Exhibit 10.2


 


CANADA


 


SUBSCRIPTION AGREEMENT
FOR


7% SECURED CONVERTIBLE
DEBENTURES


 


	
  TO:

  	
  Signet Energy Inc. (the “Corporation”)

  
	
  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 Signet Energy Inc.”
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 is a
director of the Corporation.


 


	
   

  	
   

  	
  Principal Amount of Debentures Subscribed for:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  (Name of Subscriber - please print)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  (Authorized Signature)

  	
   

  	
  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:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  (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 11 pages (not including Exhibit 1).


 





















 


ACCEPTANCE:  The Corporation hereby accepts the
subscription as set forth above on the terms and conditions contained in this
Subscription Agreement and the Corporation represents and warrants to the
Subscriber that the representations and warranties made by the Corporation 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.


 


December                 , 2005


 


 


	
  SIGNET ENERGY INC.

  	
  Subscription No:

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
				



 


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TERMS
AND CONDITIONS OF SUBSCRIPTION FOR


7% SECURED CONVERTIBLE DEBENTURES


OF SIGNET ENERGY INC.


 


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 allotment by the Corporation in whole
or in part.  If this Subscription Agreement is rejected in
whole or in part by the Corporation, the Subscriber acknowledges that the
unused portion of the Principal Amount will be promptly returned to it by the
Corporation, 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) between the Corporation 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 $15,000,000 (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 $5,000,000, 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 $5,000,000, whereby
the maximum additional indebtedness will be limited to $15,000,000 in total;


 


(ii)                                  the
Debentures will be issuable only in minimum denominations of $50,000 and
integral multiples of $1,000 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 November 15, 2007 (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 $8.55 million principal amount of secured convertible debentures
previously issued by the Corporation on November 15, 2005 and 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 “Common 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 Common Share (the “Share
Conversion Price”), being a conversion rate of 50,000 Common Shares
per $50,000 principal amount of Debentures. 
The 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,


 


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dividends, share
consolidations, share dividends and similar recapitalizations) and other
distributions of Common 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 Common 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 Common 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 Common 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 Common Shares receiving for their Common 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 Share Conversion Price in the
event a Going Public Transaction is completed at a price below $1.15 per Common
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 Common Shares or other
securities which are not subject to resale restrictions, accrued and unpaid
interest in respect of the Debentures;


 


(vii)                           in the
event of a sale, assignment or transfer or series of sales, assignments or
transfers by Surge Global Energy, Inc. (“Surge
U.S.”) of Common 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 Common 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 Common Shares being owned by a
person not affiliated with the Corporation or Surge U.S.; and


 


(viii)                        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


 


(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 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 and the Common Shares (collectively, the “Securities”) (the Common Shares are
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


 


4





















 


the Common 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 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 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


 


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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 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 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 any of its 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 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
Common 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 Common 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 Common 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


 


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(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 Common 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)                                  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
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


 


(n)                                 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


 


(o)                                 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


 


(p)                                 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


 


(q)                                 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


 


(r)                                    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


 


(s)                                  it
is aware that there is no market and may never be a market for the Debentures or Common 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 Common Shares will be listed on any stock exchange or that
application has been or will be made for such listing; and


 


(t)                                    except
for the representations and warranties made by the Corporation 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
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


 


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Corporation required to
be disclosed by the Corporation 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
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 their respective directors, officers, employees, agents,
advisors and shareholders from any claims that may arise in respect of such
statements; and


 


(u)                                 it
acknowledges that the Corporation’s counsel and the Agent’s counsel are acting
as counsel to the Corporation and the Agent, respectively, and not as counsel
to the Subscriber; and


 


(v)                                 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


 


(w)                               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


 


(x)                                   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


 


(y)                                 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


 


(z)                                   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


 


(aa)                            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 the
Agent with respect thereto; and


 


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


 


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.


 


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 December 20, 2005 or
such other date as the Corporation and the


 


8





















 


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 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 Signet Energy Inc., Suite 1818,
144 — 4th Avenue S.W., Calgary,
Alberta T2P 3N4, Attention:  C.W. Leigh
Cassidy, Executive Chairman and Chief Executive Officer, (Fax Number: (403) 440-1114)
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),
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 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, is a
director of the Corporation.


 


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.  Such information is being
collected by the Corporation 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 to: (a) stock exchanges or
securities regulatory authorities; (b) the Corporation’s registrar and
transfer agent; (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


 


9





















 


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.                                 For
Subscribers resident in the Province of Ontario, the Corporation is required to
file with the Ontario Securities Commission an Authorization of Indirect
Collection of Personal Information for Distributions in Ontario, which contains
personal information of the Subscriber and details of the sale of Units to the
Subscriber.  You are hereby notified: (i) of
the delivery to the Ontario Securities Commission of your full name,
residential address and telephone number; (ii) that this information is
being collected indirectly by the Ontario Securities Commission under the
authority granted to it in securities legislation; (iii) that this
information is being collected for the purposes of the administration and
enforcement of the securities legislation of Ontario; and (iv) that the
public official set out below can answer questions about the Ontario Securities
Commission’s indirect collection of the information.


 


Ontario Securities Commission


Suite 1903, Box 5520 Queen Street West


Toronto, Ontario M5H 3S8


Telephone: (416) 593-3682


Facsimile: (416) 593-8252


Public official contact regarding indirect collection
of information:


Administrative Assistant to the Director of Corporate
Finance


Telephone: 
(416) 593-8086


 


By signing this
Subscription Agreement, you hereby authorize the indirect collection of the
information by the Ontario Securities Commission.


 


14.                                 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.


 


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.


 


10





















 


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.


 


11





















 


EXHIBIT 1


 


REPRESENTATION LETTER


 


(FOR ACCREDITED
INVESTORS)


 


	
  TO:

  	
  Signet Energy Inc. (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:


 


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


 


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


 


(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


 


(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


 


(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


 


(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


 


(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


 


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


 


(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


 


(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(1); or


 


(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.)


 





















 


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


 


(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 


 


(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)                                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 


 


(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


 


(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


 


(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


 


(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


 


(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


 


(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


 


(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