its assets are held;

except to the extent failure to so comply or failure to so observe and conform does not have and would not reasonably be expected to have a Material Adverse Effect;

(g): Notice of Environmental Damage: the Borrower shall, promptly upon acquiring actual knowledge thereof, provide the Agent with written notice of the discovery of any Release of a contaminant into the environment from or upon the land or property of the Borrower or a Subsidiary which is contrary to applicable Environmental Laws and which has had or would reasonably be expected to have a Material Adverse Effect;
(h): Additional Environmental Information: the Borrower shall, upon the request of the Agent (acting reasonably), make available for discussion with the Lenders at reasonable times during Business Days and on a reasonable number of occasions the senior officers of the Borrower and any Designated Subsidiary primarily responsible for the environmental activities and affairs of the Borrower and any such Designated Subsidiary;
(i): Payment of Taxes and Government Levies: the Borrower shall and shall cause each Designated Subsidiary to pay or cause to be paid all material rents, Taxes, rates, levies, royalties and assessments, ordinary or extraordinary, government fees, dues, and other similar obligations to pay money validly levied, assessed or imposed upon it, or upon its properties or any part thereof, by any competent governmental authority in any jurisdiction where the Borrower or such Designated Subsidiary is required by Section 8.1(b) or 8.1(c), respectively, to register or qualify to carry on business, as and when the same become due and payable, except to the extent failure to do so would not be reasonably expected to have a Material Adverse Effect, and to the extent payment of any such amount is being contested by it, the Borrower has established adequate reserves in accordance with GAAP for the payment thereof if, and to the extent, required by GAAP;
(j): Notice of Litigation: the Borrower shall provide the Agent with prompt written notice of any action, suit, litigation or other proceeding which is commenced or threatened in writing against the Borrower or any Designated Subsidiary and which has or would reasonably be expected to have a Material Adverse Effect;

(k): Notice of Defaults: the Borrower shall provide notice to the Agent of any Default or Event of Default no later than five (5) Business Days after any person referred to in the definition of Compliance Certificate becomes aware that a Default or Event of Default has occurred and is continuing;
(l): Maintenance of Books and Records: the Borrower shall and shall cause each Designated Subsidiary to keep proper and adequate records and books of account in a manner sufficient to enable the preparation of financial statements in accordance with Generally Accepted Accounting Principles and, if an Event of Default has occurred and is continuing, upon the request of the Agent, make the same available for confidential inspection by the Agent and the Lenders and their respective employees at all reasonable times and upon reasonable notice;
(m): Year End Financial Statements of the Borrower: the Borrower shall furnish to the Agent as soon as made publicly available, and in any event within ninety (90) days of each Fiscal Year of the Borrower, a consolidated balance sheet of the Borrower as at the close of such Fiscal Year and a consolidated statement of earnings and a consolidated statement of changes in cash position of the Borrower for such Fiscal Year, in each case setting forth in comparative form the corresponding figures of the preceding Fiscal Year together with an auditor's report thereon expressed in accordance with generally accepted auditing standards and Generally Accepted Accounting Principles as then in effect; provided the Borrower shall be deemed to have complied with this Section 8.1(m) if it advises the Agent that it has posted such financial statements (and has in fact posted such financial statements) on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com;
(n): Quarterly Financial Statements of the Borrower: the Borrower shall furnish to the Agent as soon as publicly available and in any event within forty-five (45) days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, a consolidated balance sheet of the Borrower as at the end of such Fiscal Quarter and a consolidated statement of earnings and a consolidated statement of changes in cash position of the Borrower for such period; provided the Borrower shall be deemed to have complied with this Section 8.1(n) if it advises the Agent that it has posted such financial statements (and has in fact posted such financial statements) on SEDAR;
(o): Compliance Certificate: the Borrower shall furnish to the Agent as soon as available and in any event within one hundred and five (105) days of each Fiscal Year of the Borrower, and within sixty (60) days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, a duly executed and completed Compliance Certificate;
(p): Regulatory Filings: the Borrower shall promptly make all filings it is required to make with any governmental or regulatory authority in each jurisdiction where it carries on a material portion of its business or in each jurisdiction in Canada or under the federal laws of the United States where it is required by applicable securities laws to make any filings which, in any case, shall include, for greater certainty, material change reports, except, in each case, to the extent failure to do so would not reasonably be expected to have a Material Adverse Effect and shall furnish to the Agent (or advise the Agent of posting of the same on SEDAR or, if applicable, the Electronic Data Gathering, Analysis and Retrieval system ("EDGAR") at www.edgar.com) all financial statements, proxy statements, information circulars, notices and reports as it shall send to its shareholders together with copies of all final prospectuses, registration statements, material change reports and annual information forms filed by it with any Canadian or United States securities regulatory authorities;
(q): Additional Information: the Borrower shall furnish to the Agent any additional information in the control or possession of or readily available to the Borrower or any Subsidiary regarding the business affairs, operations, properties and assets and financial condition of the Borrower and its Subsidiaries as the Agent may reasonably request from time to time, provided that the Borrower

shall not be required to provide to the Agent under this Section 8.1(q) any information which the Borrower or any Subsidiary is prohibited by contract or law from so providing or which would require the Borrower to make a securities filing or press release in order to comply with securities disclosure rules as a result of such disclosure to the Agent;

(r)

Payment of Other Obligations: the Borrower shall and shall cause each Designated Subsidiary to pay or cause to be paid all material rents, royalties and similar obligations to pay money validly imposed upon it, or upon its properties or assets or any part thereof, as and when the same become due and payable or shall establish adequate reserves (in accordance with GAAP) for payment of any such obligation the payment of which is being contested in good faith, unless the failure to make such payments would not, individually or in the aggregate, have a Material Adverse Effect;

(s)

Rating: forthwith upon release of the same by any Rating Agency and notification of the Borrower, the Borrower shall advise the Agent if any Rating Agency changes, discontinues, suspends or puts on review for a potential downgrade its rating of the long term senior unsecured and unsubordinated debt of the Borrower;

(t)

Ranking with Other Debt: the Borrower shall ensure that its payment obligations hereunder rank at least pari passu in right of payment with the other most senior unsecured and unsubordinated Indebtedness for Borrowed Money of the Borrower;

(u)

Change of Business: the Borrower shall ensure that notwithstanding any additions to, deletions from or other changes to the nature of its and its Subsidiaries' businesses, operations or properties, the businesses and operations of the Borrower and its Subsidiaries taken as a whole shall consist primarily of businesses forming part of the Core Business;

(v)

Use of Proceeds and U.S. Economic Sanctions: the Borrower shall only use the Borrowings obtained hereunder for the purposes set out in Section 3.3 and shall maintain in place at all times procedures and measures to ensure that:

(i): the Borrowings are only used for such purposes; and
(ii): none of the Borrowings are used to fund operations, or finance investments, in any country targeted by any of the U.S. Economic Sanctions or to make payments to any country or person targeted by the U.S. Economic Sanctions;

(w)

Negative Pledge: except for Permitted Encumbrances, neither the Borrower nor any Designated Subsidiary shall create, incur, assume or suffer to exist any Security Interest, upon or with respect to any of its undertaking, properties, rights or assets, whether now owned or hereafter acquired and including, without limitation, its oil and gas properties and related production facilities unless at the time thereof or prior thereto the indebtedness and liabilities of the Borrower hereunder and under the International Credit Facility are equally and rateably secured with the indebtedness and liabilities of the Borrower and/or its Designated Subsidiaries secured by any such Security Interest;

(x)

Restriction on Amalgamation etc.: neither the Borrower nor any Designated Subsidiary shall merge, amalgamate, consolidate or otherwise enter into any transaction whereby all or substantially all of its undertaking, property and assets would become the property of any other person other than the Borrower or a Designated Subsidiary (each called a "Successor") whether by way of reconstruction, reorganization, recapitalization, consolidation, amalgamation, merger, transfer, sale

or otherwise (each a "Transaction") without the consent of the Lenders, such consent not to be unreasonably withheld, provided that no such consent will be required if:

(i)

prior to or contemporaneously with the consummation of such Transaction and if the Transaction involves the Borrower:

(A): the Successor will be bound by or have assumed all the covenants and obligations of the Borrower under this Agreement and the other Loan Documents; and
(B): this Agreement and the other Loan Documents will be valid and binding obligations of the Successor, enforceable against the Successor and entitling the Lenders, as against the Successor, to exercise all its rights under, as applicable, this Agreement and the other Loan Documents;

and, if the Transaction involves the Borrower, the Successor shall also execute and/or deliver to the Lenders such documents (including legal opinions of counsel to the Successor), if any, as may, in the opinion of the Agent, acting reasonably, be necessary to effect or establish (A) and (B) above;

(ii): if the Transaction involves the Borrower, the Successor is a person organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia or the laws of Canada or any province or territory thereof, or, if such consolidation, amalgamation, merger, statutory arrangement or other transaction would not impair the rights of the Lenders, in any other jurisdiction;
(iii): immediately after such Transaction and after giving effect thereto, the unsubordinated debt of the Borrower or such Successor is or will be rated at least Baa3 by Moody's or BBB- by S&P;
(iv): if the Transaction involves the Borrower, such Transaction shall be on such terms and shall be carried out in such manner as to preserve and not to impair any of the rights and powers of the Lenders hereunder and under any other Loan Documents and not to affect adversely the liability of the Lenders for any present or future taxes, duties, assessments or charges of whatsoever nature imposed or levied by or on behalf of the Government of Canada or any province or political subdivision thereof other than Excluded Taxes; and
(v): no Default or Event of Default shall exist after or result from such Transaction;

(y): Designated Subsidiary Asset Test: the Borrower shall not permit, for a period of more than sixty (60) days after the last day of the first three (3) Fiscal Quarters of the Fiscal Year or for a period of more than ninety (90) days after the last day of the Fiscal Year, the aggregate of the Consolidated Net Tangible Assets of the Borrower and its Designated Subsidiaries as determined on an unconsolidated basis as of the last day of such Fiscal Quarter and by excluding all amounts which would be excluded in the Consolidated Net Tangible Assets of the Borrower reported on a consolidated basis as of the last day of such Fiscal Quarter to be less than seventy percent (70%) of the Consolidated Net Tangible Assets of the Borrower, as shown on the most recent consolidated balance sheet of the Borrower delivered to the Agent pursuant to Section 8.1(m) or 8.1(n), as applicable and as determined as of the last day of such Fiscal Quarter and in accordance with GAAP to the extent relevant;
(z): Restriction on Swaps: the Borrower shall not and shall not permit any Designated Subsidiary to enter into any Swap which is entered into for speculative purposes; provided, however, that the Borrower shall be considered in compliance with this covenant so long as the Borrower has in place formal policies prohibiting entering into Swaps for speculative purposes and takes commercially reasonable steps to enforce such policies; and

(aa): Further Assurances: the Borrower shall, within thirty (30) days after notice thereof from the Agent, do all such further acts and things and execute and deliver all such further documents as shall be required by the Agent, acting reasonably, in order to ensure the material terms and provisions of the Loan Documents are fully performed and carried out and to ensure that each material provision of each Loan Document is and continues to be a valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms (except as enforceability may be limited by general principles of equity and bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by moratorium laws from time to time in effect).

8.2 Financial Covenants

During the term of this Agreement, the Borrower covenants with each of the Lenders and the Agent that, without the consent of all of the Lenders, the Borrower shall not permit the Consolidated Debt to Capitalization Ratio to be greater than .60 to 1.0 as at the end of any Fiscal Quarter.

8.3 Designation of Designated Subsidiaries

The Borrower may, so long as no Event of Default will exist immediately thereafter or result therefrom:

(a): designate by notice in writing to the Agent that a Subsidiary, which is not otherwise a Designated Subsidiary, be a Designated Subsidiary for all purposes of this Agreement (which designation may be retroactive to the end of the preceding Fiscal Quarter); and
(b): revoke the designation of a Subsidiary as a Designated Subsidiary at any time; provided, for certainty, the Borrower shall not be entitled to revoke any such designation in respect of a Designated Subsidiary which is a Designated Subsidiary pursuant to paragraph (a) of the definition thereof.

ARTICLE 9
EVENTS OF DEFAULT

9.1 Events of Default

The occurrence of any one or more of the following events or circumstances constitutes an Event of Default under this Agreement:

(a)

Repayment of Borrowings: the failure to repay or otherwise reduce the Borrowings or any portion thereof when due for repayment, payment or other reduction hereunder;

(b)

Repayment of Other Amounts: the failure to pay any amount due hereunder (other than Borrowings) for a period of three (3) Business Days after the date on which such amount was due;

(c)

Voluntary Insolvency: if the Borrower or any Designated Subsidiary shall:

(i): apply for or consent to the appointment of a receiver, trustee or liquidator of itself or of all or a substantial part of its assets;
(ii): make a general assignment for the benefit of creditors;
(iii): commit an act of bankruptcy under the Bankruptcy and Insolvency Act (Canada) or under any analogous statute of any other jurisdiction;
(iv): commence any cause, proceeding or other action under any existing or future law relating to bankruptcy, insolvency, reorganization or relief of debtors seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking

reorganization, arrangement, adjustment, winding up, liquidation, dissolution, composition or other relief with respect to it or its debts or an arrangement with creditors or taking advantage of any insolvency law or proceeding for the relief of debtors, or file an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding or file a notice of intention or a proposal under the Bankruptcy and Insolvency Act (Canada); or

(v): take corporate or partnership action for the purpose of effecting any of the foregoing;

unless, in the case of any such action in respect of a Designated Subsidiary, such action would not reasonably be expected to have a Material Adverse Effect;

(d)

Involuntary Insolvency: if any cause, proceeding or other action shall be instituted in any court of competent jurisdiction, against the Borrower or any Designated Subsidiary, seeking in respect of the Borrower or such Designated Subsidiary an adjudication in bankruptcy, reorganization, dissolution, winding up, liquidation, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or the like of the Borrower or such Designated Subsidiary or of all or any substantial part of its assets, or any other like relief in respect of the Borrower or such Designated Subsidiary under any bankruptcy or insolvency law and:

(i): such cause, proceeding or other action results in an entry of an order for relief or any such adjudication or appointment unless such order, adjudication or appointment is stayed or otherwise effectively reversed within fifteen (15) days thereof; or
(ii): if such cause, proceeding or other action is being contested by the Borrower or such Designated Subsidiary in good faith, the same shall continue undismissed, or unstayed and in effect, for any period of sixty (60) consecutive days;

(e)

Cross Default: if the Borrower or any Designated Subsidiary is in default under any term or provision of any agreement evidencing Indebtedness for Borrowed Money (other than this Agreement and any agreement evidencing Non-Recourse Debt of the Borrower or any Designated Subsidiary but including, for this purpose, unless constituting Non-Recourse Debt, any agreement evidencing a Capital Lease, a Swap, a Purchase Money Obligation or a Production Payment) between itself and any lender (which, for purposes hereof, shall include any lessor under a Capital Lease, a counter party under a Swap, a lender under a Purchase Money Obligation and a purchaser under a Production Payment) and as a result of such default such lender shall have accelerated or shall have the right to accelerate the repayment of any indebtedness of the Borrower or such Designated Subsidiary, or if any lender shall demand repayment of any indebtedness (other than Non-Recourse Debt) which is repayable on demand and is owing to it by the Borrower or such Designated Subsidiary and such indebtedness shall not be paid within the time required by law, and the aggregate amount of all such indebtedness outstanding at any one time to which all such defaults or demands relate is in excess of the greater of Cdn. $75,000,000 or the Equivalent Amount in any other currency and 2% of Consolidated Shareholders' Equity based upon the Borrower's most recent consolidated financial statements delivered to the Agent pursuant to Section 8.1(m) or 8.1(n), as applicable;

(f)

Judgments: if final judgments for the payment of money (other than Non-Recourse Debt of the Borrower or any Designated Subsidiary) aggregating in excess of the greater of Cdn. $75,000,000 or the Equivalent Amount in any other currency and 2% of Consolidated Shareholders' Equity based upon the Borrower's most recent consolidated financial statements delivered to the Agent pursuant to Section 8.1(m) or 8.1(n), as applicable, shall be rendered against the Borrower or any Designated Subsidiary and the same shall remain undischarged and not effectively stayed or

appealed for a period of the lesser of sixty (60) days and the relevant period under the laws of the applicable jurisdiction during which such judgments may be appealed;

(g): Representations and Warranties: if any representation or warranty made or deemed to be made by the Borrower in Article 2 or repeated pursuant to Section 7.1 or 7.2 shall prove to have been incorrect, when made or deemed to be made, in any material respect and the underlying facts, if capable of being remedied such that the representation and warranty if made at such time would be correct, are not so remedied within such period (not exceeding 60 days after notice of such incorrectness is given to the Borrower by the Agent) as may be required to so remedy such facts but only if and for so long as the remedying thereof was and continues to be diligently and in good faith pursued and there is no Material Adverse Effect as a result of such facts;
(h): Writs: if a writ, execution, attachment or similar process is issued or levied against the property of the Borrower or any Designated Subsidiary in connection with any judgment or judgments against the Borrower or such Designated Subsidiary (other than in respect of Non-Recourse Debt of the Borrower or any Designated Subsidiary or, subject to Section 9.1(n), as a result of any expropriation proceedings commenced by any governmental authority) aggregating in excess of the greater of Cdn. $75,000,000 or the Equivalent Amount in any other currency and 2% of Consolidated Shareholders' Equity based upon the Borrower's most recent consolidated financial statements delivered to the Agent pursuant to Section 8.1(m) or 8.1(n), as applicable, and such writ, execution, attachment or similar process is not released, satisfied, discharged, vacated or stayed within thirty (30) days after the Borrower or such Designated Subsidiary has notice of its entry, commencement or levy;
(i): Encumbrancers: if any encumbrancers or lienors take possession of any part of the property of the Borrower or any Designated Subsidiary (other than property in which a holder of Non-Recourse Debt of the Borrower or any Designated Subsidiary has a Security Interest or, subject to Section 9.1(n), property which is the subject of expropriation proceedings) which property has a fair market value aggregating in excess of the greater of Cdn. $75,000,000 or the Equivalent Amount in any other currency and 2% of Consolidated Shareholders' Equity based upon the Borrower's most recent consolidated financial statements delivered to the Agent pursuant to Section 8.1(m) or 8.1(n), as applicable, or if execution or other similar process is enforced against such property and such taking of possession or enforcement is not being contested by the Borrower or such Designated Subsidiary in good faith and the encumbrancer or lienor remains in possession for any period of thirty (30) consecutive days;
(j): Carrying on Business: if the Borrower or any Designated Subsidiary ceases or takes affirmative action to cease to carry on any part of its business as presently conducted by it other than as provided for herein if such cessation or action has or would reasonably be expected to have a Material Adverse Effect;
(k): Financial Covenants and Designated Subsidiary Asset Test: if the Agent provides notice to the Borrower in writing that the Borrower is in breach of or has failed to comply with the provisions of Section 8.2 or 8.1(y);
(l): Invalid Loan Documents: if the Agent notifies the Borrower in writing that the representation and warranty set forth in Section 2.1(f) would, if made on the date of such notice, be incorrect in respect of any of the Loan Documents, such condition continues for a period exceeding thirty (30) days without being cured to the satisfaction of the Agent, acting reasonably, and such incorrectness would reasonably be expected to materially and adversely affect the rights and remedies of the Lenders under the Loan Documents taken as a whole;
(m): Notice of Default: if the Borrower breaches Section 8.1(k) and such breach continues for a period of three (3) Business Days;

(n): Expropriation: if expropriation proceedings are commenced by any governmental authority in respect of any property of the Borrower or any Designated Subsidiary, the result of which would reasonably be expected to have a Material Adverse Effect; or
(o): Breach of Other Covenants: if there is a breach or failure of due performance by the Borrower or any Designated Subsidiary of any covenant in any of the Loan Documents to which it is a party (other than those heretofore dealt with in this Section 9.1) for a period of thirty (30) consecutive days after notice in writing of such breach or failure shall have been given to the Borrower or such Designated Subsidiary or, if such breach or failure is capable of being remedied, such longer period, not exceeding ninety (90) days, as is required to remedy such breach or failure but only if and for so long as the remedying thereof was and continues to be diligently and in good faith pursued and there is no Material Adverse Effect as a result of such breach or failure.

9.2 Acceleration and Demand

Upon the occurrence of any Event of Default which has not been remedied or waived as provided in Section 11.12, the Agent shall, if so required by the Majority Lenders, by written notice to the Borrower (an "Acceleration Notice"):

(a): declare the Total Commitment and each Lender's Commitment and the right of the Borrower to apply for further Accommodations to be terminated; and
(b): declare all indebtedness and liabilities (whether matured or unmatured) of the Borrower outstanding to the Lenders hereunder (including the face amount of all Bankers' Acceptances and the undrawn amount of all outstanding Letters of Credit) to be immediately due and payable (or to be due and payable at such later time as may be stated in such notice) without further demand, presentation, protest or other notice of any kind, all of which are expressly waived by the Borrower;

but upon the occurrence of an Event of Default specified in Sections 9.1(c) or 9.1(d), the Total Commitment shall automatically terminate and all indebtedness and liabilities specified in Section 9.2(b) shall automatically become due and payable, in each case without any requirement that notice be given to the Borrower. Immediately upon the occurrence of an Event of Default specified in Section 9.1(c) or 9.1(d), or at the time stated in an Acceleration Notice, the Borrower shall pay to the Agent on behalf of each Lender all amounts owing or payable in respect of such indebtedness and liabilities specified in Section 9.2(b), failing which all rights and remedies of the Lenders and the Agent under the Loan Documents shall thereupon become enforceable and shall be enforced by the Agent in accordance with the determinations of the Majority Lenders.

9.3 Waiver of Default

Any single or partial exercise by any Lender, the Agent or by the Agent on behalf of any Lender of any right or remedy for a default or breach of any term, covenant, condition or agreement contained in the Loan Documents shall not be deemed to be a waiver of or to alter, affect or prejudice any other right or remedy to which the Agent or such Lender may be lawfully entitled for the same default or breach, and any waiver by any Lender, the Agent or by the Agent on behalf of any Lender of the strict observance, performance or compliance with any term, covenant, condition or agreement contained in the Loan Documents, and any indulgence granted thereby, shall be deemed not to be a waiver of any subsequent default. To the extent permitted by applicable law, the Borrower hereby waives any rights now or hereafter conferred by statute or otherwise which may limit or modify any of the Agent's or Lenders' rights or remedies under the Loan Documents.

9.4 Application of Payments Following Demand and Acceleration

Except as otherwise agreed to by all the Lenders in their sole discretion, any sum received by the Agent at any time after delivery of an Acceleration Notice or the occurrence of an Event of Default specified in Sections 9.1(c) or 9.1(d), which the Agent is obliged to apply in or towards satisfaction of sums due from the Borrower hereunder shall be applied by the Agent among the Lenders and the Agent in accordance with amounts owed to the Lenders and the Agent in respect of each category of amounts set forth below, each such application to be made in the following order with the balance remaining after application in respect of each category to be applied to the next succeeding category:

(a): in or towards payment of any fees or expenses then due and payable to the Agent hereunder;
(b): rateably among the Lenders in respect of amounts due and payable to the Lenders as and by way of recoverable expenses hereunder;
(c): rateably among the Lenders in respect of amounts due and payable to the Lenders by way of interest pursuant to Sections 5.1, 5.2 and 5.3, Acceptance Fees pursuant to Section 5.4, LC Fees pursuant to Section 5.5, Utilization Fees pursuant to Section 5.6, interest on overdue amounts pursuant to Section 5.7 and standby fees pursuant to Section 5.8;
(d): rateably among the Lenders in respect of any other amount (other than Borrowings) not hereinbefore referred to in this Section 9.4 which are then due and payable by the Borrower hereunder;
(e): in or towards repayment to the Lenders of the Borrowings then outstanding hereunder in accordance with the provisions of Section 11.11; and
(f): any balance remaining to the Borrower or as otherwise required by applicable law.

9.5 Remedies Cumulative

For greater certainty, it is expressly understood and agreed that the rights and remedies of the Agent and the Lenders under the Loan Documents are cumulative and are in addition to and not in substitution for any rights or remedies provided by law; any single or partial exercise by the Agent or any Lender of any right or remedy for a default or breach of any term, covenant, condition or agreement therein contained shall not be deemed to be a waiver of or to alter, affect or prejudice any other right or remedy or other rights or remedies to which the Agent or such Lender or any of the other Lenders may be lawfully entitled for the same default or breach, and any waiver by the Agent or any Lender of the strict observance, performance or compliance with any term, covenant, condition or agreement therein contained, and any indulgence granted thereby, shall be deemed not to be a waiver of any subsequent default. The Agent, if so required by the Majority Lenders, shall, to the extent permitted by applicable law, bring suit at law, in equity or otherwise for any available relief or purpose including but not limited to:

(a): the specific performance of any covenant or agreement contained in the Loan Documents;
(b): enjoining a violation of any of the terms of the Loan Documents;
(c): aiding in the exercise of any power granted by the Loan Documents or by applicable law; or
(d): obtaining and recovering judgment for any and all amounts due in respect of the Borrowings or amounts otherwise due hereunder or under the Loan Documents.

9.6 Set-Off

In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, the Agent and the Lenders are authorized at any time after the

occurrence and during the continuance of an Event of Default and from time to time thereafter for so long as such Event of Default is continuing without prior notice to the Borrower or to any other person, any such prior notice being expressly waived by the Borrower, to set-off and to appropriate and to apply any and all deposits (general and special) and any other indebtedness at any time held by or owing by the Agent or such Lender to or for the credit of or the account of the Borrower against and on account of the obligations and liabilities of the Borrower to the Agent or such Lender under this Agreement, including, without limitation, all claims of any nature or description arising out of or connected with this Agreement, including, without limitation, contingent obligations of the Lenders in respect of unmatured Bankers' Acceptances, provided demand for payment to the extent required hereunder has been made.

9.7 Cash Collateral Accounts

Upon the occurrence of an Event of Default and for so long as such Event of Default is continuing or upon receipt of cash cover by the Agent pursuant to Section 4.2 and in addition to any other rights or remedies of the Lenders hereunder but subject to Section 3.15 with respect to Letters of Credit, the Agent, for the benefit of the Lenders hereunder, shall thereafter be entitled to deposit and retain in an account to be maintained by the Agent, and which for the purposes hereof shall be considered to be the Agent's account and not the Borrower's account (bearing interest for the Borrower's account at the rates of the Agent as may be applicable in respect of other deposits of similar amounts for similar terms), amounts which are received by the Agent from the Borrower to the extent that, and for so long as, such amounts may be required to satisfy any contingent or unmatured obligations or liabilities of the Borrower to the Agent and the Lenders under the Loan Documents.

9.8 Lenders May Perform Covenants

If an Event of Default has occurred and is continuing and the Borrower fails to perform any covenant on its part herein contained, the Agent may on behalf of the Lenders and with the approval of the Majority Lenders, without prior notice to the Borrower, perform any of the said covenants capable of being performed by it and, if any such covenant requires the payment or expenditure of money, it may make such payment or expenditure with its own funds on behalf of the Lenders and shall be entitled to reimbursement of any such expenditure from the Lenders on a Pro-Rata basis. All amounts so paid by the Agent hereunder shall be repaid by the Borrower on demand therefor, and shall bear interest at the rate set forth in Section 5.7 from the date paid by the Agent hereunder to and including the date such amounts are repaid in full by the Borrower.

ARTICLE 10
EXPENSES AND INDEMNITIES

10.1 Reimbursement of Expenses and Indemnity

All statements, reports, certificates, opinions and other documents or information required to be furnished to the Agent or the Lenders by the Borrower under this Agreement shall be supplied by the Borrower without cost to the Agent or the Lenders and, in the case of Sections 8.1(m), 8.1(n), 8.1(o) and 8.1(p) and in any other circumstances where the Agent, acting reasonably, requests, the Borrower shall furnish sufficient copies of such items to the Agent for distribution to the Lenders to the extent the Borrower has not advised the Agent and the Lenders that such items are available electronically and is entitled hereunder to deliver such items electronically. In addition, the Borrower hereby agrees to pay promptly to the Agent on demand all reasonable legal fees and all other reasonable out of pocket expenses which are incurred from time to time by the Agent in respect of the documentation, preparation, negotiation, execution, and administration of the Loan Documents (including Taxes payable in connection with the execution, delivery or enforcement of the Loan Documents) and the initial syndication of the Credit Facilities and all out-of-pocket expenses which are incurred from time

to time by the Agent or the Lenders in respect of the enforcement of this Agreement and any other Loan Documents.

10.2 Increased Cost

If, subsequent to the date of this Agreement, the introduction of, any change in or the implementation of any applicable law, regulation, treaty or official directive or regulatory requirement of general application now or hereafter in effect (whether or not having the force of law) or any change in the interpretation or application thereof by any court or by any judicial or governmental authority charged with the interpretation or administration thereof, or if compliance by any Lender with any request from any central bank or other fiscal, monetary or other authority (whether or not having the force of law):

(a): subjects a Lender to any Tax (other than Excluded Taxes) for which the Lender is not entitled to be indemnified by the Borrower pursuant to Section 6.3, or changes the basis of taxation of payments due to such Lender or increases any existing Tax (in either case other than Excluded Taxes) for which the Lender is not entitled to be indemnified by the Borrower pursuant to Section 6.3, on payments of principal, interest or other amounts payable by the Borrower to such Lender under this Agreement unless, in any such case, such Tax is for the account of the Lender pursuant to Section 12.1;
(b): imposes, modifies or deems applicable any reserve, special deposit, capital adequacy, regulatory or similar requirement against assets or liabilities held by, or deposits in or for the account of, or loans by, or any other acquisition of funds for loans or commitments to fund loans or obligations in respect of bankers' acceptances accepted by a Lender; or
(c): imposes on a Lender any other condition of general application which applies to this Agreement;

and the result of (a), (b) or (c) is, in the determination of such Lender acting reasonably and in good faith, to increase the cost to such Lender or to reduce the income or return (including, without limitation, return on capital) which is receivable by such Lender in respect of a Borrowing or standby fees payable pursuant to Section 5.8, such Lender shall promptly notify the Agent. The Agent shall promptly notify the Borrower in writing and the Borrower shall pay to the Agent for the benefit of such Lender that amount which compensates such Lender for such additional cost or reduction in income ("Additional Compensation") on the later of:

(i): the next Libor Interest Date in the case of a Libor Loan, on the next date on which standby fees are payable under Section 5.8 in the case of standby fees and on the next Interest Date in any other case (and each such successive date, if applicable); and
(ii): three (3) Business Days after receipt of such notice.

The Borrower shall not be obligated to pay any portion of such Additional Compensation accruing under this Section 10.2 for any period prior to the date on which the Agent, on behalf of such Lender, gives written notice to the Borrower that such Additional Compensation is so accruing or if such Lender is not generally collecting amounts which are the equivalent to Additional Compensation from other borrowers in similar circumstances to the Borrower where it is contractually entitled to do so. A certificate of an officer of such Lender setting forth the amount of the Additional Compensation must be submitted by the Agent to the Borrower and shall be prima facie evidence, in the absence of manifest error, of the amount of the Additional Compensation and shall set forth in reasonable detail the calculation of Additional Compensation being claimed and describe in reasonable detail the basis for such Additional Compensation. The Lender shall (where appropriate) use reasonable averaging and attribution methods in determining the amount of Additional Compensation to be paid by the Borrower under this Section 10.2. If the Agent notifies the Borrower that Additional Compensation is owed, the Borrower shall pay such Additional Compensation to the Agent for the account of such

Lender and the Borrower shall have the right, upon written irrevocable prior notice of at least three (3) Business Days to the Agent at the Agent's Branch of Account, to make payment in full to the Agent for the account of such Lender in respect of the applicable Borrowing on the date specified in such notice together with accrued interest in respect of such Borrowing or to convert such Borrowing into another basis of Borrowing available under this Agreement.

10.3 Illegality

If, after the date hereof, the introduction of or any change in applicable law, regulation, treaty or official directive, or regulatory requirement (whether or not having the force of law) or in the interpretation or application thereof by any court or by any governmental authority charged with the administration thereof (including, without limitation, the U.S. Economic Sanctions), makes it unlawful, or prohibited for a Lender (in its opinion acting reasonably and in good faith) to make, to fund or to maintain the Borrowings or a portion of the Borrowings or to perform its obligations under this Agreement, the Lender may, by written notice to the Borrower through the Agent terminate its obligations under this Agreement to make such Borrowings or perform such obligations and the Borrower shall prepay such Borrowings forthwith (or at the end of such period as the Lender in its discretion agrees acting reasonably and in good faith) together with all accrued but unpaid interest and fees as may be applicable to the date of payment or, if any such Lender is not similarly affected with respect to any other basis of Borrowing, convert by notice to the Agent such Borrowings forthwith into any of such other basis of Borrowing available under this Agreement.

10.4 Substitute Basis of Borrowing

(a)

Libor Loans: If, on or prior to any Interest Determination Date in respect of a Libor Loan, a Lender determines acting reasonably and in good faith (which determination is final, conclusive and binding upon the Borrower) that:

(i): adequate and fair means do not exist for ascertaining the rate of interest on such Libor Loan;
(ii): the making or the continuation of such Libor Loan or a portion of such Libor Loan by such Lender has become impracticable by reason of circumstances which materially and adversely affect the London interbank market; or
(iii): deposits in Canadian Dollars, U.S. Dollars, Euros or Pounds Sterling are not available to such Lender in the London interbank market in sufficient amounts in the ordinary course of business for the applicable Libor Interest Period to make, fund or maintain such Libor Loan during such Libor Interest Period;

then, such Lender shall promptly notify the Agent and the Agent shall promptly notify the Borrower in writing of such determination setting forth the basis of such determination and such Lender shall not thereafter be obligated to provide such Libor Loan. The Borrower shall thereupon forthwith notify such Lender as to the substitute basis of Borrowing available under this Agreement which it has selected for such Libor Loan. If the Borrower has not so notified the Lender, such Libor Loan shall automatically be made as or converted at the end of the Libor Interest Period applicable to such Libor Loan to, as applicable, a U.S. Base Rate Loan in the case of Libor Loans denominated in U.S. Dollars and a Cdn. Prime Loan in the case of Libor Loans denominated in Canadian Dollars, Euros or Pounds Sterling for all purposes under this Agreement on the date falling two (2) Business Days subsequent to such Interest Determination Date.

(b): Bankers' Acceptances: In the event that at any time subsequent to the giving of a Drawdown Notice, Conversion Notice or Rollover Notice to the Agent by the Borrower with regard to any requested Bankers' Acceptances, but before the date of the Drawdown, Rollover or Conversion, as the case may be, the Agent (acting reasonably) makes a determination, which shall be conclusive

and binding upon the Borrower, that there no longer exists an active market for bankers' acceptances accepted by the Lenders then:

(i): the right of the Borrower to request Bankers' Acceptances or BA Equivalent Advances from any Lender shall be suspended until the Agent determines that the circumstances causing such suspension no longer exist, and so notifies the Borrower;
(ii): any outstanding Drawdown Notice requesting an Accommodation by way of Bankers' Acceptances or BA Equivalent Advances shall be deemed to be a Drawdown Notice requesting an Accommodation by way of Cdn. Prime Loans in the amount specified in the original Drawdown Notice;
(iii): any outstanding Conversion Notice requesting a Conversion of U.S. Base Rate Loans or Libor Loans into Bankers' Acceptances or BA Equivalent Advances shall be deemed to be a Conversion Notice requesting a Conversion of such Loan into Cdn. Prime Loans; and
(iv): any outstanding Rollover Notice requesting a Rollover of Bankers' Acceptances or BA Equivalent Advances shall be deemed to be a Rollover Notice requesting a Conversion of such Bankers' Acceptances into Cdn. Prime Loans.

The Agent shall promptly notify the Borrower and the Lenders of any suspension of the Borrower's right to request Bankers' Acceptances or BA Equivalent Advances and of any termination of any such suspension.

10.5 Funding Indemnity

If, for any reason whatsoever and whether or not required or permitted pursuant to the provisions of this Agreement, the Borrower repays, prepays, converts or cancels a Libor Loan other than on the last day of a Libor Interest Period applicable to such Libor Loan, the Borrower shall indemnify the applicable Lender for any loss or expense incurred by such Lender including, without limitation, any loss of profit or expenses such Lender incurs by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to maintain the Libor Loan or any increased interest or other charges payable to lenders of funds borrowed in order to maintain such Libor Loan together with any other out-of-pocket charges, costs or expenses incurred by such Lender relative thereto. A certificate of such Lender (acting reasonably and prepared in good faith) setting out the basis for the determination of the amount necessary to indemnify such Lender shall be prima facie evidence thereof.

10.6 General Indemnity

The Borrower hereby covenants with the Agent and each Lender that it shall at all times hereafter keep the Agent and such Lender indemnified and held harmless from and against all suits (whether founded or unfounded), actions, proceedings, judgments, demands or claims instituted or made against the Agent or such Lender, and all costs, losses, liabilities, damages and expenses (including all reasonable legal fees on a solicitor and his own client basis) incurred by the Agent or such Lender in any way relating to, arising out of, or incidental to any Environmental Laws or Environmental Liabilities or any default by the Borrower under any provision of any of the Loan Documents (collectively, the "Damages"). This indemnity shall extend to the officers, directors, employees, agents, shareholders and assignees of the Agent and each Lender (each such person, together with the Agent and each Lender, an "Indemnified Party") but shall not apply to Damages arising from or attributable to the wilful misconduct or negligence of any Indemnified Party.

If any claim (in this Section 10.6 referred to as a "Claim") shall be asserted by any person against an Indemnified Party which may give rise to Damages, the Indemnified Party shall promptly notify the Borrower in writing of all particulars of such Claim upon learning of same. The failure to give any such notice, however, shall not affect the Borrower's liability to indemnify the Indemnified Party except to

the extent such failure adversely affects the Borrower's ability to defend, object to, oppose or contest that Claim.

The Borrower shall at all times have the right, if no Event of Default has occurred and is continuing, at its sole expense, to resist, defend and compromise any Claim in the name of the Indemnified Party, by legal counsel acceptable to the Indemnified Party, acting reasonably, who will co-operate in such defence on a reasonable basis; provided that the Indemnified Party shall have the right to participate in the defense or compromise of any Claim by other legal counsel of its choosing if the Indemnified Party, acting reasonably, determines it should so participate; provided that the fees and disbursements of such other counsel shall be for the account of such Indemnified Person unless:

(a): the Borrower and the Indemnified Party shall have mutually agreed to the retention of counsel;
(b): the named parties to such proceedings include the Borrower or a Subsidiary thereof and the Indemnified Party and representation of such parties by the same counsel would be inappropriate due to actual or potential differing interests between them; or
(c): the Borrower has failed to assume the defense of the Claim in a timely manner or to continue to defend the Claim diligently and reasonably throughout the period while such Claim exists.

The Indemnified Party shall not effect any settlement or compromise of any Claim without the written consent of the Borrower which consent shall not be unreasonably withheld or delayed. If the Borrower exercises its rights under this Section 10.6, it shall not compromise or otherwise settle a Claim without the consent of the Indemnified Party suffering such Claim, which consent shall not be unreasonably withheld or delayed. The inability of the Borrower to pay such Claim in full shall constitute a sufficient reason to withhold such consent.

The Borrower shall not, in connection with any Damages in the same jurisdiction, be liable for the fees and expenses of more than one separate legal firm for the Indemnified Parties unless such representation by the same legal counsel would be inappropriate due to actual or potential differing interests or the employment thereof has been specifically authorized by the Borrower in writing and such firm or firms shall be designated in writing by the Agent on behalf of each Indemnified Party.

ARTICLE 11
THE AGENT AND THE LENDERS

11.1 Authorization

Each Lender irrevocably appoints and authorizes the Agent to exercise such powers, perform such duties, take such actions, make such decisions and determinations and give such consents under the Loan Documents as are required to be exercised, performed, taken, made, given or otherwise carried out by the Agent hereunder or under any other agreement between the Lenders, together with all powers reasonably incidental thereto. As to any matters not expressly required by this Agreement or by any other agreement between the Lenders to be carried out by the Agent, the Agent is not required to exercise any discretion or take or to refrain from taking any action except upon the written instructions of the Majority Lenders. Notwithstanding anything to the contrary in this Agreement, the Agent shall not be required to exercise any discretion or to take or to refrain from taking any action in any manner which is contrary to the Loan Documents or to applicable law.

11.2 Responsibility of Agent

The Agent makes no representations or warranties and accepts no responsibility with respect to the due execution, legality, validity, sufficiency, enforceability or priority of any of the Loan Documents nor with respect to the due execution, legality, validity, sufficiency, enforceability, accuracy or authenticity of any documents, papers, materials or other information furnished by the Borrower (or

any other person, including any Designated Subsidiary or the Agent) in connection with the Loan Documents, whether provided before or after the date of this Agreement. The Agent shall not incur any liability to the Lenders under or in respect of the Loan Documents with respect to anything which it may do or refrain from doing in the reasonable exercise of its judgment or which may seem to it to be necessary or desirable in the circumstances, except for its gross negligence or wilful misconduct. The Agent does not assume any responsibility for the payment of any of the Borrowings or other amounts outstanding hereunder by the Borrower.

11.3 Acknowledgement of Lenders

Each Lender acknowledges to the Agent that it has been, and will continue to be, solely responsible for making its own independent appraisal of and investigation into the financial condition, creditworthiness, affairs, status and nature of the Borrower and accordingly each Lender confirms to the Agent that it has not relied, and will not hereafter rely, on the Agent:

(a): Information: to check or inquire on its behalf into the adequacy, accuracy or completeness of any information provided by the Borrower or any Subsidiary or in connection with the Loan Documents (whether or not such information has been or is hereafter circulated to such Lender by the Agent);
(b): Performance: to inquire as to the performance by the Borrower or any Subsidiary of its obligations under the Loan Documents; or
(c): Credit Review: to assess or keep under review on its behalf the financial condition, creditworthiness, affairs, status or nature of the Borrower or any Subsidiary.

11.4 Rights and Obligations of Each Lender

The rights and obligations of each Lender under this Agreement are several and no Lender shall be obligated to make Accommodations available to the Borrower in excess of such Lender's Commitment. The failure of a Lender to perform its obligations under this Agreement shall neither:

(a): result in any other Lender incurring any liability whatsoever; nor
(b): relieve any of the other Lenders from their respective obligations under any Loan Document to which they are a party or relieve the Borrower or any Subsidiary from its obligations to such other Lenders.

Nothing contained herein or in any other Loan Document nor any action taken pursuant hereto or thereto shall be deemed to constitute the Lenders a partnership, joint venture or any other similar entity.

11.5 Determinations by Lenders

(a): Lenders' Determinations: Where the provisions of this Agreement provide that any waiver of or any amendment to any provision of the Loan Documents may be made or any action, consent or other determination in connection with the Loan Documents may be taken or given, with the consent or agreement of the Majority Lenders or "the Lenders" and not "all the Lenders", then any such waiver, amendment, action, consent or determination so made, so taken or so given with the consent or agreement of the Majority Lenders shall be binding on all of the Lenders and all of the Lenders shall cooperate in all ways necessary or desirable to implement and effect such waiver, amendment, action, consent or determination.
(b): Deemed Non-Consent: If the Agent delivers a written notice to a Lender requesting advice from such Lender as to whether it consents or objects to any matter in connection with the Loan Documents, then, except as otherwise expressly provided herein, if such Lender does not deliver to

the Agent its written consent or objection to such matter within fifteen (15) Business Days of the delivery of such written notice by the Agent to such Lender, such Lender shall be deemed not to have consented thereto upon the expiry of such fifteen (15) Business Day period.

(c): International Credit Facility: If a Lender is an Exempt Lender and is a lender under the International Credit Facility, the Lender will be required to vote the same way under this Agreement and the credit agreement for the International Credit Facility on matters common to both this Agreement and the credit agreement for the International Credit Facility.

11.6 Notices between the Lenders, the Agent and the Borrower

All notices by the Lenders to the Agent shall be through the Agent's Branch of Account and all notices by the Agent to a Lender shall be through such Lender's Branch of Account. All notices or communications between the Borrower and the Lenders which are required or contemplated pursuant to the Loan Documents shall be given or made through the Agent at the Agent's Branch of Account.

11.7 Agent's Duty to Deliver Documents Obtained from the Borrower

Other than as specifically provided for herein, the Agent shall within five (5) Business Days deliver to each Lender, at its Branch of Account, such documents, papers, materials and other information as are furnished by the Borrower to the Agent on behalf of such Lender pursuant to this Agreement or provide notice that the same are available electronically, and the Borrower shall provide the Agent with sufficient copies of all such information for such purpose. The Agent shall make requests of the Borrower pursuant to Section 8.1(q) from time to time on behalf of a Lender for such information as such Lender may from time to time reasonably request.

11.8 Arrangements for Borrowings

The Agent shall promptly give written notice to each Lender at its Branch of Account upon receipt by the Agent of any notice given pursuant to any of Sections 3.5, 3.16, 3.18, 3.19 or 4.3. The Agent shall advise each such Lender of the amount, date and details of each Accommodation and of such Lender's participation in each such Accommodation. At or before 11:00 a.m. (Calgary time) on the Drawdown Date, Conversion Date or Rollover Date, as the case may be:

(a)

Loan Participation: each Lender will make its Pro-Rata Share of Accommodations by way of Loans available to the Borrower at the Agent's Account for Payments by forwarding to the Agent the amount of Loans required to be made available by such Lender;

(b)

Bankers' Acceptance Participation: each Lender will make available to the Borrower its Pro-Rata Share of Accommodations by way of Bankers' Acceptances (or BA Equivalent Advances) by forwarding to the Agent at the Agent's Account for Payments the amount of:

(i): if the Borrower has not elected to have (or is deemed not to have elected to have) the Lenders purchase such Bankers' Acceptances pursuant to Section 3.7(h), the discounted proceeds of sale of such Bankers' Acceptances received by such Lender or the amount of any BA Equivalent Advance (less, in each case, the amount of applicable Acceptance Fees payable by the Borrower to such Lender); or
(ii): if the Borrower has elected to have the Lenders purchase such Bankers' Acceptances pursuant to Section 3.7(h), the Discount Proceeds in respect of such Bankers' Acceptances and BA Equivalent Advances (less, in each case, the amount of applicable Acceptance Fees payable by the Borrower to such Lender).

11.9 Arrangements for Repayment of Borrowings

(a): Prior to Acceleration: Prior to the delivery of an Acceleration Notice or the occurrence of an Event of Default specified in Section 9.1(c) or 9.1(d), upon receipt by the Agent of payments from the Borrower on account of principal, interest, fees or any other payment made to the Agent on behalf of the Lenders, the Agent shall pay over to each Lender at its Branch of Account the amount to which it is entitled under this Agreement and shall use its best efforts to make such payment to such Lender on the same Business Day on which such payment is received by the Agent. If the Agent does not remit any such payment to a Lender on the same Business Day as such payment is received by the Agent, the Agent shall pay interest thereon to such Lender until the date of payment at a rate determined by the Agent (such rate to be conclusive and binding on such Lender) in accordance with the Agent's usual banking practice in respect of deposits of amounts comparable to the amount of such payment which are received by the Agent at a time similar to the time at which such payment is received by the Agent.
(b): Subsequent to Demand and Acceleration: Following the delivery of an Acceleration Notice or the occurrence of an Event of Default specified in Section 9.1(c) or 9.1(d), the Lenders shall share any payments subsequently received in accordance with Section 9.4 of this Agreement.

11.10 Repayment by Lenders to Agent

(a): Where Borrower Fails to Pay: Unless the Agent has been notified in writing by the Borrower at least one (1) Business Day prior to the date on which any payment to be made by the Borrower hereunder is due that the Borrower does not intend to remit such payment, the Agent may, in its discretion, assume that the Borrower has remitted such payment when so due and the Agent may, in its discretion and in reliance upon such assumption, make available to each Lender on such payment date an amount equal to the amount of such payment which is due to such Lender pursuant to this Agreement. If the Borrower does not in fact remit such payment to the Agent, the Agent shall promptly notify each Lender and each such Lender shall forthwith on demand repay to the Agent the amount of such assumed payment made available to such Lender, together with interest thereon until the date of repayment thereof at a rate determined by the Agent (such rate to be conclusive and binding on such Lender) in accordance with the Agent's usual banking practice for similar advances to financial institutions of like standing to such Lender.
(b): Where a Lender Fails to Pay: Unless the Agent has been notified in writing by a Lender at least one (1) Business Day prior to a Drawdown Date, Conversion Date or Rollover Date that such Lender does not intend to make available the amount required to be made available by such Lender pursuant to this Agreement on such Drawdown Date, Conversion Date or Rollover Date, the Agent may, in its discretion, assume that such Lender has remitted funds to the Agent in an amount equal to the amount required to be made available by such Lender pursuant to this Agreement and the Agent may, in its discretion and in reliance upon such assumption, make available to the Borrower on such Drawdown Date, Conversion Date or Rollover Date an amount equal to the amount required to be made available by such Lender pursuant to this Agreement. If a Lender does not in fact remit such funds to the Agent, the Agent shall promptly notify such Lender and such Lender shall forthwith remit such funds to the Agent, failing which the Borrower shall forthwith on demand repay to the Agent (without prejudice to the Borrower's rights against such Lender) the amount made available by the Agent on behalf of such Lender, in each case together with interest thereon until the date of repayment thereof at a rate determined by the Agent (such rate to be conclusive and binding on such Lender or the Borrower, as the case may be) in accordance with the Agent's usual banking practice for similar advances to financial institutions of like standing to such Lender.

11.11 Adjustments Among Lenders

(a): Adjustments to Outstanding Borrowings: Each Lender agrees that, after the delivery of an Acceleration Notice or the occurrence of an Event of Default specified in Section 9.1(c) or 9.1(d), it will at any time and from time to time upon the request of the Agent as required by any Lender purchase portions of the Borrowings made available by the other Lenders which remain outstanding and make any other adjustments which may be necessary or appropriate, in order that the amount of Borrowings made available by each Lender which remain outstanding, as adjusted pursuant to this Section 11.11, will be in the same proportion as the Pro-Rata Share of each such Lender.
(b): Application of Payments: The Lenders agree that, after the delivery of an Acceleration Notice or the occurrence of an Event of Default specified in Section 9.1(c) or 9.1(d), the amount of any repayment made by the Borrower in respect of Borrowings, and the amount of any proceeds from the exercise of any rights or remedies of the Lenders under the Loan Documents, which are to be applied against amounts owing hereunder, will be so applied in a manner so that to the extent possible the amount of Borrowings made available by each Lender which remain outstanding after giving effect to such application will be in the same proportion as the Pro-Rata Share of each such Lender.
(c): Receipt of Payments other than Borrowings: Notwithstanding anything contained in this Section 11.11, there shall not be taken into account for the purposes of computing any amount payable to any Lender pursuant to this Section 11.11, any amount which a Lender receives as a result of any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of any monies owing by the Borrower to such Lender other than on account of liabilities arising under the Loan Documents; provided that, if at any time a Lender receives any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of monies owing or payable to it by the Borrower in respect of liabilities of the Borrower arising under the Loan Documents, such Lender shall purchase portions of the applicable Borrowings made available by the other Lenders which remain outstanding to the extent required pursuant to Section 11.11(a).
(d): Further Assurances: The Borrower agrees to be bound by and, at the request of the Agent, to do all things necessary or appropriate to give effect to any and all purchases and other adjustments made by and between the Lenders pursuant to this Section 11.11 but shall incur no increased liabilities, in aggregate, by reason thereof.

11.12 Lenders' Consents to Waivers, Amendments, etc.

(a)

Unanimous Consent: Any waiver of or any amendment to a provision of the Loan Documents which relates to:

(i): a change in the types of Borrowings, decreases in interest rates, standby fees, Acceptance Fees, LC Fees, Utilization Fees, the Margin, the Standby Fee Rate, decreasing the amount of any payments payable by the Borrower to the Lenders under this Agreement or any waiver of the time of payment of any amounts payable to the Lenders under this Agreement;
(ii): an increase or decrease in the Commitment of any Lender other than as provided for herein;
(iii): an assignment or transfer by the Borrower of any of its rights and obligations under this Agreement other than as provided for herein;
(iv): a change in the definition of "Majority Lenders", "Maturity Date", "Designated Subsidiary", "Term Date", "Term Period" or any other definition to the extent relevant to any of the other provisions of this Section 11.12(a);

(v): any matter which, pursuant to the Loan Documents, specifically requires the consent or agreement of all of the Lenders;
(vi): the provisions of Section 8.1(v), Section 8.2 or this Section 11.12(a); or
(vii): an Event of Default under Section 9.1(a) or 9.1(b);

shall bind the Lenders only if such waiver or amendment is agreed to in writing by all of the Lenders. In addition, any waiver of or amendment to any provision of the Loan Documents which relates to an increase in the Commitment of any Lender shall bind that Lender only if agreed to in writing by such Lender.

(b): Majority Consent: Subject to Sections 11.12(a) and 11.12(c) and except as otherwise provided in the Loan Documents, any waiver of or any amendment to any provision of the Loan Documents and any action, consent or other determination in connection with the Loan Documents shall bind all of the Lenders if such waiver, amendment, action, consent or other determination is agreed to in writing by the Majority Lenders.
(c): Agent Approval: Subject to Section 11.12(a) and except as otherwise provided in the Loan Documents, any determination, consent, approval or other action made by the Agent hereunder pursuant to any provision which states that such action shall or may be taken by the Agent shall bind all of the Lenders.
(d): Agent Consent: Any waiver of or any amendment to any provision of the Loan Documents which relates to the rights or obligations of the Agent in its capacity as Agent shall require the agreement of the Agent thereto.

11.13 Reimbursement of Agent's Expenses

Each Lender agrees that it will indemnify the Agent for its Pro-Rata Share of any and all costs, expenses and disbursements (including, without limitation, those costs and expenses referred to in Section 10.1) which may be incurred or made by the Agent in good faith in connection with the Loan Documents, and agrees that it will, on written demand, reimburse the Agent for any such costs, expenses or disbursements for which the Agent is not promptly reimbursed at any time by the Borrower. The Agent may refrain from exercising any right, power or discretion or taking any action to protect or enforce the rights of any Lender under the Loan Documents until it has been so reimbursed.

11.14 Reliance by Agent on Notices, etc.

The Agent shall be entitled:

(a): Reliance on Written Documents: to rely upon any writing, letter, notice, certificate, telex, facsimile copy, cable, statement, order or other document believed by the Agent to be genuine and correct and to have been signed, sent or made by the proper person or persons; and
(b): Reliance on Legal Advice: with respect to legal matters, to act upon advice of legal advisors selected by the Agent concerning all matters pertaining to the Loan Documents and the Agent's duties thereunder;

and the Agent shall assume no responsibility and shall incur no liability to any Lender by reason of relying on any such document or acting on any such advice.

11.15 Relations with Borrower

Except for the transactions provided for in this Agreement, each Lender may deal with the Borrower in all transactions and generally do any banking business with or provide any financial services to the Borrower without having any liability to account to the other Lenders therefor. With

respect to the Agent's Commitment and Pro-Rata Share with respect thereto, the Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent.

11.16 Sharing of Information

Subject to Section 12.2, the Borrower authorizes the Agent and each Lender to share among each other any information possessed by it regarding the Borrower, any Subsidiary or the Loan Documents. The Agent and each Lender agrees to keep the Loan Documents and all information provided by the Borrower or any Subsidiary confidential and shall not disclose such information to any person whatsoever (other than as provided for herein and other than to employees and professional advisors in the necessary course of business).

11.17 Successor Agent

Subject to the appointment and acceptance of a successor agent as provided in this Section 11.17, the Agent may resign at any time by giving written notice thereof to each of the Lenders and the Borrower, and the Agent may be removed at any time for cause by the Lenders other than the Agent in its capacity as a Lender (the "Remaining Lenders") provided that Remaining Lenders holding Commitments of eighty percent (80%) or more of the aggregate of the Commitments of all the Remaining Lenders consent to such removal. Upon any such resignation or removal, the Remaining Lenders shall appoint a successor agent; provided that the Borrower shall provide its written approval of the successor agent (such approval not to be unreasonably withheld). Any successor agent appointed under this Section 11.17 shall be a Lender which has offices in Calgary, Alberta and Toronto, Ontario. If no successor agent shall have been appointed by the Remaining Lenders and shall have accepted such appointment within thirty (30) days after the retiring agent's giving of notice of resignation or the Remaining Lenders' removal of the retiring agent, then the retiring agent may, on behalf of the Lenders and with the written approval of the Borrower (such approval not to be unreasonably withheld), appoint a successor agent. Upon the acceptance of any appointment as Agent by a successor agent, such successor agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring agent as Agent, and the retiring agent shall be discharged from its duties and obligations under this Agreement as Agent. After any retiring agent's resignation or removal hereunder as the Agent, the provisions of this Agreement shall continue in effect for its benefit and for the benefit of the Lenders in respect of any actions taken or omitted to be taken by the retiring agent while it was acting as the Agent.

11.18 Dealing with the Agent

In the absence of actual knowledge of a lack of authority of the Agent to act for and on behalf of the Lenders in respect of any matter hereunder or under the Loan Documents, the Borrower shall be entitled to conclusively assume that any certificate, directive or other writing of the Agent for and on behalf of the Lenders in connection with such matter has been duly authorized by the Lenders in accordance with this Agreement.

11.19 Indemnity of Agent

Each Lender hereby agrees to indemnify the Agent (to the extent either not reimbursed by the Borrower or not paid for by the Borrower pursuant to Section 5.9), as to its Pro-Rata share from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or the other Loan Documents or any action taken or omitted by the Agent under or in respect of this Agreement or the other Loan Documents provided that the Lenders shall not be liable for any portion of such liabilities, obligations,

losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or wilful misconduct. Without limiting the generality of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its Pro-Rata share of any out-of-pocket expenses (including counsel fees) incurred by the Agent in connection with the preservation of any rights of the Agent or the Lenders under, or the enforcement of, or legal advice in respect of rights or responsibilities under, this Agreement and the other Loan Documents, to the extent that the Agent is not reimbursed for such expenses by the Borrower.

ARTICLE 12
SUCCESSORS AND ASSIGNS AND JUDGMENT CURRENCY

12.1 Successors and Assigns

Subject to Section 8.1(x), the Borrower may not assign its rights or obligations hereunder without the prior written consent of all of the Lenders. If an Event of Default has occurred and is continuing, a Lender may, with the prior consent of the Agent and each Fronting Lender (such consents not to be unreasonably withheld) and upon payment to the Agent (for the benefit of the Agent) of Cdn. $3,500 but without the Borrower's consent, assign in whole or in part their rights and obligations under this Agreement and the other Loan Documents. If no Event of Default has occurred and is continuing, a Lender may, at its sole cost and expense, with the prior consent of the Agent, each Fronting Lender and the Borrower (such consents not to be unreasonably withheld) and upon payment to the Agent (for the benefit of the Agent) of Cdn. $3,500, assign in whole or in part its rights and obligations under this Agreement and the other Loan Documents to another financial institution where such Lender assigns a minimum aggregate amount of its Commitment of at least Cdn. $10,000,000 and in whole multiples of Cdn. $1,000,000 thereafter and would thereafter, where such assignment is for less than its entire Commitment, retain for its own account a Commitment of at least Cdn. $10,000,000. Assignments by an Exempt Lender shall include a concurrent assignment by the Exempt Lender which is a "Lender" under the International Credit Facility of a corresponding portion of its "Commitment" under the International Credit Facility to the assignee. Notwithstanding the foregoing and without the consent of the Borrower or the Agent but subject to the immediately preceding sentence, a Lender may, at any time, assign all or any part of its Commitment to an Affiliate of such Lender provided that any increased cost to the Borrower howsoever arising, including as a result of the residency of such Affiliate, will be the sole obligation of such Lender. Upon any assignment by a Lender to an assignee permitted by this Section 12.1 (a "Permitted Assignee") in accordance with the provisions of this Section 12.1, such Lender shall cause such Permitted Assignee to execute a Lender Assignment Agreement and to be substituted for such Lender in respect of the whole or any part of its rights and obligations under the Loan Documents which are so assigned and such Lender shall, as of the effective date thereof and except in the case of an assignment to an Affiliate where the consent, not to be unreasonably withheld, of the Borrower to a release shall be required, be released from its obligations to the Borrower hereunder arising subsequent to such date to the extent thereof. Any such assignment shall not increase, in aggregate, the liabilities of the Borrower hereunder and, for greater certainty, the Borrower shall have no liability to a Permitted Assignee of a Lender pursuant to either Section 6.3(a) or 10.2(a) if such Lender assigns all or any of its Commitment to a Permitted Assignee who is a non-resident of Canada within the meaning of the Income Tax Act (Canada) if such liability would not arise if such Permitted Assignee was not a non-resident of Canada for such purposes. Nothing in this Section 12.1 shall restrict a Lender from the sale of participations in all or any part of the Borrowings made or to be made by it; provided that any increased costs to the Borrower as a result of any such participation shall be for the sole account of such Lender and that the selling Lender shall continue to be obligated as a Lender hereunder in all respects notwithstanding any such participation. The selling Lender shall act on behalf of all of its participants in all dealings with the Borrower in respect of the Credit Facilities and no person who acquires a participation shall have any voting or consent rights with respect to any matter requiring the Lender's consent hereunder. A person who acquires a participation

in Borrowings hereunder shall have no standing as a Lender under the Loan Documents and shall not acquire as a result thereof any rights or benefits under any of the Loan Documents in relation to the Borrower and its Subsidiaries.

12.2 Exchange and Confidentiality of Information

Each of the Lenders and the Agent acknowledges the confidential nature of the financial, operational and other information, reports and data provided and to be provided to them by the Borrower and its Subsidiaries pursuant to this Agreement including, without limitation, any confidential information obtained pursuant to Section 8.1(q) (the "Information") and agrees to hold the Information in confidence and shall not discuss or disclose or allow access to, or transfer or transmit the Information to any person, provided however that:

(a): each of the Lenders and the Agent may disclose all or any part of the Information if such disclosure is required by any applicable law or regulation, or by applicable order, policy or directive having the force of law, to the extent of such requirement, or is required in connection with any actual or threatened judicial, administrative or governmental proceeding, including, without limitation, proceedings initiated under or in respect of this Agreement, provided that in any such circumstance (other than disclosure to governmental regulators conducting examinations of a Lender's loan portfolio) the Lenders and the Agent, as soon as reasonably practicable, shall advise the Borrower of their obligation to disclose such Information in order to enable the Borrower, if it so chooses, to attempt to ensure that any such disclosure is made on a confidential basis;
(b): each of the Lenders and the Agent may disclose Information to each other and to any Permitted Assignees or participants and to their respective counsel, agents, employees and advisors; provided that in the case of a participant, the participant has provided the Agent or the applicable Lender, as the case may be, with the written agreement referred to in Section 12.2(c) and, in the case of any such agents and advisors, the Agent or the applicable Lender shall advise such person of the confidential nature of the Information;
(c): each of the Lenders and the Agent may disclose and discuss the Information with credit officers of any potential Permitted Assignees for the purposes of assignment pursuant to Section 12.1 or any participant for the purposes of a participation; provided that such potential Permitted Assignee or participant shall have, for the benefit of the Borrower, previously provided to the Agent or the applicable Lender, as the case may be, its written agreement to hold the Information under the same obligations of confidentiality as set forth in this Section 12.2 at all times prior to and, if applicable, after becoming a Permitted Assignee or participant;
(d): each of the Lenders and the Agent may disclose all or any part of the Information so as to enable such Lender or the Agent to initiate any lawsuit against the Borrower or to defend any lawsuit commenced by the Borrower with respect to or arising from the Loan Documents, the issues of which are directly or indirectly related to the Information, but only to the extent such disclosure is necessary or desirable to the initiation or defense of such lawsuit; and
(e): each of the Lenders and the Agent may disclose Information to any person with the prior written consent of the Borrower.

Notwithstanding the foregoing, "Information" shall not include any such information:

(f): which is or becomes readily available to the public (other than by a breach hereof or by a breach of an obligation of confidentiality imposed on a Permitted Assignee or participant or other person referred to in this Section 12.2) or which has been made readily available to the public by the Borrower;

(g): which the Agent or any Lender can show was, prior to receipt thereof from the Borrower, lawfully in the Agent's or the Lender's possession and not then subject to any obligation on its part to or for the benefit of the Borrower to maintain confidentiality; or
(h): which the Agent or any Lender received from a third party, prior to receipt thereof from the Borrower, which was not, to the knowledge of the Agent or such Lender after due enquiry, subject to a duty of confidentiality to or for the benefit of the Borrower at the time the Information was so received.

12.3 Judgment Currency

If for the purposes of obtaining judgment in any court in any jurisdiction with respect to this Agreement it becomes necessary to convert into the currency of such jurisdiction (herein called the "Judgment Currency") any amount due hereunder in any currency other than the Judgment Currency, then conversion shall be made at the rate of exchange prevailing on the Business Day before the day on which judgment is given. For this purpose "rate of exchange" means the spot rate at which the Agent will, on the relevant date at or about 12:00 o'clock noon (Toronto time), sell such currency in Toronto, Ontario against the Judgment Currency. In the event that there is a change in the rate of exchange prevailing between the Business Day before the day on which the judgment is given and the date of payment of the amount due, the Borrower will, on the date of payment, pay such additional amounts (if any) as may be necessary to ensure that the amount paid on such date is the amount in the Judgment Currency which when converted at the rate of exchange prevailing on the date of payment is the amount then due under this Agreement in such other currency. Any additional amount due from the Borrower under this Section 12.3 will be due as a separate debt and shall not be affected by judgment being obtained for any other sums due under or in respect of this Agreement.

ARTICLE 13
MISCELLANEOUS

13.1 Severability

Any provision of this Agreement which is or becomes prohibited or unenforceable in any jurisdiction does not invalidate, affect or impair the remaining provisions hereof in such jurisdiction and any such prohibition or unenforceability in any jurisdiction does not invalidate or render unenforceable such provision in any other jurisdiction.

13.2 Survival of Undertakings

All covenants, undertakings, agreements, representations and warranties made pursuant to this Agreement survive the execution and delivery of this Agreement and continue in full force and effect until the full payment and satisfaction of all obligations of the Borrower incurred pursuant to the Loan Documents and the termination of this Agreement.

13.3 Failure to Act

No failure, omission or delay on the part of any Lender in exercising any right, power or privilege hereunder shall impair such right, power or privilege or operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege.

13.4 Waivers

No breach of any of the provisions of any of the Loan Documents may be waived or discharged verbally; any such waiver or discharge may only be made by way of an instrument in writing signed by

either the Agent on behalf of the Lenders or the Majority Lenders, as applicable, or by all the Lenders and, if required, by the Agent and the Borrower, and such waiver or discharge will then be effective only in the specific instance, for the specific purpose and for the specific length of time for which it is given. Any such waiver or discharge which affects the rights of the Agent may only be made by way of an instrument in writing signed by the Agent.

13.5 Amendments

No provision of the Loan Documents may be amended verbally and any such amendment may only be made by way of an instrument in writing signed by the Borrower, the Agent and either the Agent on behalf of the Lenders or by all of the Lenders or by the Majority Lenders, as the case may be.

13.6 Notice

Except as otherwise expressly provided herein, all notices, advices, requests and demands hereunder shall be in writing (including facsimile transmissions) or, if telephonic, immediately confirmed in writing, and shall be given to or made upon the respective parties hereto at the address set forth opposite their names on the signature pages hereto or at such other address as any party shall designate for itself. Any demand, notice or communication made or given by personal delivery shall be conclusively deemed to have been given on the day of actual delivery thereof, or, if made or given by facsimile or other electronic means of communication on the date of transmittal if sent prior to noon (Calgary time), otherwise on first Business Day following the transmittal thereof. In the event of any discrepancy between any telephonic notice, advice, request or demand and the written confirmation thereof, the telephonic version shall govern with respect to actions taken by the recipient thereof notwithstanding subsequent written notice to the contrary but the person receiving such contrary subsequent written notice shall, as soon as practicable, use its reasonable best efforts to act in accordance with the written notice. The Borrower shall indemnify the Agent and each Lender for, and hold them harmless from, any and all loss, damage, claim or expense (including reasonable legal fees on a solicitor and client basis) however arising, which the Agent or any Lender may suffer or incur, based on or arising out of any action taken by the Agent or such Lender pursuant to the telephonic notice, advice, request or demand and which did not result from the Agent's or such Lender's negligence or wilful misconduct.

13.7 Further Assurances

The Borrower, the Agent and each of the Lenders shall do all such further acts and things and execute and deliver all such further documents as shall be reasonably required in order to fully perform and carry out the terms of the Loan Documents.

13.8 Governing Law

The parties agree that this Agreement is conclusively deemed to be made under, and for all purposes to be governed by and construed in accordance with, the laws of the Province of Alberta and the federal laws of Canada applicable therein.

13.9 Whole Agreement

This Agreement together with the other Loan Documents constitutes the whole and entire agreement between the parties and cancels and supersedes any prior agreements, undertakings, declarations and representations, written or verbal, in respect of the subject matter of this Agreement and the other Loan Documents.

13.10 Term of Agreement

The term of this Agreement is until the termination of the Commitment of each Lender and payment in full of all the obligations of the Borrower incurred pursuant to this Agreement.

13.11 Time of Essence

Time shall be of the essence of this Agreement.

13.12 Jurisdiction

(a)

Submission: The courts of the Province of Alberta shall have jurisdiction to settle any disputes in connection with the Loan Documents and each of the Lenders, the Agent and the Borrower accordingly submits to the jurisdiction of the courts of the Province of Alberta.

(b)

Forum Convenience and Enforcement Abroad: The Borrower, each Lender and the Agent:

(i): waives objection to the courts of the Province of Alberta on grounds of inconvenient forum or otherwise as regards proceedings in connection with a Loan Document; and
(ii): agrees that a judgment or order of a court of the Province of Alberta in connection with a Loan Document is conclusive and binding on it (subject to any rights of appeal in respect thereof) and may be enforced against it in the courts of any other jurisdiction.

(c)

Non-exclusivity: Nothing in this Section 13.12 limits the right of a Lender or the Agent or the Borrower to bring proceedings in connection with any Loan Document:

(i): in any other court of competent jurisdiction; or
(ii): concurrently in more than one jurisdiction.

13.13 Counterpart Execution

This Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument.

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed as of March 18, 2004.

COMMITMENTS AND ADDRESS FOR NOTICES:
Borrower:		PETRO-CANADA
150—6^th Avenue S.W. Calgary, Alberta
T2P 3E3		Per:	/s/ E. F. H. ROBERTS
Attention:	Vice President, General Counsel & Corporate Secretary	Name: Title:	E. F. H. Roberts Senior Vice President and Chief Financial Officer
Facsimile:	(403) 296-4990	Per:	/s/ DOUGLAS FRASER
		Name: Title:	Douglas Fraser Treasurer

Lender:		BANK OF MONTREAL
2200, 333—7th Avenue S.W. Calgary, Alberta
T2P 2Z1		Per:	/s/ R. P. HEINRICHS
Attention:	Director	Name: Title:	R. P. Heinrichs Vice-President
Facsimile:	(403) 515-3650	Per:
		Name: Title:
Commitment: Cdn. $90,000,000 Fronted LC Commitment: Cdn. $75,000,000

Lender:		ROYAL BANK OF CANADA
1100, 888–3^rd Street S.W. Calgary, Alberta
T2P 5C5		Per:	/s/ KEVIN ADAMS
Attention:	Director, Corporate Credit	Name: Title:	Kevin Adams Authorized Signatory
Facsimile:	(403) 292-3234	Per:
		Name: Title:
Commitment: Cdn. $90,000,000 Fronted LC Commitment: Cdn. $75,000,000

Lender:		THE BANK OF NOVA SCOTIA
2000, 700–2nd Street S.W. P.O. Box 2540 Calgary, Alberta
T2P 2N7		Per:	/s/ JEFF CEBRYK
Attention:	Director	Name: Title:	Jeff Cebryk Director
Facsimile:	(403) 221-6497	Per:	/s/ EUGENIA SCARLETT
		Name: Title:	Eugenia Scarlett Associate
Commitment: Cdn. $90,000,000 Fronted LC Commitment: Cdn. $75,000,000

Lender:		ABN AMRO BANK N.V.
79 Wellington St. West, Suite 1500 Toronto, Ontario
M5K 1G8		Per:	/s/ LAWRENCE J. MALONEY
Attention:	Group Vice President	Name: Title:	Lawrence J. Maloney Managing Director Credit Portfolio Management
Facsimile:	(416) 367-7937	Per:	/s/ DAVID MOORE
		Name: Title:	David Moore Credit Portfolio Management
Commitment: Cdn. $65,000,000

Lender:		BNP PARIBAS (CANADA)
77 King Street West, Suite 4100 Box 31 Toronto, Ontario
M5K 1N8		Per:	/s/ JEAN-PHILIPPE CADOT
Attention:	Vice President	Name: Title:	Jean-Philippe Cadot Vice-President Energy & Project Finance
Facsimile:	(416) 947-3538	Per:	/s/ MICHAEL GOSSELIN
		Name: Title:	Michael Gosselin Managing Director
Commitment: Cdn. $65,000,000

Lender:		CANADIAN IMPERIAL BANK OF COMMERCE
Oil and Gas Group 855—2nd St. S.W., 9^th floor (East Tower, Bankers Hall) Calgary, Alberta
T2P 2P2		Per:	/s/ DAVID SWAIN
Attention:	Vice President	Name: Title:	David Swain Managing Director
Facsimile:	(403) 221-5779	Per:	/s/ SCOTT BLACK
		Name: Title:	Scott Black Associate
Commitment: Cdn. $65,000,000

Lender:		CITIBANK, N.A. Canadian branch
4301, 400—3rd Avenue S.W. Calgary, Alberta
T2P 4H2		Per:	/s/ _______________
Attention:	Vice President	Name: Title:
Facsimile:	(403) 294-0601	Per:
		Name: Title:
Commitment: Cdn. $95,000,000

Lender:		DEUTSCHE BANK AG, CANADA BRANCH
1200, 222 Bay Street Toronto, Ontario
M5K 1H6		Per:	/s/ ROBERT A. JOHNSTON
Attention:	Vice President	Name: Title:	Robert A. Johnston Vice President
Facsimile:	(416) 682-8444	Per:	/s/ _______________
		Name: Title:
Commitment: Cdn. $65,000,000

Lender:		HSBC BANK CANADA
2210, 777—8^th Avenue S.W. Calgary, AB
T2P 3R5		Per:	/s/ NIGEL RICHARDSON
Attention:	Assistant Vice President, Corporate Banking	Name: Title:	Nigel Richardson Assistant Vice President, Corporate Banking
Facsimile:	(403) 215-4433	Per:	/s/ GREG GANNETT
		Name: Title:	Greg Gannett Senior Manager
Commitment: Cdn. $65,000,000

Lender:		JPMORGAN CHASE BANK, Toronto Branch
200 Bay Street, Suite 1800 Royal Bank Plaza, South Tower Toronto, Ontario
M5J 2J2		Per:	/s/ DREW MCDONALD
Attention:	Vice President	Name: Title:	Drew McDonald Vice President
Facsimile:	(416) 981-9138	Per:
		Name: Title:
Commitment: Cdn. $95,000,000

Lender:		THE TORONTO-DOMINION BANK
800, 324—8th Avenue S.W. Calgary, Alberta
T2P 2Z2		Per:	/s/ NORM BIRBECK
Attention:	Manager	Name: Title:	Norm Birbeck Managing Director
Facsimile:	(403) 292-2772	Per:	/s/ CLINT WARKENTIN
		Name: Title:	Clint Warkentin Vice President
Commitment: Cdn. $65,000,000

Agent:		BANK OF MONTREAL, as Agent
19^th Floor, First Canadian Place 100 King Street West Toronto, Ontario
M5X 1A1		Per:	/s/ R. P. HEINRICHS
Attention:	Manager, Agency Services Canada	Name: Title:	R. P. Heinrichs Vice-President
Facsimile:	(416) 867-5718

		Schedule A to the Credit Agreement (Canada) dated as of March 18, 2004 between PETRO-CANADA as Borrower and a syndicate of Lenders with BANK OF MONTREAL as Agent

NOTICE OF BORROWING, REPAYMENT,
PREPAYMENT OR CANCELLATION OF COMMITMENT

Date:

Bank of Montreal
19^th Floor, First Canadian Place
100 King Street West
Toronto, Ontario M5X 1A1

Attention: Manager, Agency Services Canada

Dear Sir:

We refer to the Credit Agreement (Canada) dated as of March 18, 2004 between PETRO-CANADA as Borrower, and a syndicate of Lenders with BANK OF MONTREAL as Agent (the "Credit Agreement"). Capitalized terms used herein have the same meaning as in the Credit Agreement.

We hereby give notice of our request for a [Accommodation, repayment, prepayment and/or cancellation of [all/a portion of] the Total Commitment] pursuant to Section [3.5, 3.16 or 4.3] of the Credit Agreement as follows:

1.: Amount of [Accommodation, prepayment, repayment] [Cdn. $, U.S. $, Euros or Pounds Sterling]
2.: Date of [Accommodation, repayment, prepayment and/or cancellation of Total Commitment/ Fronted LC Commitment] .
3.: [If applicable]. Nature of [Accommodation, repayment or prepayment] is by way of a [Cdn. Prime Loan, U.S. Base Rate Loan, Libor Loan, Letter of Credit or Bankers' Acceptances and, if applicable, BA Equivalent Advance)].
4.: [If applicable]. The amount of the [Total Commitment/Fronted LC Commitment] to be cancelled is Cdn. $ .
5.: [If applicable]. The Libor Interest Period for the Libor Loan is months.
6.: [If applicable]. We hereby request that the Lenders accept drafts and purchase Bankers' Acceptances at the applicable Discount Rate.
7.: [If applicable—when Lenders are not purchasing Bankers' Acceptances]. We will forward a Notice of Borrowing by way of Bankers' Acceptance in the form of Schedule B to the Credit Agreement on [the Drawdown Date]. The term of each such Bankers' Acceptance shall be for a period of days, maturing on .
8.: [If applicable—when Lenders are purchasing Bankers' Acceptances]. Please forward the funding particulars with respect to the Bankers' Acceptances on [the Drawdown Date]. The term of each such Bankers' Acceptance shall be for a period of days, maturing on .
9.: [If applicable]. We hereby request the Agent issue a Direct Letter of Credit or [ • ], as Fronting Lender, issue a Fronted Letter of Credit on the following terms: [Note: include an LC Application and all of the terms required by Section 3.10(b)]. The Letter of Credit is a [Standby/Performance] Letter of Credit.

10.: We hereby confirm that each condition precedent in Section 7.2 of the Credit Agreement is satisfied on the date hereof and will be satisfied on the Drawdown Date unless, in each case, waived in accordance with the Credit Agreement.

	Yours truly,
	PETRO-CANADA
	Per:

	Name:

	Title:

		Schedule B to the Credit Agreement (Canada) dated as of March 18, 2004 between PETRO-CANADA as Borrower and a syndicate of Lenders with BANK OF MONTREAL as Agent

NOTICE OF BORROWING BY WAY OF BANKERS' ACCEPTANCES

Date:

Bank of Montreal
19^th Floor, First Canadian Place
100 King Street West
Toronto, Ontario M5X 1A1

Attention: Manager, Agency Services Canada

Dear Sir:

In accordance with Section 3.7 of the Credit Agreement, we confirm our instructions regarding the issuance of the following Bankers' Acceptances for value , .

Each should be dated so as to mature on , , resulting in a term of days and should be delivered to the persons described in Exhibit 1 attached hereto.

Particulars in respect of such Bankers' Acceptances are as set out in Exhibit 1 attached hereto.

	Yours truly,
	PETRO-CANADA
	Per:

	Name:

	Title:

Exhibit 1 to Notice of Borrowing by way of Bankers' Acceptances

CONFIRMATION OF BANKERS' ACCEPTANCES FUNDING DETAILS

Name of Lender	Bank of Montreal	•	•
Amount
Discount Rate
Price
Discount Proceeds
Acceptance Fees
Net Proceeds
BA Purchaser

Note: if any Non-Acceptance Lenders include particulars of BA Equivalent Advance

		Schedule C to the Credit Agreement (Canada) dated as of March 18, 2004 between PETRO-CANADA as Borrower and a syndicate of Lenders with BANK OF MONTREAL as Agent

CONVERSION NOTICE

Date:

Bank of Montreal
19^th Floor, First Canadian Place
100 King Street West
Toronto, Ontario M5X 1A1

Attention: Manager, Agency Services Canada

Dear Sir:

We hereby give notice of a conversion of Borrowings pursuant to Section 3.18 of the Credit Agreement.

We have outstanding $ by way of [Cdn. Prime Loan, U.S. Base Rate Loan, Libor Loan or Bankers' Acceptances]. Please convert [Cdn. $, U.S. $, Euros or Pounds Sterling] outstanding by way of [Cdn. Prime Loan, U.S. Base Rate Loan, Libor Loan or Bankers' Acceptances] into a [Cdn. Prime Loan, U.S. Base Rate Loan, Libor Loan or Bankers' Acceptances] on the day of .

[If Applicable]. The Libor Interest Period for the Libor Loan is days.

[If Applicable]. We hereby request that the Lenders accept drafts [and purchase] the Bankers' Acceptances to be issued pursuant to this Notice of Conversion.

[If Applicable]. We will forward a notice of Borrowing by way of Bankers' Acceptances in the form of Schedule B to the Credit Agreement on the Conversion Date. The term of each Bankers' Acceptance shall be for a period of days, maturing on .

[If Applicable]. Please forward the funding particulars with respect to the Bankers' Acceptances on the Conversion Date. The term of each Bankers' Acceptance shall be for a period of days, maturing on .

We hereby confirm that each condition precedent in Section 7.2 of the Credit Agreement is satisfied on the date hereof and will be satisfied on the Conversion Date unless, in each case, waived in accordance with the Credit Agreement.

	Yours truly,
	PETRO-CANADA
	Per:

	Name:

	Title:

		Schedule D to the Credit Agreement (Canada) dated as of March 18, 2004 between PETRO-CANADA as Borrower and a syndicate of Lenders with BANK OF MONTREAL as Agent

ROLLOVER NOTICE

Date:

Bank of Montreal
19^th Floor, First Canadian Place
100 King Street West
Toronto, Ontario M5X 1A1

Attention: Manager, Agency Services Canada

Dear Sir:

We hereby give notice of a rollover of a [Bankers' Acceptance/Libor Loan/Letter of Credit] pursuant to Section 3.19 of the Credit Agreement.

We have outstanding [Cdn. $ by way of Bankers' Acceptances] [Cdn. $, U.S. $/Euros/Pounds Sterling] by way of Libor Loan.] The [Bankers' Acceptance matures on /Libor Interest Period in respect of such Libor Loan expires on .] Please rollover such [Bankers' Acceptance/Libor Loan [or Cdn. $/U.S. $/Euros/Pounds Sterling] thereof—if less than entire [Bankers' Acceptance/Libor Loan] is being rolled-over] such that the subsequent [term of each such Bankers' Acceptance shall be months maturing on /Libor Interest Period is days].

We have outstanding [Cdn. $/U.S. $/Euro/Pounds Sterling ] by way of Letter of Credit. The Letter of Credit matures on . Please extend the expiry date of such Letter of Credit to .

We hereby confirm that each condition precedent in Section 7.2 of the Credit Agreement is satisfied on the date hereof and will be satisfied on the Rollover Date unless, in each case, waived in accordance with the Credit Agreement.

	Yours truly,
	PETRO-CANADA
	Per:

	Name:

	Title:

		Schedule E to the Credit Agreement (Canada) dated as of March 18, 2004 between PETRO-CANADA as Borrower and a syndicate of Lenders with BANK OF MONTREAL as Agent

COMPLIANCE CERTIFICATE

To: The Agent and the Lenders under the Credit Agreement defined in paragraph 3 below

I, , of the City of Calgary, in the Province of Alberta, hereby certify as at the date of this Certificate as follows:

1.: I am the [Chairman, President, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Vice President, Treasurer or Corporate Secretary] of Petro-Canada (the "Borrower");
2.: This Certificate applies to the Fiscal [Quarter/Year] ending ;
3.: I am familiar with and have examined the provisions of the Credit Agreement (Canada) (the "Credit Agreement") dated as of March 18, 2004 between the Borrower and a syndicate of Lenders and Bank of Montreal as Agent and I have made such reasonable investigations as I have deemed necessary for purposes of this Certificate;
4.: The following constitute the only Subsidiaries which are Designated Subsidiaries: ;
5.: No Default or Event of Default has occurred and is continuing;
6.: [If applicable]. The present rating given to the Borrower's long term senior unsecured and unsubordinated debt by Moody's is and by S&P is .

For purposes of this Compliance Certificate, the following defined terms have been determined in accordance with the definitions thereof in the Credit Agreement as at the end of the above Fiscal [Quarter/Year]:

*Consolidated Debt*
All Indebtedness for Borrowed Money from consolidated balance sheet plus (without duplication):		Cdn. $
reimbursement obligations under financial letters of credit		Cdn. $
other support obligations		Cdn. $
Production Payments and deferred revenues in respect of obligations to third parties		Cdn. $
Capitalized Lease Obligations		Cdn. $
Purchase Money Obligations		Cdn. $
Non-Recourse Debt		Cdn. $
Guarantees of the above obligations		Cdn. $
Consolidated Debt		Cdn. $

*Consolidated Assets*
Total assets from consolidated balance sheet		Cdn. $
Consolidated Assets		Cdn. $

*Consolidated Net Tangible Assets*
Consolidated Assets less: amounts attributable to goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other similar intangibles and adjustments on account of minority interests of other persons holding stock of a Subsidiary		Cdn. $
Consolidated Net Tangible Assets		Cdn. $

*Consolidated Shareholders' Equity*
Consolidated Shareholders' Equity from consolidated balance sheet		Cdn. $

Consolidated Shareholders' Equity		Cdn. $

*Consolidated Capitalization*
Consolidated Shareholders' Equity		Cdn. $
plus: Consolidated Debt		Cdn. $
Consolidated Capitalization		Cdn. $

7.	The Consolidated Debt to Capitalization Ratio as of the end of this Fiscal [Quarter/Year], which is to be not more than .60 to 1.0, is to ;
8.	(a)	The Consolidated Net Tangible Assets of the Borrower and its Designated Subsidiaries as of the end of this Fiscal [Quarter/Year], determined as provided for in Section 8.1(y) of the Credit Agreement, and which are to be not less than 70% of the Consolidated Net Tangible Assets, are not less than % of Consolidated Net Tangible Assets;
9.	Except where the context otherwise requires, all capitalized terms used herein have the same meaning as in the Credit Agreement; and
10.	This Certificate is given by the undersigned officer in [his/her] capacity as an officer of the Borrower without any personal liability on the part of such officer.

Executed at the City of Calgary, in the Province of Alberta this day of , .

	PETRO-CANADA
	Per:

	Name:

	Title:

		Schedule F to the Credit Agreement (Canada) dated as of March 18, 2004 between PETRO-CANADA as Borrower and a syndicate of Lenders with BANK OF MONTREAL as Agent

LENDER ASSIGNMENT AGREEMENT

TO:	Bank of Montreal (the "Agent")
AND TO:	Petro-Canada (the "Borrower")
RE:	Credit Agreement (Canada) ("Credit Agreement") made as of March 18, 2004 between the Borrower, the Agent and a syndicate of Lenders

Unless otherwise defined herein, capitalized terms in this Lender Assignment Agreement shall have the meanings set out in the Credit Agreement.

1.: [name of new lender] (the "Assignee") acknowledges that its proper officers have received and reviewed a copy of the Loan Documents and further acknowledges the provisions of the Loan Documents.
2.: The Assignee desires to become a Lender under the Credit Agreement. [name of selling Lender] (the "Assignor") has agreed to and does hereby sell, assign and transfer to the Assignee [Cdn. $ ] of its Commitment such that the Commitment of the Assignor shall be [Cdn. $ ] and, accordingly, the Assignee has agreed to execute this Lender Assignment Agreement.
3.: The Assignee, by its execution and delivery of this Lender Assignment Agreement, agrees that from and after the date hereof it shall be a Lender under the Credit Agreement and agrees to be subject to, bound by and to perform all of the terms, conditions and covenants of the Credit Agreement applicable to a Lender but its liability to make Borrowings shall be limited to its Commitment identified in paragraph 2 of this Lender Assignment Agreement.
4.: The Assignee agrees to assume, without recourse to the Assignor, all liabilities and obligations of the Assignor as Lender under the Credit Agreement to the extent of the Assignee's Commitment as provided for herein and [each of the Borrower and] [may not be applicable if assignment is to an Affiliate of Assignor] the Assignee hereby releases and discharges the Assignor from such obligations and liabilities to the same extent. Nothing herein shall release or be deemed to release any claim, demand, action or cause of action which the Borrower may have against the Assignor arising out of or in connection with a breach or default by the Assignor of any provision of the Credit Agreement and the other Loan Documents. Notwithstanding the foregoing, if any Libor Loans made by the Assignor or Bankers' Acceptances accepted by the Assignor or Direct Letters of Credit remain outstanding on the effective date of the sale, assignment or transfer referred to therein, such Libor Loans, Bankers' Acceptances and Letters of Credit shall remain the liability and obligation of the Assignor and the Assignor shall be entitled to all of the rights, titles and benefits arising out of the Credit Agreement and the other Loan Documents with respect to such Libor Loans, Bankers' Acceptances and Letters of Credit until the last day of the Libor Interest Period of any such Libor Loan or the maturity date of such Bankers' Acceptances or the expiry date of such Letter of Credit (including repayment and reimbursement rights); provided, however, that the Assignee shall indemnify the Assignor and hold the Assignor harmless from and against any losses or costs paid or incurred by the Assignor in connection with such Libor Loans, Bankers' Acceptances and Letters of Credit (other than losses or costs which arise out of the gross negligence or wilful misconduct of the Assignor) and shall be entitled to a proportionate amount of the Margin paid in respect of such Libor Loans or fees paid in respect of such Bankers' Acceptances or Letters of Credit based upon the number of days remaining in the Libor Interest Period of any such Libor Loan or the term of any such Bankers' Acceptances or Letters of Credit, in each case as agreed with the Assignor.

5.: The Assignee acknowledges and confirms that it has not relied upon and that the Assignor or the Agent or any of their respective directors, officers, employees or agents have not made any representation or warranty whatsoever as to the due execution, legality, effectiveness, validity or enforceability of any of the Loan Documents or any other documentation or information delivered by the Assignor or the Agent to the Assignee in connection therewith or for the performance thereof by any party thereto or of the financial condition of the Borrower or any Subsidiary. All representations, warranties and conditions express or implied by law or otherwise are hereby excluded.
6.: The Assignee represents and warrants that it [is not a non-resident within the meaning of the Income Tax Act (Canada) and that it—delete if second sentence applicable] has itself been, and will continue to be, solely responsible for making its own independent appraisal of and investigation into the financial condition, creditworthiness, affairs, status and nature of the Borrower or any Subsidiary and has not relied and will not hereafter rely on the Assignor or the Agent or any of their respective directors, officers, employees or agents to appraise or keep under review on its behalf the financial condition, creditworthiness, affairs, status or nature of the Borrower or any Subsidiary. [If applicable—By its execution hereof, each Assignee that is not listed on Schedule I or Schedule II to the Bank Act (Canada) represents and warrants to the Borrower, each of the other Lenders and the Agent, which representation and warranty shall survive the execution of this Lender Assignment Agreement, that either: (i) it is listed on Schedule III to the Bank Act (Canada), is not subject to the restrictions and requirements referred to in Section 524(2) of the Bank Act (Canada) and is resident, or deemed to be resident, in Canada for purposes of Part XIII of the Income Tax Act (Canada) and any amounts paid or credited to the Assignee under the terms of the Credit Agreement will be paid or credited to such Assignee in respect of its Canadian banking business; or (ii) it is a government-owned entity organized in Canada and is resident in Canada for purposes of the Income Tax Act (Canada).]
7.: The Assignee represents and warrants that its (or its parent's) current credit rating is as rated by .
8.: Each of the Assignor and the Assignee represents and warrants to the other, and to the Agent and the Lenders that it has the capacity and power to enter into this Lender Assignment Agreement in accordance with the terms hereof and to perform its obligations arising therefrom, and all actions required to authorize the execution and delivery hereof and the performance of such obligations have been duly taken.
9.: This Lender Assignment Agreement shall be governed by and construed in accordance with the laws of the Province of Alberta, Canada.
10.: Notices shall be given to the Assignee in the manner provided for in the Credit Agreement as follows:
: •
: •
: Attention: •
: Telecopier: •
: [specify lending office of the Assignee if different from above]
11.: This Lender Assignment Agreement shall be binding upon the Assignee and its successors and permitted assigns.

DATED this day of , .

	[Name of Assignee]
	Per:

	Name:

	Title:

The Assignor hereby acknowledges the above Lender Assignment Agreement and agrees that its Commitment is reduced by an amount equal to the Commitment assigned to the Assignee hereunder.
	[Name of Assignor]
	Per:

	Name:

	Title:

Each of Petro-Canada and Bank of Montreal hereby acknowledges the above Lender Assignment Agreement and consents to the Assignee becoming a Lender under the Credit Agreement to the extent of its Commitment as set out in paragraph 2 of the Lender Assignment Agreement.
	PETRO-CANADA
	Per:

	Name:

	Title:

	BANK OF MONTREAL, as Agent
	Per:

	Name:

	Title:

[if necessary—insert consent of Fronting Lenders]

		Schedule G to the Credit Agreement (Canada) dated as of March 18, 2004 between PETRO-CANADA as Borrower and a syndicate of Lenders with BANK OF MONTREAL as Agent

REQUEST FOR OFFER OF EXTENSION

Date:

Bank of Montreal
19^th Floor, First Canadian Place
100 King Street West
Toronto, Ontario M5X 1A1

Attention: Manager, Agency Services Canada

Dear Sir:

In accordance with Section 3.21 of the Credit Agreement, we hereby request that the Lenders in respect of whom the Term Period has not commenced provide an Offer of Extension to extend the Term Date.

	Yours truly,
	PETRO-CANADA
	Per:

	Name:

	Title:

		Schedule H to the Credit Agreement (Canada) dated as of March 18, 2004 between PETRO-CANADA as Borrower and a syndicate of Lenders with BANK OF MONTREAL as Agent

POWER OF ATTORNEY TERMS- BANKERS' ACCEPTANCES

In order to facilitate the acceptance of Bankers' Acceptances pursuant to the terms of the Credit Agreement (Canada), Petro-Canada (the "Borrower") hereby appoints each Lender (individually, the "Bank"), acting by its duly authorized signatories (the "Attorney") for the time being at the Bank's main branch in Toronto, Ontario or at such other branch designated by the Bank (the "Branch of Account"), the attorney of the Borrower:

1.: to sign for and on behalf and in the name of the Borrower as drawer, drafts in the Bank's standard form of a "depository bill" under and as defined in the Depository Bills and Notes Act (Canada) (the "DBNA") ("Drafts") drawn on the Bank payable to the order of a "clearing house" under the DBNA or its nominee for deposit by the Bank with the "clearing house" after acceptance thereof by the Bank; and
2.: to fill in the amount, date and maturity date of such Drafts;

provided that such acts in each case are to be undertaken by the Bank in accordance with written instructions given to the Bank by the authorized officers of the Borrower as provided in this power of attorney.

Notwithstanding paragraph 1 above, in the event the Bank is an Old System Issuer, such Bank shall sign for and on behalf of and in the name of the Borrower as drawer, drafts in the Bank's standard form ("Old System Issuer Drafts") drawn on the Bank payable to the order of the Bank.

Instructions to the Bank relating to the execution, completion, endorsement, discount and/or delivery or deposit by the Bank on behalf of the Borrower of Drafts or Old System Issuer Drafts, as applicable, which the Borrower wishes to submit to the Bank for acceptance by the Bank shall be communicated by the Agent and/or by officers of the Borrower, designated by the Borrower as its "authorized officers" to the Bank in writing at the Branch of Account following delivery by the Borrower of a Drawdown Notice, Conversion Notice or Rollover Notice pursuant to the Credit Agreement and shall specify the following information:

(a): a Canadian Dollar amount, which shall be the aggregate face amount of the Drafts or Old System Issuer Drafts to be accepted by the Bank in respect of a particular drawdown, conversion or rollover;
(b): a specified period of time, as provided in the Credit Agreement, which shall be the number of days after the date of such Drafts or Old System Issuer Drafts that such Drafts or Old System Issuer Drafts are to be payable, and the dates of issue and maturity of such Drafts; and
(c): payment instructions specifying the account number of the Borrower and the financial institution at which the proceeds from the sale of such Drafts or Old System Issuer Drafts are to be credited.

The communication in writing by the authorized officers of the Borrower to the Bank of the instructions referred to above shall constitute the authorization and instruction of the Borrower to the Bank to complete and execute and, if applicable, endorse Drafts and Old System Issuer Drafts in accordance with such information as set out above and the request of the Borrower to the Bank to accept such Drafts and Old System Issuer Drafts and deliver the same or deposit the same with the "clearing house", against payment as set out in the instructions. The Borrower acknowledges that the Bank shall not be obligated to accept any such Drafts and Old System Issuer Drafts except in accordance with the provisions of the Credit Agreement. The Bank shall be and it is hereby authorized to act on behalf of the Borrower upon and in compliance with instructions communicated to the Bank as provided herein if the Bank reasonably believes them to be genuine.

The Borrower agrees to indemnify the Bank and its directors, officers, employees, affiliates and agents and to hold it and them harmless from and against any loss, liability, expense or claim of any kind or nature whatsoever incurred by any of them as a result of any action or inaction in any way relating to or arising out of this power of attorney or the acts contemplated hereby including the deposit of any Draft with the "clearing house"; provided that this indemnity shall not apply to any such loss, liability, expense or claim which results from the gross negligence or wilful misconduct of the Bank or any of its directors, officers, employees, affiliates or agents.

This power of attorney may be revoked by the Borrower at any time upon not less than five (5) Business Days' written notice served upon the Bank at the Branch of Account, provided that (i) it may be replaced with another power of attorney forthwith in accordance with the requirements of the Credit Agreement; and (ii) no such revocation shall reduce, limit or otherwise affect the obligations of the Borrower in respect of any Draft or Old System Issuer Drafts executed, completed, discounted and/or deposited in accordance herewith prior to the time at which such revocation becomes effective. This power of attorney may be terminated by the Bank at any time upon not less than five (5) Business Days' written notice to the Borrower in accordance with Section 13.6 of the Credit Agreement.

Any revocation or termination of this power of attorney shall not affect the rights of the Bank and the obligations of the Borrower with respect to the indemnities of the Borrower above stated with respect to all matters arising prior in time to any such revocation or termination.

This power of attorney is in addition to and not in substitution for any agreement to which the Bank and the Borrower are parties.

This power of attorney shall be governed in all respects by the laws of the Province of Alberta and the laws of Canada applicable therein and each of the Borrower and the Bank hereby irrevocably attorns to the non-exclusive jurisdiction of the courts of such jurisdiction in respect of all matters arising out of this power of attorney.

In the event of a conflict between the provisions of this Power of Attorney and the Credit Agreement, the Credit Agreement shall prevail.

		Schedule I to the Credit Agreement (Canada) dated as of March 18, 2004 between PETRO-CANADA as Borrower and a syndicate of Lenders with BANK OF MONTREAL as Agent

FORM OF DIRECT LETTER OF CREDIT

[Letterhead of Agent, Toronto Branch]

Irrevocable Letter of Credit No.:
Date of Issue:
Expiry Date:
Place of Expiry:
Amount:

Beneficiary:	Name:	Applicant:	Name:
	Address:		Address:
	Attn:		Attn:
	Fax No.:

The Issuing Lenders (as defined below) hereby establish this irrevocable and unconditional Letter of Credit in your favour as beneficiary for drawings up to [Canadian Dollars/U.S. Dollars/Euros/Pounds Sterling] in aggregate amount. This Letter of Credit is issued, presentable and payable at our office at [ • , Toronto, Ontario] and expires at our close of business 5:00 PM on (the "Expiry Date"). The aggregate amount available under this Letter of Credit shall be reduced immediately following the honoring of any draft drawn hereunder in an amount equal to the amount of such draft. Except when the amount of this Letter of Credit is increased, this Letter of Credit cannot be modified or revoked without your consent. Bank of Montreal, in addition to acting in its individual capacity as an Issuing Lender hereunder, is acting as an agent for the other Issuing Lenders hereunder (in such capacity, together with its successors in such capacity, the "Agent").

Funds shall be available under this Letter of Credit upon presentation to the Agent of the following: [ • describe requirements for a drawing]

Each Issuing Lender hereby undertakes, severally according to the percentage set forth next to its signature below (such Issuing Lender's "Applicable Percentage") and not jointly with any other Issuing Lender, that drafts drawn under and in strict compliance with the terms of this Letter of Credit will be duly honored by paying to the Agent such Issuing Lender's share (according to its Applicable Percentage) of the amount of such draft. The Agent hereby undertakes that any amount so received by it will be made available to you by promptly remitting the payment so received, in like funds, in accordance with your instructions.

The obligation of each Issuing Lender under this Letter of Credit is several and not joint and shall at all times be an amount equal to such Issuing Lender's Applicable Percentage of the aggregate undrawn amount of this Letter of Credit (and of each drawing under this Letter of Credit).

This Letter of Credit has been executed and delivered by the Agent in the name and on behalf of, and as attorney-in-fact for, each Issuing Lender. The Agent is authorized to act under this Letter of Credit as the agent of each Issuing Lender in order to:

(a): receive drafts, other demands for payment and other documents presented by you under this Letter of Credit;
(b): determine whether such drafts, demands and documents are in compliance with the terms and conditions of this Letter of Credit; and
(c): notify such Issuing Lender that a valid drawing has been made and the date that the related disbursement is to be made.

The Agent undertakes that it will promptly notify each Issuing Lender of any valid drawing under this Letter of Credit.

The beneficiary hereof by its acceptance hereof, agrees that the Agent shall have no obligation or liability to honor any drawing under this Letter of Credit (subject to the obligation and liability of the Agent in its capacity as an Issuing Lender with respect to its Applicable Percentage) and that neither any Issuing Lender nor the Agent shall be responsible for the failure of any other Issuing Lender to make a payment to be made by such other Issuing Lender hereunder.

This Letter of Credit sets forth in full the terms of our and each Issuing Lender's undertaking, and such undertaking is not subject to any agreement, requirement or qualification and shall not in any way be amended, modified, amplified or limited by reference to any document, instrument or agreement referred to herein or in which this Letter of Credit is referred to or to which this Letter of Credit relates (other than the annexes attached hereto, if any), and any such reference shall not be deemed to incorporate herein by reference any document, instrument or agreement. The obligation of each Issuing Lender under this Letter of Credit is the individual obligation of such Issuing Lender and is in no way contingent upon reimbursement of any drawing hereunder or upon any Issuing Lender's ability to perfect a lien or security interest.

Each Issuing Lender's obligation to pay is irrevocable, absolute and unconditional and, in furtherance and support thereof and without limiting the irrevocable, absolute and unconditional nature of each Issuing Lender's obligations to the beneficiary hereunder, any demand by the beneficiary shall be honoured without any inquiry as to the beneficiary's rights to make such demand, without regard to or recognition of any contractual rights, claims or defences (legal or equitable) of the applicant against the beneficiary and without regard to any other defence to the beneficiary's demand for payment, arising as a result of any dispute between the beneficiary and the applicant or between the applicant and the Issuing Lenders.

[If applicable—It is a condition of this Letter of Credit that it will be automatically extended without amendment for one year periods from the Expiry Date hereof, or any future expiration date unless, not more than [30] days and not less than [ • ]days prior to any expiration date, we shall notify you by registered mail, at your address specified above, that this Letter of Credit will not be extended for any such additional period.]

This Letter of Credit shall be governed by and construed in accordance with the law of the Province of [Alberta] (without reference to choice of law doctrine) and is subject to the Uniform Customs and Practice for Letter of Credits (1993 Revision), International Chamber of Commerce Publication No. 500 (the "UCP"). In the event of any conflict between the law of the Province of [Alberta] and the UCP, the UCP shall control. Notwithstanding Article 17 of the UCP, if this Letter of Credit expires during an interruption of business as described in said Article 17, each Issuing Lender agrees to effect payment if this Letter of Credit is drawn against within 30 days after the resumption of business.

This [Letter of Credit may not be assigned or transferred; provided that this] Letter of Credit shall inure to the benefit of any successor by operation of law of the named beneficiary hereof, including, without limitation, any liquidator, receiver or trustee for such named beneficiary.

All communications regarding this Letter of Credit should be addressed to Bank of Montreal, [ • ], Toronto, Ontario, Attention: , referencing Irrevocable Letter of Credit No. .

An Issuing Lender may, subject to the replacement thereof with a new Lender having the minimum credit rating set forth below or with your consent (as applicable), cease to be a party to, and a new Lender may become a party to, this Letter of Credit, and the Applicable Percentage of an Issuing Lender may change; provided that no such event will reduce the then available amount under

this Letter of Credit. Upon the occurrence of any such event, the Agent will provide prompt notice to you of such event, including any change in the identities of the Issuing Lenders severally but not jointly liable in respect of the aggregate undrawn amount of this Letter of Credit (based upon their respective Applicable Percentages thereof) and any change in such Applicable Percentages. If a new Lender becomes a party to this Letter of Credit and the credit rating of such new Lender (or its parent) is lower than [A-] as rated by Standard & Poors or the equivalent by any other recognized rating agency, the consent of the beneficiary to such change shall be required.

	Very truly yours,
	BANK OF MONTREAL, as Agent
	By:	Name: Title:
Applicable Percentage	ISSUING LENDERS
%	[NAME OF LENDER]
	By:	Bank of Montreal, Attorney-in-Fact
	By:	Title
NTD: LIST OTHER LENDERS AND APPLICABLE PERCENTAGE.

		Schedule J to the Credit Agreement (Canada) dated as of March 18, 2004 between PETRO-CANADA as Borrower and a syndicate of Lenders with BANK OF MONTREAL as Agent

REALLOCATION REQUEST

Date:

Bank of Montreal 19^th Floor, First Canadian Place 100 King Street West Toronto, Ontario M5X 1A1		[International Credit Facility Agent]
		Attention: [•]
Attention: Manager, Agency Services Canada

Dear Sir:

Pursuant to Section 3.2 of the Credit Agreement, we hereby give notice of our intention, effective , to cancel the Total Commitment from Cdn.$ to Cdn.$ and to do so by reducing the Commitment of each of the Exempt Lenders by the amounts described in Exhibit I hereto and to increase the "Total Commitment" under the International Credit Facility from Cdn.$ to Cdn.$ and to do so by increasing the "Commitment" of each of the "Lenders" under the International Credit Facility by the amounts described in Exhibit I hereto. We confirm that the conditions precedent to such reallocation contained in Section 3.2 will be satisfied on the effective date of such reallocation.

	Yours truly,
	PETRO-CANADA
	Per:

	Name:

	Title:

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TABLE OF CONTENTS
ARTICLE 1 INTERPRETATION
ARTICLE 2 REPRESENTATIONS AND WARRANTIES
ARTICLE 3 THE CREDIT FACILITY
ARTICLE 4 REPAYMENT AND PREPAYMENT
ARTICLE 5 PAYMENT OF INTEREST AND FEES
ARTICLE 6 PAYMENT AND TAXES
ARTICLE 7 CONDITIONS PRECEDENT TO DISBURSEMENT OF THE BORROWINGS
ARTICLE 8 COVENANTS OF THE BORROWER
ARTICLE 9 EVENTS OF DEFAULT
ARTICLE 10 EXPENSES AND INDEMNITIES
ARTICLE 11 THE AGENT AND THE LENDERS
ARTICLE 12 SUCCESSORS AND ASSIGNS AND JUDGMENT CURRENCY
ARTICLE 13 MISCELLANEOUS
EX-19 20 a2138532zex-19.htm EXHIBIT 19
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EXHIBIT 19

JOINT FILING AGREEMENT

In accordance with Rule 13d-1(k) under the Securities and Exchange Act of 1934, as amended, the undersigned hereby agree to the joint filing on behalf of each of them of a Statement on Schedule 13D, and any amendments thereto, with respect to the outstanding shares of common stock, par value $0.015 per share, of Prima Energy Corporation, a Delaware corporation ("Prima"), including the associated rights to purchase the preferred shares of Prima, and that this agreement be included as an Exhibit to such filing.

This Agreement may be executed in two or more counterparts by each of the undersigned, and each of which, taken together, shall constitute one and the same instrument.

Date: June 18, 2004
	Petro-Canada
	By:	/s/ E. F. H. ROBERTS
	Name:	E. F. H. Roberts
	Title:	Senior Vice-President and Chief Financial Officer
	Petro-Canada (US) Holdings Ltd.
	By:	/s/ FRANCOIS LANGLOIS
	Name:	Francois Langlois
	Title:	Vice President
	Raven Acquisition Corp.
	By:	/s/ HUGH L. HOOKER
	Name:	Hugh L. Hooker
	Title:	President

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JOINT FILING AGREEMENT
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