Exhibit
10.17


 


CANADA


 


SUBSCRIPTION AGREEMENT
FOR


 


7% SECURED CONVERTIBLE
DEBENTURES


 


	
  TO:

  	
   

  	
  Surge
  Global Energy (Canada), Ltd. (the “Corporation”)

  
	
  AND TO:

  	
   

  	
  Surge Global Energy, Inc.
  (“Surge U.S.”)

  
	
  AND TO:

  	
   

  	
  MGI Securities Inc. (the
  “Agent”)

  



 


The undersigned
(hereinafter referred to as the “Subscriber”)
hereby irrevocably subscribes for and agrees to purchase the principal amount
(the “Principal Amount”) of 7%
secured convertible debentures (the “Debentures”)
of the Corporation set forth below, at an aggregate subscription price that is
equivalent to the Principal Amount of Debentures subscribed for, upon and
subject to the terms and conditions set forth in “Terms and Conditions of
Subscription for 7% Secured Convertible Debentures of Surge Global Energy (Canada),
Ltd.” attached hereto (together with this page and the attached Exhibits, the “Subscription Agreement”).  In addition
to this face page, the Subscriber must also complete Exhibit 1 attached hereto,
if applicable.  The Corporation is a “connected
issuer” (as defined in Section 1.1 of National Instrument 33-105) of the Agent,
as the Agent has an employee, being Tony Loria, who will be appointed as a
director of the Corporation on the Closing Date (as defined herein).


 


	
   

  	
   

  	
  Principal Amount of Debentures
  Subscribed for:

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  (Name of Subscriber - please print)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  If the Subscriber is signing as
  agent for a principal and is not deemed to be purchasing as principal
  pursuant to NI 45-106 (as defined herein) by virtue of being either (i) a
  trust company or trust corporation acting on behalf of a fully managed
  account managed by the trust company or trust corporation as the case may be
  or, (ii) a person acting on behalf of a fully managed account managed by it,
  and in each case satisfying the criteria set forth in NI 45-106, complete the
  following and ensure that Exhibit 1 is completed in respect of such
  principal:

  
	
   

  	
  (Authorized Signature)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Official Capacity or Title - please print)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Please print
  name of individual whose signature appears above if different than the name
  of the subscriber printed above.)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Subscriber’s Address)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Name of Principal)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (Principal’s Address)

  
	
   

  	
  (Telephone Number)

  	
  (E-Mail Address)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Principal’s Telephone
  Number)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Principal’s E-Mail
  Address)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Register the Debentures as set forth below:

  	
   

  	
  Deliver the Debentures as set
  forth below:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Name)

  	
   

  	
  (Name)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Account reference, if applicable)

  	
   

  	
  (Account reference, if
  applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Address)

  	
   

  	
  (Contact Name)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Address)

  
	
   

  	
   

  	
   

  	
   

  
											



 


This
is the first page of an agreement comprised of 12 pages (not including Exhibits
1 and 2).


 





















 


ACCEPTANCE:  The Corporation and Surge U.S. hereby accept
the subscription as set forth above on the terms and conditions contained in
this Subscription Agreement and the Corporation and Surge U.S. represent and
warrant to the Subscriber that the representations and warranties made by the
Corporation and Surge U.S. to the Agent in the Agency Agreement (as defined herein)
are true and correct in all material respects as of the Closing Date (as
defined herein) (save and except as waived by the Agent) and that the
Subscriber is entitled to rely thereon as though the Subscriber was a party
thereto.


 


                                      ,
2005


 


 


	
  SURGE GLOBAL ENERGY (CANADA), LTD.

  	
   

  	
   

  	
  Subscription No:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SURGE
  GLOBAL ENERGY, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  



 


2





















 


CANADA


 


TERMS
AND CONDITIONS OF SUBSCRIPTION FOR


7% SECURED
CONVERTIBLE DEBENTURES


OF SURGE GLOBAL
ENERGY (CANADA), LTD.


 


Terms of the Offering


 


1.             The Subscriber acknowledges (on its own behalf and, if
applicable, on behalf of each person on whose behalf the Subscriber is
contracting) that this subscription is subject to rejection or acceptance by
the Corporation in whole or in part.  If this subscription is rejected by
the Corporation, this subscription and all monies tendered therewith shall be
returned forthwith to the Subscriber, without interest or deduction.


 


2.             The Subscriber acknowledges (on its own behalf and, if
applicable, on behalf of each person on whose behalf the Subscriber is
contracting) that:


 


(a)                                  the
Debentures subscribed for by it hereunder form part of a larger issuance and
sale by the Corporation of up to $10,000,000 principal amount of Debentures or
such greater number of Debentures as may be agreed to by the Corporation and
the Agent on a commercially reasonable efforts marketed offering basis through
the Agent (the “Offering”); and


 


(b)                                 the
Offering is not subject to any minimum subscription level, and therefore, any
funds invested are available to the Corporation and will be paid to the
Corporation on the Closing Date; and


 


(c)                                  the
Debentures will be duly and validly created and issued pursuant to, and the
conversion thereof shall be governed by, the terms and conditions of a trust
indenture (the “Indenture”) to be
dated the Closing Date (as defined below) among the Corporation, Surge U.S. and
Valiant Trust Company, as trustee, which Indenture shall include the following
terms:


 


(i)                                     the
Debentures will be limited in the aggregate principal amount to
$10,000,000.  The Corporation may,
however, from time to time, without the consent of the holders of Debentures,
incur additional indebtedness of $25,000,000 (of which a maximum of $10,000,000
may rank in priority to the Debentures (the “Senior
Bank Debt”) and the remainder of such amount may consist of secured
convertible debentures which will rank equally in terms of priority with the
Debentures (the “Subsequent Offering”)).  For greater certainty, in the event that the
Corporation completes a Subsequent Offering in excess of $15,000,000, the
maximum allowable Senior Bank Debt of $10,000,000 will be reduced by an amount
equal to the amount that the Subsequent Offering exceeds $15,000,000, whereby
the maximum additional indebtedness will be limited to $25,000,000 in total;


 


(ii)                                  the
Debentures will be issuable only in minimum denominations of $50,000 and
integral multiples of $25,000 thereafter. 
At the closing of the Offering, the Debentures will be available for
delivery in certificated form;


 


(iii)                               the
Debentures will bear interest from the date of issue at 7% per annum, which
will be payable in cash on a quarterly basis in arrears on February 28, May 31,
August 31 and November 30 in each year, commencing with February 28, 2006.  The first payment will include accrued and
unpaid interest for the period from the Closing Date to February 28, 2006.  The interest on the Debentures will be
payable in lawful money of Canada.  The
principal amount of the Debentures will also be payable in lawful money of
Canada on that date that is two (2) years subsequent to the Closing Date (the “Maturity Date”);


 


(iv)                              the
Debentures will be direct obligations of the Corporation, will be secured
pursuant to the terms of the Indenture and will rank equally in terms of
priority with the secured convertible debentures which may be issued pursuant
to the Subsequent Offering and will rank subordinate to any Senior Bank Debt;


 


(v)                                 the
Debentures will be convertible at the option of the holder (hereinafter
referred to as the “Conversion Right”)
into fully paid and non-assessable common shares of the Corporation (the “Surge Canada Shares”) at any time prior to
5:00 p.m. (Calgary time) on the business day prior to the Maturity Date, at a
conversion price of $1.00 per Surge Canada Share (the “Surge Canada Share Conversion Price”),
being a conversion rate of 50,000 Surge Canada Shares per $50,000 principal
amount of Debentures.  The Surge Canada
Share Conversion Price shall be adjusted in accordance with specified
anti-dilution clauses relating to changes in the Corporation’s share capital
(including share splits, dividends, share consolidations, share dividends and
similar


 


3





















 


recapitalizations) and other distributions of Surge
Canada Shares, all as more particularly set forth in the Indenture.  Holders converting their Debentures shall be
entitled to receive, in addition to the applicable number of Surge Canada
Shares, accrued and unpaid interest in respect of the Debentures;


 


(vi)                              the
Conversion Right shall be and shall be deemed to be exercised (without any
further action on the part of the holder) on the date the Corporation completes
a Going Public Transaction.  For the
purposes hereof, “Going Pubic Transaction”
means: (i) a final receipt for a prospectus of
the Corporation filed in at least one “jurisdiction” (as listed in Appendix B
to Multilateral Instrument 45-102) has been obtained and the Surge Canada
Shares are listed and posted for trading on the Toronto Stock Exchange (the “TSX”) or the TSX Venture Exchange (the “TSXV”) (or any successor exchange thereof);
or (ii) the sale, exchange, reorganization or arrangement of all of the Surge
Canada Shares for, or the sale of all or substantially all of the assets of the
Corporation in a transaction that results in the holders of Surge Canada Shares
receiving for their Surge Canada Shares consideration consisting of: (A) cash;
and/or (B) securities which are not subject to resale restrictions (except for
those applicable to “control persons”) in Alberta and Ontario and are listed
and posted for trading on the TSX or the TSXV (or any successor exchange
thereof).  Furthermore, the Indenture shall
contain anti-dilution provisions that will adjust the Surge Canada Conversion
Price in the event a Going Public Transaction is completed at a price below
$1.15 per Surge Canada Share.  In the
event of the deemed exercise of the Conversion Right, holders of Debentures
shall be entitled to receive, in addition to the applicable number of Surge
Canada Shares or other securities which are not subject to resale restrictions,
accrued and unpaid interest in respect of the Debentures;


 


(vii)                           the
Debentures will also be exchangeable at the option of the holder into fully
paid and non-assessable shares of common stock (the “Surge U.S. Shares”) of Surge U.S. on either June 30 or
December 31 in each year prior to the Maturity Date, at an exchange price of
U.S. $1.00 per Surge U.S. Share (the “Surge
U.S. Share Exchange Price”), being a fixed exchange rate of 40,000
Surge U.S. Shares per $50,000 principal amount of Debentures.  The Surge U.S. Share Exchange Price shall be
adjusted in accordance with specified anti-dilution clauses relating to changes
in Surge U.S.’s share capital (including share splits, dividends, share
consolidations, share dividends and similar recapitalizations) and other
distributions of Surge U.S. Shares, all as more particularly set forth in the
Indenture.  In the event that holders exchange their Debentures for Surge U.S. Shares,
holders shall be entitled to receive, in addition to the applicable number of
Surge U.S. Shares, accrued and unpaid interest in respect of the Debentures;


 


(viii)                        in the event a holder transfers the Debentures to
Surge U.S. in exchange for Surge U.S. Shares, the Conversion Right shall be and
shall be deemed to be exercised (without any further action on the part of
Surge U.S.) upon Surge U.S. receiving the Debentures pursuant to such transfer,
such that Surge U.S. shall receive additional Surge Canada Shares at the Surge
Canada Share Conversion Price;


 


(ix)                                in the event of a sale, assignment or transfer or
series of sales, assignments or transfers by Surge U.S. of Surge Canada Shares
to a person not affiliated with the Corporation or Surge U.S. resulting in a
change of control of the Corporation (except for a change of control resulting
from a Going Public Transaction) at any time while the Debentures are
outstanding the Corporation shall immediately offer to purchase the Debentures
then outstanding at a purchase price equal to: (A) 115% of the principal amount
thereof plus accrued and unpaid interest if the transaction occurs on or prior
to September 30, 2006; or (B) 120% of the principal amount thereof plus accrued
and unpaid interest if the transaction occurs after September 30, 2006.  For the purposes of this provision, the term “change
of control” shall mean the sale, assignment or transfer of Surge Canada Shares
owned by Surge U.S. to a person not affiliated with the Corporation or Surge
U.S. resulting in more than 50% of the outstanding Surge Canada Shares being
owned by a person not affiliated with the Corporation or Surge U.S.; and


 


(x)                                   the Indenture will contain provisions making binding,
upon all holders of Debentures outstanding thereunder, resolutions passed at
meetings of such holders held in accordance with such provisions and
instruments in writing signed by the holders of a specified percentage of the
principal amount of Debentures outstanding;


 


(d)                                 the
Indenture shall otherwise be in such form and contain such terms as shall be
approved by the Corporation and the Agent; and


 


4





















 


(e)                                  in
the event the Corporation or its agent is required to deduct or withhold any
tax from payments due under the Debentures to the Subscriber, the Corporation
shall so deduct or withhold and pay over to the taxing authority imposing such
tax the amount required to be deducted or withheld and the amounts otherwise
payable to the Subscriber will be reduced accordingly.


 


Representations,
Warranties and Covenants by Subscriber


 


3.             The Subscriber (on its own behalf and, if applicable, on
behalf of each person on whose behalf the Subscriber is contracting)
represents, warrants and covenants to the Corporation, Surge U.S. and the Agent
and their respective counsel (and acknowledges that the Corporation and the
Agent, and their respective counsel, are relying thereon) that both at the date
hereof and at the Closing Time (as defined herein) that:


 


(a)                                  it has been
independently advised as to the restrictions with respect to trading in the
Debentures, the Surge Canada Shares and the Surge U.S. Shares (collectively,
the “Securities”) (the Surge
Canada Shares and Surge U.S. Shares are collectively referred to herein as the “Underlying Shares”) imposed by applicable
securities legislation in the jurisdiction in which it resides; it confirms
that no representation has been made to it by or on behalf of the Corporation
or the Agent with respect thereto; it acknowledges that it is aware of the
characteristics of the Securities, the risks relating to an investment therein,
that there is no market for the Debentures or the Surge Canada Shares and of
the fact that it may not be able to resell the Securities except in accordance
with limited exemptions under applicable securities legislation and regulatory
policy until expiry of the applicable restricted period and compliance with the
other requirements of applicable law; it
agrees that the certificates representing the Debentures will, and the
Underlying Shares may (if required), bear a legend indicating that the resale
of such securities is restricted; and it further acknowledges that it
should consult its own legal counsel in its jurisdiction for full particulars
of applicable resale restrictions; and


 


(b)                                 it acknowledges that the Corporation is not a “reporting
issuer” in any jurisdiction and that the applicable “hold period” under
applicable securities laws will not even commence to run until the Corporation
becomes a reporting issuer in the applicable jurisdiction and that it will only
be able to resell the Securities in accordance with limited exemptions under
applicable securities legislation and regulatory policy; and


 


(c)                                  it
has not received or been provided with, nor has it requested, nor does it have
any need to receive, any offering memorandum, any prospectus, sales or
advertising literature, or any other document describing or purporting to
describe the business and affairs of the Corporation or Surge U.S. which has
been prepared for delivery to, and review by, prospective purchasers in order
to assist it in making an investment decision in respect of the Securities and that the decision to enter into
the Subscription Agreement and purchase the Debentures has not been based upon
any verbal or written representations as to fact or otherwise made by or on
behalf of the Corporation; and


 


(d)                                 it
has not become aware of any advertisement in printed media of general and
regular paid circulation (or other printed public media), radio, television or
telecommunications or other form of advertisement (including electronic display
such as the Internet) with respect to the distribution of the Debentures; and


 


(e)                                  it
acknowledges and agrees that the offer to purchase the Debentures was not made
to it when it was in the United States or when it was a U.S. Person, as defined
below, and at the time this Subscription Agreement was executed and delivered
to the Corporation, it was outside the United States and was not a U.S. Person,
and it is not purchasing the
Debentures on behalf of, or for the account or benefit of, a person in the
United States or a U.S. Person. 
For the purposes of this Subscription Agreement, a U.S. Person shall
mean (i) any natural person resident in the United States, (ii) any partnership
or corporation organized under the laws of the United States, (iii) any estate
of which any executor or administrator is a U.S. person, (iv) any trust of
which any trustee is a U.S. person, (v) any non-discretionary account or
similar account (other than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a U.S. person, (vi) any
non-discretionary account or similar account (other than an estate or trust)
held by a dealer or other fiduciary organized, incorporated, or (if an
individual) resident in the United States, and (vii) any partnership or
corporation organized under the laws of a non-U.S. jurisdiction that is formed
by U.S. persons solely for the purpose of investing in restricted securities,
unless it is organized and owned solely by Accredited Investors as such term is
defined under Rule 501(a) of the United States Securities
Act of 1933, as amended (the “U.S.
Securities Act”); and


 


(f)                                    unless
it is purchasing under subparagraph 3(g), it is purchasing the Debentures as
principal for its own account, not for the benefit of any other person, for
investment only and not with a view to the resale or distribution of all or any
of the


 


5





















 


Debentures or the Underlying Shares, it is resident in
or otherwise subject to applicable securities laws of the jurisdiction set out
as the “Subscriber’s Address” on the face page hereof and it is resident in or
otherwise subject to applicable securities laws of a Province of Canada, it is
an “accredited  investor”, as such term is defined in
National Instrument 45-106 - “Prospectus and Registration Exemptions” (“NI 45-106”) of the Canadian Securities
Administrators, it is not a trust company or trust corporation registered under
the laws of Prince Edward Island that is not registered under the Trust and Loan Companies Act (Canada) or
under comparable legislation in another jurisdiction of Canada, it was not
created or used solely to purchase or hold securities as an accredited investor
as described in paragraph (m) of the definition of “accredited investor” in NI
45-106, and it has concurrently executed and delivered a Representation Letter
in the form attached as Exhibit 1
to this Subscription Agreement and has initialled in Appendix ”A” thereto indicating that the Subscriber
satisfies one of the categories of “accredited investor” set forth in such
definition; and


 


(g)                                 if
it is not purchasing the Debentures as a principal under subparagraph 3(f)
hereof, it is duly authorized to enter into this Subscription Agreement and to
execute and deliver all documentation in connection with the purchase on behalf
of each beneficial purchaser, each of whom is purchasing as principal for its
own account, not for the benefit of any other person, for investment only and
not with a view to the resale or distribution of all or any of the Debentures
or the Underlying Shares, it acknowledges that the Corporation is required by law
to disclose to certain regulatory authorities the identity of each beneficial
purchaser of Debentures for whom it may be acting, it and each beneficial
purchaser is resident in the jurisdiction set out as the “Subscriber’s Address”
on the face page hereof, and each beneficial purchaser complies with
subparagraph 3(f) hereof by virtue of its place of residence or by virtue
of the securities laws of such place being applicable to the Subscriber; and


 


(h)                                 if
it is a resident of or otherwise subject to applicable securities laws of any jurisdiction referred to in the preceding
subparagraph 3(f) but not purchasing thereunder, it is
purchasing pursuant to an exemption from prospectus and registration
requirements (particulars of which are enclosed herewith) available to it under
applicable securities legislation and shall deliver to the Corporation and the
Agent such further particulars of the exemption(s) and the Subscriber’s
qualifications thereunder as the Corporation or the Agent or their respective
counsel may request; and


 


(i)                                     if
it is a resident of or otherwise subject to applicable securities laws of any jurisdiction not referred to in the preceding subparagraph 3(f) it,
or any beneficial purchaser for whom it is acting, complies with paragraph 3(f)
hereof as if it was a resident in or otherwise subject to applicable securities
laws of a Province of Canada, has concurrently executed and delivered a
Representation Letter in the form attached as Exhibit
1 to this Subscription Agreement and has initialed in Appendix “A” thereto indicating that the
Subscriber satisfies one of the categories of “accredited investor” set forth
in such definition, and complies with the requirements of all applicable
securities legislation in the jurisdiction of its residence and will provide
such evidence of compliance with all such matters as the Corporation, Surge
U.S. or the Agent or their respective counsel may request including, but not
limited to, that the delivery of this Subscription Agreement, the acceptance
hereof by the Corporation and Surge U.S. and the issuance of the Debentures to
the Subscriber complies with all applicable laws of the Subscriber’s
jurisdiction of residence and domicile and will not cause the Corporation or
Surge U.S. or any of their officers or directors to become subject to or
require any disclosure, prospectus or other reporting requirements; and


 


(j)                                     it
(and any beneficial purchaser for whom it is acting) acknowledges that:


 


(i)                                     no
securities commission or similar regulatory authority has reviewed or passed on
the merits of the Debentures or the Underlying Shares; and


 


(ii)                                  there
is no government or other insurance covering the Debentures or the Underlying
Shares; and


 


(iii)                               it has been offered the opportunity to ask
questions and receive answers concerning the terms and conditions of the
Offering and to obtain any information the undersigned deems necessary to
verify the accuracy of any information regarding the Corporation; and


 


(iv)                              there
are risks associated with the purchase of the Securities, which Securities are a speculative investment
that involves a high degree of risk of loss of entire investment; and


 


(v)                                 there
are restrictions on the Subscriber’s ability to resell the Securities, which Securities are a speculative
investment that involves a high degree of risk of loss of entire investment and
it is the responsibility of the


 


6





















 


Subscriber to find out what those restrictions are and
to comply with them before selling the Debentures or the Underlying Shares; and


 


(vi)                              the Corporation is not a “reporting issuer” (or
equivalent thereof) in any jurisdiction, that the Debentures or Surge Canada
Shares are subject to an indefinite restriction on resale (i.e., a “hold period”)
under applicable securities laws and that it will not be able to resell any of
the Debentures or Surge Canada Shares until expiration of the applicable hold
period (which hold period will not commence to run until the Corporation has
become a “reporting issuer” in a jurisdiction of Canada (which the Corporation
has no obligation to become)); and


 


(vii)                           it is aware that there is no market for any of
the Debentures or Surge Canada Shares and none is expected to develop and
acknowledges and confirms that no representation has been made to it with
respect to the future value or price of any of the Securities or that any of
the Debentures or the Underlying Shares will be listed on any exchange or that
application has been or will be made for such listing; and


 


(viii)                        it acknowledges that the Corporation may
complete additional financings in the future in order to develop the proposed
business of the Corporation and to fund its ongoing development.  There is no assurance that such financings
will be available and if available, on reasonable terms.  Any such future financings may have a
dilutive effect on current shareholders, including the Subscriber.  If such future financings are not available,
the Corporation may be unable to fund its ongoing development and the lack of
capital resources may result in the failure of its business venture; and


 


(ix)                                the
Corporation has advised the Subscriber that the Corporation is relying on an
exemption from the requirements to provide the Subscriber with a prospectus and
to sell securities through a person or company registered to sell securities
under the Securities Act (Alberta) and other
applicable securities laws and, as a consequence of acquiring Securities
pursuant to this exemption, certain protections, rights and remedies provided
by the Securities Act (Alberta) and other
applicable securities laws, including statutory rights of rescission or
damages, will not be available to the Subscriber; and


 


(x)                                   the Securities shall not be resold until after
the expiry of the applicable “hold” or “restricted” period attaching to such
Securities under applicable securities laws unless sold pursuant to an
exemption under all applicable securities laws, and the certificates evidencing
the Debentures or Surge Canada Shares which it shall receive will bear a legend
referring to such restrictions on resale and neither the Corporation nor any
transfer agent of the Corporation will register any transfers of such
Securities not made in compliance with such restrictions on resale; and


 


(k)                                  other than the Surge U.S. Shares, it is aware
that the Securities have not been and will not be registered under the U.S.
Securities Act or the securities laws of any state of the United States and
that these securities may not be offered or sold, directly or indirectly, in
the United States without registration under the U.S. Securities Act or
compliance with requirements of an exemption from registration and the
applicable laws of all applicable states and acknowledges that the Corporation
has no present intention of filing a registration statement under the U.S.
Securities Act in respect of the Securities; and


 


(l)                                     the
Debentures have not been offered to the Subscriber in the United States, and
the individuals making the order to purchase the Debentures and executing and
delivering this Subscription Agreement on behalf of the Subscriber were not in
the United States when the order was placed and this Subscription Agreement was
executed and delivered; and


 


(m)                               it understands that the Debentures may not be
exchanged for Surge U.S. Shares, unless at the time of such exchange it is
either (i) outside the United States and is not a U.S. Person as defined in
subparagraph 3(e) above, or (ii) is an Accredited Investor as defined in Rule
501(a) of the U.S. Securities Act, and upon exchange of any Debentures for any
Surge U.S. Shares, the holder effecting such exchange shall complete and
deliver to Surge U.S. the Exercise Form attached hereto as Exhibit 2; and


 


(n)                                 it
undertakes and agrees that it will not offer, sell or otherwise transfer the
Debentures or the Underlying Shares except: 
(A) to the Corporation, (B) outside the United States in accordance with
Regulation S under the U.S. Securities Act, and in compliance with applicable
local laws and regulations, (C) pursuant to the exemption from registration
under the U.S. Securities Act provided by Rule 144 thereunder, (D) to a person
it reasonably believes is a “qualified institutional buyer”


 


7





















 


(as defined in Rule 144A under the U.S. Securities Act)
purchasing for its own account or for the account of a qualified institutional
buyer in a transaction meeting the requirements of Rule 144A, (E) inside the
United States, in any other transaction exempt from registration under the U.S.
Securities Act and, in any event, in compliance with any applicable state
securities laws of the United States, provided that prior to any transfer
pursuant to this clause (E), the Corporation may require a legal opinion
reasonably satisfactory to the Corporation that such transfer is exempt from
registration under the U.S. Securities Act and any applicable U.S. state
securities laws or (F) pursuant to a registration statement effective under the
U.S. Securities Act and covering such offer, sale or transfer and in each case in accordance with the
provisions of applicable regulations, rules, policies and orders and stock
exchange rules; and


 


(o)                                 it
agrees not to engage in hedging transactions involving the Debentures or the
Underlying Shares unless in compliance with the U.S. Securities Act; and


 


(p)                                 it
understands that upon the original issuance thereof, and until such time as the
same is no longer required under applicable requirements of the U.S. Securities
Act or applicable state securities laws, the certificates representing the
Debentures and the Surge U.S. Shares, and all certificates issued in exchange
therefor or in substitution thereof, shall bear on the face of such
certificates the following legend:


 


“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S.
SECURITIES ACT”); AND MAY BE OFFERED FOR SALE, SOLD, EXCHANGED, OR OTHERWISE
TRANSFERRED OR ASSIGNED FOR VALUE ONLY (A) TO THE CORPORATION; (B) IN
COMPLIANCE WITH RULE 144 OR RULE 144A UNDER THE U.S. SECURITIES ACT (C)
PURSUANT TO REGISTRATION UNDER THE U.S. SECURITIES ACT, OR (D) IN A TRANSACTION
THAT IS OTHERWISE EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND
STATE SECURITIES LAWS, PROVIDED THE CORPORATION SHALL HAVE RECEIVED AN OPINION
OF COUNSEL SATISFACTORY TO IT AS TO THE AVAILABILITY OF THE EXEMPTIONS RELIED
ON.


 


DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE GOOD
DELIVERY IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”;


 


provided,
that if Debentures or Surge U.S. Shares are being sold in compliance with the
requirements of Rule 144 under the U.S. Securities Act or pursuant to an
effective registration statement under the U.S. Securities Act, the above
legend may be removed by delivery of (i) an opinion of counsel of recognized
standing reasonably satisfactory to the Corporation or Surge U.S., as
applicable, to the effect that such Debentures or Surge U.S. Shares held by it
are being sold pursuant to Rule 144 of the U.S. Securities Act or an effective
registration statement under the U.S. Securities Act, as the case may be, and
(ii) such other documentation reasonably requested by the registrar and
transfer agent or the Corporation or Surge U.S., as applicable;


 


and the
Corporation or Surge U.S., as applicable, shall use its reasonable best efforts
to cause the registrar and transfer agent of the Corporation or Surge U.S., as
applicable, to remove the foregoing legend within three business days
(excluding weekends and holidays) of receipt of the foregoing, as applicable;
and


 


(q)                                 it
understands and acknowledges that the certificates representing the Debentures
and the Underlying Shares, in addition to bearing the foregoing legends, where
applicable, will bear a legend that the securities cannot be traded through the
facilities of stock exchanges in Canada since the certificate is not freely
transferable and consequently is not “good delivery” in transactions on such
stock exchanges unless on or prior to such trade, arrangements have been made
to remove the legends as provided in the provisos of paragraph 3(p) hereof, and
it acknowledges that such stock exchanges would deem the selling security
holder to be responsible for any loss incurred on a sale made by such security
holder in such securities; and


 


(r)                                    it understands and
acknowledges that the Corporation is not presently, nor is the Corporation
under any obligation to remain, a “foreign private issuer”, as such term is
defined in Regulation S of the U.S. Securities Act; and


 


(s)                                  it
undertakes and agrees that it will not resell the Debentures or the Underlying
Shares, except in accordance with the provisions of applicable securities
legislation, regulations, rules, policies and orders and stock exchange rules;
and


 


8





















 


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


 


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


 


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


 


(w)                               in
the case of a subscription by it for Debentures acting as agent for a disclosed
principal, it is duly authorized to execute and deliver this Subscription
Agreement and all other necessary documentation in connection with such
subscription on behalf of such principal and this Subscription Agreement has
been duly authorized, executed and delivered by or on behalf of, and constitutes
a legal, valid, binding and enforceable agreement of, such principal which is purchasing for its own
account, not for the benefit of any other person and not with a view to resale
or distribution of any of the securities; and


 


(x)                                   it
has such knowledge in financial and business affairs as to be capable of
evaluating the merits and risks of its investment and is able to bear the
economic risk of loss of its investments or, where it is not purchasing as
principal, each beneficial purchaser is able to bear the economic risk of loss
of its investment; and


 


(y)                                 it
is aware that there is no market and may never be a market for the Debentures or Surge Canada Shares
and that none is expected to develop, and acknowledges and confirms that no
representation has been made to it with respect to the future value or price of
the Securities or that the Debentures
or Surge Canada Shares will be listed on any stock exchange or that
application has been or will be made for such listing; and


 


(z)                                   except
for the representations and warranties made by the Corporation and Surge U.S.
to the Agent in the Agency Agreement, it has not relied upon any verbal or
written representation as to fact or otherwise made by or on behalf of the
Corporation, Surge U.S. or the Agent, and agrees that the Agent and the Agent’s
counsel assume no responsibility or liability of any nature whatsoever for the
accuracy, adequacy or completeness of available information or as to whether
all information concerning the Corporation or Surge U.S. required to be
disclosed by the Corporation or Surge U.S. has been generally disclosed and
acknowledges that no person in the employment of, or acting as agent of, the
Agent has any authority to make any representation or warranty in respect of
the Corporation or Surge U.S. and any such statements made by any such person
is given or made without liability or responsibility and the Subscriber hereby
releases the Agent, the Corporation and Surge U.S. and their respective
directors, officers, employees, agents, advisors and shareholders from any
claims that may arise in respect of such statements; and


 


(aa)                            it
acknowledges that the Corporation’s counsel, Surge U.S.’s counsel and the Agent’s
counsel are acting as counsel to the Corporation, Surge U.S. and the Agent,
respectively, and not as counsel to the Subscriber; and


 


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


 


(cc)                            if
required by applicable securities legislation, regulations, rules, policies or
orders or by any securities commission, stock exchange or other regulatory
authority, the Subscriber will execute, deliver, file and otherwise assist the
Corporation in filing, such reports, undertakings and other documents with
respect to the issue of the Debentures, including, without limitation:  (i) in the case of an accredited
investor, a Representation Letter in the form attached as Exhibit 1; and (ii) such other
reports, undertakings and other documents as the Corporation or the Agent may
request; and


 


9





















 


(dd)                          it has not been created solely or
primarily to use exemptions from the registration and prospectus requirements
under applicable securities laws and has a pre-existing purpose other than the
use of such exemptions; and


 


(ee)                            the
entering into of this Subscription Agreement and the completion of the
transactions contemplated hereby do not and will not result in a violation of
any of the terms or provisions of any law applicable to the Subscriber, or if
the Subscriber is not a natural person, any of the Subscriber’s constating
documents, or any agreement to which the Subscriber is a party or by which it
is bound; and


 


(ff)                                the
Subscriber acknowledges that it has been encouraged to obtain independent
legal, income tax and investment advice with respect to its subscription for
the Debentures and accordingly, has had the opportunity to acquire an
understanding of the meanings of all terms contained herein relevant to the
Subscriber for purposes of giving representations, warranties and covenants
under this Subscription Agreement; and


 


(gg)                          it has been independently advised as
to or acknowledges that it is aware of the potential tax consequences to the
Subscriber with respect to the acquisition of the Securities, and confirms that
no representation has been made to it by or on behalf of the Corporation or
Surge U.S. with respect thereto; and


 


(hh)                          it has not relied upon any verbal or
written representation as to fact or otherwise made by or on behalf of the
Corporation or Surge U.S.


 


Closing


 


4.             The Subscriber agrees to deliver to the Agent, not later
than 4:00 p.m. (Calgary time) on the day that is two business days before the
Closing Date: (a) this duly completed and executed Subscription Agreement;
(b) if the Subscriber is purchasing as an “accredited investor”, a fully
executed and completed Representation Letter in the form of Exhibit 1; (c) such other reports,
undertakings and other documents as the Corporation or the Agent may request;
and (d) a certified cheque or bank draft payable to MGI Securities Inc.
for the Principal Amount or payment of the same amount in such other manner as
is acceptable to the Agent.  If this
Subscription Agreement is rejected in whole or in part, the Subscriber acknowledges
that the unused portion of the subscription amount will be promptly returned to
it without interest.


 


5.             The sale of the Debentures pursuant to this Subscription
Agreement will be completed at the offices of Burnet, Duckworth & Palmer
LLP, the Corporation’s counsel, in Calgary, Alberta at 10:00 a.m. (Calgary
time) or such other time as the Corporation and the Agent may agree (the “Closing Time”) on November 14, 2005 or such
other date as the Corporation and the Agent may agree (the “Closing Date”).  At the Closing Time, subject to the terms of
the Agency Agreement, the Agent shall deliver to the Corporation all completed
subscription agreements, including this Subscription Agreement, and the
Principal Amount against delivery by the Corporation of the certificates
representing the Debentures.


 


6.             The Corporation and the Agent shall be entitled to rely
on delivery of a facsimile copy of executed Subscription Agreements, and
acceptance by the Corporation of such facsimile subscriptions shall be legally
effective to create a valid and binding agreement between the Subscriber and
the Corporation in accordance with the terms hereof.  Notwithstanding the foregoing, the Subscriber
shall deliver originally executed copies of the documents listed in Section 4
to the Agent within two business days of the Closing Date.  In addition, this Subscription
Agreement may be executed in counterparts, each of which shall be deemed to be
an original and all of which shall constitute one and the same document.


 


General


 


7.             The Subscriber agrees (on its own behalf and, if
applicable, on behalf of each person or whose behalf the Subscriber is
contracting) that the representations, warranties and covenants of the
Subscriber herein will be true and correct both as of the execution of this
Subscription Agreement and as of the Closing Time and will survive the
completion of the issuance of the Debentures. 
The representations, warranties and covenants of the Subscriber herein
are made with the intent that they be relied upon by the Corporation, Surge
U.S. and the Agent and their respective counsel in determining the eligibility
of a purchaser of Debentures and the Subscriber agrees to indemnify and hold
harmless the Corporation and the Agent and their respective affiliates, shareholders,
directors, officers, partners, employees and agents, from and against all
losses, claims, costs, expenses and damages or liabilities whatsoever which any
of them may suffer or incur which are caused or arise from a breach thereof.   The Subscriber undertakes to immediately
notify the Corporation at Surge Global Energy (Canada), Ltd., Suite 1818, 144 –
4th Avenue S.W., Calgary, Alberta T2P 3N4, Attention:  Fred W. Kelly, (Fax Number: (403) 355-3371)
and the Agent c/o MGI Securities Inc., Suite 1420, 333 – 5th Avenue S.W., Calgary, Alberta T2P
3B6, Attention: Tony P. Loria (Fax Number: (403) 705-4971),


 


10





















 


of any change in any
statement or other information relating to the Subscriber set forth herein which
takes place prior to the Closing Time.


 


8.             The Subscriber acknowledges that the Agent has agreed to
offer the Debentures on a commercially reasonable efforts marketed “private
placement” basis and, in connection therewith, the Corporation, Surge U.S. and
the Agent have entered into, or will enter into prior to the Closing Date, an
agreement (the “Agency Agreement”)
pursuant to which the Agent, in connection with the issue and sale of the
Debentures, will receive a fee from the Corporation.  The Subscriber hereby irrevocably authorizes
the Agent: (a) to act as its representative at the closing and to execute
in its name and on its behalf all closing receipts and documents required;
(b) to complete or correct any errors or omissions in any form or document,
including this Subscription Agreement, provided by the Subscriber; (c) to
receive on its behalf certificates representing the Debentures purchased under
this Subscription Agreement; (d) to approve any opinions, certificates or
other documents addressed to the Subscriber; (e) to waive, in whole or in
part, any representations, warranties, covenants or conditions for the benefit
of the Subscriber and contained in the Agency Agreement; and (f) to
exercise any rights of termination contained in the Agency Agreement.


 


9.             The Subscriber acknowledges that Tony Loria, an employee
of the Agent, will be appointed as a director of the Corporation on the Closing
Date.


 


10.           The Subscriber acknowledges that the
decision to distribute the Securities under this Offering, including the terms
of this Offering, have been determined through negotiations between the
Corporation and the Agent and, based on the relationship described in Section 9
hereof, the Corporation is a “connected issuer” (as defined in section 1.1 of
National Instrument 33-105 Underwriting Conflicts) of the Agent. 
Pursuant to the terms of the Agency Agreement, the Agent is entitled to
receive a fee from the Corporation (See Section 8 above).


 


11.           The Subscriber acknowledges that this
Subscription Agreement and the Exhibits hereto require the Subscriber to
provide certain personal information to the Corporation and Surge U.S.  Such information is being collected by the
Corporation and Surge U.S. for the purposes of completing the Offering, which
includes, without limitation, determining the Subscriber’s eligibility to
purchase the Debentures under applicable securities legislation, preparing and
registering certificates representing Securities to be issued to the Subscriber
and completing filings required by any stock exchange or securities regulatory
authority.  The Subscriber’s personal
information may be disclosed by the Corporation and Surge U.S. to:
(a) stock exchanges or securities regulatory authorities; (b) the
Corporation’s and Surge U.S.’s registrar and transfer agents; (c) Canada
Revenue Agency; and (d) any of the other parties involved in the Offering,
including legal counsel, and may be included in record books in connection with
the Offering.  By executing this
Subscription Agreement, the Subscriber is deemed to be consenting to the
foregoing collection, use and disclosure of the Subscriber’s personal
information.  The Subscriber also
consents to the filing of copies or originals of any of the Subscriber’s
documents described in Section 4 hereof as may be required to be filed
with any stock exchange or securities regulatory authority in connection with
the transactions contemplated hereby.


 


12.           The Subscriber represents and
warrants that the funds representing the Principal Amount which will be advanced
by the Subscriber to the Corporation hereunder will not represent proceeds of
crime for the purposes of the Proceeds of Crime (Money
Laundering) and Terrorist Financing Act (Canada) (the “PCMLTFA”) and the Subscriber acknowledges
that the Corporation may in the future be required by law to disclose the
Subscriber’s name and other information relating to this Subscription Agreement
and the Subscriber’s subscription hereunder, on a confidential basis, pursuant
to the PCMLTFA.  To the best of its
knowledge (a) none of the subscription funds to be provided by the
Subscriber (i) have been or will be derived from or related to any
activity that is deemed criminal under the law of Canada, the United States of
America, or any other jurisdiction, or (ii) are being tendered on behalf
of a person or entity who has not been identified to the Subscriber, and
(b) it shall promptly notify the Corporation if the Subscriber discovers
that any of such representations ceases to be true, and to provide the
Corporation with appropriate information in connection therewith.


 


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


 


14.           Surge U.S. agrees that it shall
prepare and file, no later than forty five (45) days from the Closing Date,
with the Securities and Exchange Commission a registration statement on Form
SB-2 under the U.S. Securities Act for the resale by the Subscribers of the
Surge U.S. Shares.  Surge U.S. shall
cause the registration statement to remain effective until all of the Surge
U.S. Shares have been sold.  Surge U.S.
shall use its best efforts (i) to have the registration statement declared
effective by the Securities and Exchange Commission no later than ninety (90)
days after the date filed and (ii) to insure that the initial registration
statement and any subsequent registration statement remains in effect until all
of the Surge U.S. Shares have been sold.


 


11





















 


15.           The parties
irrevocably attorn to the exclusive jurisdiction of the courts of the Province
of Alberta.


 


16.           Time shall be of the
essence hereof.


 


17.           The contract arising out of this
Subscription Agreement and all documents relating thereto, which by common
accord has been or will be drafted in English, shall be governed by and
construed in accordance with the laws of the Province of Alberta and the
federal laws of Canada applicable therein.


 


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


 


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


 


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


 


21.           Subject to Section 8, neither
this Subscription Agreement nor any provision hereof shall be modified,
changed, discharged or terminated except by an instrument in writing signed by
the party against whom any waiver, change, discharge or termination is sought.


 


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


 


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


 


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


 


25.           In this Subscription Agreement
(including the Exhibits hereto) all references to dollar amounts are to
Canadian dollars, unless otherwise indicated.


 


26.           The parties hereto acknowledge and confirm that they have requested
that this Subscription Agreement
as well as all notices and other documents contemplated hereby be drawn up in
the English language.  Les
parties aux présentes reconnaissent et confirment qu’elles ont convenu que la
présente convention de souscription ainsi que tous les avis et documents qui s’y
rattachent soient rédigés dans la langue anglaise.


 


12





















 


EXHIBIT 1


 


REPRESENTATION LETTER


 


(FOR ACCREDITED
INVESTORS)


 


	
  TO:

  	
   

  	
  Surge
  Global Energy (Canada), Ltd. (the “Corporation”)

  
	
   

  	
   

  	
   

  
	
  AND TO:

  	
   

  	
  MGI Securities Inc. (the
  “Agent”)

  



 


In connection with the purchase of 7% secured convertible
debentures of the Corporation (the “Debentures”)
by the undersigned subscriber or, if applicable, the principal on whose behalf
the undersigned is purchasing as agent (the “Subscriber”
for the purposes of this Exhibit 1), the Subscriber hereby represents,
warrants, covenants and certifies to the Corporation and the Agent that:


 


1.             The Subscriber is resident in a Province of Canada or is
otherwise subject to applicable securities laws of a Province of Canada or
complies with the provisions of paragraph 3(h) of the Subscription Agreement;


 


2.             The Subscriber is purchasing the Debentures as principal
for its own account or complies with the provisions of paragraph 3(g) of
the Subscription Agreement;


 


3.             The Subscriber is an “accredited investor” within the
meaning of National Instrument 45-106 entitled “Prospectus and Registration
Exemptions” (“NI 45-106”) by
virtue of satisfying the indicated criterion as set out in Appendix “A” to this
Representation Letter;


 


4.             The Subscriber was not created or used solely to
purchase or hold securities as an accredited investor as described in paragraph
(m) of the definition of “accredited investor” in NI 45-106; and


 


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


 


Dated:                                     ,
2005


 


	
   

  	
   

  	
   

  
	
   

  	
  Print name of
  Subscriber

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print name of Signatory
  (if different from Subscriber)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title

  	
   

  
					



 


IMPORTANT:
PLEASE INITIAL THE APPLICABLE PROVISION IN

APPENDIX “A” ON THE NEXT PAGES


 





















 


APPENDIX “A”


 


TO EXHIBIT 1


 


NOTE: THE INVESTOR MUST INITIAL BESIDE THE APPLICABLE PORTION OF THE
DEFINITION BELOW.


 


Accredited Investor
- (defined in National Instrument 45-106) means:


 


	
  o

  	
   

  	
  (a)

  	
   

  	
  a Canadian financial
  institution, or a Schedule III bank; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (b)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (c)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (d)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (e)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (f)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (g)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (h)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (i)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (j)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (k)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Note:
  if individual accredited investors wish to purchase through wholly-owned
  holding companies or similar entities, such purchasing entities must qualify
  under section (t) below, which must be initialled.)

  



 





















 


	
  o

  	
   

  	
  (l)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (m)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (n)

  	
   

  	
  an investment fund that
  distributes or has distributed its securities only to

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (i)         a person that is or was an accredited
  investor at the time of the distribution,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (ii)        a person that acquires or acquired
  securities in the circumstances referred to in sections 2.10 and 2.19 of
  National Instrument 45-106, or

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (iii)       a person described in paragraph (i) or
  (ii) that acquires or acquired securities under section 2.18 of National
  Instrument 45-106; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (o)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (p)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (q)

  	
   

  	
  a person acting on
  behalf of a fully managed account managed by that person, if that person

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (i)         is registered or authorized to carry
  on business as an adviser or the equivalent under the securities legislation
  of a jurisdiction of Canada or a foreign jurisdiction, and

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (ii)        in Ontario, is purchasing a security
  that is not a security of an investment fund; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (r)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (s)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (t)

  	
   

  	
  a person in respect of
  which all of the owners of interests, direct, indirect or beneficial, except
  the voting securities required by law to be owned by directors, are persons
  that are accredited investors (as defined in National Instrument 45-106); or

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (u)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (v)

  	
   

  	
  a person that is
  recognized or designated by the securities regulatory authority or, except in
  Ontario and Québec, the regulator as

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (i)         an accredited investor, or

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (ii)        an exempt purchaser in Alberta or
  British Columbia after National Instrument 45-106 comes into force.

  



 


2





















 


For the purposes hereof:


 


(w)                               “Canadian financial institution” means


 


(i)                                     an
association governed by the Cooperative
Credit Associations Act (Canada) or a central cooperative credit
society for which an order has been made under section 473(1) of that Act, or


 


(ii)                                  a
bank, loan corporation, trust company, trust corporation, insurance company,
treasury branch, credit union, caisse populaire, financial services
cooperative, or league that, in each case, is authorized by an enactment of
Canada or a jurisdiction of Canada to carry on business in Canada or a
jurisdiction of Canada;


 


(x)                                   “control person” has the same meaning as in
securities legislation except in Manitoba, Newfoundland and Labrador, Northwest
Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island and Québec
where control person means any person that holds or is one of a combination of
persons that holds


 


(i)                                     a
sufficient number of any of the securities of an issuer so as to affect
materially the control of the issuer, or


 


(ii)                                  more
than 20% of the outstanding voting securities of an issuer except where there
is evidence showing that the holding of those securities does not affect
materially the control of the issuer;


 


(y)                                 “director” means:


 


(i)                                     a
member of the board of directors of a company or an individual who performs
similar functions for a company, and


 


(ii)                                  with
respect to a person that is not a company, an individual who performs functions
similar to those of a director of a company;


 


(z)                                   “eligibility adviser” means


 


(i)                                     a
person that is registered as an investment dealer or in an equivalent category
of registration under the securities legislation of the jurisdiction of a
purchaser and authorized to give advice with respect to the type of security
being distributed, and


 


(ii)                                  in
Saskatchewan or Manitoba, also means a lawyer who is a practicing member in
good standing with a law society of a jurisdiction of Canada or a public
accountant who is a member in good standing of an institute or association of
chartered accountants, certified general accountants or certified management
accountants in a jurisdiction of Canada provided that the lawyer or public
accountant must not


 


(A)                              have
a professional, business or personal relationship with the issuer, or any of
its directors, executive officer, founders, or control persons, and


 


(B)                                have
acted for or been retained personally or otherwise as an employee, executive
officer, director, associate or partner of a person that has acted for or been
retained by the issuer or any of its directors, executive officers, founders or
control persons within the previous 12 months;


 


(aa)                            “executive officer” means, for an issuer, an
individual who is


 


(i)                                     a
chair, vice-chair or president,


 


(ii)                                  a
vice-president in charge of a principal business unit, division or function
including sales, finance or production,


 


(iii)                               an
officer of the issuer or any of its subsidiaries and who performs a
policy-making function in respect of the issuer, or


 


3





















 


(iv)                              performing
a policy-making function in respect of the issuer;


 


(bb)                          “financial assets” means


 


(i)                                     cash,


 


(ii)                                  securities,
or


 


(iii)                               a
contract of insurance, a deposit or an evidence of a deposit that is not a
security for the purposes of securities legislation;


 


(cc)                            “founder” means, in respect of an issuer, a
person who,


 


(i)                                     acting
alone, in conjunction, or in concert with one or more persons, directly or
indirectly, takes the initiative in founding, organizing or substantially
reorganizing the business of the issuer, and


 


(ii)                                  at
the time of the trade is actively involved in the business of the issuer;


 


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


 


(ee)                            “fully managed account” means an account of a client for
which a person makes the investment decisions if that person has full discretion
to trade in securities for the account without requiring the client’s express
consent to a transaction;


 


(ff)                                “investment fund” has the same meaning as in
National Instrument 81-106 Investment Fund
Continuous Disclosure;


 


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


 


(hh)                          “local jurisdiction” means the jurisdiction
in which the Canadian securities regulatory authority is situate;


 


(ii)                                  “non-redeemable investment fund” has the
same meaning as in National Instrument 81-106 Investment
Fund Continuous Disclosure;


 


(jj)                                  “person” includes


 


(i)                                     an
individual,


 


(ii)                                  a
corporation,


 


(iii)                               a
partnership, trust, fund and an association, syndicate, organization or other
organized group of persons, whether incorporated or not, and


 


(iv)                              an
individual or other person in that person’s capacity as a trustee, executor,
administrator or personal or other legal representative;


 


(kk)                            “regulator” means, for the local
jurisdiction, the person referred to in Appendix D of National Instrument
14-101 Definitions opposite the
name of the local jurisdiction;


 


(ll)                                  “related liabilities” means


 


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


 


(ii)                                  liabilities
that are secured by financial assets;


 


(mm)                      “Schedule III bank” means an authorized foreign bank named in
Schedule III of the Bank
Act (Canada);


 


4





















 


(nn)                          “spouse” means, an individual who,


 


(i)                                     is
married to another individual and is not living separate and apart within the
meaning of the Divorce Act (Canada),
from the other individual,


 


(ii)                                  is
living with another individual in a marriage-like relationship, including a
marriage-like relationship between individuals of the same gender, or


 


(iii)                               in
Alberta, is an individual referred to in paragraph (i) or (ii) above, or is an
adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta);
and


 


(oo)                          “subsidiary” means an issuer that is
controlled directly or indirectly by another issuer and includes a subsidiary
of that subsidiary.


 


All monetary references are in Canadian Dollars.


 










Note:


(1) The following is an
excerpt from National Instrument 45-106 which provides guidance as to the
meaning of beneficial ownership of financial assets:


 


“Paragraph (j) of
the “accredited investor” definition refers to an individual who, either alone
or with a spouse, beneficially owns financial assets having an aggregate realizable
value that, before taxes but net of any related liabilities, exceeds
$1,000,000. As a general matter, it should not be difficult to determine
whether financial assets are beneficially owned by an individual, an individual’s
spouse, or both, in any particular instance. However, financial assets held in
a trust or in other types of investment vehicles for the benefit of an
individual may raise questions as to whether the individual beneficially owns
the financial assets in the circumstances. The following factors are indicative
of beneficial ownership of financial assets:


 


(a)                                  Physical
or constructive possession of evidence of ownership of the financial asset;


(b)                                 Entitlement
to receipt of any income generated by the financial asset;


(c)                                  Risk
of loss of the value of the financial asset; and


(d)                                 The
ability to dispose of the financial asset or otherwise deal with it as the
individual sees fit.


 


For example,
securities held in a self-directed RRSP, for the sole benefit of an individual
are beneficially owned by that individual. In general, financial assets in a
spousal RRSP would also be included for the purposes of the threshold test
because paragraph (j) takes into account financial assets owned beneficially by
a spouse. However, financial assets held in a group RRSP under which the
individual would not have the ability to acquire the financial assets and deal
with them directly would not meet these beneficial ownership requirements.”


 


5





















 


EXHIBIT 2


 


EXCHANGE FORM


(To be signed only upon exchange of Debentures for Common Stock of Surge
Global Energy, Inc.)


 


Surge Global Energy, Inc.


12220 El Camino Real


Suite 410


San Diego, California USA
92130


 


Dear Sirs:


 


The undersigned hereby
exercises the exchange $                         principal
amount of 7% secured convertible debentures (the “Debentures”) of Surge Global
Energy (Canada), Ltd. in exchange for                 shares
of common stock of Surge Global Energy, Inc. (the “Surge U.S. Shares”).  In connection with
such exercise the undersigned represents, warrants and certifies as follows:
(Please check the ONE box applicable):


 


	
  (a)

  	
   

  	
  o

  	
   

  	
  It is
  not (and is not acquiring Surge U.S. Shares for the account or benefit of) a
  U.S. person or person in the United States; did not execute or deliver this
  form while within the United States; and has in all other respects complied
  with the terms of Regulation S of the United States Securities
  Act of 1933, as amended (the “U.S. Securities Act”), or any
  successor rule or regulation of the United States Securities and Exchange
  Commission as presently in effect.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  o

  	
   

  	
  It is
  an “Accredited Investor”, as that term is defined in Rule 501(a) under the
  U.S. Securities Act (a “U.S. Accredited Investor”) and is exchanging the Debentures
  for its own account or the account of another “Accredited Investor”.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  o

  	
   

  	
  It is
  tendering with this form a written opinion of counsel satisfactory to Surge
  Global Energy, Inc. to the effect that the Surge U.S. Shares to be delivered
  upon exchange of the Debentures have been registered under the U.S.
  Securities Act and the securities laws of all applicable states of the United
  States or are exempt from registration thereunder.

  



 


The terms “United States”
and “U.S. Person” are as defined in Regulation S under the U.S. Securities
Act.  Certificates representing Surge
U.S. Shares will not be registered or delivered to an address in the United
States unless Box (b) or Box (c) above is checked and the applicable
requirements thereof are complied with. 
If Box (b) or Box (c) is checked, certificates representing Surge U.S.
Shares will bear a legend restricting transfer without registration under the
U.S. Securities Act and applicable state securities laws in substantially the
form set forth in the Subscription Agreement to which this form is attached.


 


Please issue a certificate for the shares being purchased as follows in
the name of the undersigned:


 


	
  NAME:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (please print)

  
	
   

  	
   

  	
   

  	
   

  
	
  ADDRESS:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


DATED this            day
of                                                       ,
                                                      


 


 


	
   

  	
   

  	
   

  
	
   

  	
  (Signature)