Document:

Exhibit 10.2

 

PURCHASE AGREEMENT

 

This PURCHASE AGREEMENT
(this “Agreement”), dated as of
December 22, 2005, by and among SOLDADURAS
PCR SOLTEC LIMITADA (“SOLDADURAS”),
a limited liability company organized and existing pursuant to the laws of the
Republic of Chile, with its principal place of business at El Bosque Norte 040,
Office 605, Comuna of Las Condes, Santiago, Chile, and PENTA CAPITAL DE RIESGO S.A., a private
stock corporation organized and existing pursuant to the laws of the Republic
of Chile, with its principal place of business at El Bosque Norte 040, 15th
Floor, Comuna of Las Condes, Santiago, Chile, parent company of SOLDADURAS (“PCR”; PCR collectively with SOLDADURAS, the
“Buyers”); and THERMADYNE CHILE HOLDINGS, LTD., a company
organized and existing pursuant to the laws of the Cayman Islands, having its
registered offices at One Capital Place, Shedden Road, P.O. Box 1034 GT, Grand
Cayman, Cayman Islands (“TCHL”),
and THERMADYNE SOUTH AMERICA HOLDINGS, LTD.,
a company organized and existing pursuant to the laws of the Cayman Islands,
having its registered offices at One Capital Place, Shedden Road, P.O. Box 1034
GT, Grand Cayman, Cayman Islands, (“TSAH”;
TSAH, collectively with TCHL, the “Sellers”)
with respect to the sale of the ownership interests in SOLDADURAS SOLTEC LIMITADA (“Soltec”) and COMERCIALIZADORA METALSERVICE LIMITADA (“Metalservice), both limited liability
companies organized pursuant to the laws of the Republic of Chile (collectively
with any subsidiaries, branches or agencies thereof, the “Companies”).

 

RECITALS:

 

WHEREAS,
TCHL is the legal and beneficial owner of 99.9% of the outstanding equity
capital interests in Soltec and of a 0.11% of the outstanding equity capital
interests in Soltec’s subsidiary, Metalservice (collectively, the “TCHL
Ownership Interests”);

 

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WHEREAS,
TSAH is the legal and beneficial owner of 0.1% of all of the outstanding equity
capital interests in Soltec (the “TSAH Ownership Interests”; the TCHL Ownership
Interests and the TSAH Ownership Interests sometimes collectively referred to
herein as the “Ownership Interests”);

 

WHEREAS,
the Ownership Interests, together with Soltec’s direct holding of 99.89% of the
remaining equity capital interest in Metalservice, represent all of the equity
capital interests in the Companies currently outstanding;

 

WHEREAS,
Sellers promise to sell to Buyers, and Buyers promise to purchase from Sellers,
the Ownership Interests, all in accordance with the provisions of this Agreement;
and

 

WHEREAS,
each of TCHL, SOLDADURAS and PCR desires to make certain representations,
warranties and agreements in connection with the sale and acquisition of the
Ownership Interests.

 

NOW,
THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements herein contained, the parties hereto
agree as follows:

 

ARTICLE I

DEFINITIONS

 

SECTION 1.1                          Definitions:  For purposes of this Agreement, the term:

 

(a)                                  “Accountants” has the meaning set forth in
Section 2.3(f).

 

(b)                                 “Affiliate” means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, another person.

 

(c)                                  “Audited Financial Statements” means the
audited

 

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consolidated balance sheet and
related statements of income, partners’ equity and cash flow of the Companies
at December 31, 2004.

 

(d)                                 “Debt” means any interest bearing debt of
the Companies existing at the Closing Date, including, without limitation,
financial leases and debt with related parties.

 

(e)                                  “Cash” has the meaning set forth in Section
2.3(a).

 

(f)                                    “Chilean GAAP” has the meaning set forth in
Section 2.3(a).

 

(g)                                 “Closing” means the completion of the sale
and purchase of the Ownership Interests by the execution of the Transfer
Documents and the payment of the Purchase Price contemplated in this Agreement,
all of which shall occur on the Closing Date.

 

(h)                                 “Closing Date” means twelve hours noon in
Santiago, Chile, on January 3, 2006.

 

(i)                                     “Closing Financial Statements” means the
audited consolidated balance sheet of the Companies as of December 31, 2005,
and the related audited statements of income, partners’ equity and cash flow of
the Companies as of December 31, 2005.

 

(j)                                     “contract” means any contract, agreement,
loan, instrument, lease, sales contract, mortgage, pledge, license,
distribution, insurance policy, commitment or other arrangement or agreement.

 

(k)                                  “Currency Conversion Rate” means, either in
respect of sums designated in Ch$ or US$ that need be converted into the other
currency, for any calculation, determination of value, price adjustment,
payment or reimbursement to be made, disbursement to be incurred or for any
other purpose whatsoever, as required pursuant to the terms of this Agreement,
the US$ - Ch$ exchange rate so-called “Dólar Observado” quoted by the Central
Bank of

 

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Chile for the transaction of
United States Dollars with Chilean Pesos and published on the business day on
which any such conversion is required to be made, shall be applied.

 

(l)                                     “Governmental Authority” means any nation or
government, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

 

(m)                               “Lien” means any liens, pledges, claims,
security interests, mortgages, easements, rights of way, restrictive covenants,
rights of first refusal, material defects in title and other burdens.

 

(n)                                 “Net Debt”
means Debt minus Cash.

 

(o)                                 “Net Working Capital” has the meaning set
forth in Section 2.3(a).

 

(p)                                 “Ownership Interests” has the meaning set
forth in the second Recital hereof.

 

(q)                                 “persons” means and includes any individual,
partnership, corporation, unincorporated organizations or other entity, and any
government or governmental authority, agency or political subdivision thereof.

 

(r)                                    “Purchase Price” has the meaning set forth
in Section 2.2.

 

(s)                                  “Salas” has the meaning set forth in Section
2.3(a).

 

(t)                                    “Salas Certificate” has the meaning set
forth in Section 2.3(a).

 

(u)                                 “Schedules” are those disclosure schedules
annexed to this Agreement, all of which will be considered to form part of this

 

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Agreement.

 

(v)                                 “Subsidiary” means, with respect to any
person, any corporation, partnership, joint venture or other entity of which
such person, directly or indirectly, owns an amount of voting securities, or
possesses other ownership interests, having the power, direct or indirect, to
elect a majority of the board of directors or other governing body thereof.

 

(w)                               “Supply Agreements” refers to agreements referenced on
Exhibit 7.2.5.

 

(x)                                   “Taxes” means any and all taxes, fees,
duties and similar governmental charges (including any interest, penalties or
additions to tax imposed in connection therewith or with respect thereto)
including, without limitation, taxes imposed on, or measured by, income or
profits, and value added, sales, service, real or personal property, license,
payroll, withholding, employment, social security, unemployment, stamp, gains
taxes, and customs duties.

 

(y)                                 “Tax Returns” means any report, return or
statement required to be supplied to the Tesorería
General de la República de Chile and/or the Servicios de Impuestos Internos de Chile,
in connection with Taxes.

 

(z)                                   “TCHL Ownership Interests” has the meaning
set forth in the first Recital hereof.

 

(aa)                            “Thermadyne Industries, Inc.” refers to the parent
corporation of the Sellers and is a Corporation duly existing under the laws of
Delaware, United States of America.

 

(bb)                          “Transfer Documents” has the meaning set
forth in Section 2.5 hereof.

 

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(cc)                            “TSAH Ownership Interests” has the meaning
set forth in the second Recital hereof.

 

(dd)                          “Underlying Asset” means any and all right, good or asset of
any kind, whether real estate or movable, tangible or intangible, held either
as owner, tenant, licensee, or at any other title, as accounted for and
registered in any of Soltec’s and/or Metalservice’s records.

 

(ee)                            “US$” means United States Dollars; and “Ch$”
means Chilean Pesos.

 

ARTICLE II

PURCHASE AND SALE

 

SECTION 2.1                          Purchase
and Sale.   On the terms and subject to the conditions
hereof, Sellers hereby promise to sell, assign, transfer and convey to Buyers
on the Closing Date, and Buyers hereby promise to purchase and acquire from
Sellers on the Closing Date, all right, title and interest in and to the
Ownership Interests, with all rights attaching to them as of the Closing Date,
free and clear of all Liens, for the purchase price set forth in Section 2.2
(subject to adjustments pursuant to Section 2.3), as follows:

 

(i)                                     SOLDADURAS
shall purchase and acquire from TCHL the TCHL Ownership Interests, and

 

(ii)                                  PCR
shall to purchase and acquire from TSAH the TSAH Ownership Interests.

 

SECTION 2.2                          Purchase
Price.   (a) The aggregate purchase price for the
Ownership Interests is the amount of US$ 7,000,000 (the “Purchase Price).

 

(b)                                 The
Purchase Price shall be paid by means of a bank transfer

 

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to the following account:

 

JP
Morgan Chase Bank

One Chase Plaza

New York, New York 10005

ABA #021000021

Swift Code: CHASUS33

 

Account number:  10-19033

Account name:  Thermadyne Industries Inc

 

Referencing:

On behalf of Thermadyne Chile Holdings, Ltd
and Thermadyne South America Holdings, Ltd.

 

as follows:

 

	
  SELLER

  	
   

  	
  PURCHASE PRICE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  - TCHL for 99.9% of Soltec

  	
   

  	
  US$

  	
  6,543,457

  	
   

  
	
  - TCHL for 0.11% of Metalservice

  	
   

  	
  US$

  	
  450,000

  	
   

  
	
  - TSAH for 0.1% of Soltec

  	
   

  	
  US$

  	
  6,543

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
  US$

  	
  7,000,000

  	
   

  

 

(c)                                  If
either Party fails to close on the Closing Date for any reason other than just
cause, the failing Party shall pay to the other an amount of U.S.
$750,000.  If the failure was for just
cause, then the Parties will set a revised Closing Date that is within 48 hours
of the original Closing Date.

 

SECTION 2.3                          Adjustments
to the Purchase Price

 

(a)                                  Within 15 calendar
days following the Closing Date, at

 

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the expense of Soltec, the
auditors’ firm Salas y Cía. Ltda. (“Salas”) will deliver to Sellers and Buyers,
duly certified by Salas and audited on a consolidated basis as of the December
31, 2005, the Closing Financial Statements and a certificate (“Salas
Certificate”) setting forth such auditors’ calculation of (i) total Cash and
Debt of the Companies as of December 31, 2005 as determined from the Closing
Financial Statements; for these purposes “Cash” shall mean cash and cash
equivalents (meaning by cash equivalents such instruments or investments easily
cashable or of such high liquidity that make them virtually as good as cash,
e.g.: mutual funds quotas/shares, banking term deposits, etc.); and (ii) the
Companies’ Adjusted Net Working Capital as of December 31, 2004 (the
Ch$2,044,239,000 as per Annex A divided by the annual sales of December 31,
2004 of Ch$ 4,307,034,000 and multiplied by the sales of the last twelve months
to December 31, 2005), and the Companies’ Net Working Capital as of December
31, 2005; for these purposes, “Net Working Capital” shall mean current assets
of the Companies (excluding cash and cash equivalents) minus current
liabilities (excluding financial debt, leases and debt with related companies).

 

All these calculations shall be
made in Ch$ and, when and as required for payments to Sellers, if any under the
terms hereunder, shall be converted into US$ at the Currency Conversion Rate.

 

Annex A shows the calculations
of Cash, Debt and Net Working Capital as of December 31st, 2004.

 

The Closing Financial
Statements shall be prepared in accordance with Chilean generally accepted
accounting policies and practices (“Chilean GAAP”) and on a basis consistent
with the preparation of the Audited Financial Statements.  The Closing Financial Statements (i) shall be
prepared without regard to any of the effects of the closing of the
transactions contemplated hereby, and (ii) shall reflect all proposed audit
adjustments determined

 

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by Salas to be necessary in
order to present the Closing Financial Statements in accordance with Chilean
GAAP on a basis consistent with such accounting policies and practices.

 

(b)                                 In
connection with the preparation of the Closing Financial Statements and on a
date mutually satisfactory to the parties, a physical inventory of all raw
materials, work-in-progress and finished goods inventories owned by the
Companies shall be taken by Salas to determine the Companies’ inventory as of
December 31, 2005, with the assistance of representatives of Buyers and TCHL,
and observed by Buyers and TCHL, or their respective representatives.  Each of Buyers and TCHL shall have the
opportunity to examine the work papers, schedules and other documents prepared
by the Companies and Salas in connection with the preparation of the Closing
Financial Statements and the Salas Certificate.

 

                                                (c)                                  On
the basis of the Closing Financial Statements and the Salas Certificate, the
Purchase Price shall be subject to adjustment (i) for the amount of Net Debt
(or net Cash) as of December 31, 2005, and (ii) for the difference between the
Net Working Capital of the Companies as of December 31, 2005 and the Adjusted
Net Working Capital as of December 31, 2004, in each case as set forth on the
Salas Certificate.

 

(d)                                 The
Salas Certificate will reflect a net amount in favor of Buyers or Sellers, as
applicable, for these price adjustments, which will be paid to the appropriate
party entitled thereto. Should the said price adjustments result in a payment
due to Sellers, then such amount shall be held by Buyers for a period of 110
days from the Closing Date, as a guarantee of the obligations and payment of
eventual liabilities of Sellers arisen hereunder towards Buyers, including
without limitation, the circumstance that any of the representations and
warranties made by Sellers under Article III hereof may be found incorrect,

 

9

 

inexact or false. Once Buyers
have applied the price adjustments to compensate the damages pursuant to the
above, the remaining amount shall be promptly paid to Sellers in US$ at the
Currency Conversion Rate on the Closing Date by bank transfer to the account
specified in Section 2.2(b).

 

(e)                                  For
the purpose of the Purchase Price adjustments referred to in paragraphs (c) and
(d) of this Section 2.3, the Closing Financial Statements and the Salas
Certificate shall be final and binding on both parties unless, within 10
calendar days after delivery of such documents to them, notice is given by any
of Buyers and/or Sellers to the other party of their objection, setting forth
in reasonable detail Buyers’ and/or Sellers’ basis for objection.  If a notice of objection is given, Buyers and
Seller shall consult with each other with respect to the objection.  Any amount that is not in dispute will be
promptly paid by the appropriate party obligor thereto pursuant to paragraphs
(d) and (g) of this Section 2.3.  If
Buyers and TCHL are unable to reach agreement within 15 calendar days after the
notice of objection has been given, circumstance that shall not be necessary to
be evidenced to third parties, the dispute shall be referred for resolution to
PriceWaterhouseCoopers, Santiago, Chile, (the “Accountants”) as promptly as
practicable on the terms set forth in paragraph (f) of this Section 2.3.

 

(f)                                    The
Accountants will make a determination as to each of the items in dispute, which
determination will be (i) in writing, (ii) furnished to each of the parties hereto
within the term of 15 calendar days after the items in dispute have been
referred to the Accountants, (iii) made in accordance with this Agreement, and
(iv) conclusive and binding upon each of the parties hereto.  In connection with their determination of the
disputed items, the Accountants will be entitled - but will not be obligated -
to rely on the working papers, trial balances and similar materials prepared by
Salas in connection with such firm’s examination of

 

10

 

the financial statements of the
Companies, and the fees and expenses of the Accountants will be shared equally
by Buyers and TCHL.  Each of Buyers and
TCHL will use reasonable efforts to cause the Accountants to render their
decision within the timeframe described above, including without limitation by
promptly complying with all reasonable requests made by the Accountants for
information, books, records and similar items.

 

(g)                                 Except as otherwise
provided herein, any payments required to be made pursuant to this Section 2.3
shall be payable in US$ and in same day funds at the Currency Conversion Rate,
by means of a bankers’ draft or a certified bank check (vale vista bancario) issued by a prime
bank established in Santiago, Chile, and shall bear interest from the Closing
Date to and including the date of such payment at a rate per annum equal to
5.0%. Any payments pursuant to this Section 2.3 shall be treated for all
purposes as an adjustment to the Purchase Price.

 

SECTION 2.4                          Withholding
taxes on Purchase Price.   Any and all payment of the Purchase Price,
whether at Closing Date or in regard to the adjustments of price, according to
section 2.3 above, shall be subject to any and all applicable tax and charge
under Chilean law, including, without limitation, articles 60 and 74 of the
Chilean Income Tax Law (DL 824) which provide a 20% taxation rate. Should the Buyers be required under Chile’s
Income Tax Act or other applicable tax law in Chile to deduct or withhold from
or in respect of the Purchase Price and/or its adjustments any income tax, then
Buyers shall make such deduction or withholding and shall within the next 24
hours of making such deduction or withholding pay the full amount deducted or
withheld to the Tesorería General de la República
or the relevant Chilean taxation authority in accordance with Chilean
applicable tax laws. Within two Chilean business days from the date Buyers made
such deduction or withholding and made such tax payment, Buyers

 

11

 

shall deliver to TCHL evidence reasonably
satisfactory to TCHL that the tax deduction or withholding has been
appropriately paid to the Tesorería General
de la República or other relevant Chilean taxation authority.

 

SECTION 2.5                          Transfers.   (i)  On the Closing Date, each of Sellers shall
transfer its Ownership Interests to Buyers as set forth in Section 2.1 above,
with all rights attaching to them as of the Closing Date, including all rights
to payments, dividends and/or withdrawals or distribution of funds, by
executing a notarial deed amending the by-laws of each of Soltec and
Metalservice, the forms of which notarial deeds are attached hereto as Exhibit
A (the “Transfer Documents”).

 

(ii)   At
Closing, each of Sellers and Buyers shall execute the respective notarial deeds
in form and substance satisfactory to Sellers and Buyers documenting this
transaction and simultaneously amending the by-laws of each of Soltec and
Metalservice so as to properly evidence thereto the purchase of the Ownership
Interests by Buyers, the form of which is attached hereto as Exhibit A, and an
excerpt of which shall be duly published in the Official Gazette and registered
in the Commerce Registry of Santiago, Chile, promptly after the Closing.

 

(iii)   Each of
Sellers and Buyers shall waive the right to seek the rescission of any of the
Transfer Documents (acción resolutoria)
that may derive from any breach or failure to fully comply with this Agreement
and/or the Transfer Documents.

 

SECTION 2.6                          Closing
Date.   Closing shall take place on
the Closing Date at the offices of Eyzaguirre & Cía, located at El Golf
No.40, 15th Floor, Las Condes, Santiago, Chile, or on such other
date or at such other place as the parties may mutually agree upon in writing.

 

12

 

SECTIONS 2.7                 Further Access
for Due Diligence.   Sellers have had access to persons authorized
by Buyers, including but not limited to the officers, employees and accountants
of Fidelitas Servicios y Asesorías Ltda., and the members of the law firm of
Alcaíno Rodríguez Sahli Abogados, and have had unrestrained access to the
premises of each of the Companies for the purposes of inspecting its assets,
liabilities, inventories, accounting books, contracts, records and other
documents. Until the Closing Date, Buyers may request additional access to the
Companies from the Sellers, and Sellers will grant this access during normal
operating hours and in a manner to avoid interference with any of the Companies
normal business.

 

SECTION 2.8                          Conduct
of Business Prior to the Closing Date.   TCHL, with the consent of TSAH, undertakes
for the benefit of Buyers that starting from and after the date of this
Agreement and until the Closing Date, it will procure that Soltec and Metalservice:

 

(a)                                  operate
and conduct their business and preserve their goodwill in the ordinary course
of business, in accordance with sound commercial practices, and in compliance
with applicable laws and regulations;

 

(b)                                 maintain
all of their (i) assets in as good a state of operating condition and repair as
they are on the date of this Agreement, except for ordinary depreciation and
wear and tear; (ii) inventories at such levels as are reasonable and sufficient
for the ordinary conduct of business; and (iii) do not, without the prior
written consent of Buyers, engage in levels of trading with persons related to
Sellers which are materially different from historical levels of such trading;

 

(c)                                  maintain
their existing business in accordance with current budget and marketing plans,
without incurring in any new liabilities (whether present or future, actual or
contingent),

 

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and do not enter into any
additional marketing ventures without the prior written consent of Buyers;

 

(d)                                 take
no action or actions which will interfere with the consummation of the Closing
hereunder in accordance with the terms of this Agreement; and

 

(e)                                  make
no distribution of dividends, profits or any fund in general, and/or capital;
and

 

(f)                                    Regardless
of whether the transactions contemplated by this Agreement are consummated,
each of the parties will, unless otherwise specified hereunder, bear its own
legal and accounting costs and other expenses incidental to the execution and
completion of this Agreement.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLERS

 

TCHL, and TSAH, but the latter
only when expressly mentioned, either individually or collectively within the
term Sellers, hereby represent and warrant to Buyers as set forth below:

 

SECTION 3.1                          Organization
and Qualification.   Sellers represent and warrant that each of
Soltec and Metalservice is a limited liability company duly organized, validly
existing and in good standing under the laws of the Republic of Chile, and that
each of Sellers are corporations duly organized, validly existing and in good
standing under the laws of their jurisdiction of incorporation; and that each
of Soltec, Metalservice and Sellers have all requisite corporate power and
authority to own, operate and lease their respective properties and to carry on
their business as they are now being conducted. TCHL represents and warrants,
further, that each of the Companies is qualified to do business and is in good
standing in every jurisdiction where the nature of the business conducted by it
or the properties owned or

 

14

 

leased by it require
qualification.

 

SECTION 3.2                          Authorizations.   Each
of Sellers represents and warrants that it has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.  The
execution and delivery of this Agreement by each of Sellers, the performance by
Sellers of their obligations and agreements hereunder and the consummation by
Sellers of the transactions contemplated hereby, have been duly authorized by
each of Sellers’ Board of Directors. No other corporate action on the part of
any of Sellers is necessary to authorize the execution and delivery of this
Agreement. This Agreement constitutes a valid and legally binding obligation of
each of Sellers, enforceable against each of them in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency or other
laws affecting generally the enforceability of creditors’ rights.

 

SECTION 3.3                          No
Violation.   Neither the execution
and delivery of this Agreement by each of TCHL and TSAH and the performance by
each of them of their obligations hereunder nor the consummation by them of the
transactions contemplated hereby will violate, conflict with or result in any
breach of any provision of the Estatutos
Sociales or equivalent documents of Sellers or the Companies; TCHL
represents and warrants, further, that none of the above actions will: (a) violate,
conflict with or result in a violation or breach of, or constitute a default or
give raise to any right of termination or acceleration (with or without due
notice or lapse of time or both) or result in the acceleration of any payment
under the terms, conditions or provisions of any note, mortgage, or any
license, lease or agreement to which TCHL or the Companies are party of or by
which any of their assets are bound, provided, however, that the prior written
consent of Thermadyne Holdings Corporation’s creditor banks needs be obtained
in respect of Sellers and, therefore, is subject to such consent being obtained
or waived, (b) violate any order, writ,

 

15

 

judgment, injunction, decree,
statute, rule or regulation of any court or Governmental Authority applicable
to TCHL or the Companies or any of their assets, or (f) result in the creation
of any Lien.

 

SECTION 3.4                          Effects
of Agreement.   Neither the execution
and delivery of this Agreement by Sellers and the performance by Sellers of
their obligations hereunder, nor the consummation of the transactions
contemplated hereby, will (a) violate, conflict with or result in a breach of
any provision of the organizational documents of Sellers or the Companies, (b)
violate any statute, regulation, order, judgment, or decree of any court or
governmental agency binding on any of the Sellers or any of the Companies, (c)
conflict with, result in a breach of any of the terms of, constitute a default
under, result in the termination of, or result in the creation of any Lien
pursuant to the terms of, any material contract or agreement to which Sellers
or the Companies are a party.

 

SECTION 3.5                          Ownership
of Interests and Underlying Assets (1).   (i) The
Sellers are both the exclusive legal and beneficial owners of the Ownership
Interests, free and clear of any Liens, and (ii) such ownership does not
violate any statute, ordinance, regulation, order, judgment, or decree of any
court or governmental agency of Chile or otherwise binding on any of them. (2)
Any and all Underlying Asset is owned, held or possessed as accounted in any of
Soltec’s and/or Metalservice’s records and is held free and clear from any
encumbrance, litigation, claim and/or dispute of any nature, shape or form,
except as set forth on Exhibit 3.9. Furthermore, both (1) and (2) are currently
in a good material and legal standing, fit to be destined to the purposes it
was acquired whether as owner or as holder.

 

SECTION 3.6                          Consents
and Approvals.   No filing or registration with, no notice to
and no permit, authorization, consent or approval of any Governmental Authority
is necessary for the

 

16

 

consummation by Sellers of the
transactions contemplated by this Agreement, other than consents,
registrations, approvals, authorizations, permits, filings or notifications
which have already been obtained or made, as appropriate.

 

SECTION 3.7                          Accurate
Information.   To Seller’s knowledge, no material information
has been omitted to be furnished or disclosed by or on behalf of Sellers to
Buyers in respect of them or in respect of the Companies which, if furnished or
disclosed, would be likely to lead a proposing buyer for value of the Ownership
Interests (i) to reduce its assessment of the value thereof, or (ii) to reverse
its decision to purchase the Ownership Interests.

 

SECTION 3.8                          Audited
Financial Statements.   The Audited Financial Statements:

 

(a)                                  comply
with the provisions of applicable law and have been prepared in accordance with
Chilean GAAP, and are complete and accurate in all material respects; and

 

(b)                                 give
a true and fair view of all of the assets and liabilities (whether present or
future, actual or contingent) and of the state of affairs of the Companies as
of December 31, 2004.

 

SECTION 3.9                          Liens
on Assets.   Except as set forth on Exhibit 3.9, the
Companies (i) have not created or agreed to create or suffer from nor will
prior to the Closing Date create or agree to create or suffer from any Lien
over any part of their undertaking or assets; and (ii) have and will at the
Closing Date have full beneficial interest in and good and marketable title,
free from any Lien, to each of their assets.

 

SECTION 3.10                    No Material
Adverse Change.   Since December 31,
2004 (i) there has been, and pending the Closing will be, no material adverse
change in the financial condition or

 

17

 

operation of the Companies;
(ii) the business of each of the Companies has been carried out on a normal
basis and will be so carried out up to the Closing Date; (iii) the Companies
have not disposed of any of their assets other than in the ordinary course of
business and for full consideration and on normal terms; and (iv) the Companies
have not distributed any profits or effected any distribution of its assets or
made any loan or other payment other than in the ordinary course of business
and the Companies, prior to the Closing Date, will not make or cause to be made
any distribution of its profits or assets, or make any loan or other payments
other than in the ordinary course of business.

 

SECTION 3.11                    No
Contingency or Material Litigation.   Except as set forth in Exhibit 3.11, (i) the
Companies do not face nor are engaged or involved in any material litigation,
arbitration, prosecution or other legal proceedings (“Proceedings”), whether as
plaintiff, defendant or otherwise, and there are no Proceedings pending or, to
Sellers’ knowledge, threatened by or against any of the Companies; (ii) there
are no Proceedings in course, pending or, to Sellers’ knowledge, threatened
under which any of the Companies is or may be liable to indemnify any person;
(iii) the Companies are not involved in any inquiry, whether convened by a
governmental, regulatory or municipal board of inquiry or commission or any
other administrative body.

 

SECTION 3.12                    Trademarks
and User Agreements.   The trademarks set forth in Exhibit 3.12
hereto: (i) are now and will at the Closing Date be legally and beneficially
owned by and registered in the name of the Companies, free from any Lien, and
the Companies have and will continue to have after the Closing Date, the
exclusive right to use, free from any restriction whatsoever, each such
trademarks, particularly the trademark “Soltec”; (ii) are valid and
enforceable; (iii) are not the subject of registered user agreements, licenses
or other rights; (iv) have not been subject to any event, nor will prior to the
Closing Date be subject to any event, under which any of them has ceased or,

 

18

 

to Sellers’ knowledge, might
cease to be valid and subsisting.  Except
for those set forth on Exhibit 3.12 hereto, no other trademarks or copyrights
are owned by and registered in the name of the Companies, and the Companies are
not a party to any user agreements or license, know-how, information,
assistance or development agreements.

 

SECTION 3.13                    Related
Transactions.   Except as set forth
on Exhibit 3.13, neither of the Companies (i) have entered or become party to
any agreement or contract with any of the Sellers, their affiliates or their
employees, officers or advisors; (ii) have sponsored, pledged, warranted or
guaranteed in any way, shape or form obligations of any of the Sellers, their
affiliates or their employees, officers or advisors.

 

SECTION 3.14                    Labor
matters.   Neither of the Companies (i) have unions among
their employees; (ii) have entered or become party to any collective labor
contracts or agreements of any kind; (iii) have suffered strikes or any and all
form of disruption of the normal development of the activities by their
employees; and (iv) are party to any negotiations for any collective labor
contracts or agreements of any kind.

 

SECTION 3.15                    Compliance
with Laws.   The Sellers represent and warrant that each of
the Companies has complied with any and all applicable obligations in regard to
environmental, tax, sanitary and labor matters and any and all filing, consent,
authorization or permit from any and all competent authority, including without
limitation, the Chilean environmental, tax, sanitary and labor authorities or
agencies. The parties expressly acknowledges that any tax liability Soltec,
Metalservice and/or Buyers could face should this representation be found
incorrect, inexact or false is guaranteed in accordance with section 8.2.2
herein.

 

19

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYERS

 

Buyers hereby represent and
warrant to Sellers as follows:

 

SECTION 4.1                          Organization
and Qualification.   Each of Buyers is a corporation duly
organized, validly existing and in good standing under the laws of the Republic
of Chile and have all requisite corporate power to purchase and acquire the
Ownership Interests.

 

SECTION 4.2                          Authorizations.
  The execution and delivery of this Agreement
by each of Buyers, the performance by Buyers of their obligations and
agreements hereunder and the consummation by Buyers of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
of each of Buyers.  No other corporate
action on the part of any of Buyers is necessary to authorize the execution of
this Agreement. This Agreement constitutes a valid and legally binding
obligation of each of Buyers, enforceable against each of Buyers in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency or other laws affecting generally the enforceability of creditors’
rights.

 

SECTION 4.3                          Effects
of Agreement.   Neither the execution and delivery of this
Agreement by Buyers and the performance by Buyers of their obligations
hereunder, nor the consummation of the transactions contemplated hereby, will
(a) violate, conflict with or result in a breach of any provision of the
organizational documents of Buyers, (b) violate any statute, regulation, order,
judgment, or decree of any court or governmental agency binding on any of the
Buyers, (c) conflict with, result in a breach of any of the terms of,
constitute a default under, result in the termination of, or result in the
creation of any Lien pursuant to the terms of, any material contract or
agreement to which Buyers are a party.

 

20

 

SECTION 4.4                          No
Violation.   Neither the execution and delivery of this
Agreement by each of Buyers, and the performance by each of them of their
obligations hereunder nor the consummation by them of the transactions
contemplated hereby, will (i) violate, conflict or result in any breach of any
provision of the organizational documents of Buyers or any order, writ,
judgment, injunction, decree, statute, rule or regulation of any court or
Governmental Authority applicable to or binding on Buyers, or (ii) conflict
with, result in a breach of any of the terms of, constitute a default under,
result in the termination of, or result in the creation of any Lien pursuant to
the terms of, any material contract or agreement to which any of Buyers are a
party.

 

SECTION 4.5                          Consents
and Approvals.   No filing or registration with, no notice to
and no permit, authorization, consent or approval of any Governmental Authority
is necessary for the consummation by Buyers of the transactions contemplated by
this Agreement, other than consents, registrations, approvals, authorizations,
permits, filings or notifications which have already been obtained or made, as
appropriate.

 

ARTICLE V

LIABILITIES OF COMPANIES

 

SECTION 5.1                          Any and
all liabilities of the Companies related to their respective business and duly
reflected in the Companies’ accounting records in accordance with Section 3.8
hereof shall be assumed and undertaken by Buyers at and after the Closing Date
and shall become solely the obligations of Buyers.

 

ARTICLE VI

CONFIDENTIALITY

 

SECTION 6.1                        Confidentiality.
  All information furnished by

 

21

 

Sellers to Buyers or their
officers, employees or agents, including their counsels, accountants and
representatives, whether oral or written, in connection with this Agreement is
confidential and shall be treated in a confidential manner, and Buyers shall
not directly or indirectly disclose, or permit any of their officers, employees
or agents, including their counsels, accountants and representatives, to
disclose any such information to a third party without Sellers’ prior written
consent, provided, however, that disclosure may be made in accordance with any
law, regulation, code or order of a court of competent jurisdiction.  In the event that the purchase of the
Ownership Interests is not consummated, Buyers shall return to Sellers all such
documents and other materials containing, reflecting or referring to such
information, and shall not directly or indirectly use such information for any
competitive or other commercial purpose.

 

All information furnished by
Buyers to Sellers or their officers, employees or agents, including their
counsels, accountants and representatives, whether oral or written, in
connection with this Agreement is confidential and shall be treated in a
confidential manner, and Sellers shall not directly or indirectly disclose, or
permit any of their officers, employees or agents, including their counsels,
accountants and representatives, to disclose any such information to a third
party without Buyers’ prior written consent, provided, however, that disclosure
may be made in accordance with any law, regulation, code or order of a court of
competent jurisdiction.  In the event
that the purchase of the Ownership Interests is not consummated, Sellers shall
return to Buyer all such documents and other materials containing, reflecting
or referring to such information, and shall not directly or indirectly use such
information for any competitive or other commercial purpose.

 

22

 

ARTICLE VII

CONDITIONS PRECEDENT

 

SECTION 7.1                          Conditions
Precedent to Sellers’ Obligations.   This Agreement is subject to the following
conditions precedent, any or all of which may be waived by Sellers, in their
sole discretion:

 

7.1.1.                     Statement
by Buyers.   On the Closing Date, Sellers shall have
received from each of Buyers a statement duly signed by their General Manager
or legal representative, dated on such date, in form and substance satisfactory
to Sellers, with respect to (i) the authorization granted by each of them for
the execution and delivery of this Agreement by each of Buyers and the
consummation of the transactions contemplated hereby, and (ii) the due
authorization of the officer or attorney-in-fact of each of Buyers, as the case
may be, executing this Agreement on behalf of Buyers.

 

7.1.2.                     Representations
and Warranties.   The representations
and warranties of Buyers contained in Article IV hereof shall be true and
correct in all material respects on the Closing Date.

 

7.1.3.                     Payment of
the Purchase Price.   Sellers shall have received and confirmed
receipt of the Purchase Price in full pursuant to Section 2.2 hereof.

 

SECTION 7.2                          Conditions
Precedent to Buyers’ Obligations.   This Agreement is subject to the following
conditions precedent, any or all of which may be waived by Buyers, in their
sole discretion:

 

7.2.1.                     Statement
by Sellers.   On the Closing Date, Buyers shall have
received (i) from each of Sellers duly signed by their General Manager or legal
representative a statement, dated on such date, in form and substance
satisfactory to Buyers, with respect to (a) the authorization granted by each of
them for the

 

23

 

execution and delivery of this
Agreement by each of Sellers and the consummation of the transactions
contemplated hereby, and (b) the due authorization of the officer or
attorney-in-fact of each of Sellers, as the case may be, executing this
Agreement on behalf of Sellers; and (ii) a favorable legal opinion of the
Chilean law firm Alcaíno | Rodríguez | Sahli and a favorable report of
Fidelitas Servicios y Asesorías Ltda. with regard to the inspection described
in Section 2.7 and 7.2.4 hereof.

 

7.2.2.                     Amendment
of Companies’ Powers of Attorney.   All powers of attorney granted on behalf of
the Companies shall have been revoked or amended to the satisfaction of Buyers.
For the purposes of this provision, and for the period that goes between the
date of this Agreement and the Closing Date, Sellers will cause the Companies
to execute a public deed by means of which the current powers of attorney of
the Companies are to be modified, substantially in the form of the Exhibit
7.2.2.

 

7.2.3.                     Representations
and Warranties.   The representations and warranties of Sellers
contained in Article III shall be true and correct in all material respects on
the Closing Date.

 

7.2.4.                     Due
Diligence; Counsel Approval.   Buyers
have completed to their satisfaction a full and comprehensive due diligence
inspection regarding the Companies’ business, assets, operations and affairs,
including, without limitation, a legal, accounting, financial, operational and
tax due diligence on each of the Companies at the cost and expense of
Buyers.  All legal matters in connection
with such due diligence are acceptable to counsel for Buyers and all such
additional records and information related to the due diligence process have
been furnished to such counsel by Sellers or the Companies.

 

7.2.5.                     Supply
Agreements.   On the Closing Date, Thermadyne Industries,
Inc. and Soltec, on the one hand, and on the other, Stoody Company and Soltec,
shall have entered, as appropriate,

 

24

 

into those Supply Agreements
set forth on Exhibit 3.13 hereto, for a period of 7 years, renewable by mutual
agreement of the parties and subject to the conditions set forth in each of
those Supply Agreements.

 

7.2.6.                     Related-Party
Contracts.   Except for the Supply
Agreements set forth on Exhibit 7.2.5 on the Closing Date, the Companies shall
have terminated and be fully released from any and all agreements, contracts or
obligations of any kind with any of the Sellers or their related persons.

 

ARTICLE VIII

INDEMNIFICATION

 

SECTION 8.1                          Survival.   The obligations of the parties
contained in Articles VI and VIII, Section 8.2, hereof, shall survive the
Closing, and the representations and warranties of each of TCHL, TSAH,
SOLDADURAS and PCR, respectively, contained in Sections III and IV hereof,
shall survive the Closing, in each case for a period of three (3) years after
the Closing Date; provided, however, that the representations and warranties of
TCHL as Seller in respect of taxation shall survive the Closing until
expiration of the six (6) years statute of limitations provided for under
Chilean law for tax liabilities. No covenant, representation or warranty
contained in this Agreement shall survive after such dates or, if earlier, the
time at which it would otherwise terminate.

 

SECTION 8.2                          Indemnification

 

8.2.1                        Additional
Definitions.   For purposes of this
Agreement, (i) “Indemnity Payment” means any amount of Indemnifiable Losses
required to be paid pursuant to this Agreement; (ii) “Indemnitee” means any
person or entity entitled to indemnification under this Agreement; (iii) “Indemnifying
Party” means any person or entity required to provide indemnification under
this Agreement; (iv)

 

25

 

“Indemnifiable Losses” means
any and all damages, losses, liabilities, obligations, costs and expenses, and
any and all claims, demands or suits (by any person or entity, including,
without limitation, any Governmental Authority), including, without limitation,
the costs and expenses of any and all actions, suits, proceedings, demands,
assessments, judgments, settlements and compromises relating thereto and
including reasonable attorneys’ fees and expenses in connection therewith, and
(v) “Third Party Claim” means any claim, action or proceeding made or brought
by any person or entity who or which is not a party to this Agreement or an
Affiliate of a party to this Agreement.

 

8.2.2.                     Indemnification by TCHL.   Subject to Section 8.1, TCHL agrees to
indemnify, defend and hold harmless Buyers and its directors, managers,
officers, employees, agents and representatives from and against any and all
Indemnifiable Losses to the extent relating to, resulting from or arising out
of:

 

(a)                                  any breach by Sellers
of or any inaccuracy of any representation or warranty of Sellers contained in
this Agreement, or in any agreement, instrument, certificate or other document
delivered pursuant hereto;

 

(b)                                 any breach or non-performance
by Sellers of any covenant to be performed by any of them that is contained in
this Agreement or in any agreement, certificate or other document delivered
pursuant hereto; and

 

(c)                                  any amounts to be
paid in connection with attorneys fees, costs, settlements, verdicts or any other
damages arising from the matters set forth on Exhibit 3.11.

 

8.2.3.                     Indemnification by Buyers.
Buyers agree to indemnify, defend and hold harmless Sellers and its directors,
managers,

 

26

 

officers, employees, agents and
representatives from and against any and all Indemnifiable Losses to the extent
relating to, resulting from or arising out of:

 

(a)                                  any breach by Buyers
of or any inaccuracy of any representation or warranty of Buyers contained in
this Agreement or in any agreement, instrument, certificate or other document
delivered pursuant hereto; and

 

(b)                                 any breach or non-performance
by Buyers of any covenant to be performed by any of them that is contained in
this Agreement or in any agreement, certificate or other document delivered
pursuant hereto.

 

8.2.4.                     Notice of Claim.   If any Indemnitee receives notice or becomes
aware of any claim, proceeding or other matter (a “Claim”) in respect to which
an Indemnifying Party is obligated to provide indemnification under this
Agreement, the Indemnitee shall reasonably promptly give written notice thereof
to the Indemnifying Party, which notice shall be given in any event not later
than 30 calendar days after receipt of notice or becoming aware of such Claim. Such
notice shall specify whether the Claim arises as a result of a Claim by a
Person against the Indemnitee (a “Third Party Claim”) or whether the Claim does
not so arise (a “Direct Claim”), and shall also specify with reasonable
particularity (to the extent that the information is available) the factual
basis for the Claim and the amount of the Claim, if known. If, through the
fault of the Indemnitee, the Indemnifying Party does not receive notice of any
Claim in time to contest effectively the determination of any liability being
contested, the Indemnifying Party shall be entitled to set-off against the
amount claimed by the Indemnitee the amount of any Losses incurred by the
Indemnifying Party resulting from the Indemnitee’s failure to give such notice
on a timely basis.

 

27

 

8.2.5.                     Direct Claims.   With
respect to any Direct Claim, following receipt of notice from an Indemnitee of
the Claim, the Indemnifying Party shall have sixty (60) calendar days to make
such investigation of the Claim as is considered necessary or desirable. For
the purpose of such investigation, the Indemnitee shall make available to the
Indemnifying Party the information relied upon by the Indemnitee to
substantiate the Claim, together with all such other information as the
Indemnifying Party may reasonably request. If both parties agree at or prior to
the expiration of such 60-day period (or any mutually agreed upon
extension thereof) to the validity and amount of such Claim, the Indemnifying
Party shall pay within sixty (60) calendar days to the Indemnitee the full
agreed upon amount of the Claim, failing which the matter shall be referred to
binding arbitration in such manner as the parties may agree.

 

8.2.6.                     Third Party Claims.   With
respect to any Third Party Claim, the Indemnifying Party shall have the right,
at its expense, to participate in or assume control of the negotiation,
settlement or defense of the Third Party Claim and, in such event, the
Indemnifying Party shall reimburse the Indemnitee for all the Indemnitee’s out-of-pocket
expenses as a result of such participation or assumption. If the Indemnifying
Party elects to assume such control, the Indemnitee shall have the right to
participate in the negotiation, settlement and defense of such Third Party
Claim and to retain counsel or other professional advisors to act on its
behalf, provided that the fees and disbursements of such counsel or other
professional advisors shall be paid by the Indemnitee unless the Indemnifying Party
to any action or proceeding include both the Indemnifying Party and the
Indemnitee and the representation of both the Indemnifying

 

28

 

Party and the Indemnitee by the same counsel
or other professional advisors would be inappropriate due to the actual or
potential differing interests between them (such as the availability of
different defenses). If the Indemnifying Party, having elected to assume such
control, thereafter fails to defend the Third Party Claim within a reasonable
time, the Indemnitee shall be entitled to assume such control, and the
Indemnifying Party shall be bound by the results obtained by the Indemnitee
with respect to such Third Party Claim. If any Third Party Claim is of a nature
such that the Indemnitee is required by applicable law to make a payment to any
Person (a “Third Party”) with respect to the Third Party Claim before the
completion of settlement negotiations or related legal proceedings, the
Indemnitee may make such payment and the Indemnifying Party shall, forthwith
after demand by the Indemnitee, reimburse the Indemnitee for such payment. If
the amount of any liability of the Indemnitee under the Third Party Claim in
respect of which such payment was made, as finally determined, is less than the
amount that was paid by the Indemnifying Party to the Indemnitee, the
Indemnitee shall, forthwith after receipt of the difference from the Third
Party, pay the amount of such difference to the Indemnifying Party.

 

8.2.7.                     Settlement of Third Party
Claims.   If the Indemnifying Party fails to assume
control of the defense of any Third Party Claim, the Indemnitee shall have the
exclusive right to contest, settle or pay the amount claimed. Whether or not
the Indemnifying Party assumes control of the negotiation, settlement or
defense of any Third Party Claim, the Indemnifying Party shall not settle any
Third Party Claim without the written consent of the Indemnitee, which consent
shall not be unreasonably withheld or delayed; provided, however, that the
liability of the

 

29

 

Indemnifying Party shall be limited to the
proposed settlement amount if any such consent is not obtained for any reason.

 

8.2.8.                     Co-operation.
  The Indemnitee and the Indemnifying
Party shall co-operate fully with each other with respect to Third Party
Claims, and shall keep each other fully advised with respect thereto (including
supplying copies of all relevant documentation promptly as it becomes
available).

 

8.2.9.                     Exclusivity.   The
provision of this Section 8.2 shall apply to any Claim for breach of any
covenant, representation, warranty or other provision of this Agreement or any
agreement, certificate or other document delivered pursuant hereto (other than
a claim for specific performance or injunctive relief), with the intent that
all such Claims shall be subject to the limitations and other provisions
contained in this Section 8.2.

 

8.2.10.               Limitation on Indemnifiable Losses.
  In no event shall either party hereto be
entitled to seek against the other indirect, consequential, or punitive damages
in any action relating to the subject matter of this Agreement suffered by the
claimant as a result of any misrepresentation or breach of covenants,
agreement, representation or warranty made or to be performed by either party
hereto pursuant to this Agreement.

 

8.2.11                  Limitation of
Liability.

 

(a) Buyers shall not be entitled to obtain
any recovery in respect of their Claims for breach by Sellers of their
representations and warranties hereunder, except to the extent that in respect
of the aggregate of Claims related to the Sellers and/or the Companies, the
liability of TCHL under this Section 8.2 would exceed US$100,000, then recovery
from Sellers shall be

 

30

 

limited to amounts in excess of
US$50,000 and would in no case exceed US$1,000,000 in the aggregate; and,

 

(b) Sellers shall not be entitled to obtain
any recovery in respect of their Claims for breach by Buyers of their
representations and warranties hereunder, except to the extent that in respect
of the aggregate of Claims related to the Buyers and/or the Companies, the
liability of Sellers under this Section 8.2 would exceed US$100,000, then
recovery from Buyers shall be limited to amounts in excess of US$50,000 and
would in no case exceed US$1,000,000 in the aggregate.

 

8.2.12                  Right of
Offset.   If Sellers should be
obligated to indemnify Buyers for damages suffered from the circumstance that
any of the representations and warranties related to tax matters made by
Sellers under Section 3.15 hereof may have been found incorrect, inexact or
false, then Buyers shall have the right to be indemnified by offsetting the
amount of the damages, not to exceed US$150,000, from accounts payable under
the Supply Agreement executed between Thermadyne Industries, Inc. and certain
of its Affiliates parties to such agreements, and the Companies, excluded
Stoody Company.

 

ARTICLE IX

LATIN AMERICAN OPERATIONS

 

SECTION 9.1                          Promptly after the
transactions contemplated in this Agreement are closed and completed and for a
6-month period thereafter, the parties hereto will work together and shall
exert commercially reasonable efforts to explore the possibility of having
SOLDADURAS or any Affiliate of SOLDADURAS sell and market Thermadyne’s products
in the rest of Latin America, to the extent that any existing supply,
distribution or other commercial arrangement entered into by Thermadyne
Industries, Inc. or any

 

31

 

Affiliate thereof with third
parties in any such countries does not prohibit such an arrangement or
otherwise give rise to any conflict or dispute whatsoever.

 

ARTICLE X

MISCELLANEOUS

 

SECTION 10.1                    Notices.
  All notices, requests, or instructions
hereunder shall be in writing and delivered personally or sent by telefax or
registered or certified mail, postage prepaid, as follows:

 

	
  1.

  	
   

  	
  If to
  Sellers:

  
	
   

  	
   

  	
  Thermadyne
  Holdings Corporation

  
	
   

  	
   

  	
  c/o Mr. Paul Melnuk

  
	
   

  	
   

  	
  16052
  Swingley Ridge Road, Suite 300

  
	
   

  	
   

  	
  Chesterfield,
  Missouri 63017

  
	
   

  	
   

  	
  Telephone:  (636) 728 3056

  
	
   

  	
   

  	
  Telefax:  (636) 728 3010

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With copy
  to:

  
	
   

  	
   

  	
  Thermadyne
  Holding Corporation

  
	
   

  	
   

  	
  c/o Ms.
  Patricia S. Williams

  
	
   

  	
   

  	
  16052
  Swingley Ridge Road, Suite 300

  
	
   

  	
   

  	
  Chesterfield,
  Missouri 63017

  
	
   

  	
   

  	
  Telephone:  (636) 728 3133

  
	
   

  	
   

  	
  Telefax:  (636) 728 3010

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  If to the
  Buyers:

  
	
   

  	
   

  	
  Soldaduras
  PCR Soltec Limitada

  
	
   

  	
   

  	
  c/o Mr. Horacio Peña Novoa

  
	
   

  	
   

  	
  Mr. Andrés Veras Greene

  
	
   

  	
   

  	
  El Bosque Norte, 040, 15th Floor

  
	
   

  	
   

  	
  Las Condes,
  Santiago

  

 

32

 

	
   

  	
   

  	
  Telephone:
  (56-2) 496 7200

  
	
   

  	
   

  	
  Telefax:
  (56-2) 203 5516

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With copy
  to:

  
	
   

  	
   

  	
  Penta Capital de Riesgo S.A.

  
	
   

  	
   

  	
  c/o Mr. Horacio Peña Novoa

  
	
   

  	
   

  	
  Mr. Andrés Varas Greene

  
	
   

  	
   

  	
  El Bosque
  Norte 040, Office 605

  
	
   

  	
   

  	
  Las Condes,
  Santiago

  
	
   

  	
   

  	
  Telephone:
  (56-2) 496 7200

  
	
   

  	
   

  	
  Telefax:
  (56-2) 203 5516

  

 

Either of the above addresses
may be changed at any time by notice given as provided above, provided,
however, that any such notice or change of address shall be effective only upon
receipt.

 

SECTION 10.2                    Entire
Agreement; Amendment.   This Agreement and the documents referred to
herein contain the entire agreement between the parties hereto with respect to
the transactions contemplated hereby, and no amendment or modification hereof
shall be effective unless in writing and signed by the party against which it
is sought to be enforced.

 

SECTION 10.3                    Further
Assurances.   Each of the parties hereto shall take such
further actions as may be reasonably requested by the other party hereto to
carry out and consummate the transactions contemplated by this Agreement.

 

SECTION 10.4                    Expenses.
  Each of the parties hereto shall bear such
party’s own expenses, including travel and legal expenses, in connection with
this Agreement and the transactions contemplated hereby.

 

SECTION 10.5                    Governing
Law; Arbitration.

 

(a)          The Agreement and the
Transfer Documents shall be governed

 

33

 

by, construed and interpreted
under Chilean law.

 

(b)         Any difficulty or
controversy arising among the parties with respect to the application,
interpretation, duration, validity or execution hereof or for any other reason
arising out of this transaction shall be submitted to arbitration pursuant to
the current Rules of Arbitration Procedure of the Arbitration and Mediation
Center of the Chamber of Commerce of Santiago A.G.

 

(c)          The parties confer an
irrevocable special power of attorney upon the Santiago Chamber of Commerce so
that it may, at the written request of any of the parties hereof, appoint an
arbitrator ex aequo et bono from
among the members of the arbitration corps of the Santiago Arbitration and
Mediation Center.

 

(d)         There shall be no remedy
against the arbitrator’s resolutions, which is hereby expressly waived. The
arbitrator is especially empowered to resolve any matter relating to his/her
competence and/or jurisdiction.

 

SECTION 10.6                    Public
Announcements.

 

(a)          The parties hereto agree
not to release, prior to the Closing Date, any information concerning the
proposed purchase to any third party without the prior written consent of the
other party. Either party may, however, furnish any information about the
proposed purchase and acquisition to its attorneys, agents, and Affiliates and
Subsidiaries, without informing the other party or seeking the other parties’
prior consent and to any Governmental Authority so long as the other party is
informed in advance.

 

(b)         Buyers and Sellers will
consult with each other and will mutually agree (the agreement of each party
not be unreasonably withheld) upon the content and timing of any press release
or other public statements with respect to the transactions

 

34

 

contemplated in this Agreement
and shall not issue any such press release or make any such public statement
prior to such consultation and agreement, except as may be required by law or
by obligations pursuant to any listing agreement with any securities exchange.

 

SECTION 10.7                    Beneficiaries;
Assignment.   This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights or
obligations hereunder shall be assigned by either of the parties hereto without
the prior written consent of the other.

 

SECTION 10.8                    Liability
Joint and Several.   The obligations under this Agreement of each
of Sellers and each of Buyers, respectively, shall be joint and several.

 

SECTION 10.9                    Counterparts.
  This Agreement may be executed in
counterparts, each of which shall be deemed an original, but both of which
taken together shall constitute one and the same instrument.

 

IN
WITNESS WHEREOF, this Agreement has been duly executed
by all of the parties hereto on the date first above written.

 

 

	
  SOLDADURAS PCR SOLTEC LIMITADA

  S.A.

  	
   

  	
  PENTA CAPITAL
  DE RIESGO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Andrés Varas

  	
   

  	
   

  	
  By: 

  	
  /s/ Horacio
  Peña

  	
   

  
	
  Name: 

  	
  Andrés Varas

  	
   

  	
   

  	
  Name: 

  	
  Horacio Peña

  	
   

  
	
  Title: 

  	
  Business
  Manager, Penta Capital de Riesgo S.A.

  	
   

  	
   

  	
  Title: 

  	
  Executive
  Director, Penta Capital de Riesgo S.A.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/
  Francisco Soublette

  	
   

  	
   

  	
  By: 

  	
  /s/ Hugo
  Bravo

  	
   

  
	
  Name: 

  	
  Francisco
  Soublette

  	
   

  	
   

  	
  Name: 

  	
  Hugo Bravo

  	
   

  
	
  Title: 

  	
  Operations
  Manager, Penta Capital de Riesgo S.A.

  	
   

  	
   

  	
  Title: 

  	
  General Manager, Penta Capital de Riesgo S.A.

  	
   

  
											

 

 

35

 

	
  THERMADYNE
  CHILE HOLDINGS,

  LTD.

  	
   

  	
  THERMADYNE
  SOUTH AMERICA

  HOLDINGS, LTD.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ 
  Cristián Eyzaguirre S.

  	
   

  	
   

  	
  By:

  	
  /s/ 
  Cristián Eyzaguirre S.

  	
   

  	
   

  
	
  Name:

  	
  Cristián Eyzaguirre S.

  	
   

  	
  Name:

  	
  Cristián Eyzaguirre S.

  	
   

  
	
  Title:

  	
  Attorney-in-fact

  	
   

  	
  Title:

  	
  Attorney-in-fact

  	
   

  
										

 

36

 

ANNEX A

 

SOLTEC CONSOLIDATED FINANCIAL STATEMENTS – 31st DECEMBER
2004

 

As per the calculations set
forth in the Purchase Agreement, Cash, Debt and Net Working Capital for the
period ended December 31st, 2004 are as follows:

 

Cash: Cash and Banks of Ch$ 294,512,000.

 

Debt: Bank Loans payable (current and long
term) plus Debt with related parties (current and long term) plus financial
leases of Ch$ 179,541,000.

 

Net
Working Capital:  (Current Assets minus Cash and Banks) minus
(Current Liabilities minus financial debt, leases and debt with related
companies) of Ch$ 2,044,239,000.

 

37Exhibit 4.1

 

TRUST
INDENTURE

 

 

Providing
for the Issue of up to Cdn. $10,000,000 of

 

7%
Secured Convertible Debentures

 

BETWEEN

 

SIGNET
ENERGY INC.

 

— and
—

 

VALIANT
TRUST COMPANY

 

 

Made
as of December 20, 2005

 

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  Article 1 INTERPRETATION

  	
  1

  
	
  1.1

  	
  Definitions

  	
  1

  
	
  1.2

  	
  Meaning of Outstanding

  	
  8

  
	
  1.3

  	
  Headings

  	
  8

  
	
  1.4

  	
  Gender and Number

  	
  8

  
	
  1.5

  	
  Governing Law

  	
  8

  
	
  1.6

  	
  Day Not a Business Day

  	
  9

  
	
  1.7

  	
  Accounting Principles

  	
  9

  
	
  1.8

  	
  Interest Calculations

  	
  9

  
	
  1.9

  	
  Time of the Essence

  	
  9

  
	
  1.10

  	
  Language

  	
  9

  
	
  1.11

  	
  Expanded Meanings

  	
  9

  
	
   

  	
   

  	
   

  
	
  Article 2 THE DEBENTURES

  	
  10

  
	
  2.1

  	
  Terms of Debentures

  	
  10

  
	
  2.2

  	
  Form and Signature of
  Debentures

  	
  11

  
	
  2.3

  	
  Issue of Debentures

  	
  11

  
	
  2.4

  	
  Certification

  	
  11

  
	
  2.5

  	
  Debentures to Rank Pari
  Passu

  	
  12

  
	
  2.6

  	
  Registration of Debentures

  	
  12

  
	
  2.7

  	
  Persons Entitled to
  Payment

  	
  13

  
	
  2.8

  	
  Mutilation, Loss, Theft or
  Destruction

  	
  13

  
	
  2.9

  	
  Exchange of Debentures

  	
  14

  
	
  2.10

  	
  Resale Restrictions and
  Legends

  	
  14

  
	
  2.11

  	
  Trustee Not Bound to Make
  Enquiries

  	
  15

  
	
  2.12

  	
  Restrictions on Use of
  Proceeds

  	
  15

  
	
   

  	
   

  	
   

  
	
  Article 3 SECURITY

  	
  15

  
	
  3.1

  	
  Security

  	
  15

  
	
  3.2

  	
  Attachment

  	
  16

  
	
  3.3

  	
  Leases

  	
  16

  
	
  3.4

  	
  Contractual Rights

  	
  16

  
	
  3.5

  	
  Permitted Activities

  	
  16

  
	
  3.6

  	
  Liability of Trustee

  	
  17

  
	
  3.7

  	
  Mandatory Provisions of
  Applicable Law

  	
  17

  
	
  3.8

  	
  Waivers of Applicable Laws

  	
  17

  
	
  3.9

  	
  Further Assurances

  	
  17

  
	
  3.10

  	
  Registration

  	
  18

  
	
  3.11

  	
  Discharge

  	
  18

  
	
  3.12

  	
  Partial Discharge

  	
  18

  
	
  3.13

  	
  Additional Security

  	
  18

  
	
   

  	
   

  	
   

  
	
  Article 4 SUBORDINATION OF DEBENTURES

  	
  18

  
	
  4.1

  	
  Subordination

  	
  18

  
	
  4.2

  	
  Realization

  	
  19

  
	
  4.3

  	
  Subrogation of Permitted
  Senior Debt

  	
  19

  
	
  4.4

  	
  Payment of Obligations Permitted

  	
  20

  

 

 

	
  4.5

  	
  Enforceable by Holders of
  Permitted Senior Debt

  	
  20

  
	
  4.6

  	
  Payment of Debentures
  Permitted

  	
  20

  
	
  4.7

  	
  Notice of Default under
  Permitted Senior Debt

  	
  21

  
	
  4.8

  	
  No Impairment Between
  Corporation and Debentureholders

  	
  21

  
	
  4.9

  	
  Authorization of Trustee
  to Affect Subordination

  	
  21

  
	
   

  	
   

  	
   

  
	
  Article 5 EXERCISE OF CONVERSION RIGHT

  	
  21

  
	
  5.1

  	
  Conversion Right

  	
  21

  
	
  5.2

  	
  Deemed Conversion Upon
  Going Public Transaction

  	
  22

  
	
  5.3

  	
  Effect of Exercise of
  Conversion Right

  	
  22

  
	
  5.4

  	
  Partial Exercise of
  Conversion Right; Fractions

  	
  23

  
	
  5.5

  	
  Cancellation and
  Destruction of Debentures

  	
  23

  
	
  5.6

  	
  Expiration of Conversion
  Right

  	
  23

  
	
  5.7

  	
  Securities Restrictions

  	
  23

  
	
  5.8

  	
  Debentureholders not a
  Shareholder

  	
  23

  
	
  5.9

  	
  Charges for Conversion or
  Transfer

  	
  23

  
	
   

  	
   

  	
   

  
	
  Article 6 REDEMPTION, RETRACTION AND REPAYMENT

  	
  24

  
	
  6.1

  	
  Redemption

  	
  24

  
	
  6.2

  	
  Non-Retractable

  	
  25

  
	
  6.3

  	
  Repayment at the Maturity
  Date

  	
  25

  
	
   

  	
   

  	
   

  
	
  Article 7 ADJUSTMENT ON CONVERSION PRICE

  	
  26

  
	
  7.1

  	
  Adjustment of Conversion
  Price

  	
  26

  
	
  7.2

  	
  Protection of Trustee

  	
  28

  
	
  7.3

  	
  Entitlement to Shares on
  Exercise of Conversion Right

  	
  28

  
	
  7.4

  	
  No Adjustment for Stock
  Options

  	
  28

  
	
  7.5

  	
  Determination by
  Corporation’s Auditors

  	
  28

  
	
  7.6

  	
  Proceedings Prior to any
  Action Requiring Adjustment

  	
  28

  
	
  7.7

  	
  Certificate of Adjustment

  	
  29

  
	
  7.8

  	
  Notice of Special Matters

  	
  29

  
	
  7.9

  	
  No Action after Notice

  	
  29

  
	
   

  	
   

  	
   

  
	
  Article 8 COVENANTS, REPRESENTATIONS AND WARRANTIES

  	
  29

  
	
  8.1

  	
  Positive Covenants

  	
  29

  
	
  8.2

  	
  Negative Covenants

  	
  30

  
	
  8.3

  	
  Representations and
  Warranties - Corporation

  	
  31

  
	
  8.4

  	
  Trustee May Perform
  Covenants

  	
  31

  
	
  8.5

  	
  Pay Trustee’s Remuneration

  	
  32

  
	
  8.6

  	
  Certificate as to Interest
  Rate

  	
  32

  
	
  8.7

  	
  Certificates Relating to
  Default

  	
  32

  
	
   

  	
   

  	
   

  
	
  Article 9 DEFAULT

  	
  32

  
	
  9.1

  	
  Acceleration of Maturity
  Date

  	
  32

  
	
  9.2

  	
  Acceleration

  	
  33

  
	
  9.3

  	
  Remedies - General

  	
  34

  
	
  9.4

  	
  Possession

  	
  35

  
	
  9.5

  	
  Judgment

  	
  35

  
	
  9.6

  	
  Account Debtors

  	
  35

  
	
  9.7

  	
  Receiver

  	
  36

  
	
  9.8

  	
  Remedies Not Exclusive

  	
  37

  

 

ii

 

	
  9.9

  	
  Expenses

  	
  37

  
	
  9.10

  	
  Notice of Events of
  Default

  	
  37

  
	
  9.11

  	
  Waiver of Default

  	
  37

  
	
  9.12

  	
  Certificate re Default

  	
  38

  
	
  9.13

  	
  Enforcement by the Trustee

  	
  38

  
	
  9.14

  	
  No Suits by
  Debentureholders

  	
  39

  
	
  9.15

  	
  Application of Monies by
  Trustee

  	
  40

  
	
  9.16

  	
  Distribution of Proceeds

  	
  40

  
	
   

  	
   

  	
   

  
	
  Article 10 MEETINGS OF DEBENTUREHOLDERS

  	
  41

  
	
  10.1

  	
  Right to Convene Meeting

  	
  41

  
	
  10.2

  	
  Notice of Meetings

  	
  41

  
	
  10.3

  	
  Chairperson

  	
  41

  
	
  10.4

  	
  Quorum

  	
  41

  
	
  10.5

  	
  Power to Adjourn

  	
  42

  
	
  10.6

  	
  Show of Hands

  	
  42

  
	
  10.7

  	
  Poll

  	
  42

  
	
  10.8

  	
  Voting

  	
  42

  
	
  10.9

  	
  Regulations

  	
  42

  
	
  10.10

  	
  Persons Entitled to Attend
  Meetings

  	
  43

  
	
  10.11

  	
  Powers Exercisable by
  Extraordinary Resolution

  	
  43

  
	
  10.12

  	
  Meaning of Extraordinary
  Resolutions

  	
  46

  
	
  10.13

  	
  Powers Cumulative

  	
  46

  
	
  10.14

  	
  Minutes

  	
  46

  
	
  10.15

  	
  Binding Effect of
  Resolutions

  	
  46

  
	
  10.16

  	
  Evidence of Rights of
  Debentureholder

  	
  47

  
	
   

  	
   

  	
   

  
	
  Article 11 CONCERNING THE TRUSTEE

  	
  47

  
	
  11.1

  	
  No Conflict of Interest

  	
  47

  
	
  11.2

  	
  Replacement of Trustee

  	
  47

  
	
  11.3

  	
  Duties of Trustee

  	
  48

  
	
  11.4

  	
  Reliance Upon Declarations

  	
  49

  
	
  11.5

  	
  Evidence and Authority to
  Trustee

  	
  50

  
	
  11.6

  	
  Certificate of the
  Corporation as Evidence

  	
  51

  
	
  11.7

  	
  Experts, Advisers and
  Agents

  	
  51

  
	
  11.8

  	
  Documents Held by Trustee

  	
  51

  
	
  11.9

  	
  Investments of Monies by
  Trustee

  	
  51

  
	
  11.10

  	
  Trustee Not Ordinarily
  Bound

  	
  51

  
	
  11.11

  	
  Trustee Not Required to
  Give Security

  	
  52

  
	
  11.12

  	
  Trustee Not to Be
  Appointed Receiver

  	
  52

  
	
  11.13

  	
  Trustee Not Bound to Act

  	
  52

  
	
  11.14

  	
  Conditions Precedent to
  Trustee’s Obligations to Act Hereunder

  	
  52

  
	
  11.15

  	
  Authority to Carry on
  Business

  	
  52

  
	
  11.16

  	
  Acceptance of Trust

  	
  53

  
	
  11.17

  	
  Indemnity of Trustee

  	
  53

  
	
  11.18

  	
  Environmental Indemnity

  	
  53

  
	
   

  	
   

  	
   

  
	
  Article 12 NOTICES

  	
  54

  
	
  12.1

  	
  Notice

  	
  54

  

 

iii

 

	
  Article 13 SUPPLEMENTAL INDENTURES

  	
  55

  
	
  13.1

  	
  Supplemental Indenture

  	
  55

  
	
  13.2

  	
  Indenture Confirming or
  Evidencing Subordination

  	
  55

  
	
   

  	
   

  	
   

  
	
  Article 14 SUCCESSOR CORPORATIONS

  	
  56

  
	
  14.1

  	
  Successor Corporation to
  the Corporation

  	
  56

  
	
  14.2

  	
  Vesting of Powers in
  Successor Corporation

  	
  56

  
	
   

  	
   

  	
   

  
	
  Article 15 GENERAL

  	
  56

  
	
  15.1

  	
  Entire Agreement

  	
  56

  
	
  15.2

  	
  Amendments

  	
  57

  
	
  15.3

  	
  Further Assurances

  	
  57

  
	
  15.4

  	
  Unenforceable Terms

  	
  57

  
	
  15.5

  	
  Trustee Indenture
  Legislation

  	
  57

  
	
  15.6

  	
  Severability

  	
  57

  
	
  15.7

  	
  Meaning of “Collateral”
  and “Obligations” on Amalgamation

  	
  58

  
	
  15.8

  	
  Enurement

  	
  58

  
	
  15.9

  	
  Execution

  	
  58

  
	
  15.10

  	
  Formal Date

  	
  59

  

 

iv

 

TRUST INDENTURE

 

THIS TRUST INDENTURE IS MADE AS OF DECEMBER 20,
2005

 

BETWEEN:

 

SIGNET ENERGY
INC., a corporation existing under
the laws of the Province of Alberta

 

AND:

 

VALIANT TRUST
COMPANY, a trust company existing
under the laws of Alberta

 

WHEREAS:

 

A.                                                                                   The Corporation is proposing to issue Debentures in the manner
herein set forth;

 

B.                                                                                     The Corporation represents to the Trustee that all necessary
resolutions of the Corporation have been duly enacted, passed or confirmed and
all other proceedings taken and conditions complied with to authorize the
execution and delivery of this Trust Indenture and the execution and issue of
the Debentures and to make the same legal, valid and binding on the Corporation
and enforceable against the Corporation in accordance with the laws applicable
to the Corporation;

 

C.                                                                                     All necessary acts and deeds have been done and performed to make
the Debentures, when certified by the Trustee and issued as provided for in
this Trust Indenture, legal, valid and binding upon the Corporation and
enforceable against the Corporation with the benefits and subject to the terms
of this Trust Indenture;

 

D.                                                                                    The foregoing recitals are made as representations and statements of
fact by the Corporation and not the Trustee; and

 

E.                                                                                      The Trustee has agreed to act as trustee for the Debentureholders on
the terms and conditions herein set forth.

 

NOW THEREFORE, in consideration of the premises and in further consideration of
the mutual covenants herein contained, the parties hereto agree as follows:

 

ARTICLE 1

INTERPRETATION

 

1.1                                                                               Definitions

 

In this
Trust Indenture (including the recitals and schedules hereto) and in the
Debentures, unless there is something in the subject matter or context
inconsistent therewith:

 

“Acceleration
Notice” means a written notice delivered pursuant to Section 9.2
declaring all Indebtedness of the Corporation outstanding to the
Debentureholders to be due and payable;

 

“Adjustment
Period” means the period from and including the date hereof up to
and including the Maturity Date;

 

 

“Affiliate”
has the meaning ascribed thereto in of the Business
Corporations Act (Alberta), as amended from time to time;

 

“Agency
Agreement” means the agency agreement dated November 15, 2005
between the Corporation and the Agent;

 

“Agent”
means MGI Securities Inc.;

 

“Agent’s
Warrants” means the irrevocable warrants granted to the Agent in
accordance with the terms and conditions of the Agency Agreement;

 

“Applicable
Laws” means, in relation to any Person, property, transaction or
event, all applicable rules of common law and equity and all applicable
provisions, whether now or hereafter in effect (or mandatory applicable
provisions, if so specified) of federal, provincial, state, regional or
municipal laws, statutes, rules, regulations, policies, official directives and
orders of all Governmental Authorities (whether or not having the force of law)
and all judgments, orders, awards, decrees, writs, injunctions and decisions of
all Governmental Authorities in which the Person in question is a party or by
which it is bound or having application to the Person, property, transaction or
event;

 

“Applicable
Securities Laws” means all applicable securities, corporate and other
laws, rules, regulations, notices and policies of Canada and each of the
Provinces of Canada;

 

“Business
Day” means a day (other than a Saturday, Sunday or statutory
holiday) on which banks are generally open for business in the City of Calgary,
Alberta;

 

“Canadian
Dollars”, “Cdn. Dollars”
or “Cdn. $” means the lawful
currency of Canada;

 

“Certificate
of the Corporation”, “Request of
the Corporation”, “Written
Direction of the Corporation” and “Consent
of the Corporation” mean, respectively, a written certificate,
request, direction or consent signed in the name of the Corporation by any one
director or senior officer of the Corporation, and may consist of one or more
instruments so executed.  A Certificate
of the Corporation shall be in the form of a statutory declaration if and when
required under the provisions of this Trust Indenture or by the Trustee;

 

“Change of
Control” means the acquisition from Surge U.S. by any Person, or
group of Persons acting jointly or in concert, other than the Corporation, Surge
U.S. and any of their Subsidiaries or Affiliates, of voting control or
direction of Common Shares representing an aggregate of 50% or more of the
outstanding Common Shares, other than any such acquisition directly connected
with or resulting from a Going Public Transaction;

 

“Charge”
means the Security Interests created by or intended to be created by this Trust
Indenture;

 

“Collateral”
means the whole, or any item or part, of the property, assets, rights and
undertaking of the Corporation from time to time subjected or intended to be
subjected to the Charge and any reference herein to the Collateral shall,
unless the context otherwise requires, be deemed to be a reference to all of
the Collateral or any part thereof;

 

“Common
Shares” means, subject to Article 7, fully paid and non-assessable
common shares in the capital of the Corporation, as presently constituted;

 

2

 

“Conversion
Date” means, as applicable, the date on which a Debenture is
surrendered, and accompanying notice is delivered, to the Trustee for
conversion in accordance with Section 5.1, or the effective date of any
deemed exercise of the Conversion Right pursuant to Section 5.2;

 

“Conversion
Price” means the price at which a Common Share may be issued from
time to time on the conversion of the Principal Sum of a Debenture, which is
currently Cdn. $1.00 per Common Share, subject to adjustment in accordance with
the provisions of Article 7, in which case it shall mean the adjusted
price in effect at such time;

 

“Conversion
Right” means the right of a Debentureholder to convert the Principal
Sum of its Debenture into Common Shares at the Conversion Price pursuant to Section 5.1(a);

 

“Corporation”
means Signet Energy Inc. and its permitted successors and assigns;

 

“Corporation’s
Auditors” means a firm of independent chartered accountants duly
appointed as auditors of the Corporation;

 

“Counsel”
means a barrister or solicitor or firm of barristers or solicitors who may, but
need not be, counsel for the Corporation, retained, employed, engaged or
appointed by the Trustee or retained, employed, engaged or appointed by the
Corporation and acceptable to the Trustee where the context so indicates;

 

“Creditor
Proceedings” means any dissolution, winding-up, total or partial
liquidation, adjustment or readjustment of debt, reorganization of creditors,
compromise, arrangement with creditors, proposal under the Bankruptcy and Insolvency Act (Canada),
plan of arrangement under the Companies’
Creditors Arrangement Act (Canada) or arrangement provisions of
applicable corporate law, or similar proceedings of or with respect to the
Corporation or its property or liabilities, or any bankruptcy, insolvency,
receivership, assignment for the benefit of creditors, marshalling of assets
and liabilities of or with respect to the Corporation, or proceedings in
relation to any of the foregoing;

 

“Current
Market Price” means in respect of the Common Shares: 

 

(a)                                  prior to a Going Public
Transaction, the greater of Cdn. $1.00 per Common Share (subject to adjustment
pursuant to Article 7) and the price per Common Share established by the
Board of Directors (acting reasonably) from time to time; or

 

(b)                                 after a Going Public
Transaction, the Weighted Average Price per Common Share for the 15 consecutive
Trading Days immediately preceding such date;

 

“Debentures”
means up to the Cdn. $10,000,000 principal amount of 7% secured
convertible debentures issued hereunder and maturing on the Maturity Date and
outstanding and entitled to the benefits hereof, as such debentures may be
amended, modified, replaced, restated or supplemented from time to time;

 

“Debentureholders”
means the Persons from time to time entered in the Register as holders of
Debentures;

 

“Debentureholders’
Request” means an instrument signed in one or more counterparts by
the holder(s) of 25% of the Principal Sum of the Debentures outstanding
requesting the Trustee to take some action or proceeding specified therein;

 

3

 

“Default”
means any event or conditions which, with the giving of notice, lapse of time
or upon a declaration or determination being made (or any combination thereof),
would constitute an Event of Default;

 

“Director”
means a member of the board of directors of the Corporation for the time being
and “Directors”, “Board of Directors” or “Board” means the board of directors of the
Corporation or any duly authorized committee thereof, and reference to “action
by the Directors” means action by the directors of the Corporation as a board
or, whenever duly empowered, the action of a committee thereof;

 

“Event of
Default” means any of the events of default referred to in Section 9.1;

 

“Extraordinary
Resolution” has the meaning attributed to it in Section 10.12;

 

“Farmout
Agreement” means the farmout agreement dated February 25, 2005
(as amended) between Surge U.S., the Corporation, Deep Well Oil & Gas
Ltd. and Northern Alberta Oil Ltd., whereby the Corporation has a right to earn
a 40% working interest in the lands described therein;

 

“Fiscal
Quarter” means the three month period commencing on the first day of
each Fiscal Year and each successive three month period thereafter during such
Fiscal Year;

 

“Fiscal
Year” means the Corporation’s fiscal year which at present commences
on January 1 of each year and ends on December 31 of the same year;

 

“Generally
Accepted Accounting Principles” or “GAAP” means generally accepted accounting principles as may be
described in the Canadian Institute of Chartered Accountants Handbook and other
principal sources recognized from time to time by the Canadian Institute of
Chartered Accountants;

 

“Going
Public Transaction” means the occurrence of either of: 

 

(a)                                  a final receipt for a
prospectus of the Corporation filed in at least one “jurisdiction” (as listed
in Appendix B to Multi-Lateral Instrument 45-102) has been obtained and the
Common Shares are listed and posted for trading on the TSX or the TSXV; or

 

(b)                                 the sale, exchange,
reorganization or arrangement of all 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;

 

“Governmental
Approval” means an authorization, consent, approval, waiver, order,
decree, licence, exemption, permit, registration, filing, qualification or
declaration of or with any Governmental Authority or the giving of notice to
any Governmental Authority or any other action in respect of a Governmental
Authority;

 

“Governmental
Authority” means any nation or government, and any political
subdivision thereof (including federal, state, provincial, regional, county,
local or municipal government; any governmental body, agency, authority, board,
bureau, department or commission (including any taxing authority); any
instrumentality or office of any of the foregoing (including any court or
tribunal) exercising executive, legislative, judicial, regulatory or
administrative functions; or any Person directly or indirectly controlled by
any of the foregoing;

 

4

 

“including”
means including, without limitation, and shall not be construed to limit any
general statement which it follows to the specific or similar items or matters
immediately following it, and “includes” shall be construed in a like manner;

 

“Indebtedness”
means all present and future obligations, indebtedness, liabilities, covenants,
agreements and undertakings of a Person howsoever arising, whether direct or
indirect, absolute or contingent, joint or several, matured or not, extended or
renewed, wheresoever and howsoever incurred, including all future advances and
re-advances, and whether the same is from time to time reduced and thereafter
increased or entirely extinguished and thereafter incurred again and whether
such Person be bound alone or with others and whether as principal or surety,
including all interest, fees, expenses, indemnities and costs;

 

“Interest”
means the interest from time to time calculated and payable pursuant to Article 2;

 

“Interest
Payment Date” means the last day of February, May, August and November in
each year for so long as this Trust Indenture is outstanding and the Maturity
Date, provided that in the event that:

 

(a)                                  all or any part of the
Principal Sum is partially or totally prepaid at any time (including by the
exercise of a Conversion Right) other than on an Interest Payment Date, then
the date upon which such partial or total prepayment occurs shall be an
Interest Payment Date in respect of the amount of such Principal Sum so
prepaid; and

 

(b)                                 if all amounts owing under
this Trust Indenture are not repaid on the Maturity Date, the last Business Day
of each calendar month after the Maturity Date;

 

“Interest
Period” means:

 

(a)                                  the period beginning on (and
including) the date a Debenture is issued and ending on (and including) February 28,
2006;

 

(b)                                 thereafter, successive periods
beginning on (and including) March 1, June 1, September 1 and December 1,
respectively, and ending on (and including) the last day of May, August, November and
February, respectively, or ending on (but excluding) the Maturity Date, as
applicable; and

 

(c)                                  if applicable, after the
Maturity Date, the period beginning on (and including) the Maturity Date and
ending on (and including) the last day of each calendar month and thereafter
beginning on (and including) the first day of each calendar month and ending on
(and including) the last day of each calendar month;

 

“Interest
Rate” means the interest rate of seven percent (7.0%) per annum;

 

“Maturity
Date” means the earlier of November 15, 2007 and the date on
which the Principal Sum is declared, or deemed to be, due and owing as a result
of an Event of Default;

 

“Obligations”
means any and all Indebtedness of the Corporation to the Trustee and/or any
Debentureholders under this Trust Indenture and the Debentures;

 

“outstanding”
in relation to Debentures has the meaning ascribed thereto in Section 1.2;

 

5

 

“Permitted
Debt” means indebtedness for borrowed money of the Corporation,
including Permitted Senior Debt and the Subsequent Debentures, which, in
aggregate, does not exceed the principal amount of Cdn. $15,000,000;

 

“Permitted
Encumbrances” means those items set forth in Schedule ”A”
annexed to and incorporated in this Trust Indenture and which is deemed to be
part hereof;

 

“Permitted
Senior Debt” means all Senior Debt of the Corporation which, in
aggregate, does not exceed the lesser of (i) the principal amount of
Cdn. $10,000,000, and (ii) Cdn. $15,000,000 minus the principal
amount of the outstanding Subsequent Debentures;

 

“Person”
means any individual, firm, partnership, company, corporation or other body
corporate, government, governmental body, agency, instrumentality,
unincorporated body of Persons or association and the heirs, executors,
administrators or other legal representatives of an individual;

 

“PPSA”
means the Personal Property Security Act
(Alberta) and the regulations thereunder, as amended from time to time; and the
terms “proceeds”, “chattel paper”, “intangible”, “instrument”,
“accessions”, “document of title” and “account” shall, when used herein, have the
same meanings as are ascribed thereto in the PPSA;

 

“Principal
Sum” means Cdn. $10,000,000 or such lesser principal amount as is
outstanding under this Trust Indenture or, if applicable, the principal amount
which is owing under a Debenture from time to time;

 

“Prior
Debentures” means the $8,550,000 principal amount of 7% secured
convertible debentures previously issued by the Corporation on November 15,
2005;

 

“Realization
Event” means the occurrence of an Event of Default and, except in
the case of an Event of Default under Section 9.1(c) or 9.1(d) (where
a demand is not required), the demand for payment of the Principal Sum by the
Trustee;

 

“Receiver”
means any receiver, manager, or receiver and manager of the Collateral or any
part thereof or the business and undertaking of the Corporation, or any part
thereof, whether appointed by the Trustee under this Trust Indenture or by a
court pursuant to Applicable Law;

 

“Record
Date” means the date which is 7 Business Days’ prior to each
Interest Payment Date;

 

“Register”
has the meaning ascribed thereto in Section 2.6;

 

“securities”
has the meaning ascribed thereto in the Securities
Act (Alberta);

 

“Security
Interest” means a mortgage, encumbrance, pledge, deposit by way of
security, charge, floating charge, hypothec, assignment by way of security,
security interest, lien (whether statutory, equitable or at common law), title
retention agreement, a right of set-off (if created for the purpose of directly
or indirectly securing the repayment of money owed), and any other interest in
property or assets, howsoever created or arising, that secures payment or
performance of an obligation;

 

“Senior
Debt” means all present and future indebtedness, obligations and
liabilities of the Corporation in respect of borrowed money from a bank or
similar financial institution;

 

“Senior
Debt Default” shall mean and include 

 

6

 

(a)                                  any default in payment of any
Permitted Senior Debt when due; or

 

(b)                                 any other event of default
under any Permitted Senior Debt which has not been cured or remedied within any
applicable grace period, or waived by the holder of such Permitted Senior Debt;

 

“Senior
Security” has the meaning ascribed thereto in Section 4.1(b);

 

“Subsequent
Debentures” means up to Cdn. $15,000,000 of secured convertible
debentures which will rank equally in terms of priority of payment and security
with the Debentures and the Prior Debentures, but shall otherwise have such
terms, conditions, rights and provisions (including interest rate, interest
payment date, maturity date, conversion rights and redemption rights) as the
Corporation and such debentureholders may agree, which debentures may be
evidenced by a Supplemental Indenture to this Trust Indenture or a separate
Trust Indenture, all of the foregoing without the consent or approval of, or
notice to, the Debentureholders;

 

“Subordinated
Obligations” means, as it relates to Permitted Senior Debt only, the
Indebtedness evidenced by the Debentures and any other Indebtedness of the
Corporation to the Debentureholders or the Trustee under this Trust Indenture,
but excluding any amounts owing or payable to the Trustee under this Trust
Indenture in respect of fees, expenses, indemnities and costs;

 

“Subsidiary”
has the meaning ascribed thereto in the Business
Corporations Act (Alberta);

 

“Successor
Corporation” has the meaning ascribed thereto in Section 14.1;

 

“Surge U.S.”
means Surge Global Energy, Inc.;

 

“Trading
Day” means, with respect to a stock exchange or over-the-counter
market, a day on which such exchange or market is open for the transaction of
business;

 

“Transfer”
means a transfer in the form and substance of the transfer attached to the
Debentures;

 

“Trust
Indenture”, “Indenture”,
“hereto”, “herein”, “hereby”,
“hereunder”, “hereof” and similar expressions refer to
this Trust Indenture and not to any particular Article, Section, subsection, clause,
subdivision or other portion hereof and include any and every instrument
supplemental or ancillary hereto;

 

“Trustee”
means Valiant Trust Company or its successor for the time being in the trusts
created hereunder;

 

“TSX”
means the Toronto Stock Exchange or any successor exchange thereof;

 

“TSXV”
means the TSX Venture Exchange or any successor exchange thereof;

 

“United
States Dollars”, “U.S. Dollars”
or “U.S. $” means the lawful
currency of the United States of America;

 

“U.S.
Securities Act” means the United States Securities Act of 1933, as amended; and

 

“Weighted
Average Price” per share means the aggregate sale price of all
shares of a particular class sold on an exchange or market, as the case may be,
divided by the total number of shares of that class so sold or traded, during a
stated period of time.

 

7

 

1.2                                                                               Meaning of Outstanding

 

(a)                                  Every Debenture certified and
delivered by the Trustee hereunder shall be deemed to be outstanding until:

 

(i)                                     it shall be cancelled; or

 

(ii)                                  it shall be delivered to the
Trustee for cancellation.

 

(b)                                 When a new Debenture has been
issued in substitution for a Debenture pursuant to Section 2.8, only one
of such Debentures shall be counted for the purpose of determining the
aggregate principal amount of Debentures outstanding.

 

(c)                                  For the purposes of any
provision of this Trust Indenture entitling Debentureholders to vote, sign
consents, requisitions or other instruments or to take any other action under
this Trust Indenture, Debentures owned directly or indirectly, legally or
equitably, by the Corporation or any Subsidiary of the Corporation shall be
disregarded except that:

 

(i)                                     for the purpose of determining
whether the Trustee shall be protected in relying on any such vote, consent,
requisition, instrument or other action, only the Debentures which have been
certified to the Trustee as so owned shall be so disregarded; and

 

(ii)                                  Debentures so owned which have
been pledged in good faith other than to the Corporation or a Subsidiary of the
Corporation shall not be so disregarded if the pledgee shall establish to the
satisfaction of the Trustee the pledgee’s right to vote such Debentures in its
discretion free from the control of the Corporation or any Subsidiary of the
Corporation.

 

1.3                                                                               Headings

 

The
division of this Trust Indenture into Articles and Sections and the insertion
of headings are for convenience of reference only and shall not affect the
construction or interpretation of this Trust Indenture or the Debentures.  Unless something in the subject matter or
context is inconsistent therewith, references herein to Articles, Sections and
Schedules are to Articles, Sections or Schedules of this Trust Indenture.

 

1.4                                                                               Gender and Number

 

In this
Trust Indenture and in the Debentures, words importing the singular number only
shall include the plural and vice versa and words importing the masculine
gender shall include the feminine and neuter genders and vice versa.

 

1.5                                                                               Governing Law

 

This
Trust Indenture and the Debentures shall be governed by and construed in
accordance with the laws of the Province of Alberta and the federal laws of
Canada applicable therein but without giving effect to applicable conflicts of
law provisions of the laws of such jurisdictions to the extent that such
provision would require the application of the law of another
jurisdiction.  The Corporation hereby
irrevocably submits to the jurisdiction of the courts of the Province of
Alberta for any action, suit or any other proceeding arising out of or relating
to this Trust Indenture and any other agreement or instrument mentioned herein
or any of the transactions contemplated hereby.

 

8

 

1.6                                                                               Day Not a Business Day

 

Whenever
any payment to be made hereunder shall be due or any other action is to be
taken on, or as of, a day other than a Business Day, such payment shall be made
and such other actions shall be taken, as the case may be, on the immediately
following Business Day.

 

1.7                                                                               Accounting Principles

 

All
financial statements required to be furnished by the Corporation to the Trustee
hereunder shall be prepared in accordance with Generally Accepted Accounting
Principles.  Each accounting term used in
this Trust Indenture, unless otherwise defined herein, has the meaning assigned
to it under Generally Accepted Accounting Principles.  Reference to any balance sheet item,
statement of income and retained earnings item or statement of cash flows or
changes in cash position item means such item as computed from the applicable
financial statement prepared in accordance with Generally Accepted Accounting
Principles.

 

1.8                                                                               Interest Calculations

 

Unless
otherwise stated, whenever in this Trust Indenture reference is made to a rate “per
annum” or a similar expression is used, such rate shall be calculated on the
basis of a calendar year of 365 or 366 days as the case may be.  Interest calculated for an Interest Period
shall be calculated on the actual number of days elapsed in such Interest
Period divided by 365 or 366, as applicable, depending on the actual number of
days in the calendar year containing the first day of such Interest
Period.  All interest computations
hereunder or under any Debenture shall be based on the nominal rate method of
calculation, and the theory of deemed reinvestment shall not apply to the
calculation of interest hereunder or under any Debenture.  To the extent permitted by Applicable Law,
any provision of the Interest Act
(Canada), or the Judgment Interest Act
(Alberta) which restricts any rate of interest set forth herein shall be
inapplicable to this Trust Indenture and is hereby waived.

 

1.9                                                                               Time of the Essence

 

Time
shall be of the essence of this Trust Indenture.

 

1.10                                                                        Language

 

This
document is drawn up in English at the express request of the parties.  C’est la volonté expresse des parties que
cette entente soit rédigée en anglais.

 

1.11                                                                        Expanded Meanings

 

In this
Trust Indenture, references herein to any agreement or instrument shall be
deemed to be references to the agreement or instrument as varied, amended,
modified, supplemented or replaced from time to time, and any specific
references herein to any enactment, regulation, order, ruling or decision shall
be deemed to be references to such enactment, regulation, order, ruling or decision
as the same may be re-enacted, varied, amended, modified, supplemented or
replaced from time to time.

 

9

 

ARTICLE 2

THE DEBENTURES

 

2.1                                                                               Terms of Debentures

 

(a)                                  The aggregate principal amount
of Debentures authorized to be issued under this Trust Indenture shall be
limited to Cdn. $10,000,000.

 

(b)                                 The Corporation shall pay
interest to the Debentureholders on the Principal Sum of each Debenture at a
rate equal to the Interest Rate payable before and after demand, default and
judgment.  Such interest is calculated
and payable in arrears, and not in advance, on each Interest Payment Date for
the Interest Period which includes such Interest Payment Date, and shall be calculated
on a daily basis and on the basis of the actual number of days elapsed in a
year of 365 or 366 days, as applicable. 
The Principal Sum of each Debenture is due and payable in full on the
Maturity Date.

 

(c)                                  As Interest on each Debenture
becomes due, the Corporation (except in case of payment on redemption pursuant
to Section 6.1, at which time payment of Interest shall be made upon
surrender of a Debenture) shall, on each Interest Payment Date, cause to be
paid to each Debentureholder an amount equal to such Interest in immediately
available funds.

 

(d)                                 Interest shall be payable by
the Corporation on all overdue amounts owing by it under this Trust Indenture
and the Debentures from the date any such payment becomes overdue and for so
long as such amount remains unpaid at the rate of 12% per annum.  Such interest on overdue amounts shall be
payable after as well as before maturity, default and judgment.  Prior to the issuance of an Acceleration
Notice, any such interest on overdue amounts shall be calculated and payable in
arrears on each Interest Payment Date. 
After the issuance of an Acceleration Notice, interest on overdue
amounts shall be payable on demand.

 

(e)                                  Payments of the Principal Sum,
Interest, fees and other amounts payable by the Corporation pursuant to this
Trust Indenture shall be paid in Canadian dollars for value at or before 10:00 a.m.
(Calgary time) on the day such amount is due. 
If any such day is not a Business Day such amount shall be deemed for
all purposes of this Trust Indenture to be due on the immediately following
Business Day.  As Interest becomes due on
the Debentures, the Corporation shall cause to be sent, either directly or
through the Trustee, at least three (3) Business Days prior to each date
on which such Interest becomes due, by prepaid ordinary mail a cheque or by
other transfer of funds by such means as may be considered appropriate by the
Trustee for such Interest (less any tax required by law to be withheld
therefrom) payable to the order of each Debentureholder as at the Record Date
and addressed to it at its last address or account, as the case may be,
appearing on the Register.  In the case
of joint Debentureholders as at the applicable Record Date, the cheque or other
such transfer of funds, as the case may be, shall be payable or issued to the order
of all such joint Debentureholders and addressed to them at the last address or
account appearing on the Register, as the case may be.  If more than one address or account appears
on the Register in respect of such joint Debentureholders, the cheque or other
such transfer of funds, as the case may be, shall be mailed or delivered, as
the case may be, to the first address or account so appearing.  In the event of non-receipt of any cheque or
funds for Interest by such Debentureholder, the Corporation will cause to be
issued, either directly or through the Trustee, to such Debentureholder a
replacement cheque or replacement transfer of funds for like amount upon being
furnished with such evidence of non-receipt as it shall reasonably require and
upon the Corporation and the Trustee being indemnified to their satisfaction,
acting reasonably.  The forwarding of
such cheque or the making of such payment by other means shall satisfy and

 

10

 

discharge the liability for the Interest on
such Debentures to the extent of the sum or sums represented thereby (plus the
amount of any tax deducted as aforesaid) unless such cheque if payment is so
made by cheque be not paid on presentation. 
The Corporation will give the Trustee contemporaneous notice of each
payment of Interest on the Debentures on each Interest Payment Date.

 

(f)                                    If the Corporation or the
Trustee, as applicable, receives notice that payment in respect of the
Debentures is required to be suspended under Article 4, then the
Corporation will not pay, and the Trustee will not distribute any amount paid
to it by the Corporation, for the benefit of the Debentureholders until the
Trustee has received a certificate of the holder of the relevant Permitted
Senior Debt or an agent or trustee therefor evidencing indefeasible payment in
full and in cash of such Permitted Senior Debt or cure or waiver of the
relevant Senior Debt Default.

 

2.2                                                                               Form and Signature of Debentures

 

(a)                                  The Debentures shall be issued
only as fully registered Debentures, in denominations of Cdn. $50,000 and
in integral multiples of Cdn. $1,000 thereafter.  The Debentures (including the certificate of
the Trustee endorsed thereon) shall be substantially in the form set forth in Schedule ”B”.  The Debentures shall bear such distinguishing
letters and numbers as the Trustee may approve.

 

(b)                                 The Debentures shall be signed
(either manually or by facsimile signature) by one officer of the
Corporation.  A facsimile signature upon
any of the Debentures shall for all purposes of this Trust Indenture be deemed
to be the signature of the Person whose signature it purports to be and to have
been signed at the time such facsimile signature is reproduced; provided,
however, that the certification of the Trustee shall not be by facsimile
signature.  Notwithstanding that any
Person whose signature, either manual or in facsimile, may appear on the
Debentures is no longer, at the date of this Trust Indenture or at the date of
the Debentures or at the date of the certification and delivery thereof, the
holder of the office indicated, any such Debenture shall be valid and binding
upon the Corporation and entitled to the benefits of this Trust Indenture.

 

2.3                                                                               Issue of Debentures

 

Debentures
in the aggregate principal amount of not more than Cdn. $10,000,000 may be
executed by the Corporation and, forthwith after such execution, shall be
delivered to the Trustee and shall be certified by the Trustee and delivered to
or to the order of the Corporation pursuant to a Written Direction of the
Corporation.

 

2.4                                                                               Certification

 

(a)                                  No Debenture shall be issued
or, if issued, shall be obligatory or shall entitle the Debentureholder to the
benefits of this Trust Indenture, until it has been certified by or on behalf
of the Trustee substantially in the form set out in Schedule ”B” (or in
some other form approved by the Trustee). 
Such certification on any Debenture shall be conclusive evidence that
such Debenture is duly issued, is a valid obligation of the Corporation and the
Debentureholder is entitled to the benefits hereof.

 

(b)                                 The certificate of the Trustee
signed on the Debentures shall not be construed as a representation or warranty
by the Trustee as to the validity of this Trust Indenture or of the Debentures
or as to the issuance of the Debentures and the Trustee shall in no respect be
liable or answerable for the use made of the Debentures or any of them or the
proceeds thereof.  The certificate of the
Trustee

 

11

 

signed on the Debentures shall, however, be
a representation and warranty of the Trustee pursuant to the provisions of this
Trust Indenture.

 

2.5                                                                               Debentures to Rank Pari Passu

 

(a)                                  The Debentures may be issued
in such amounts, to such Persons and on such terms not inconsistent with the
provisions of this Trust Indenture as the Corporation by Written Direction of
the Corporation directs, pursuant to Section 2.3, at par.  The Debentures as soon as issued or
negotiated, subject to the terms hereof, will be direct obligations of the
Corporation.  The Debentures will rank pari passu with the Prior Debentures and
will rank in priority of payment to all existing and future Indebtedness of the
Corporation other than existing and future Permitted Debt and will be
subordinated in right of payment to all existing and future Permitted Senior
Debt in accordance with Article 4.

 

(b)                                 Except as provided in Article 4,
nothing contained in this Trust Indenture or in the Debentures is intended to
or shall impair, as between the Corporation and the Debentureholders, the
obligation of the Corporation, which is absolute and unconditional, to pay to
the Debentureholders the Principal Sum and Interest on the Debentures as and
when the same shall become due and payable in accordance with their terms, nor
shall anything herein or therein prevent the Trustee or the Debentureholders
from exercising all remedies otherwise permitted by Applicable Law upon an
Event of Default, subject to the rights, if any, of the holders of Permitted
Senior Debt.

 

(c)                                  Except as provided in Article 4,
nothing contained in this Section 2.5 or elsewhere in this Trust Indenture
or in any of the Debentures shall prevent the application by the Trustee of any
monies deposited with the Trustee hereunder for the purpose of the payment of
or on account of the Principal Sum or Interest on the Debentures.  Notwithstanding the provisions of this Section 2.5
or any provisions contained in this Trust Indenture or in the Debentures, the
Trustee shall not be charged with knowledge of the existence of any Permitted
Senior Debt or of any Senior Debt Default, unless and until the Trustee shall
have received written notice thereof from the Corporation or from the holder of
any Permitted Senior Debt or from the representative of any such holder.

 

2.6                                                                               Registration of Debentures

 

(a)                                  The Corporation shall, at all
times while any Debentures are outstanding, cause to be kept by the Trustee at
the principal office of the Trustee in the City of Calgary and in such other
place or places as the Corporation with the approval of the Trustee may
designate, registers (“Register(s)”)
in which shall be entered the names and addresses of the Debentureholders and
the Principal Sum and certificate number of the Debentures held by them
respectively and of all transfers of Debentures.  No transfer of a Debenture shall be valid
unless made by the Debentureholder or his executors or administrators or other
legal representatives or his or their attorney duly appointed by a Transfer in
writing, upon compliance with such requirements as the Trustee may prescribe,
and unless such transfer shall have been duly entered on one of the appropriate
Registers.

 

(b)                                 The Registers shall at all
reasonable times be open for inspection by the Corporation, the Trustee or any
Debentureholder.  The Trustee shall from
time to time when requested so to do by the Corporation or a Debentureholder,
subject to Applicable Law, furnish the Corporation or such Debentureholder with
a list of the names and addresses of Debentureholders entered on the Register
and showing the Principal Sum and certificate numbers of the Debentures held by
each

 

12

 

Debentureholder.  The reasonable costs of furnishing any such
lists shall be for the account of the Corporation.

 

(c)                                  A Debentureholder may at any
time and from time to time have such Debenture transferred at any of the places
at which a Register is kept pursuant to the provisions of this Section, in
accordance with such reasonable regulations as the Trustee may prescribe, which
shall include delivery of the Debenture together with a duly exercised
Transfer, and subject to payment of the costs referred to in Section 2.9(b).

 

(d)                                 Neither the Trustee or the
Corporation shall be charged with notice of or be bound to see to the execution
of any trust, whether expressed, implied or constructive, with respect to any
Debenture nor be affected by notice of any equity that may be subsisting with
respect thereto and the Trustee and the Corporation may transfer any Debenture
on the direction of the Debentureholder whether named as trustee or otherwise,
as though that Person were the beneficial owner thereof.

 

(e)                                  Except in the case of the
Register required to be kept at the Trustee’s principal office in the City of
Calgary, the Corporation, with the approval of the Trustee, may at any time
close any Register upon which the registration of any Debenture appears and
transfer the records thereof to another existing Register or to a new Register
and thereafter such Debentures shall be deemed to be registered on such
existing or new Register, as the case may be.

 

2.7                                                                               Persons Entitled to Payment

 

(a)                                  The holder for the time being
of any Debenture shall be entitled to the Principal Sum and Interest evidenced
by such Debenture, free from all equities or rights of set-off or counterclaim
between the Corporation and the original or any intermediate holder thereof and
all Persons may act accordingly and a transferee of a Debenture shall, after an
appropriate form of Transfer is lodged with the Trustee and upon compliance
with all other conditions required by this Trust Indenture or by any conditions
contained in such Debenture or by Applicable Law, be entitled to be entered on
the Register as the owner of such Debenture free from all equities or rights of
set-off or counterclaim between the Corporation and the transferor or any
previous holder thereof, save with respect to equities of which such
Debentureholder is required to take notice by statute or by order of a court of
competent jurisdiction.  The Corporation
and the Trustee shall deem and treat the registered holder of any Debenture as
the absolute owner thereof for all purposes and the Corporation and the Trustee
shall not be affected by any notice or knowledge to the contrary, save as
ordered by a court of competent jurisdiction or as required by Applicable Law.
Nothing contained in this Section 2.7 shall limit or restrict the
entitlement of the Corporation to make payments of Interest, in accordance with
Section 2.1 as applicable, to such Person as is the Debentureholder on a
Record Date with respect to the Interest payable on the Interest Payment Date
relating thereto.

 

(b)                                 In the case of the death of
one or more joint Debentureholders, the Principal Sum and Interest on any
Debentures so held may be paid to the survivor or survivors of such
Debentureholders whose receipt thereof shall irrevocably and unconditionally
constitute a valid discharge to the Trustee and the Corporation of the
Obligations thereunder.

 

2.8                                                                               Mutilation, Loss, Theft or Destruction

 

In case
any of the Debentures issued hereunder shall be mutilated, lost, stolen or
destroyed, the Corporation, in its discretion, may issue, and thereupon the
Trustee shall certify, a new Debenture upon surrender and cancellation of the
mutilated Debenture, or in the case of a lost, stolen or

 

13

 

destroyed Debenture, in lieu of and in substitution for the same, and
the substituted Debenture shall be in a form approved by the Trustee and shall
be entitled to the benefits of this Trust Indenture equally with all other
Debentures issued or to be issued hereunder without preference or priority one
over another.  In case of loss, theft or
destruction, the applicant for a substituted Debenture shall furnish to the
Corporation and the Trustee such evidence of such loss, theft or destruction as
shall be satisfactory to them in their discretion and shall also furnish an
indemnity and surety bond satisfactory to them in their discretion.  The applicant shall pay all expenses
incidental to the issuance of any substituted Debenture.

 

2.9                                                                               Exchange of Debentures

 

(a)                                  Debentures of any denomination
may be exchanged for Debentures of any other authorized denomination or
denominations, any such exchange to be for Debentures of an equivalent
aggregate Principal Sum.  Any exchange of
Debentures may be made at the offices of the Trustee where Registers are
maintained for the Debentures pursuant to the provisions of Section 2.6.  Any Debentures tendered for exchange shall be
surrendered to the Trustee and shall be cancelled.

 

(b)                                 Except as herein otherwise
provided, upon any exchange of Debentures of any denomination for other
Debentures and upon any transfer of Debentures, the Trustee may make a
sufficient charge to reimburse it for any stamp or security transfer taxes or
other governmental charge required to be paid and, in addition, a reasonable
charge for its services and payment of the said charge shall be made by the
party requesting such exchange or transfer as a condition precedent thereto.

 

2.10                                                                        Resale Restrictions and Legends

 

The
Debentures will be distributed pursuant to exemptions from Applicable
Securities Laws and accordingly there will be resale restrictions imposed by
Applicable Securities Laws on the Debentures and the Common Shares issuable
upon conversion thereof.  All resales of
Debentures and the Common Shares issuable upon conversion thereof, are subject
to restrictions in Canada as a result of Applicable Securities Laws.  A description of restrictions on resale of
the Debentures and Common Shares issuable upon conversion thereof is set forth
below.

 

(a)                                  The Debentures and the Common
Shares issuable upon conversion thereof have been issued in Canada pursuant to
exemptions from prospectus requirements of Applicable Securities Laws and each
Debenture and the Common Shares issuable upon conversion thereof shall bear a
legend to the following effect (the “Canadian
Legend”):

 

“UNLESS PERMITTED UNDER
SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY
BEFORE THE DATE THAT IS FOUR MONTHS AND A DAY AFTER THE LATER OF (i) THE
DATE OF THIS DEBENTURE CERTIFICATE, AND (ii) THE DATE THE ISSUER BECAME A
REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.”

 

(b)                                 If Debentures or certificates
for Common Shares bearing a Canadian Legend are presented to the Trustee for
exchange, the Trustee shall deliver to the holder thereof new certificates
bearing the Canadian Legend in the name requested, representing the appropriate
aggregate number of securities.

 

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2.11                                                                        Trustee Not Bound to Make Enquiries

 

The
Trustee, prior to the certification and delivery of any Debentures, under any
of the provisions of this Article 2, shall not be bound to make any enquiry
or investigation as to the correctness of the matters set out in any of the
resolutions, opinions, certificates or other documents required by the
provisions of this Trust Indenture, but shall be entitled to accept without
verification thereof and act upon the said resolutions, opinions, certificates
and other documents.  The Trustee may
nevertheless, in its sole discretion, require further proof in cases where it
deems further proof desirable.

 

2.12                                                                        Restrictions on Use of Proceeds

 

The
Corporation shall be entitled to use the proceeds realized by it from the issue
of the Debentures:

 

(a)                                  firstly, for the payment of
costs, fees and expenses in connection with the issue of this Trust Indenture
and the Debentures; and

 

(b)                                 secondly, for general corporate
purposes, including capital expenditures and the acquisition, exploration and
development of resource properties.

 

The Corporation shall not use the proceeds
realized by it from the issue of the Debentures:  (i) to pay or loan (directly to or on
behalf of) any amount to any director, officer, shareholder or Affiliate of the
Corporation for any purpose; or (ii) for capital expenditures or
acquisitions relating to resource properties outside of the Province of
Alberta.

 

ARTICLE 3

SECURITY

 

3.1                                                                               Security

 

To secure
the payment, performance and satisfaction in full of each and every Obligation,
the Corporation hereby (subject to the exceptions contained in
Sections 3.3 and 3.4):

 

(a)                                  assigns, transfers, mortgages,
pledges and charges in favour of the Trustee, for and on behalf of each
Debentureholder, and grants to and in favour of the Trustee, for and on behalf
of each Debentureholder, a continuing security interest in and to all of the
Corporation’s present and after-acquired personal property; and

 

(b)                                 assigns, transfers, mortgages,
pledges and charges as and by way of a floating charge to and in favour of the
Trustee, for and on behalf of each Debentureholder, and grants to and in favour
of the Trustee, for and on behalf of each Debentureholder, a continuing security
interest in and to all of the undertaking and all the property and assets,
rights and things of the Corporation both present and future, legal or
equitable, of which the Corporation may be possessed or to which it may be
entitled or which may hereafter be acquired by the Corporation, including all
its right, title, estate and interest in and to any and all real, personal or
mixed property, now owned or hereafter acquired by the Corporation and all
proceeds and products of, all accessions to, and all substitutions and
replacements of, any of the foregoing;

 

TO HAVE AND TO HOLD the Collateral and the
Charge and all rights hereby conferred unto the Trustee, for and on behalf of
each Debentureholder.

 

15

 

3.2                                                                               Attachment

 

The
Corporation acknowledges conclusively that the Corporation and the Trustee
intend the Charge in the Collateral to attach immediately upon the execution of
this Trust Indenture, except in the case of Collateral in which the Corporation
subsequently acquires rights, in which case the Charge shall attach
contemporaneously with the Corporation acquiring rights therein without the
need for any further or other deed, act or consideration.  The Charge shall be effective and shall
attach as of the date hereof whether the monies hereby secured or any part
thereof shall become owing by the Corporation before or after or upon the date
of execution of this Trust Indenture. 
The Corporation acknowledges conclusively that value has been given.

 

3.3                                                                               Leases

 

The
last day of any term reserved by any lease, oral or written, or any agreement
therefor, now held or hereafter acquired by the Corporation, is hereby excepted
from the Charge and does not and shall not form part of the Collateral, but the
Corporation shall stand possessed of the reversion remaining in the Corporation
of any leasehold premises for the time being demised as aforesaid upon trust to
assign and dispose thereof as the Trustee shall direct and upon any sale of the
leasehold premises, or any part thereof, the Trustee, for the purpose of
vesting the aforesaid reversion of any such term or any renewal thereof in any
purchaser or purchasers thereof, shall be entitled by deed or writing to
appoint such purchaser or purchasers or any other Person or Persons as trustee
or trustees of the aforesaid reversion of any such term or any renewal thereof
in the place of the Corporation and to vest same accordingly in the new trustee
or trustees so appointed freed and discharged from any obligation respecting
same.

 

3.4                                                                               Contractual Rights

 

In the
event the validity and effectiveness of the Charge over any of the Collateral
requires the consent, approval or waiver of a third Person in order to be
effective as against such third Person, the Charge with respect to any such
Collateral shall be effective as against the Corporation and all Persons other
than such third Person and shall be effective as against such third Person when
the applicable consent, approval or waiver is obtained, retroactively, to the
fullest extent legally possible, to the later of the date hereof or the date
such consent, approval or waiver is obtained or becomes effective, as
applicable, and until such consent, approval or waiver is obtained, the
Corporation shall (subject to the other terms hereof) stand possessed of such
Collateral upon trust to assign and dispose thereof as the Trustee shall for
such purposes direct.

 

3.5                                                                               Permitted Activities

 

Until
an Event of Default occurs, the Corporation shall be entitled to:

 

(a)                                  sell, assign, dispose of and
otherwise deal with the Collateral in the ordinary course of business,
excluding the sale, assignment or
disposition of any right, interest or claim acquired by the Corporation
pursuant to the Farmout Agreement; and

 

(b)                                 retain full possession of the
Collateral and explore, operate, manage, develop, use and enjoy the same and
every part thereof in the ordinary course of business; provided that the
Corporation shall not make, give, grant, create or permit to exist any
mortgage, charge, encumbrance or other security interest in, on, over or in
respect of the Collateral to any other Person, save and except for the
Permitted Encumbrances.

 

16

 

3.6                                                                               Liability of Trustee

 

Neither
the Trustee nor any Receiver shall (i) be responsible or liable for any
debts contracted by it, for damages to Persons or property, for salaries or for
non-fulfilment of contracts during any period when the Trustee or any Receiver
shall manage or be in possession of the Collateral; (ii) be liable to
account as mortgagee in possession or for anything except actual receipts or be
liable for any loss on realization or for any default or omission for which a
mortgagee in possession may be liable; (iii)  be bound to do, observe or
perform or to see to the observance or performance by the Corporation of any
obligations or covenants imposed upon the Corporation; or (iv) in the case
of any chattel paper, security or instrument, be obligated to preserve rights
against any other Persons.  The Corporation
hereby waives any provision of Applicable Law permitted to be waived by it
which imposes higher or greater obligations upon the Trustee or any Receiver
than aforesaid.

 

3.7                                                                               Mandatory Provisions of Applicable Law

 

Subject
to Section 3.8, all rights, remedies, and powers provided herein may be
exercised only to the extent that the exercise thereof does not violate any
mandatory provision of Applicable Law and all the provisions of this Trust
Indenture are intended to be subject to all mandatory provisions of Applicable
Law which may be controlling in the premises and to be limited to the extent
necessary so that they will not render this Trust Indenture invalid,
unenforceable or not entitled to be recorded, registered or filed under any
mandatory provisions of Applicable Law. 
Subject to Section 3.8, if any mandatory provision of Applicable
Law shall provide for different or additional requirements than or to those
specified herein as prerequisites to or incidental to the realization, sale or
foreclosure of the Charge or any part thereof, then, to that extent, such laws
shall be deemed to have been set forth herein at length, and any conflicting
provisions hereof shall be disregarded, and the method of realization, sale or
foreclosure of the Charge required by any such laws shall, insofar as may be
necessary, be substituted herein as the method of realization, sale or
foreclosure in lieu of that set forth above. 
Any provision hereof contrary to mandatory provisions of Applicable Law
shall be deemed to be ineffective and shall be severable from and not
invalidate any other provision of this Trust Indenture.

 

3.8                                                                               Waivers of Applicable Laws

 

To the
extent not prohibited by Applicable Law, the Corporation hereby waives its
rights, if any, under all provisions of Applicable Law that would in any
manner, limit, restrict or otherwise affect the Trustee’s rights and remedies
hereunder or impose any additional obligations on the Trustee.  The Corporation waives the right to receive
any financing statement or any verification statement issued by any registry
that confirms registration of a financing statement relating to this Trust
Indenture.

 

3.9                                                                               Further Assurances

 

The
Corporation hereby covenants and agrees that it will at all times do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged and
delivered all such further acts, deeds, mortgages, transfers, assignments and
assurances as the Trustee may reasonably require for the better accomplishing
and effectuating the purpose of this Trust Indenture, including the execution
and delivery of indentures supplemental hereto more particularly describing the
Collateral or to correct or amplify the description of the Collateral or to
better assure, convey and confirm unto the Trustee any of the Collateral.  Upon the execution of any supplemental
indenture under this Section, this Trust Indenture shall be modified in
accordance therewith, and each such supplemental indenture shall form part of
this Trust Indenture for all purposes.

 

17

 

3.10                                                                        Registration

 

The
Corporation will ensure that this Trust Indenture and all documents, caveats,
security notices, financing statements and financing change statements in
respect thereof, are promptly filed and re-filed, registered and re-registered
and deposited and re-deposited, in such manner, in such offices and places, and
at such times and as often as may be required by Applicable Law or as may be
necessary or desirable to perfect and preserve the Charge as a first priority
Security Interest subject only to Permitted Encumbrances and will promptly provide the Trustee with
evidence (satisfactory to the Trustee) of such filing, registration and
deposit; provided that the Corporation shall have 10 Business Days following
the issuance of the first Debentures hereunder to register this Trust Indenture
as a fixed charge against the resource properties of the Corporation pursuant
to the Land Titles Act (Alberta)
and the Mines and Minerals Act
(Alberta) and, upon receipt, to provide the Trustee with evidence of such
registrations.

 

3.11                                                                        Discharge

 

Upon
the full and final payment and performance of the Obligations, this Trust
Indenture and the rights hereby granted shall, at the request of the
Corporation, be terminated and thereupon the Trustee shall at the request and
at the expense of the Corporation cancel and discharge the Charge and execute
and deliver to the Corporation such deeds and other instruments as shall be
requisite to cancel and discharge the Charge. 
Further, this Trust Indenture shall continue to be effective or be
reinstated, as the case may be, if for any reason at any time any payment or
performance of the Obligations, or any part thereof, is rescinded, reversed,
nullified, rendered void or voidable or such payment must otherwise be
restored, refunded, returned or reimbursed by the Trustee or a Debentureholder.

 

3.12                                                                        Partial Discharge

 

No
postponement or partial release or discharge of the Charge in respect of all or
any part of the Collateral shall in any way operate or be construed so as to
release and discharge the Charge except as therein specifically provided, or so
as to release or discharge the Corporation from its liability to fully pay and
satisfy the Obligations.  The
Debentureholders, by their acceptance of a Debenture, specifically authorize
the Trustee to execute and deliver to the Corporation partial discharges of the
Charge to give effect to any permitted disposition of the Collateral
contemplated by Section 3.5.

 

3.13                                                                        Additional Security

 

Nothing
in this Trust Indenture contained shall detract from or limit the absolute
obligation of the Corporation to make payment of this Trust Indenture and of
all monies owing hereunder at the time and in the manner provided in this Trust
Indenture and to perform or observe any other act or condition which it is
required to perform or observe hereunder whether or not the Charge is
operative, and the rights under this Trust Indenture shall be in addition to
and not in substitution for any other Security Interests of any and every
character now or hereafter held by the Trustee for the Obligations.

 

ARTICLE 4

SUBORDINATION OF DEBENTURES

 

4.1                                                                               Subordination

 

The
Corporation, and each Debentureholder by its acceptance of a Debenture, agrees
to the following subordination, postponement and priority:

 

18

 

(a)                                  subject to the payment of the
Subordinated Obligations as permitted by Section 4.4, the payment of all
Subordinated Obligations is hereby postponed and subordinated to the payment in
full of all Permitted Senior Debt and the Debentureholders will not, and will
not permit any representative thereof to, directly or indirectly take or
receive from the Corporation, payment of, or consideration for the reduction
of, the whole or any part of the Subordinated Obligations and if a payment is
received or made on the Subordinated Obligations, the Debentureholders will
hold such payment in trust for the benefit of, and shall forthwith pay over in
the form received to, the holders of Permitted Senior Debt; and

 

(b)                                 all present and future
Security Interests granted by the Corporation to the holders of Permitted
Senior Debt (collectively, the “Senior
Security”), shall have priority over the Charge, and the Charge is
hereby postponed and subordinated in all respects to the Senior Security.

 

4.2                                                                               Realization

 

The
Corporation, and each Debentureholder by its acceptance of a Debenture, agrees
that, in the event of any distribution, division or application, partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
any part of the assets of the Corporation by reason of the liquidation,
dissolution or winding-up of the business of the Corporation, or any sale,
receivership, insolvency or bankruptcy proceedings, or assignment for the
benefit of creditors, or in the event of a bulk sale of any of the assets of
the Corporation, or any proceeding by or against the Corporation for any relief
under any bankruptcy or insolvency law or laws relating to the relief of debtors,
readjustment of indebtedness, reorganizations, arrangements, marshalling of
assets, compromise, or other proceedings (other than in respect of a bona fide
merger, amalgamation or arrangement permitted by the terms of this Trust
Indenture and pursuant to which a Successor Corporation assumes all of the
obligations of the Corporation in respect of the Permitted Senior Debt and the
Subordinated Obligations), then and in every such event:

 

(a)                                  all of the Permitted Senior
Debt shall first be paid in full and satisfied before the Debentureholders
shall be entitled to receive or retain any payment or distribution from the
Corporation or any receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making such payment or distribution in respect of the
Subordinated Obligations;

 

(b)                                 any payment or distribution of
assets or securities of the Corporation of any kind or character, whether in
cash, property or securities, to which the Debentureholders would be entitled
in respect of the Subordinated Obligations, shall be paid by the Corporation or
by any receiver, trustee in bankruptcy, liquidating trustee, agent or other
Person making such payment or distribution, directly to the holders of
Permitted Senior Debt to the extent necessary to pay in full all the Permitted
Senior Debt before any payment or distribution is made to the Debentureholders
or any representative thereof in respect of the Subordinated Obligations; and

 

(c)                                  if any payment or distribution
of assets or securities of the Corporation of any kind or character, whether in
cash, property or securities, shall be received by the Debentureholders or any
representative thereof before all the Permitted Senior Debt is paid in full and
satisfied, the Debentureholders will hold such payment or distribution in trust
for the benefit of, and shall forthwith pay over in the form received to, the
holders of Permitted Senior Debt.

 

4.3                                                                               Subrogation of Permitted Senior Debt

 

If the
Debentureholders shall pay any amount to the holders of Permitted Senior Debt
pursuant to Sections 4.1 or 4.2, and upon the Permitted Senior Debt being
paid in full and satisfied, then

 

19

 

to the extent that the Corporation shall then be indebted to the
Debentureholders under this Trust Indenture, the Debentureholders shall be
subrogated to the rights of the holders of Permitted Senior Debt (without any
representation or warranty from holders of the Permitted Senior Debt) and shall
be entitled to receive an assignment of any and all of the documents
representing the Permitted Senior Debt and to receive payments or distributions
of assets of the Corporation made on the Permitted Senior Debt until the
principal of, premiums and the interest thereon, shall be paid in full, as
between the Corporation and the Debentureholders, to be applied to this Trust
Indenture until the Subordinated Obligations shall have been paid in full and
satisfied, and the effect of this Section shall in no manner reduce the
amount which the Debentureholders are entitled to recover in respect of this
Trust Indenture.

 

4.4                                                                               Payment of Obligations Permitted

 

Nothing
contained in this Article 4 shall prevent the Corporation or the Trustee
from making the following payments at the specified times to the Debentureholders
(nor from the Debentureholders receiving such payments for their own account):

 

(a)                                  payment of all fees and
expenses and all Interest when due hereunder and payment of all interest on
overdue amounts when due hereunder;

 

(b)                                 payment of the Principal Sum
and all other amounts outstanding under this Trust Indenture and the Debentures
on the Maturity Date;

 

(c)                                  the purchase of Debentures by
the Corporation; or

 

(d)                                 the exercise of a Conversion
Right;

 

until, in the case of paragraphs (a), (b) and
(c) above, the Debentureholders, the Corporation and the Trustee have
received notice from the holders of Permitted Senior Debt that a Senior Debt
Default has occurred and remains outstanding.

 

4.5                                                                               Enforceable by Holders of Permitted Senior Debt

 

The
provisions of this Article 4 are intended to be enforceable directly
by each Person from time to time entitled to enforce any Permitted Senior
Debt.  The Corporation hereby declares
itself to hold the benefits of this Article 4 in trust for each Person
entitled to enforce any Permitted Senior Debt from time to time and will do and
execute all such documents and things as may be necessary to enable any such
Person to enforce the provisions of this Article 4.

 

4.6                                                                               Payment of Debentures Permitted

 

If the
Trustee has not received written notice from or on behalf of any holder of any
Permitted Senior Debt or any agent or trustee therefor, notifying the Trustee
of any facts that would result in the making of any payment with respect to
Debentures a contravention of the provisions of this Article 4, then the
Trustee will be entitled to assume that payments accruing hereunder may be
made, and that no such facts exist and the Trustee may apply any money that may
be received by the Trustee at such time pursuant to any provisions of this
Trust Indenture to the purposes for which the same were so received.

 

20

 

4.7                                                                               Notice of Default under Permitted Senior Debt

 

The
Corporation shall give the Trustee and each Debentureholder prompt written notice
of the happening of any Senior Debt Default, and prompt written notice of any
cure or withdrawal thereof.

 

4.8                                                                               No Impairment Between Corporation and Debentureholders

 

Nothing
herein shall impair, as between the Corporation and the Debentureholders, the
obligation of the Corporation, which is unconditional and absolute, to pay the
Debentureholders the Principal Sum and Interest on the Debentures in accordance
with its terms, nor shall anything therein or herein prevent the Trustee or the
Debentureholders from exercising all the remedies otherwise permitted by
Applicable Law or hereunder upon the occurrence of any Default or Event of
Default hereunder, even if the Default or Event of Default arose by reason of
the Corporation being prohibited from making payment on the Subordinated
Obligations in accordance with the terms of this Article 4.

 

4.9                                                                               Authorization of Trustee to Affect Subordination

 

Each
Debentureholder, by its acceptance of a Debenture, authorizes and directs the
Trustee to take such action on the Debentureholder’s behalf as may be necessary
or appropriate to enter into contractual subordination agreements (each a “Subordination Agreement”) with holders of
Permitted Senior Debt in order to implement and give effect to the terms of
this Article 4; provided that the Trustee will not be obliged to take such
action unless and until it has received a duly executed officers certificate
confirming:

 

(a)                                  that the Corporation has
complied with all covenants, conditions or other requirements contained in the
Trust Indenture, the non-compliance with which would, with the giving of notice
or the lapse of time, or both, constitute an Event of Default; and

 

(b)                                 that the subordination to be
effected by the Subordination Agreement is in respect of Permitted Senior Debt
and Senior Security, all as contemplated by Section 4.1.

 

Without limiting or restricting the
provisions of this Section 4.9, each Debentureholder, by its acceptance of
a Debenture (i) specifically authorizes and directs the Trustee to, and
specifically acknowledges, understands and agrees that the Trustee may, execute
and deliver Subordination Agreements to holders of Permitted Senior Debt, and (ii) acknowledges
and agrees to be bound by the provisions of each Subordination Agreement to the
extent such provisions are in accordance with the terms of this Trust
Indenture.

 

ARTICLE 5

EXERCISE OF CONVERSION RIGHT

 

5.1                                                                               Conversion Right

 

(a)                                  Upon and subject to the terms
and conditions of this Article 5, each Debentureholder shall have the
right, at its option, at any time and from time to time prior to 5:00 p.m.
(Calgary time) on the Business Day prior to the Maturity Date, to convert the
Principal Sum of its Debenture, in whole or in whole multiples of Cdn. $1,000,
into fully paid and non-assessable Common Shares at the Conversion Price in
effect on the Conversion Date.

 

(b)                                 The Conversion Right shall
entitle the Debentureholder to receive:

 

21

 

(i)                                     Common Shares; and

 

(ii)                                  all accrued and unpaid
Interest (including overdue Interest) on the Principal Sum so converted up to
the Conversion Date.

 

(c)                                  Subject to Section 5.4, a
Debentureholder may exercise the Conversion Right by surrendering its Debenture
to the Trustee and giving notice to the Corporation and the Trustee, prior to
the Maturity Date, specifying the following:

 

(i)                                     the Principal Sum in respect
of which the Conversion Right is being exercised;

 

(ii)                                  the address of the
Debentureholder which is to appear on the Share Register of the Corporation;

 

(iii)                               the address where the new
Debenture, if any, representing the unconverted portion of its Debenture may be
sent; and

 

(iv)                              the number of Common Shares
the Debentureholder is currently the beneficial owner of.

 

5.2                                                                               Deemed Conversion Upon Going Public Transaction

 

(a)                                  Upon the occurrence of a Going
Public Transaction on or prior to the Maturity Date, the Debentureholders shall
and shall be deemed to exercise their Conversion Right pursuant to Section 5.1
and, subject to the Debentureholders complying with Section 5.1(c), the
Corporation shall issue Common Shares in respect of such conversion to the
Debentureholder.

 

(b)                                 In the event that a Going
Public Transaction is completed at a price per Common Share (or cash and stock
value per share) below Cdn. $1.15 (subject to adjustment pursuant to Article 7),
the deemed exercise of the Debentureholder’s Conversion Right pursuant to Section 5.2(a) and
Section 5.1 shall be completed at a deemed Conversion Price equal to the
then current Conversion Price multiplied by a ratio, the numerator of which is
the price per Common Share (or cash and stock value per share) that the Going
Public Transaction was completed at, and the denominator of which is
Cdn. $1.15 (subject to adjustment pursuant to Article 7).

 

5.3                                                                               Effect of Exercise of Conversion Right

 

(a)                                  Upon the exercise of the
Conversion Right pursuant to Section 5.1 or 5.2, and subject to Section 5.4,
the Common Shares subscribed for shall be deemed to have been issued and the
applicable Debentureholder shall be deemed to have become the holder of record
of such Common Shares on the Conversion Date unless the transfer registers of
the Corporation shall be closed on such date (including by application of any
Applicable Law), in which case the Common Shares subscribed for shall be deemed
to have been issued and such Debentureholder deemed to have become the holder
of record of such Common Shares, on the date on which such transfer registers
are reopened.

 

(b)                                 Within 5 Business Days
after the Conversion Date, the Corporation shall cause to be delivered to such
Debentureholder, as specified in the exercise notice referred to in Section 5.1(c),
a share certificate for the appropriate number of Common Shares acquired and a
calculation of any adjustment to the original Conversion Price; provided that
such Debentureholder simultaneously surrenders its Debenture to the Trustee for
cancellation, in whole or in part, as applicable.

 

22

 

5.4                                                                               Partial Exercise of Conversion Right; Fractions

 

(a)                                  A Debentureholder may elect to
convert less than the whole Principal Sum (in whole multiples of Cdn. $1,000)
of its Debenture, in which case such Debentureholder upon such exercise shall,
in addition, be entitled to receive, without charge therefor, a new Debenture
in respect of the balance of the Principal Sum which is not converted.

 

(b)                                 Notwithstanding anything
herein contained including any adjustment provided for in Article 7, the
Corporation shall not be required, upon the exercise of the Conversion Right,
to issue fractions of Common Shares or to distribute certificates which
evidence fractional Common Shares.

 

5.5                                                                               Cancellation and Destruction of Debentures

 

Any
portion of a Debenture converted under this Article 5 shall forthwith be
cancelled by the Corporation and the Trustee and no Debenture shall be issued
in substitution for the portion so cancelled.

 

5.6                                                                               Expiration of Conversion Right

 

On the
Maturity Date, the Conversion Right shall cease and terminate with respect to
any amount of the Principal Sum which has not been converted except to the
extent that a Debentureholder has not received certificates representing the
Common Shares issued upon exercise of the Conversion Right, in which instance
such Debentureholder’s rights hereunder shall continue until it has received
that to which it is entitled hereunder.

 

5.7                                                                               Securities Restrictions

 

Notwithstanding
anything herein contained, Common Shares will only be issued pursuant to the
Conversion Right in compliance with Applicable Securities Laws, and without
limiting the generality of the foregoing, the certificates representing the
Common Shares thereby issued will bear such legend as may, in the opinion of
Counsel, be necessary in order to avoid a violation of any Applicable
Securities Laws or to comply with the requirements of any stock exchange on
which the Common Shares are listed, provided that if, at any time, such legends
are no longer necessary in order to avoid a violation of any such laws, and the
holder of any such legended certificates provides the Corporation with evidence
satisfactory in form and substance to the Corporation to the effect that such
holder is entitled to sell or otherwise transfer such Common Shares in a
transaction in which such legends are not required, such legended certificates
may thereafter be surrendered to the Corporation in exchange for certificates
which do not bear such legend.

 

5.8                                                                               Debentureholders not a Shareholder

 

Nothing
in this Trust Indenture shall, in itself, confer or be construed as conferring
upon the Debentureholders any right or interest whatsoever as a shareholder of
the Corporation, including the right to vote at, to receive notice of, or to
attend, meetings of shareholders or any other proceedings of the Corporation,
or the right to receive dividends and other distributions.

 

5.9                                                                               Charges for Conversion or Transfer

 

In the
event the Corporation is required to deduct or withhold any tax from payments
due under the Debentures to the Debentureholder or in connection with the
exercise of the Conversion Right,

 

23

 

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 Debentureholder will be reduced
accordingly.

 

ARTICLE 6

REDEMPTION, RETRACTION AND REPAYMENT

 

6.1                                                                               Redemption

 

The
Debentures are not redeemable by the Corporation at any time prior to the
Maturity Date except in accordance with this Section 6.1 in respect of a Change
of Control.

 

(a)                                  Contemporaneous with the
occurrence of a Change of Control, and subject to the provisions and conditions
of this Section 6.1, the Corporation shall be obligated to offer to
purchase the Debentures on the following terms and conditions:

 

(i)                                     At least 14 Business Days
prior to the scheduled occurrence of a Change of Control, the Corporation shall
deliver to the Trustee, and the Trustee shall promptly deliver to the
Debentureholders, a notice stating that there will be a Change of Control and
specifying the circumstances and parties surrounding such event (a “Change of Control Notice”) together with an
offer in writing (the “Change of Control
Offer”) to purchase all then outstanding Debentures upon the
occurrence of the Change of Control at a price equal to:

 

(A)                              115% of the Principal Sum
thereof, where such Change of Control occurs on or before September 30,
2006; or

 

(B)                                120% of the Principal Sum
thereof, where such Change of Control occurs after September 30, 2006;

 

(the “Offer Price”) plus
accrued and unpaid interest on such Debentures up to, but excluding, the date
of acquisition by the Corporation of such Debentures (collectively, the “Total Offer Price”).  The Change of Control Offer shall be open for
acceptance by each Debentureholder for a period of not less than 10 Business
Days.

 

(ii)                                  The Corporation shall, on or
before 11:00 a.m. (Calgary time) on the Business Day of the occurrence of
the Change of Control, deposit with the Trustee such sums of money as may be
sufficient to pay the Total Offer Price for each of the Debentures to be
purchased or redeemed by the Corporation pursuant to accepted Change of Control
Offers.  The Corporation shall also
deposit with the Trustee a sum of money sufficient to pay any charges or
expenses that may be incurred by the Trustee in connection with such purchase
and/or redemption, as the case may be. 
Every such deposit shall be irrevocable. 
From the sums so deposited, the Trustee shall pay or cause to be paid to
the holders of such Debentures, the Total Offer Price to which they are
entitled on the Corporation’s purchase or redemption. 

 

(iii)                               Debentures for which holders
have accepted the Change of Control Offer by delivering a signed copy of the
Change of Control Offer along with their Debenture Certificate to the Trustee
shall become due and payable at the Total Offer Price on the date of occurrence
of the Change of Control, in the same manner and with the same effect as if it
were the date of maturity specified in such Debentures, anything therein or
herein to the contrary notwithstanding, and from and after such date of
occurrence of the Change of Control, if

 

24

 

the money necessary to purchase or redeem
the Debentures shall have been deposited as provided in this Section 6.1
and affidavits or other proofs satisfactory to the Trustee as to the
publication and/or mailing of the Change of Control Notice shall have been
lodged with it, interest on the Debentures shall cease.  If any question shall arise as to whether any
notice has been given as above provided and such deposit made, such question
shall be decided by the Trustee whose decision shall be final and binding upon
all parties in interest.

 

(iv)                              In case the holder of any
Debenture who has accepted a Change of Control Offer shall fail on or before
the date of occurrence of the Change of Control so to surrender such holder’s
Debenture or shall not accept payment of the moneys payable, or give such
receipt therefor, if any, as the Trustee may require, such moneys may be set
aside in trust, either in the deposit department of the Trustee or in a
chartered bank, and such setting aside shall for all purposes be deemed a
payment to the Debentureholder of the sum so set aside and the Debentureholder
shall have no other right except to receive payment of the moneys so paid and
deposited, upon surrender and delivery up of such holder’s Debenture.  In the event that any money required to be
deposited hereunder with the Trustee on account of principal, premium, if any,
or interest, if any, on Debentures issued hereunder shall remain so deposited
for a period of six years from the date of occurrence of the Change of Control,
then such moneys, together with any accumulated interest thereon, shall at the
end of such period be paid over or delivered over by the Trustee to the
Corporation and the Trustee shall not be responsible to Debentureholders for
any amounts owing to them. 
Notwithstanding the foregoing, the Trustee will pay any remaining funds
deposited hereunder prior to the expiry of six years after the date of
occurrence of the Change of Control to the Corporation upon receipt from the
Corporation of an unconditional letter of credit from a Schedule A
Canadian chartered bank in an amount equal to or in excess of the amount of the
remaining funds.  If the remaining funds
are paid to the Corporation prior to the expiry of six years after the date of
occurrence of the Change of Control, the Corporation shall reimburse the
Trustee for any amounts required to be paid by the Trustee to a holder of a
Debenture pursuant to the Change of Control Offer after the date of such
payment of the remaining funds to the Corporation but prior to six years after
the date of occurrence of the Change of Control.

 

(v)                                 All Debentures redeemed and paid under this
Section 6.1(a) shall forthwith be delivered to the Trustee and
cancelled and no Debentures shall be issued in substitution therefor.

 

6.2                                                                               Non-Retractable

 

Except
as specifically provided in this Trust Indenture, the Debentureholders shall
have no right to obligate the Corporation to repurchase the Debentures prior to
the Maturity Date.

 

6.3                                                                               Repayment at the Maturity Date

 

The
Debentures shall be repayable in full as to the Principal Sum, together with
all accrued and unpaid Interest then outstanding hereunder, as well as any and
all other sums then payable by the Corporation to the Trustee and the
Debentureholders hereunder, on the Maturity Date.

 

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ARTICLE 7

ADJUSTMENT ON CONVERSION PRICE

 

7.1                                                                               Adjustment of Conversion Price

 

The
Conversion Price in effect at any date shall be subject to adjustment from time
to time as follows:

 

(a)                                  if and whenever at any time
during the Adjustment Period, the Corporation shall:

 

(i)                                     subdivide, re-divide or change
its outstanding Common Shares into a greater number of shares; or

 

(ii)                                  reduce, combine or consolidate
its outstanding Common Shares into a smaller number of shares;

 

the
Conversion Price in effect on the effective date of such subdivision, re-division,
change, reduction, combination or consolidation, as the case may be, shall in
the case of the events referred to in (i) above, be decreased in
proportion to the number of outstanding Common Shares resulting from such
subdivision, re-division or change, or shall, in the case of the events
referred to in (ii) above, be increased in proportion to the number of
outstanding Common Shares resulting from such reduction, combination or
consolidation in each such case by multiplying the Conversion Price in effect
on such effective date by a fraction of which the numerator shall be the total
number of Common Shares outstanding immediately prior to such date and the
denominator shall be the total number of Common Shares outstanding immediately
after such date.  Such adjustment shall
be made successively whenever any event referred to in this Section 7.1(a) shall
occur;

 

(b)                                 if and whenever at any time
during the Adjustment Period, the Corporation shall fix a record date for the
issuance of rights, options or warrants to all or substantially all the holders
of its outstanding Common Shares entitling them, for a period expiring not more
than 45 days after such record date, to subscribe for or purchase Common
Shares (or securities convertible or exchangeable into Common Shares) at a
price per share (or having a conversion or exchange price per share) less than
95% the Current Market Price on such record date, the Conversion Price shall be
decreased immediately after such record date so that it shall equal the amount
determined by multiplying the Conversion Price in effect on such record date by
a fraction, of which the numerator shall be the total number of Common Shares
outstanding on such record date plus that number of Common Shares equal to the
number arrived at by dividing the aggregate price of the total number of
additional Common Shares offered for subscription or purchase (or the aggregate
conversion or exchange price of the convertible or exchangeable securities so
offered) by the Current Market Price, and of which the denominator shall be the
total number of Common Shares outstanding on such record date plus the total
number of additional Common Shares offered for subscription or purchase or into
which the convertible or exchangeable securities so offered are convertible or
exchangeable; any Common Shares owned by or held for the account of the
Corporation or any Subsidiary shall be deemed not to be outstanding for the
purpose of any such computation; such adjustment shall be made successively
whenever such a record date is fixed; to the extent that any such rights,
options or warrants are not exercised prior to the expiration thereof, the
Conversion Price shall be readjusted to the Conversion Price which would then
be in effect if such record date had not been fixed or to the Conversion Price
which would then be in effect based upon the number of Common Shares (or
securities convertible or exchangeable into

 

26

 

Common Shares) actually issued upon the exercise
of such rights, options or warrants, as the case may be;

 

(c)                                  if and whenever at any time
during the Adjustment Period, the Corporation shall fix a record date for the
making of a distribution to all or substantially all the holders of its
outstanding Common Shares of (i) shares of any class, whether of the
Corporation or any other corporation, (ii) rights, options or warrants
(excluding those referred to in Section 7.1(b) and rights, options or
warrants to subscribe for or purchase Common Shares or other securities
convertible into or exchangeable for Common Shares at a price per share, or
having a conversion or exercise price per share not less than 95% of the
Current Market Price on such record date) to subscribe for or purchase Common
Shares or other securities convertible into or exchangeable for Common Shares
for a period expiring not more than 45 days after such record date, (iii) evidences
of its Indebtedness or (iv) assets (including cash) of the Corporation or
any Subsidiary, then, in each such case, the Conversion Price shall be
decreased immediately after such record date so that it shall equal the price
determined by multiplying the Conversion Price in effect on such record date by
a fraction, of which the numerator shall be the total number of Common Shares
outstanding on such record date multiplied by the Current Market Price on such
record date, less the fair market value (as determined by the Directors, acting
reasonably, which determination shall be conclusive) of such shares, rights, options,
warrants, evidences of Indebtedness or assets so distributed, and of which the
denominator shall be the total number of Common Shares outstanding on such
record date multiplied by such Current Market Price; and Common Shares owned by
or held for the account of the Corporation or any Subsidiary shall be deemed
not to be outstanding for the purpose of any such computation; such adjustment
shall be made successively whenever such a record date is fixed; to the extent
that such distribution is not so made, the Conversion Price shall be readjusted
to the Conversion Price which would then be in effect if such record date had
not been fixed or to the Conversion Price which would then be in effect based
upon such shares or rights, options or warrants or evidences of Indebtedness or
assets actually distributed, as the case may be;

 

(d)                                 if and whenever at any time
during the Adjustment Period, there is a reclassification of the Common Shares
or a capital reorganization of the Corporation other than as described in Section 7.1(a) or
a consolidation, amalgamation, arrangement or merger of the Corporation with or
into any other body corporate, trust, partnership or other entity, or a sale or
conveyance of the property and assets of the Corporation as an entirety or
substantially as an entirety to any other body corporate, trust, partnership or
other entity, each Debentureholder shall, upon the exercise of the Conversion
Right, be entitled to receive and shall accept, in lieu of the number of Common
Shares then sought to be acquired by it, the number of Common Shares or other
securities or property of the Corporation or of the body corporate, trust,
partnership or other entity resulting from such merger, amalgamation or
consolidation, or to which such sale or conveyance may be made, as the case may
be, that each Debentureholder would have been entitled to receive on such
reclassification, capital reorganization, consolidation, amalgamation,
arrangement or merger, sale or conveyance, if, on the record date or the effective
date thereof, as the case may be, such Debentureholder had been the registered
holder of the number of Common Shares sought to be acquired by it and to which
it was entitled to acquire upon the exercise of the Conversion Right and a
contemporaneous and equal adjustment shall be made to the Conversion
Price.  To give effect to or to evidence
the provisions of this Section 7.1(d), the Corporation, its successor, or
such purchasing body corporate, partnership, trust or other entity, as the case
may be, shall, prior to or contemporaneously with any such reclassification,
capital reorganization, consolidation, amalgamation, arrangement, merger, sale
or conveyance, enter into an agreement which shall provide for the application
of the provisions set forth in this Trust Indenture with respect to the rights
and interests thereafter of the Debentureholders to the end that the provisions
set forth in this Trust Indenture shall thereafter correspondingly be made
applicable with respect to any

 

27

 

shares, other securities or property to
which the Debentureholders are entitled on the exercise of the Conversion
Right; and

 

(e)                                  the adjustments provided for
in this Section 7.1 are cumulative, and shall, in the case of adjustments
to the Conversion Price be computed to the nearest whole cent and shall apply
to successive subdivisions, re-divisions, reductions, combinations,
consolidations, distributions, issues or other events resulting in any
adjustment under the provisions of this Section 7.1.

 

7.2                                                                               Protection of Trustee

 

The
Trustee shall not at any time be under any duty or responsibility to any
Debentureholder to determine whether any fact exists which may require any
adjustment in the Conversion Price, or with respect to the nature or extent of
any such adjustment when made, or with respect to the method employed in making
the same and shall not be responsible for any failure of the Corporation to
make any payment or issue, transfer or deliver securities upon the surrender of
any Debenture for the purpose of conversion, or to comply with any of the
covenants of the Corporation contained in this Article.

 

7.3                                                                               Entitlement to Shares on Exercise of Conversion Right

 

All
shares of any class or other securities which a Debentureholder is at the time
in question entitled to receive on the exercise of the Conversion Right,
whether or not as a result of adjustments made pursuant to this Article 7,
shall, for the purposes of the interpretation of this Trust Indenture, be
deemed to be shares which such Debentureholder is entitled to acquire pursuant
to the exercise of the Conversion Right.

 

7.4                                                                               No Adjustment for Stock Options

 

Notwithstanding
anything in this Article 7, no adjustment shall be made in the Conversion
Price if the issue of Common Shares is being made pursuant to this Trust
Indenture or pursuant to any stock option plan in force from time to time for
directors, officers or employees of the Corporation.

 

7.5                                                                               Determination by Corporation’s Auditors

 

In the
event of any question arising with respect to the adjustments provided for in
this Article 7, such question shall be conclusively determined by the
Corporation’s Auditors, or such other firm of chartered accountants mutually
acceptable to the Corporation and the applicable Debentureholder, who shall
have access to all necessary records of the Corporation, and such determination
shall be binding upon the Corporation, such Debentureholder and all other
Persons interested therein.

 

7.6                                                                               Proceedings Prior to any Action Requiring Adjustment

 

As a
condition precedent to the taking of any action which would require an
adjustment in any of the conversion rights pursuant hereto, including the
number of Common Shares which are to be received upon the exercise thereof, the
Corporation shall take any corporate action which may, in the opinion of its
Counsel, be necessary in order that the Corporation has unissued and reserved
in its authorized capital and may validly and legally issue as fully paid and
non-assessable all the Common Shares which the Debentureholders are entitled to
receive on the full exercise of the Conversion Right in accordance with the
provisions hereof.

 

28

 

7.7                                                                               Certificate of Adjustment

 

The
Corporation shall from time to time immediately after the occurrence of any
event which requires an adjustment or readjustment as provided in this Article 7,
deliver a certificate of the Corporation to the Trustee and the
Debentureholders specifying the nature of the event requiring the same and the
amount of the adjustment necessitated thereby and setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.

 

7.8                                                                               Notice of Special Matters

 

The
Corporation covenants that it will give notice to the Trustee and each
Debentureholder of its intention to fix a record date that is prior to the
Maturity Date for the issuance of rights, options or warrants to all or
substantially all the holders of its outstanding Common Shares.  Such notice shall specify the particulars of
such event, the record date for such event and, if prepared or available as at
the date that such notice is required to be given pursuant to this Section 7.8,
such notice shall be accompanied by the material (i.e., proxy circulars,
information booklets etc.) sent to the holders of Common Shares in respect of
the event in question, provided that the Corporation shall only be required to
specify in the notice such particulars of the event as shall have been fixed
and determined on the date on which the notice is given.  The notice shall be given in each case not
less than 14 days prior to such applicable record date.

 

7.9                                                                               No Action after Notice

 

The
Corporation covenants that it will not close its transfer books or take any
other corporate action which might deprive the Debentureholder of the
opportunity to exercise their right of conversion pursuant thereto during the
period of 14 days after the giving of the certificate or notices set forth
in Sections 7.7 and 7.8.

 

ARTICLE 8

COVENANTS, REPRESENTATIONS AND WARRANTIES

 

8.1                                                                               Positive Covenants

 

The
Corporation hereby covenants and agrees with the Trustee for the benefit of the
Trustee and the Debentureholder that it shall:

 

(a)                                  Payment and
Performance:  duly and punctually pay all
amounts due by it hereunder and under the Debentures and shall perform all
other obligations on its part to be performed under the terms of this Trust
Indenture at the times and places and in the manner provided for herein;

 

(b)                                 Corporate
Existence:  maintain its corporate existence in good
standing under the laws of its jurisdiction of incorporation and register and
qualify and remain registered and qualified as a corporation authorized to
carry on business under the laws of each jurisdiction in which the nature of
any business conducted by it or the character of any properties and assets
owned or leased by it requires such registration and qualification;

 

(c)                                  Insurance:  maintain in full force and effect such
policies of insurance, including public liability and property damage
insurance, in such amounts issued by insurers of recognized standing covering
its properties and operations as are customarily maintained by Persons engaged
in the same or similar business in the localities where its properties and operations
are located;

 

29

 

(d)                                 Compliance With Applicable
Laws:

 

(i)                                     carry on and conduct its
business and keep, maintain and operate its assets and properties in all
material respects in accordance with all Applicable Laws, including Applicable
Securities Laws, and in a good and workmanlike manner and in accordance with
sound industry practice; and

 

(ii)                                  observe and conform in all
material respects to all valid requirements of any Governmental Approval
relative to any of its assets and properties and all covenants, terms and
conditions of all agreements upon or under which any of its assets and
properties are held;

 

(e)                                  Payment of
Other Obligations:  pay or cause
to be paid all rents, royalties, taxes and other indebtedness to pay money
validly imposed upon it, or upon its properties or assets or any part thereof,
as and when the same became due and payable or shall provide adequate reserves
(in accordance with GAAP) for payment of any such obligation, the payment of
which is being contested in good faith;

 

(f)                                    Maintenance
of Books and Records:  keep proper
and adequate records and books of account in which true and complete entries
will be made in a manner sufficient to enable the preparation of financial
statements in accordance with GAAP and permit the Trustee or any
Debentureholder at any time and from time to time during normal business hours
to enter its premises and inspect its records, books of account and operations;

 

(g)                                 Use of
Proceeds:  only use the proceeds received from the
issuance of the Debentures in accordance with Section 2.12;

 

(h)                                 Defend Title
to Assets:  maintain, protect and defend
title to all property and assets held by it in its own capacity or on behalf of
others, and take all such acts and steps as are necessary or advisable at any
time and from time to time to maintain its property and assets in good
standing;

 

(i)                                     Additional
Information:  furnish to the Trustee or any
Debentureholder, on request (acting reasonably), any additional information
regarding its business affairs, operations (including environmental policies
and reports), properties, assets and financial condition; and

 

(j)                                     Events of
Default:
give notice promptly to the Trustee of any Default or Event of Default.

 

8.2                                                                               Negative Covenants

 

Without
the prior written consent of the Trustee, acting pursuant to an Extraordinary
Resolution, the Corporation shall not:

 

(a)                                  Negative
Pledge:  except for Permitted Encumbrances, create,
incur, assume or suffer to exist any Security Interest, upon or with respect to
any of the Collateral which ranks equal with or in priority to the Charge;

 

(b)                                 Indebtedness: except for Permitted Debt,
create, incur or suffer to exist any Indebtedness for borrowed money that ranks
equal with or in priority to the Debentures and the Prior Debentures; or

 

(c)                                  Change of
Business:  change in any material respect the nature of
its business or operations.

 

30

 

8.3                                                                               Representations and Warranties - Corporation

 

The
Corporation hereby represents and warrants to the Trustee and each
Debentureholder and acknowledges that the Trustee and each Debentureholder is
relying on such representations and warranties, that as at the date hereof:

 

(a)                                  the Corporation has been duly
incorporated and is validly subsisting under the laws of each jurisdiction in
which it carries on business and has all requisite corporate power and
authority to carry on its business as now conducted by it and to own its
properties and assets;

 

(b)                                 the authorized capital of the
Corporation consists of an unlimited number of Common Shares of which there are
24,000,000 Common Shares issued and outstanding, and there are no other issued
and outstanding rights, warrants, options or other securities convertible into
Common Shares, except for the Agent’s Warrants and Prior Debentures;

 

(c)                                  the Corporation has conducted
and is conducting its business in compliance in all material respects with all
Applicable Laws and the Corporation holds all material licences, registrations
and qualifications in all jurisdictions in which the Corporation carries on
business which are necessary or desirable to carry on the business of the
Corporation as now conducted and as presently proposed to be conducted by it,
and all such licenses, registrations or qualifications are valid and existing
and in good standing;

 

(d)                                 the Corporation has full
corporate power and authority to execute, deliver and perform its obligations
under this Trust Indenture, to create and issue the Debentures and to issue the
Common Shares issuable upon conversion of the Debentures;

 

(e)                                  this Trust Indenture has been
duly and validly created;

 

(f)                                    the Common Shares issuable
upon the conversion of the Debentures will be duly and validly authorized,
allotted and reserved for issuance and, upon such conversion, will be issued as
fully paid and non-assessable Common Shares; and

 

(g)                                 this Trust Indenture has been
duly authorized, executed and delivered by the Corporation, and this Trust
Indenture constitutes legal, valid and binding obligations of the Corporation
enforceable against the Corporation in accordance with its terms subject to the
general qualifications that:

 

(i)                                     enforceability may be limited
by bankruptcy, insolvency, moratorium, reorganization or other laws affecting
creditors’ rights generally;

 

(ii)                                  equitable remedies, including
the remedies of specific performance and injunctive relief, are available only
in the discretion of the applicable court; and

 

(iii)                               the equitable or statutory
powers of the applicable courts having jurisdiction to stay proceedings before
them and the execution of judgments.

 

8.4                                                                               Trustee May Perform Covenants

 

If the
Corporation fails to perform any covenant on its part herein contained, the
Trustee may in its discretion, but (subject to Section 8.7) need not,
notify the Debentureholders of such failure or may but need not perform any of
said covenants capable of being performed by it and, if any such covenant
requires the payment or expenditure of money, it may but need not make such
payment or

 

31

 

expenditure with its own funds, or with money borrowed by or advanced
to it for such purposes, but shall be under no obligation to do so and all sums
so expended or advanced shall be repayable by the Corporation in the manner
provided in Section 8.5, but no such performance or payment by the Trustee
shall be deemed to relieve the Corporation from default hereunder.

 

8.5                                                                               Pay Trustee’s Remuneration

 

The
Corporation will, from time to time, pay the Trustee’s reasonable remuneration
for its services hereunder as agreed separately by the Corporation and the
Trustee, together with all costs incurred by the Trustee pursuant to Section 11.7,
and will repay to the Trustee on demand all monies which shall have been paid
by the Trustee in and about the execution of the trusts hereby created,
including reasonable legal fees and expenses and all costs incurred by the
Trustee in complying with any laws applicable to it as a result of its duties
as Trustee hereunder, with interest at a rate which is charged from time to
time by the corporate trust department of the Trustee, from 30 days after the
date of receipt of the invoice from the Trustee to the Corporation with respect
to such expenditure until repayment, and such monies and the interest thereon,
including the Trustee’s remuneration, shall be payable out of any funds coming
into the possession of the Trustee in priority to any payment in respect of any
of the Debentures or interest thereon. 
The said remuneration shall continue to be payable until the trusts
hereof shall be finally wound up and whether or not the trusts of this Trust
Indenture shall be in the course of administration by or under the direction of
the court.

 

8.6                                                                               Certificate as to Interest Rate

 

If the
Corporation requires the Trustee to distribute Interest to the Debentureholders
on an Interest Payment Date, the Corporation shall, on or before the Record
Date for each Interest Payment Date occurring prior to the issuance of an
Acceleration Notice, deliver to the Trustee a Certificate of the Corporation
stating the amount of Interest payable on such Interest Payment Date and
setting forth, in reasonable detail, a calculation of such Interest.

 

8.7                                                                               Certificates Relating to Default

 

The
Corporation will, annually within 120 days after the end of its Fiscal
Year and at any other reasonable time if requested by the Trustee, deliver to
the Trustee a Certificate of the Corporation stating that the Corporation has
complied with all covenants, conditions or other requirements contained in this
Trust Indenture or, if such is not the case, specifying the covenant, condition
or other requirement which has not been complied with and the particulars of
each such Default, the period of existence thereof and the action which the
Corporation is taking or proposes to take with respect thereto; provided, that,
if at any time the Corporation is required by any legislation which, in the
opinion of Counsel, is applicable to this Trust Indenture, to furnish the
Trustee periodic certificates or reports with respect to compliance by the
Corporation with the provisions of this Trust Indenture, the Corporation shall
also furnish such periodic certificates or reports in addition to the
aforementioned Certificate of the Corporation.

 

ARTICLE 9

DEFAULT

 

9.1                                                                               Acceleration of Maturity Date

 

An
Event of Default shall occur upon the happening of any one or more of the
following events, namely:

 

32

 

(a)                                  if the Corporation defaults in
payment of the Principal Sum when the same becomes due and payable under this
Trust Indenture;

 

(b)                                 if the Corporation makes
default in payment of any Interest due on this Trust Indenture when the same
becomes due and any such default continues thereafter for a period of 5
Business Days;

 

(c)                                  if the Corporation shall (i) institute
or commence proceedings to be adjudicated a bankrupt or insolvent or consent to
the filing of a bankruptcy or insolvency proceeding against it, (ii) file,
institute or commence or otherwise take any proceeding relating to
reorganization, adjustment, arrangement, composition, compromise, stay of
proceedings or relief similar to any of the foregoing under any Applicable Law
regarding bankruptcy, insolvency, reorganization or relief of debtors
(including under the Companies’ Creditors
Arrangement Act or the Bankruptcy
and Insolvency Act), (iii) consent to the filing of any such
proceeding, (iv) consent to the appointment of a receiver, liquidator,
trustee or assignee in bankruptcy or similar official or to the liquidation,
dissolution or winding-up of the Corporation or of all or a substantial part of
its property and assets (v) make an assignment for the benefit of
creditors, (vi) admit in writing its inability to pay its debts generally
as they become due, (vii) generally not be paying its debts as they come
due or otherwise be insolvent, or (viii) take any corporate or other
action authorizing or in furtherance of any of the foregoing;

 

(d)                                 if any proceeding is filed,
instituted or commenced by any Person seeking (i) to adjudicate the
Corporation a bankrupt or insolvent or the liquidation, reorganization,
winding-up, adjustment, arrangement, compromise, composition, stay of
proceedings or similar relief of or for the Corporation under any Applicable
Law regarding bankruptcy, insolvency, reorganization or relief of debtors
(including under the Companies’ Creditors
Arrangement Act or the Bankruptcy
and Insolvency Act), or (ii) to appoint a receiver, liquidator,
trustee or assignee in bankruptcy or similar official of the Corporation or of
all or a substantial part of its property and assets, if such proceeding shall
continue undismissed or unstayed for a period of 30 days;

 

(e)                                  if there shall be a breach by
the Corporation of any other covenant or condition contained in this Trust
Indenture and the breach is not cured within 30 days after written notice by
the Trustee to the Corporation; or

 

(f)                                    if any representation or
warranty in favour of the Trustee or the Debentureholders contained in this Trust
Indenture shall prove to have been incorrect in any material respect when made
and such representation or warranty (if capable of being corrected) continues
to be incorrect for a period of 30 days after the Trustee gives written notice
of such incorrect representation and warranty to the Corporation.

 

9.2                                                                               Acceleration

 

Upon
the occurrence of an Event of Default which is continuing, the Trustee may, and
shall if so required by the Debentureholders acting by Extraordinary
Resolution, by notice in writing to the Corporation declare the Principal Sum
and all accrued Interest thereon and other amounts owing hereunder and under
the Debentures to be immediately due and payable and the same shall become
immediately due and payable and the Corporation shall forthwith pay the same to
the Trustee failing which all rights and remedies of the Trustee and the
Debentureholders hereunder or at law or equity in respect of such non-payment
shall become enforceable; provided that upon the occurrence of an Event of
Default specified in Section 9.1(c) or 9.1(d), all Indebtedness
hereunder shall automatically become due and payable without any requirement
that notice be given to the Corporation.

 

33

 

9.3                                                                               Remedies - General

 

Upon the
occurrence of a Realization Event, the Trustee, for and on behalf of the
Debentureholders, may, in its absolute discretion:

 

(a)                                  exercise such rights and
remedies as are provided by the PPSA with respect to the Collateral or any part
thereof that constitutes personal property and all other rights and remedies
recognized under Applicable Law against the Corporation or in respect of the
Collateral or any part thereof for the enforcement of full payment and
performance of all the Obligations;

 

(b)                                 either with or without notice,
enter into and upon the Corporation’s premises and take possession of all or
any part of the Collateral with full power to exclude the Corporation and
additionally shall have full power and authority;

 

(i)                                     to carry on, manage and conduct
the business operations of the Corporation respecting such Collateral and the
power to borrow money in its own name or advance its own money for the purpose
of such business operations, the maintenance and preservation of such
Collateral or any part thereof and the making of such replacements thereof and
additions thereto as it shall deem desirable and the payment of taxes, wages
and other charges ranking in priority to the Charge; and

 

(ii)                                  to receive the revenues,
incomes, issues and profits of such Collateral and to pay therefrom the costs,
charges and expenses of the Trustee in carrying on the said business operations
or otherwise, and all taxes, assessments and other charges against such
Collateral ranking in priority to the Charge the payment of which may be
necessary to preserve such Collateral, and to apply the remainder of the monies
so received in the same manner as if the same arose from a sale or realization
of such Collateral;

 

(c)                                  either after entry as
aforesaid or after other entries, or without any entry, sell or dispose of the
Collateral, either as a whole or in separate parcels, by private contract, at
public auction, by public tender, by lease or by deferred payment arrangement;

 

(d)                                 make any such sale or
disposition of the Collateral either for cash or upon credit and upon such
reasonable conditions as to upset or reserve bid or price and terms of payment
as it may deem proper; to rescind or vary any contract or sale that may have
been entered into and re-sell with or under any of the powers conferred herein;
to adjourn such sale from time to time; and to execute and deliver to the
purchaser or purchasers of the Collateral or any part thereof, good and
sufficient deed or deeds for the same, and any such sale or disposition made as
aforesaid shall be a perpetual bar at law and in equity against the Corporation
and all other Persons claiming the Collateral or any part or parcel thereof,
by, from, through, or under the Corporation. 
The Trustee and any Debentureholder may become a purchaser at any sale
of the Collateral or any part thereof;

 

(e)                                  with or without entry or sale
as aforesaid, in its discretion, proceed to protect and enforce its rights
under this Trust Indenture by sale under judgment order in any judicial
proceeding or by foreclosure or a suit or suits in equity or at law or
otherwise whether for the specific performance of any covenant or agreement
contained in this Trust Indenture or in aid of the execution of any power
granted in this Trust Indenture or in aid of the execution of this Trust
Indenture or for the filing of such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claim of the
Trustee lodged in any bankruptcy, winding-up or other judicial

 

34

 

proceeding, or for the enforcement of any
other legal or equitable remedy as the Trustee shall deem most effective to
protect and enforce any of the rights or duties of the Trustee; or

 

(f)                                    in lieu of appointing a
Receiver as provided in Section 9.7, apply to any court or courts of
competent jurisdiction for the appointment of a Receiver of the Collateral or
any part thereof, with such powers as the court or courts making such
appointment or appointments shall confer.

 

9.4                                                                               Possession

 

Upon
the occurrence of a Realization Event, the Corporation shall on demand by the
Trustee or any Receiver yield up possession of the Collateral or any part
thereof as demanded by the Trustee and put no obstacle in the way of, but
facilitate by all legal means, the actions of the Trustee or any Receiver
hereunder and not interfere with the carrying out of the powers hereby granted
to the Trustee or any Receiver.

 

9.5                                                                               Judgment

 

The
Corporation covenants and agrees with the Trustee that, in the case of any judicial
or other proceeding to enforce the Charge or any part thereof, judgment may be
rendered against the Corporation in favour of the Trustee for any amount
remaining due under this Trust Indenture or for which the Corporation may be
liable hereunder, after the application to the payment thereof of the proceeds
of any sale of the Collateral or any part thereof.  The covenant of the Corporation to pay
Interest at the rate provided in this Trust Indenture shall not merge in any
such judgment and such judgment shall bear interest at the rate set forth in
this Trust Indenture until such judgment and all interest thereon has been paid
in full.

 

9.6                                                                               Account Debtors

 

Upon
the occurrence of a Realization Event:

 

(a)                                  All Persons being obligated to
pay any account receivable or other debt due, owing or accruing due to the
Corporation, including operators or managers under any operating agreement,
management agreement, lease, or otherwise, are entitled at all times to treat
and regard the Trustee as the assignee and transferee from the Corporation,
entitled in the place and stead of the Corporation to receive such accounts and
other debts.  The Trustee may give notice
to all or any of such Persons of the Charge and to remit all such accounts and
other debts directly to the Trustee, whether or not the Corporation was making
collections on such Collateral prior to notification by the Trustee; and all
such Persons shall be fully protected in so treating and regarding the Trustee
and shall be under no obligation to see to the application in any particular
manner by the Trustee of any such accounts and other debts received by it.

 

(b)                                 Any money collected or
received by the Trustee pursuant to paragraph (a) above shall be applied
in the manner set out in Section 9.15. 
The Trustee shall not be liable or accountable for its failure to
collect, realize, sell or obtain payment of accounts, chattel paper,
instruments, intangibles, choses in action or rights to payment or any part
thereof and shall not be bound to institute proceedings for the purpose of
collecting, realizing or obtaining payment of the same or for the purpose of
preserving any right to payment of the Trustee, the Corporation or any other
Person in respect thereof.

 

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9.7                                                                               Receiver

 

Upon
the occurrence of a Realization Event, the Trustee may in its absolute
discretion appoint a Receiver of the Collateral or any part thereof and upon
any such appointment by the Trustee the following provisions shall apply:

 

(a)                                  such appointment shall be made
in writing signed by the Trustee and such writing shall be conclusive evidence
for all purposes of such appointment; the Trustee may from time to time in the
same manner remove any Receiver so appointed and appoint another in its stead;
in making any such appointment the Trustee shall be deemed to be acting as the
attorney for the Corporation and the Corporation hereby consents to the
appointment of a Receiver;

 

(b)                                 any such appointment may be
limited to any part or parts of the Collateral or may extend to the whole
thereof;

 

(c)                                  every Receiver may, in the
discretion of the Trustee, be vested with all or any of the powers, rights,
benefits, discretions, protection and relief of the Trustee hereunder and shall
be vested with all of the powers and protections afforded to a Receiver under
Applicable Law;

 

(d)                                 the Trustee may from time to
time fix the reasonable remuneration of the Receiver and direct the payment
thereof, in priority to the other Obligations, out of the Collateral, the income
therefrom or the proceeds thereof;

 

(e)                                  the Trustee may from time to
time require any Receiver to give security for the performance of its duties
and may fix the nature and amount thereof, but the Trustee shall not be bound
to require such security;

 

(f)                                    every such Receiver may, with
the consent in writing of the Trustee, borrow money for the purpose of carrying
on the business of the Corporation in respect of any part of the Collateral or
for the maintenance, protection or preservation of the Collateral or any part
thereof, and any Receiver may issue certificates (in this Section called “Receiver’s Certificates”), for such sums as
will in the opinion of the Trustee be sufficient for carrying out the
foregoing, and such Receiver’s Certificates may be payable either to order or
bearer and may be payable at such time or times as the Trustee may consider
expedient, and shall bear such interest as shall therein be declared and the
Receiver may sell, pledge or otherwise dispose of the same in such manner as the
Trustee may consider advisable and may pay such commission on the sale thereof
as the Trustee may consider reasonable, and the amounts from time to time
payable by virtue of such Receiver’s Certificates shall at the option of the
Trustee form a charge upon the Collateral in priority to this Trust Indenture;

 

(g)                                 every Receiver shall,
regarding its acts or omissions, be deemed the agent of the Corporation, and in
no event the agent of the Trustee and the Trustee shall not, in making or
consenting to such appointment, incur any liability to any Receiver for its
remuneration or otherwise howsoever;

 

(h)                                 except as may be otherwise
directed by the Trustee, all monies from time to time received by any Receiver
shall be paid over to the Trustee at the place where this Trust Indenture is
payable; and

 

(i)                                     the Trustee may pay over to
any Receiver any monies constituting part of the Collateral to the extent that
the same may be applied for the purposes hereof by such Receiver and the
Trustee may from time to time determine what funds any Receiver shall be at
liberty to keep on hand with a view to the performance of its duties as such
Receiver.

 

36

 

 

9.8                                                                               Remedies Not Exclusive

 

No
right, power or remedy herein conferred upon or reserved to the Trustee or any
Receiver is intended to be exclusive of any other right, power or remedy or
remedies, and each and every right, power and remedy shall, to the extent
permitted by Applicable Law, be cumulative and shall be in addition to every
other right, power or remedy given hereunder or now or hereafter existing at
law, in equity or by statute.  Subject to
Section 9.11, the Trustee shall have the power to waive any Event of
Default, provided no such waiver shall be effective unless made in writing and
shall not constitute a waiver of any other or subsequent Event of Default.  No delay or omission of the Trustee in the
exercise of any right, power or remedy accruing upon any default shall impair
any such right, power or remedy or shall be construed to be a waiver of any
such default or an acquiescence therein. 
Every right, power and remedy given to the Trustee or to a Receiver by
this Trust Indenture or under Applicable Law may be exercised from time to time
and as often as may be deemed expedient by the Trustee or such Receiver, as
applicable.

 

9.9                                                                               Expenses

 

The
Corporation shall pay all reasonable expenses (including legal fees and
expenses on a solicitor and his own client basis) incurred by the Trustee, a
Debentureholder or any Receiver in connection with the enforcement of this
Trust Indenture, the realization of the Collateral, the disposition, retention,
protection or collection of the Collateral and the protection and enforcement
of the rights of the Trustee, each Debentureholder and any Receiver hereunder
together with all remuneration paid to a Receiver and all costs, charges and
expenses of or incidental to any receivership and such expenses shall become part
of the Obligations, and shall, from the time they are paid by the Trustee, such
Debentureholder or such Receiver until repaid by the Corporation, bear interest
at the Interest Rate.

 

9.10                                                                        Notice of Events of Default

 

If an
Event of Default shall occur and be continuing, the Trustee shall, within 10
days after it becomes aware of the occurrence of such Event of Default, give
notice of such Event of Default to the Debentureholders.

 

9.11                                                                        Waiver of Default

 

Upon
the happening of any Event of Default hereunder:

 

(a)                                  the Debentureholders shall have the power
(in addition to the powers exercisable by Extraordinary Resolution as
hereinafter provided) by Extraordinary Resolution to instruct the Trustee to
waive any Event of Default and rescind and cancel any Acceleration Notice, and
the Trustee shall thereupon waive the Event of Default on such terms and
conditions as shall be prescribed in such requisition provided:

 

(i)                                     the rescission would not conflict with any
judgment or decree;

 

(ii)                                  all existing Events of Default have been
cured or waived except non-payment of the Principal Sum or Interest that has
become due solely because of the Acceleration Notice;

 

(iii)                               interest on overdue instalments of Interest
and any overdue Principal Sum which has become due, otherwise than by such
Acceleration Notice, has been paid;

 

37

 

(iv)                              the Corporation has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances; and

 

(v)                                 in the event of the cure or waiver of an
Event of Default of the type described in Sections 9.1(c) and 9.1(d),
the Trustee shall have received an officers’ certificate and an opinion of
Counsel that such Event of Default has been cured; and

 

(b)                                 the Trustee, so long as it has not become
bound to declare the Principal Sum and Interest on the Debentures outstanding
to be due and payable, or to obtain or enforce payment of the same, shall have
the power to waive any Event of Default if, in the Trustee’s reasonable
opinion, the same shall have been cured or adequate satisfaction made therefor,
and in such event to cancel any such declaration theretofore made by the
Trustee in the exercise of its discretion, upon such terms and conditions as
the Trustee may deem advisable;

 

provided that no act or omission either of
the Trustee or of the Debentureholders shall extend to or be taken in any
manner whatsoever to affect any subsequent Event of Default or the rights
resulting therefrom.

 

9.12                                                                        Certificate re Default

 

In
addition to the Corporation’s obligations under Section 11.5(d), the
Corporation shall provide a Certificate of the Corporation to the Trustee
promptly upon any such officer obtaining knowledge of any Event of Default that
has occurred and, if applicable, describing such Event of Default and the
status thereof.  The Trustee shall not be
bound to give any notice or do or take any act, action or proceeding by virtue
of the powers conferred on it hereby unless and until it shall have been
required so to do under the terms hereof; nor shall the Trustee be required to
take notice of any Event of Default hereunder, unless and until notified in
writing of such Event of Default, which notice shall distinctly specify the
Event of Default desired to be brought to the attention of the Trustee and in
the absence of any such notice the Trustee may for all purposes of this Trust
Indenture conclusively assume that no Event of Default has been made in the
observance or performance of any of the representations, warranties, covenants,
agreements or conditions contained herein. 
Any such notice shall in no way limit any discretion given to the
Trustee to determine whether or not the Trustee shall take any action with
respect to any Event of Default.

 

9.13                                                                        Enforcement by the Trustee

 

(a)                                  Subject to the provisions of Section 9.15
and to the provisions of any Extraordinary Resolution that may be passed by the
Debentureholders, in the event the Corporation shall fail to pay to the
Trustee, forthwith after the same shall have been declared to be due and
payable under Section 9.2, the Obligations, the Trustee shall pursuant to
an Extraordinary Resolution, and upon being indemnified and funded to its
reasonable satisfaction against all costs, expenses and liabilities to be incurred,
but subject to Article 4, proceed in its name as Trustee hereunder to
obtain or enforce payment of the Obligations by such proceedings authorized by
this Trust Indenture or by law or equity as the Trustee in such request shall
have been directed to take, or if such request contains no such direction, or
if the Trustee shall act without such request, then by such proceedings
authorized by this Trust Indenture or by suit at law or in equity as the
Trustee shall deem expedient.

 

(b)                                 The Trustee shall be entitled and
empowered, either in its own name or as trustee of an express trust, or as
attorney-in-fact for the Trustee, or in any one or more of such capacities, but
subject to Article 4, to file such proof of debt, amendment of proof of
debt, claim, petition or other

 

38

 

document as may be necessary or advisable
in order to have the claims of the Trustee and of the Debentureholders allowed
in any Creditor Proceedings. The Trustee is hereby irrevocably appointed (and
the successive respective Debentureholders by taking and holding Debentures
shall be conclusively deemed to have so appointed the Trustee) the true and
lawful attorney-in-fact of the respective Debentureholders with authority to
make and file in the respective names of the Debentureholders or on behalf of
the Debentureholders as a class, subject to deduction from any such claims of
the amounts of any claims filed by any of the Debentureholders themselves, any
proof of debt, amendment of proof of debt, claim, petition or other document in
any Creditor Proceedings and to receive payment of any sums becoming
distributable on account thereof, and to execute any such acts and things for
and on behalf of such Debentureholders as may be necessary or advisable in the
opinion of the Trustee, in order to have the respective claims of the Trustee
and of the Debentureholders against the Corporation or its property allowed in
any such proceeding, and to receive payment of or on account of such claims,
provided, however, that (i) nothing contained in this Trust Indenture
shall be deemed to give to the Trustee, unless so authorized by Extraordinary
Resolution, any right to accept or consent to any plan of reorganization or
otherwise by action of any character in such proceeding to waive or change in
any way any right of the Debentureholders, and (ii) all such rights shall
be subject to Article 4.

 

(c)                                  The Trustee shall also have power at any
time and from time to time, but subject to Article 4, to institute and to
maintain such suits and proceedings as it may be advised shall be necessary or
advisable to preserve and protect its interest and the interests of the
Debentureholders.

 

(d)                                 All rights of action hereunder may be
enforced, subject to Article 4, by the Trustee without the possession of
any of the Debentures or the production thereof in the trial or other
proceedings relative thereto.  Any such
suit or proceeding instituted by the Trustee shall be brought in the name of
the Trustee as trustee of an express trust, and any recovery of judgment shall
be for the rateable benefit of the Debentureholders subject to the provisions
of this Trust Indenture.  In any
proceeding brought by the Trustee (and also any proceeding in which a
declaratory judgment of a court may be sought as to the interpretation or
construction of any provision of this Trust Indenture, to which the Trustee
shall be a party) the Trustee shall be held to represent all of the
Debentureholders, and it shall not be necessary to make any Debentureholders
party to any such proceeding.

 

9.14                                                                        No Suits by Debentureholders

 

No
Debentureholder shall have any right to institute any action, suit or
proceeding at law or in equity for the purposes of enforcing payment of the
Principal Sum or Interest on the Debentures or for the execution of any trust
or power hereunder or for the appointment of a liquidator or receiver or for a
receiving order under the Bankruptcy and
Insolvency Act (Canada) or to have the Corporation wound up or to
file or prove a claim in any liquidation or bankruptcy proceeding or for any
other remedy hereunder, unless: (i) such Debentureholder shall previously
have given to the Trustee written notice of the happening of an Event of
Default hereunder; (ii) the Debentureholders by Extraordinary Resolution
shall have made a request to the Trustee and the Trustee shall have been
afforded reasonable opportunity either itself to proceed to exercise the powers
hereinbefore granted or to institute an action, suit or proceeding in its name
for such purpose; (iii) the Debentureholders or any of them shall have
furnished to the Trustee, when so requested by the Trustee, sufficient funds or
security therefor and an indemnity satisfactory to the Trustee to cover the
costs, expenses and liabilities to be incurred therein or thereby; (iv) the
Trustee shall have failed to act within a reasonable time of receipt of such
notification, request and offer of funds and indemnity and such notification,
request and offer of funds and indemnity are hereby declared in

 

39

 

every such case, at the option of the Trustee, to be conditions
precedent to any such proceedings; and (v) the bringing of such action,
suit or proceeding would not be contrary to Article 4.

 

9.15                                                                        Application of Monies by Trustee

 

Except
as herein otherwise expressly provided, any money received by the Trustee from
the Corporation pursuant to the foregoing provisions of this Article 9, or
as a result of legal or other proceedings or from any trustee in bankruptcy or
liquidator of the Corporation, shall be applied, together with any other monies
in the hands of the Trustee available for such purpose as follows:

 

(a)                                  first, in payment or in reimbursement of
the Trustee and any Receiver of its compensation, costs, charges, expenses,
borrowings, advances or other monies furnished or provided by or at the
instance of the Trustee in or about the execution of its trusts under, or
otherwise in lawful relation to, this Trust Indenture, with interest thereon as
herein provided;

 

(b)                                 second, but subject as hereinafter in this Section 9.15
provided, in payment, rateably and proportionately, to the Debentureholders on
account of accrued and unpaid Interest and Interest on amounts in default; and
thereafter, on account of the Principal Sum; unless otherwise directed by
Extraordinary Resolution and in that case in such order or priority as between
Principal Sum and Interest as may be directed by such resolution;

 

(c)                                  third, in payment of the surplus, if any,
of such monies to the Corporation or its assigns;

 

provided, however, that no payment shall be
made pursuant to Section 9.15(b) above contrary to Article 4 or
with respect to the Principal Sum or Interest on any Debenture held, directly
or indirectly, by or for the benefit of the Corporation or any Subsidiary of
the Corporation (other than any Debenture pledged for value and in good faith
to a Person other than the Corporation or any Subsidiary of the Corporation but
only to the extent of such Person’s interest therein) except subject to the
prior payment in full of the Principal Sum and Interest of all Debentures which
are not so held.

 

9.16                                                                        Distribution of Proceeds

 

Payments
to Debentureholders pursuant to Section 9.15(b) shall be made as
follows:

 

(a)                                  at least 15 days’ notice of every such
payment shall be given specifying the time when and the place or places where
the Debentures are to be presented and the amount of the payment and the
application thereof as between Principal Sum and Interest;

 

(b)                                 payment of any Debenture shall be made upon
presentation thereof at any one of the places specified in such notice and any
such Debenture thereby paid in full shall be surrendered, otherwise a
memorandum of such payment shall be endorsed thereon; but the Trustee may in
its discretion dispense with presentation and surrender or endorsement in any
special case upon such indemnity being given to it as it shall deem sufficient;

 

(c)                                  from and after the date of payment
specified in the notice, Interest shall accrue only on the amount owing on each
Debenture after giving credit for the amount of the payment specified in such
notice; and

 

(d)                                 the Trustee shall not be bound to apply or
make any partial or interim payment of any monies coming into its hands if the
amount so received by it, after reserving therefrom such amount as the Trustee
may think necessary to provide for the payments mentioned in Section 9.15(a),
is less

 

40

 

than 5% of the Principal Sum, but it may
retain the money so received by it and invest or deposit the same in accordance
with Section 11.9 until the money or the investments representing the
same, with the income derived therefrom, together with any other monies for the
time being under its control shall be at least 5% of the Principal Sum.  The foregoing shall not apply to a final
payment or distribution hereunder.

 

ARTICLE 10

MEETINGS OF DEBENTUREHOLDERS

 

10.1                                                                        Right to Convene Meeting

 

The
Trustee or the Corporation may at any time and from time to time, and the Trustee
shall on receipt of a Request of the Corporation or a Debentureholders’ Request
and upon being indemnified and funded to its reasonable satisfaction by the
Corporation or by the Debentureholders signing such request against the costs
which may be incurred in connection with the calling and holding of such
meeting, convene a meeting of the Debentureholders.  In the event of the Trustee failing within
10 days after receipt of any such request and such indemnity to give
notice convening a meeting, the Corporation or such Debentureholders, as the
case may be, may convene such meeting. 
Every such meeting shall be held in the City of Calgary, or at such
other place as may be approved or determined by the Trustee.

 

10.2                                                                        Notice of Meetings

 

At
least 21 days’ notice of any meeting shall be given to the
Debentureholders by the Corporation or the Trustee, as the case may be, and a
copy thereof shall be sent by courier to the Trustee, unless the meeting has
been called by it.  Such notice shall
state the time at which and place where the meeting is to be held and shall
state briefly the general nature of the business to be transacted thereat.  The accidental omission to give notice of a
meeting to any Debentureholder shall not invalidate any resolution passed at
any such meeting.

 

10.3                                                                        Chairperson

 

A
Person, who need not be a Debentureholder, nominated in writing by the Trustee
shall be chairperson of the meeting and if no Person is so nominated, or if the
Person so nominated is not present within 15 minutes from the time fixed
for the holding of the meeting, the Debentureholders present in Person or by
proxy shall, by majority vote, choose a Person present to be chairperson.

 

10.4                                                                        Quorum

 

Subject
to the provisions of Section 10.12, at any meeting of the Debentureholders
a quorum shall consist of Debentureholders present in person or by proxy and
representing 25% of the Principal
Sum of the Debentures outstanding.  If a
quorum of the Debentureholders shall not be present within 30 minutes from
the time fixed for holding any meeting, the meeting, if summoned pursuant to a
Debentureholders’ Request, shall be dissolved; but in any other case the
meeting shall be adjourned to the same day in the next week (unless such day is
not a Business Day in which case it shall be adjourned to the first Business
Day thereafter) at the same time and place and no notice shall be required to
be given with respect to such adjourned meeting. At the adjourned meeting, the
Debentureholders present in Person or by proxy shall form a quorum and may
transact the business for which the meeting was originally convened
notwithstanding that they may not represent 25% of the Principal Sum of the
Debentures outstanding.  Any business may
be brought before or dealt with at an adjourned meeting which might have been
brought before or dealt with at the original meeting in accordance with the
notice

 

41

 

calling the same.  No business
shall be transacted at any meeting other than an adjourned meeting unless the required
quorum is present at the commencement of business.

 

10.5                                                                        Power to Adjourn

 

The
chairperson of any meeting at which a quorum of the Debentureholders is present
may with the consent of the Debentureholders of a majority of the Principal Sum
of the Debentures represented thereat adjourn any such meeting and no notice of
such adjournment need be given except such notices, if any, as the meeting may
prescribe.

 

10.6                                                                        Show of Hands

 

Every
question submitted to a meeting shall, subject to Section 10.7, be decided
in the first instance by a majority of the votes given on a show of hands.  At any such meeting, unless a poll is duly
demanded as herein provided, a declaration by the chairperson that a resolution
has been carried or carried unanimously or by a particular majority or lost or
not carried by a particular majority shall be conclusive evidence of the
fact.  The chairperson of any meeting
shall be entitled both on a show of hands and on a poll, to vote with respect
to the Debentures, if any, held by him or the Debentureholder whose proxy he
holds.

 

10.7                                                                        Poll

 

On
every Extraordinary Resolution, and on any other question submitted to a
meeting, when demanded by the chairperson or by one or more Debentureholders or
proxies for Debentureholders either before or after a vote by show of hands, a
poll shall be taken in such manner and either at once or after an adjournment
as the chairperson shall direct. 
Resolutions other than Extraordinary Resolutions shall, if a poll is
taken, be decided by the votes of the holders of a majority of the Principal
Sum of the Debentures represented at the meeting and voted on the poll.

 

10.8                                                                        Voting

 

On a
show of hands, every Person who is present and entitled to vote, whether as a
Debentureholder or as proxy for one or more Debentureholders or both, shall
have one vote.  On a poll, each
Debentureholder present in Person or represented by a proxy duly appointed by
an instrument in writing shall be entitled to one vote with respect to each Cdn.
$1,000 Principal Sum of Debentures of which he shall then be the holder or the
proxy for such Debentureholder.  A proxy
need not be a Debentureholder.  In the
case of joint registered Debentureholders, any one of them present in Person or
by proxy at the meeting may vote in the absence of the other or others; but in
case more than one of them shall be present in Person or by proxy, they shall
vote together with respect to the Debentures of which they are joint registered
holders.

 

10.9                                                                        Regulations

 

The
Trustee, or the Corporation with the approval of the Trustee, may from time to
time make and from time to time vary or revoke such regulations as it shall
from time to time think fit providing for and governing:

 

(a)                                  the form of the instrument appointing a
proxy, which shall be in writing, and the manner in which the same shall be
executed and for the production of the authority of any Person signing on
behalf of a Debentureholder;

 

42

 

(b)                                 the deposit of instruments appointing
proxies at such place as the Trustee, the Corporation or the Debentureholder
convening the meeting, as the case may be, may, in the notice convening the
meeting, direct, and the time, if any, before the holding of the meeting or any
adjournment thereof by which the same shall be deposited; and

 

(c)                                  the deposit of instruments appointing
proxies at some approved place or places other than the place at which the
meeting is to be held and enabling particulars of such instruments appointing
proxies to be delivered, mailed or telecopied before the meeting to the
Corporation or to the Trustee at the place where the same is to be held and for
the voting of proxies so deposited as though the instruments themselves were
produced at the meeting.

 

Any regulations so made shall be binding and
effective and the votes given in accordance therewith shall be valid and shall
be counted.  Save as such regulations may
provide, the only Persons who shall be recognized at any meeting as the
Debentureholders, or as entitled to vote or be present at the meeting with
respect thereto, shall be Debentureholders and Persons whom Debentureholders
have by instrument in writing duly appointed as their proxies.

 

10.10                                                                 Persons Entitled to Attend Meetings

 

The
Corporation and the Trustee (by their respective employees, officers and
directors) and the legal advisers of the Corporation, the Trustee and any
Debentureholder, and any other Person permitted by the chairperson to attend,
may attend any meeting of the Debentureholders, but such parties, unless
otherwise entitled to vote as Debentureholders or proxies, shall not be
entitled to vote at such meeting.

 

10.11                                                                 Powers Exercisable by Extraordinary Resolution

 

Subject
to receipt of all regulatory approvals required by Applicable Securities Law in
addition to the powers conferred upon them by any other provision of this Trust
Indenture or by Applicable Law, but subject to the provisions of Section 13.1
and the rights of Debentureholders generally under this Trust Indenture, a
meeting of the Debentureholders shall have the following powers exercisable
from time to time by Extraordinary Resolution:

 

(a)                                  power to sanction any modification,
abrogation, alteration, compromise or arrangement of the rights of the
Debentureholders or the Trustee (with the prior written consent of the Trustee)
against the Corporation or against the Collateral, whether such rights arise
under this Trust Indenture, the Debentures or otherwise;

 

(b)                                 power to assent to any modification of or
change in or addition to or omission from the provisions contained in this
Trust Indenture or any Debenture (collectively, “amendments”), as agreed to by the Corporation, and to
authorize the Trustee to concur in and execute any indenture supplemental
hereto or thereto embodying any amendment; provided that the rights of the
Trustee hereunder shall not be prejudiced thereby;

 

(c)                                  power to sanction any scheme for the
reconstruction or reorganization of the Corporation or for the consolidation,
amalgamation or merger of the Corporation with any other corporation or for the
sale, lease, transfer or other disposition of the undertaking, property and
assets of the Corporation or any part thereof;

 

43

 

(d)                                 power to direct or authorize the Trustee to
exercise any power, right, remedy or authority given to it by this Trust
Indenture in any manner specified in any such Extraordinary Resolution or to
refrain from exercising any such power, right, remedy or authority;

 

(e)                                  power to waive and direct the Trustee to
waive any Event of Default hereunder or cancel any Acceleration Notice
delivered by the Trustee either unconditionally or upon any condition specified
in such Extraordinary Resolution;

 

(f)                                    power to restrain any Debentureholder from
taking or instituting any suit, action or proceeding for the purpose of
enforcing payment of the principal of or interest on the Debentures, or for the
execution of any trust or power hereunder;

 

(g)                                 power to direct any Debentureholder who has
brought any action, suit or proceeding to stay or discontinue or otherwise deal
with the same, upon payment of the costs, charges and expenses reasonably and
properly incurred by such Debentureholder in connection therewith if the taking
of such suit, action or proceeding shall have been permitted by Section 9.14;

 

(h)                                 power to assent to any compromise or
arrangement with any creditor or creditors of any class or classes of
creditors, whether secured or otherwise, and with holders of any shares or
other securities of the Corporation;

 

(i)                                     power to appoint a committee with power and
authority (subject to such limitations, if any, as may be prescribed in any
such Extraordinary Resolution) to exercise, and to direct the Trustee to
exercise, on behalf of the Debentureholders, such of the powers of the Debentureholders
as are exercisable by extraordinary or other resolution as shall be included in
the resolution appointing the committee. 
The Extraordinary Resolution making such appointment may provide for
payment of the expenses and disbursements of and compensation to such
committee.  Such committee shall consist
of such number of Persons as shall be prescribed in the resolution appointing
it and the members need not be Debentureholders.  Every such committee may elect its
chairperson and may make regulations respecting its quorum, the calling of its
meetings, the filing of vacancies occurring in its number and its procedure
generally.  Such regulations may provide
that the committee may act at a meeting at which a quorum is present or may act
by minutes signed by the number of members thereof necessary to constitute a
quorum.  All acts of any such committee
within the authority delegated to it shall be binding upon all
Debentureholders.  Neither the committee
nor any member thereof shall be liable for any loss arising from or in
connection with any action taken or omitted to be taken by it in good faith;

 

(j)                                     power to authorize, subject to Article 4,
the distribution in specie of any shares, bonds, debentures or other securities
or obligations or cash or other consideration received hereunder or the use or
disposal of the whole or any part of such shares, bonds, debentures or other
securities or obligations or cash or other consideration in such manner and for
such purpose as may be deemed advisable and specified in such Extraordinary
Resolution, provided that no such Extraordinary Resolution shall be necessary
to authorize the exercise of the Conversion Right;

 

(k)                                  power to authorize the Trustee or any other
Person or Persons to (i) bid at any sale of the Corporation’s properties
or assets or any part thereof; (ii) borrow the monies required to make any
deposit at said sale or pay the balance of the purchase price and to
hypothecate, mortgage, pledge, charge, cede and transfer the property or assets
so purchased as security for the repayment of the monies so borrowed and
interest thereon, or itself, himself or themselves, as the case may be, to
advance such monies (in which event it, he or they shall have a lien upon the
property or assets so purchased for the amount so advanced and interest
thereon); (iii) hold any property or assets to be

 

44

 

purchased (subject to any hypothec,
mortgage, pledge, charge or lien to secure any monies so borrowed or advanced)
in trust for all the Debentureholders at the time of such sale pro rata in proportion to the amounts due
to them thereon respectively for principal and interest before such sale, and
to sell, transfer and convey the whole or any part or parts of the property or
assets so purchased for such consideration in cash or in the shares, bonds,
debentures or other securities or obligations pursuant to the provisions of Section 10.11(j);
(iv) until the sale, transfer or conveyance of the whole of such property
or assets so purchased, to maintain and operate such part of said property and
assets as has not been disposed of, and for such purposes to borrow monies and
to hypothecate, mortgage, pledge, charge, cede and transfer the property or
assets so purchased, or any part thereof, as security for the repayment of the
monies so borrowed and interest thereon, or itself, himself or themselves, as
the case may be, to advance such monies (in which event it, he or they shall
have a lien upon the property or assets so purchased for the amount so advanced
and interest thereon); and (v) otherwise deal with such property and
assets and the proceeds of any sale, transfer or conveyance thereof as the
Debentureholders may by such Extraordinary Resolution direct;

 

(l)                                     power to remove the Trustee from office and
to appoint a new trustee or trustees;

 

(m)                               power to authorize the Corporation and the
Trustee to grant extensions of time for payment of interest on any of the
Debentures whether or not the interest, the payment with respect to which is
extended, is at the time due or overdue;

 

(n)                                 power to amend, alter or repeal any
Extraordinary Resolution previously passed or sanctioned by the
Debentureholders or by any committee appointed pursuant to Section 10.11(i);
and

 

(o)                                 subject to Article 4, power to
authorize the Trustee to issue an Acceleration Notice and/or to enforce the
Charge.

 

Notwithstanding
anything to the contrary herein contained, no modification or amendment of this
Trust Indenture may be made without the consent of the Debentureholders by
Extraordinary Resolution to:

 

(a)                                  reduce the Principal Sum of the Debentures;

 

(b)                                 reduce the rate of or change or have the
effect of changing the time for payment of Interest, including defaulted
interest, on any Debentures;

 

(c)                                  reduce the principal of or change or have
the effect of changing the fixed maturity of any Debentures;

 

(d)                                 make any Debentures payable in any currency
other than that stated in the Debentures;

 

(e)                                  make any change in provisions of this Trust
Indenture protecting the right of each Debentureholder to receive payment of
the Principal Sum and Interest on such Debenture on or after the Maturity Date
thereof or to bring suit to enforce such payment, or permitting
Debentureholders by Extraordinary Resolution to waive Events of Default;

 

(f)                                    modify or change any provision of this
Trust Indenture or the related definitions affecting the ranking of the
Debentures in a manner which adversely affects the Debentureholders; or

 

(g)                                 amend Section 10.11 or 10.12.

 

45

 

10.12                                                                 Meaning of Extraordinary Resolutions

 

(a)                                  The expression “Extraordinary Resolution” when used in this Trust Indenture
means, subject as hereinafter in this Article provided, a resolution
proposed to be passed as an Extraordinary Resolution at a meeting of
Debentureholders (including an adjourned meeting) duly convened for the purpose
and held in accordance with the provisions of this Article 10 at which the
Debentureholders of not less than 25% in principal amount of the Debentures
outstanding are present in Person or by proxy and passed by the affirmative
votes of the Debentureholders of not less than 66 2/3% of the principal
amount of Debentures represented at the meeting and voted on a poll upon such
resolution.

 

(b)                                 All actions which may be taken and all
powers that may be exercised by the Debentureholders at a meeting held as
hereinbefore in this Article 10 provided may also be taken and exercised
by the Debentureholders of not less than 50% in principal amount of the outstanding
Debentures in the case of such actions and powers not requiring an
Extraordinary Resolution and not less than 662/3% of the
principal amount of the outstanding Debentures in the case of such actions and
powers requiring an Extraordinary Resolution, by an instrument in writing
signed in one or more counterparts and the expression Extraordinary Resolution
when used in this Trust Indenture shall include an instrument so signed.

 

(c)                                  Votes on an Extraordinary Resolution shall
always be given on a poll and no demand for a poll on an Extraordinary
Resolution shall be necessary.

 

10.13                                                                 Powers Cumulative

 

It is
hereby declared and agreed that any one or more of the powers under this Trust
Indenture stated to be exercisable by the Debentureholders by Extraordinary
Resolution or otherwise may be exercised from time to time and the exercise of
any one or more of such powers from time to time shall not be deemed to exhaust
the rights of the Debentureholders to exercise the same or any other such power
or powers thereafter from time to time.

 

10.14                                                                 Minutes

 

Minutes
of all resolutions and proceedings at every meeting as aforesaid shall be made
and duly entered in books to be from time to time provided for that purpose by
the Trustee at the expense of the Corporation, and any such minutes as
aforesaid, if signed by the chairperson of the meeting at which such
resolutions were passed or proceedings had, or by the chairperson of the next
succeeding meeting of the Debentureholders, shall be prima facie evidence of the matters therein stated and,
until the contrary is proved, every such meeting, with respect to the
proceedings of which minutes shall have been made, shall be deemed to have been
duly held and convened, and all resolutions passed thereat or proceedings taken
thereat to have been duly passed and taken.

 

10.15                                                                 Binding Effect of Resolutions

 

Every
resolution and every Extraordinary Resolution passed in accordance with the
provisions of this Article 10 at a meeting of Debentureholders shall be
binding upon all the Debentureholders, whether present at or absent from such
meeting, and every instrument in writing signed by Debentureholders in
accordance with Section 10.12(b) shall be binding upon all
Debentureholders, whether signatories thereto or not, and each and every
Debentureholder and the Trustee (subject to the provisions for its indemnity
herein contained) shall be bound to give effect accordingly to every such
resolution, Extraordinary Resolution and instrument in writing.

 

46

 

10.16                                                                 Evidence of Rights of Debentureholder

 

Any
request, direction, notice, consent or other instrument which this Trust
Indenture may require or permit to be signed or executed by the
Debentureholders may be in any number of counterparts and may be signed or
executed by such Debentureholders in Person or by attorney duly appointed in
writing.  Proof of the execution of any
such request or other instrument or of a writing appointing any such attorney
or (subject to the provisions of this Article 10 with regard to voting at
meetings of Debentureholders) of the holding by any Person of Debentures shall
be sufficient for any purpose of this Trust Indenture if made in the following
manner, namely, the fact and date of execution by any Person of such request or
other instrument or writing may be proved by the certificate of any notary
public, or other officer authorized to take acknowledgments of deeds to be
recorded at the place where such certificate is made, that the Person signing
such request or other instrument in writing acknowledged to him the execution
thereof or by affidavit of a witness of such execution or in any other manner
which the Trustee may consider adequate.

 

The
Trustee may, nevertheless, in its discretion require further proof in cases
where it deems further proof desirable or may accept such other proof as it
shall consider proper.

 

ARTICLE 11

CONCERNING THE TRUSTEE

 

11.1                                                                        No Conflict of Interest

 

The
Trustee represents to the Corporation that at the date of execution and delivery
by it of this Trust Indenture there exists no material conflict of interest in
the role of the Trustee as a fiduciary hereunder.  If, notwithstanding the provisions of this Section 11.1,
such a material conflict of interest exists, the validity and enforceability of
this Trust Indenture, and the Debentures issued hereunder, shall not be
affected in any manner whatsoever by reason only that such material conflict of
interest exists but the Trustee shall, within 90 days after ascertaining
that it has a material conflict of interest, either eliminate such material
conflict of interest or resign in the manner and with the effect specified in Section 11.2.

 

11.2                                                                        Replacement of Trustee

 

(a)                                  The Trustee may resign its trust and be
discharged from all further duties and liabilities hereunder by giving to the
Corporation three months’ notice in writing or such shorter notice as the
Corporation may accept as sufficient.  In
the event of the Trustee resigning or being removed or being dissolved,
becoming bankrupt, going into liquidation or otherwise becoming incapable of
acting hereunder, the Corporation shall forthwith appoint a new Trustee unless
a new Trustee has already been appointed by the Debentureholders; failing such
appointment by the Corporation, the retiring Trustee or any Debentureholder
may, at the expense of the Corporation, apply to a Justice of the Court of
Queen’s Bench of (Alberta), on such notice as such Justice may direct, for the
appointment of a new Trustee; but any new Trustee so appointed by the
Corporation or by the Court shall be subject to removal as herein provided by
the Debentureholders.  Any new Trustee
appointed under any provision of this Section shall be a corporation
authorized to carry on the business of a trust company in all provinces of
Canada.  On any new appointment the new
Trustee shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as Trustee.

 

(b)                                 Any corporation into which the Trustee may
be merged or with which it may be consolidated or amalgamated or any
corporation resulting from any merger, consolidation or amalgamation to

 

47

 

which the Trustee shall be a party, shall
be the successor Trustee under this Trust Indenture without the execution of
any instrument or any further act. 
Nevertheless, upon the written request of the successor Trustee or of
the Corporation, the Trustee ceasing to act shall execute and deliver an instrument
assigning and transferring to such successor Trustee, upon the trusts herein
expressed, all the rights, powers and trusts of the Trustee so ceasing to act,
and shall duly assign, transfer and deliver all property and money held by such
Trustee, and deliver a copy of each Register maintained by such Trustee, to the
successor Trustee so appointed in its place. 
Should any deed, conveyance or instrument in writing from the
Corporation be required by any new Trustee for more fully and effectively
vesting in and confirming to it such estates, properties, rights, powers and
trusts, then any and all such deeds, conveyances and instruments in writing
shall on request of said new Trustee be made, executed, acknowledged and
delivered by the Corporation.

 

11.3                                                                        Duties of Trustee

 

(a)                                  In the exercise of the rights, duties and
obligations prescribed or conferred by the terms of this Trust Indenture, the
Trustee shall exercise that degree of care, diligence and skill that a
reasonably prudent trustee would exercise in comparable circumstances;

 

(b)                                 In addition to all other duties of the
Trustee set forth herein, at all times while any Debentures are outstanding,
the Trustee shall, in addition, have the following responsibilities hereunder:

 

(i)                                     to keep the Corporation’s Debenture ledgers
and Registers of transfers and unissued Debentures and, subject to such general
and particular instructions as may from time to time be given to it by or under
the authority of the Board of Directors (which shall be in the form of a
Written Direction of the Corporation), the Trustee shall:

 

(A)                              record the particulars of all transfer of
Debentures upon the appropriate Register of transfers;

 

(B)                                certify and issue Debentures to the
Debentureholders entitled thereto, representing Debentures held by or
transferred to them, respectively;

 

(C)                                maintain the Register and make such entries
from time to time in the Register as may be necessary in order that the account
of each Debentureholder may be properly and accurately maintained; and

 

(D)                               furnish to the Corporation, at the
Corporation’s expense, at any time such statements, lists, entries, information
and material concerning transfers and other matters prepared and undertaken by
it as Trustee, including all documents, papers, information and material as it
may have and the Corporation may require;

 

(ii)                                  forthwith upon receipt of sufficient monies
from the Corporation, but subject to Article 4, to forward cheques or
other transfers of funds by such means as considered appropriate by the Trustee
representing payments of interest upon the Debentures to the Debentureholders
thereof in accordance with the provisions of Section 2.1(e);

 

(iii)                               upon receipt of sufficient monies upon the
stated or accelerated maturity of the Debentures, but subject to Article 4,
to make all payments of principal or interest on the Debentures to the
Debentureholders thereof as provided in this Trust Indenture; and

 

48

 

(iv)                              promptly as and when due to make such
recordings and filings as may be required to satisfy any statutory or
regulatory duty imposed upon the Trustee and to provide the Debentureholders
with any such statements and records as they may require to comply with any
statutory or regulatory duties imposed upon the Debentureholders in their
capacity as Debentureholders.

 

(c)                                  All Debentures shall be effectively and
interchangeably transferable on the Register regardless of where or when the
Debentures shall have been issued, and entry of the transfer of any Debentures
in the Register shall for all purposes be a complete and valid transfer.

 

(d)                                 The Trustee may use its own judgment in the
performance of its duties as trustee for the Corporation, but at any time it
may apply to the Board of Directors or an officer of the Corporation or to such
counsel as the Corporation may from time to time determine at the expense of
the Corporation, for instructions or advice, and the Corporation will fully
protect and hold the Trustee harmless from all liability for any action taken,
or not taken, by the Trustee in accordance with or pursuant to such
instructions or advice that may be given to it.

 

(e)                                  Subject to Section 11.3(a), except for
its acts of gross negligence or wilful misconduct, the Trustee shall not be
liable for any act done or step taken or omitted by it in good faith, or for
any mistake of fact or law and the Corporation agrees, at all times, to
indemnify and save harmless the Trustee and its agents from and against all
liability, claims, demands, action, suits or other proceedings by whomsoever
made, prosecuted or brought and from all loss, costs, damages and expenses in
any manner based upon, occasioned by or attributable to any act of the Trustee
in the execution of its duties hereunder.

 

(f)                                    The transfer of any Debentures in respect
of a certificate presented to the Trustee may be refused by it (i) as
permitted by this Trust Indenture, or (ii) until it is satisfied that such
certificate is valid, that the endorsement thereon is genuine and that the
transfer requested is legally authorized. 
The Trustee shall not incur any liability by refusing in good faith to
effect any transfer which, in its judgement, is improper or unauthorized, or
which is not required to be effected pursuant to the terms of this Trust
Indenture.

 

(g)                                 The Trustee agrees to faithfully carry out
and perform its duties hereunder and, on termination hereof and upon payment by
the Corporation to the Trustee of all monies owing to the Trustee hereunder, to
deliver over to the Corporation the Register maintained by it and any documents
connected therewith or with the Corporation transacted hereunder, and a receipt
signed by an officer of the Corporation shall be a valid discharge of the
Trustee.

 

11.4                                                                        Reliance Upon Declarations

 

In the
exercise of its rights, duties and obligations hereunder the Trustee may, if
acting in good faith, rely, as to the truth of the statements and accuracy of
the opinions expressed therein, upon statutory declarations, opinions, reports
or certificates furnished pursuant to and in accordance with any covenants,
conditions and requirements of this Trust Indenture.  The Trustee shall not be liable for or by
reason of any statements or recitals in this Trust Indenture or in the
Debentures (except in the Certificate of the Trustee thereon and except as
provided in Section 11.15) or be required to verify the same, but all such
statements or recitals are and shall be deemed to be made by the
Corporation.  The Trustee shall not in
any way be responsible for the consequence of any breach on the part of the
Corporation of any of the Corporation’s covenants contained herein.

 

49

 

11.5                                                                        Evidence and Authority to Trustee

 

(a)                                  The Corporation shall furnish to the
Trustee evidence of compliance with the conditions precedent provided for in this
Trust Indenture relating to any action or step required or permitted to be
taken by the Corporation or the Trustee under this Trust Indenture or as a
result of any obligation imposed under this Trust Indenture, including the
certification and delivery of Debentures hereunder, the satisfaction and
discharge of this Trust Indenture and the taking of any other action to be
taken by the Trustee at the request of or on the application of the
Corporation, forthwith if and when such evidence is required by any other Section of
this Trust Indenture to be furnished to the Trustee or the Trustee, in the
exercise of its rights and duties under this Trust Indenture, gives the
Corporation written notice requiring it to furnish such evidence in relation to
any particular action or obligation specified in such notice.

 

Such
evidence shall consist of:

 

(i)                                     a Certificate of the Corporation stating
that any such condition precedent has been complied with in accordance with the
terms of this Trust Indenture; and

 

(ii)                                  in the case of a condition precedent for
which compliance with is, by the terms of this Trust Indenture, made subject to
review or examination by a solicitor, an opinion of Counsel that such condition
precedent has been complied with in accordance with the terms of this Trust
Indenture.

 

(b)                                 Whenever such evidence relates to a matter
other than the certification and delivery of Debentures and the satisfaction
and discharge of this Trust Indenture, and except as otherwise specifically
provided herein, such evidence may consist of a report or opinion of any
solicitor, auditor, accountant, engineer or appraiser or any other Person whose
qualifications give authority to a statement made by him, provided that if such
report or opinion is furnished by a director, officer or employee of the
Corporation, it shall be in the form of a statutory declaration.

 

(c)                                  Each statutory declaration, certificate,
opinion or report with respect to compliance with a condition precedent
provided for in this Trust Indenture shall include: (i) a statement by the
Person giving the evidence that he has read and is familiar with those
provision of this Trust Indenture relating to the condition precedent in
question; (ii) a brief statement of the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such evidence are based; (iii) a statement that in the belief of the
Person giving such evidence, he has made such examination or investigation as
is necessary to enable him to make the statements or give the opinions
contained or expressed therein; and (iv) a statement whether in the
opinion of such Person the conditions precedent in question have been complied
with or satisfied.

 

(d)                                 The Corporation shall furnish to the
Trustee annually, on the anniversary date of this Trust Indenture and at any
other reasonable time if the Trustee so requires, a Certificate of the
Corporation to the effect that it has complied with all covenants, conditions
or other requirements contained in this Trust Indenture, the non-compliance
with which would, with the giving of notice or the lapse of time, or both, or
otherwise, constitute an Event of Default, or if such is not the case,
specifying the covenant, condition or other requirement which has not been
complied with and giving particulars of such non-compliance.  The Corporation shall, whenever the Trustee
so requires, furnish the Trustee with evidence by way of statutory declaration,
opinion, report or certificate as specified by the Trustee as to any action or
step required or permitted to be taken by the Corporation or as a result of any
obligation imposed by this Trust Indenture.

 

50

 

11.6                                                                        Certificate of the Corporation as Evidence

 

Except
as otherwise specifically provided or prescribed by this Trust Indenture,
whenever in the administration of the provisions of this Trust Indenture the
Trustee shall deem it necessary or desirable that a matter be proved or
established prior to taking or omitting any action hereunder the Trustee, if
acting in good faith, may request and rely upon a Certificate of the
Corporation.

 

11.7                                                                        Experts, Advisers and Agents

 

In
relation to this Trust Indenture, the Trustee may act on the opinion or advice
of or information obtained from any solicitor, auditor, valuator, engineer,
surveyor, appraiser or other expert, whether obtained by the Trustee or by the
Corporation, or otherwise, and may employ such assistants as may be necessary
to the proper discharge of its duties and may pay proper and reasonable
compensation for all such legal and other advice or assistance as aforesaid.

 

11.8                                                                        Documents Held by Trustee

 

Any
securities, documents of title or other instruments that may at any time be
held by the Trustee subject to the trusts hereof may be placed in the deposit
vaults of the Trustee or of any Canadian chartered bank or trust company or
deposited for safekeeping with any such bank or trust company.

 

11.9                                                                        Investments of Monies by Trustee

 

(a)                                  Unless herein otherwise expressly provided,
any money held pending the application or withdrawal thereof under any
provision of this Trust Indenture may be deposited in the name of the Trustee
in any Schedule 1 Canadian chartered bank at the rate of interest then
current on similar deposits or, with the Consent of the Corporation, may be:

 

(i)                                     deposited in the deposit department of the
Trustee or of any other loan or trust company authorized to accept deposits
under the laws of Canada or a province thereof; or

 

(ii)                                  invested in securities issued or guaranteed
by the Government of Canada or a province thereof or in obligations, maturing
not more than one year from the date of investment, of any Schedule 1
Canadian chartered bank.

 

(b)                                 Unless the Corporation is in default
hereunder, all interest or other income received by the Trustee in respect of
deposits and investments will belong to the Corporation.  Nothing herein contained shall restrict or
prohibit the Trustee, in its personal or any other capacity (other than in its
capacity as Trustee herein), from buying, selling, lending upon or dealing in
the Debentures or other securities of the Corporation or from generally
contracting or entering into financial or other transactions with the
Corporation, nor shall the Trustee be liable to account to any Debentureholders
of the Debentures for any profits made by the Trustee as a consequence of any
such transactions.

 

11.10                                                                 Trustee Not Ordinarily Bound

 

Except
as specifically provided in this Trust Indenture, the Trustee shall not,
subject to Section 11.3, be bound to give notice to any Person of the
execution hereof, nor to do, observe or perform or see to the observance or
performance by the Corporation of any of the obligations herein imposed upon
the Corporation or of the covenants on the part of the Corporation herein
contained unless the Trustee

 

51

 

shall have been required to do so by an Extraordinary Resolution, and
then only after it shall have been funded and indemnified to its satisfaction
against all actions, proceedings, claims and demands to which it may render
itself liable and all costs, charges, damages and expenses which it may incur
by so doing, nor in any way or at any time or on any conditions to supervise or
interfere with the conduct of the Corporation’s business.

 

11.11                                                                 Trustee Not Required to Give Security

 

The
Trustee shall not be required to give any bonds or security with respect to the
execution of the trusts and powers of this Trust Indenture or otherwise in
respect of this Trust Indenture.

 

11.12                                                                 Trustee Not to Be Appointed Receiver

 

The
Trustee and any Person related to the Trustee shall not be appointed a receiver
or receiver and manager or liquidator of all or any part of the assets or
undertakings of the Corporation.

 

11.13                                                                 Trustee Not Bound to Act

 

Except
as in this Trust Indenture otherwise specifically provided, the Trustee shall
not be bound to act in accordance with any direction or Request of the
Corporation or of the Directors until a duly authenticated copy of the
instrument or Resolution containing such direction or request shall have been
delivered to the Trustee, and the Trustee shall be empowered to act upon any
such copy purporting to be authenticated by the Trustee to be genuine.

 

11.14                                                                 Conditions Precedent to Trustee’s Obligations to Act Hereunder

 

(a)                                  The obligation of the Trustee to commence
or continue any act, action or proceeding for the purpose of enforcing the
rights of the Trustee and of the Debentureholders hereunder shall be
conditional upon the Debentureholders furnishing, when required by notice in
writing by the Trustee, sufficient funds to commence or continue such act,
action or proceeding and an indemnity reasonably satisfactory to the Trustee to
protect and hold harmless the Trustee against the costs, charges and expenses
and liabilities to be incurred thereby and any loss and damage it may suffer by
reason thereof.

 

(b)                                 None of the provisions contained in this
Trust Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties or
in the exercise of any of its rights or powers unless indemnified as aforesaid.

 

(c)                                  The Trustee may, before commencing or at
any time during the continuance of any such act, action or proceeding, require
the Debentureholders at whose instance it is acting to deposit as security with
the Trustee the Debentures held by them.

 

11.15                                                                 Authority to Carry on Business

 

The
Trustee represents to the Corporation that at the date of execution and
delivery by it of this Trust Indenture it is authorized to carry on the
business of a trust company in Alberta. 
If the Trustee ceases to be so authorized to carry on business, the
validity and enforceability of this Trust Indenture and the Debentures shall
not be affected in any manner whatsoever by reason only of such event but the
Trustee shall within 90 days after ceasing to be authorized to carry on
the business of a trust company in Alberta either become so authorized or
resign in the manner and with the effect specified in Section 11.2.

 

52

 

11.16                                                                 Acceptance of Trust

 

The
Trustee hereby accepts the trusts in this Trust Indenture declared and provided
for and agrees to perform the same upon the terms and conditions herein set
forth and to hold all rights, privileges and benefits conferred hereby and by
law in trust for the various Persons who shall from time to time be
Debentureholders, subject to all the terms and conditions herein set forth.

 

11.17                                                                 Indemnity of Trustee

 

In
addition to and without limiting any protection of the Trustee hereunder or
otherwise by law, the Corporation hereby indemnifies the Trustee and saves it
and its officers, directors, employees, shareholders and agents harmless from
all liabilities, suits, damages, costs, expenses and actions which may be
brought against or suffered by it arising out of or connected with the
performance by it of its duties hereunder, except to the extent that such
liabilities, suits, damages, costs or actions are attributable to the gross
negligence, wilful misconduct or bad faith of the Trustee.  Notwithstanding any other provision hereof,
this indemnity shall survive any removal or resignation of the Trustee,
discharge of this Trust Indenture and termination of any trusts thereunder.

 

11.18                                                                 Environmental Indemnity

 

(a)                                  The Corporation hereby indemnifies and
holds harmless the Trustee, its directors, officers, employees, and agents, and
all of their respective representatives, heirs, successors and assigns
(collectively, the “Indemnified Parties”)
against any loss, expenses, claim, proceedings, judgment, liability or asserted
liability (including strict liability and including costs and expenses of
abatement and remediation of spills or releases of contaminants and including liabilities
of the Indemnified Parties to third parties, including governmental agencies,
in respect of bodily injuries, property damage, damage to or impairment of the
environment or any other injury or damage (and including liabilities of the
Indemnified Parties to third parties for the third parties’ foreseeable and
unforeseeable consequential damages) incurred as a result of:

 

(i)                                     the administration of the trust created
hereby;

 

(ii)                                  the exercise by the Trustee of any rights
hereunder which may result from or relate, directly or indirectly, to:

 

(A)                              the presence or release of any
contaminants, by any means or for any reason, on any real property owned or
controlled by the Corporation (the “Property”),
whether or not release or presence of the contaminants was under the control,
care or management of the Corporation or of a previous owner, or of a tenant;

 

(B)                                any contaminant present on or released from
any contiguous property to the Property; or

 

(C)                                the breach or alleged breach of any
environmental laws by the Corporation;

 

but
excluding any liability arising from the gross negligence or wilful misconduct
of the Trustee.

 

(b)                                 For purposes of this Section, “liability”
shall include (i) liability of an Indemnified Party for costs and expenses
of abatement and remediation of spills and releases of contaminants, (ii) liability
of an Indemnified Party to a third party to reimburse the third party for
bodily injuries, property damages and other injuries or damages which the third
party suffers, including (to the extent, if

 

53

 

any, that the Indemnified Party is liable
therefor) foreseeable and unforeseeable consequential damages suffered by the
third party, (iii) liability of the Indemnified Party for damage suffered
by the third party, (iv) liability of an Indemnified Party for damage to
or impairment of the environment, and (v) liability of an Indemnified
Party for courts costs, expenses of alternative dispute resolution proceedings,
and fees and disbursements of expert consultants and legal counsel on a
solicitor and client basis.

 

ARTICLE 12

NOTICES

 

12.1                                                                        Notice

 

Any
notice required or permitted to be given hereunder shall be in writing and
given by delivering, by registered mail or courier, or by transmitting by
telecopier (in the case of the Corporation or the Trustee):

 

(a)                                  to the Corporation at:

 

	
  Signet
  Energy Inc.

  
	
  #1818, 144 –
  4th Avenue SW

  
	
  Calgary,
  Alberta

  
	
  T2P 3N4

  
	
   

  
	
  Attention:

  	
  C.W. Leigh
  Cassidy

  
	
  Telecopier:

  	
  (403) 238-5339

  

 

(b)                                 to the Debentureholder at the address
appearing on the Register, and if, in the case of joint Debentureholders, more
than one address appears in the Register in respect of such joint holding,
notice shall be addressed to the first address so appearing, or at the option
of such party giving notice, such notice may be given by publication twice in
the Report on Business section of the National Edition of the Globe and
Mail or similar section of any newspaper having national circulation in
Canada; provided further that if there is no newspaper having national
circulation, then by publishing twice in the business section of a
newspaper in each city where the Register is maintained;

 

(c)                                  to the Trustee at its principal office in
the City of Calgary at:

 

	
  Valiant
  Trust Company

  
	
  Suite 310,
  606 – 4th Street S.W.

  
	
  Calgary,
  Alberta

  
	
  T2P 1T1

  
	
   

  
	
  Attention:

  	
  Manager,
  Corporate Trust

  
	
  Telecopier:

  	
  (403) 233-2857

  

 

Any notice given as aforesaid shall be deemed
to have been given at the time delivered or telecopied (provided complete
transmission is confirmed) if delivered or telecopied to the recipient on a
Business Day (in the city in which the addressee is located) and before 4:30 p.m.
(local time in the city in which the addressee is located) on such Business
Day, and otherwise shall be deemed to be given at 9:00 a.m. (local time in
the city in which the addressee is located) on the next following Business Day
or, in the case of notice being given by registered mail, on the third Business
Day following the date of mailing, or, in the

 

54

 

case of notice being given by publication, on
the Business Day following the day of second publication of such notice.  Any party may change its address for notice
by notice to the other parties hereto given in the manner herein provided.

 

ARTICLE 13

SUPPLEMENTAL INDENTURES

 

13.1                                                                        Supplemental Indenture

 

From
time to time the Trustee and, when authorized by a resolution of the Directors,
the Corporation, may, and they shall when required by this Trust Indenture,
execute, acknowledge and deliver by their proper officers, deeds or indentures
supplemental hereto, which thereafter shall form part hereof, for any one or
more of the following purposes:

 

(a)                                  adding to the covenants of the Corporation
herein contained for the protection of the Debentureholders or providing for
Events of Default in addition to those herein specified;

 

(b)                                 making such provisions not inconsistent
with this Trust Indenture as may be necessary or desirable with respect to
matters or questions arising hereunder, including the making of any
modifications in the form of the Debentures which do not affect the substance
thereof, provided that the Trustee shall be of the opinion based on the advice
of Counsel that such provisions and modifications will not be prejudicial to
the interests of the Debentureholders or the Trustee;

 

(c)                                  giving effect to any Extraordinary
Resolution passed as provided in Article 10;

 

(d)                                 issuing the Subsequent Debentures, provided
that such Subsequent Debentures:

 

(i)                                     are subordinate to or rank pari passu with the Debentures and the
Prior Debentures; and

 

(ii)                                  qualify as Permitted Debt hereunder;

 

(e)                                  confirming for the purposes of any
Successor Corporation the rights provided to a Successor Corporation hereunder
and so as to ensure any such Successor Corporation is able to enforce the
provisions of this Trust Indenture applicable to it; and

 

(f)                                    for any other purpose not inconsistent with
the terms of this Trust Indenture.

 

The
Trustee may also, without the consent or concurrence of the Debentureholders,
by supplemental indenture or otherwise, concur with the Corporation in making
any changes or corrections in this Trust Indenture which it shall have been
advised by Counsel are required for the purpose of curing or correcting any ambiguity
or defective or inconsistent provisions or clerical omissions or mistakes or
manifest errors contained herein or in any deed or indenture supplemental or
ancillary hereto, provided that in the opinion of Counsel the rights of the
Trustee and the Debentureholders are in no way prejudiced thereby.

 

13.2                                                                        Indenture Confirming or Evidencing Subordination

 

From
time to time the Trustee may, and shall when requested by a holder of Permitted
Senior Debt, execute, acknowledge and deliver by its proper officers, such
deeds, documents, instruments or indentures as may be reasonably required by
such holder of Permitted Senior Debt, to confirm,

 

55

 

evidence or give effect to any of the provisions of Article 4 of
this Trust Indenture or to ensure that any holders of Permitted Senior Debt
receive the full benefit of the provisions of Article 4.

 

ARTICLE 14

SUCCESSOR CORPORATIONS

 

14.1                                                                        Successor Corporation to the Corporation

 

The
Corporation may, directly or indirectly, sell, lease, transfer or otherwise
dispose of all or substantially all of its property and assets as an entirety
to any other corporation or may amalgamate, consolidate or merge with or into
any other corporation (any such corporation to which such property and assets
are disposed or with which or into which the Corporation is consolidated,
amalgamated or merged referred to as a “Successor
Corporation”) provided that:

 

(a)                                  the Successor Corporation shall execute,
prior to or contemporaneously with the consummation of any such transaction, an
indenture supplemental hereto, together with such instruments as are
satisfactory to the Trustee, acting reasonably, as in the opinion of Counsel
are necessary or advisable to evidence the assumption by the Successor Corporation
of the obligations of the Corporation hereunder and under the Debentures and
the covenant of the Successor Corporation to observe and perform all of the
covenants and obligations of the Corporation under this Trust Indenture;

 

(b)                                 such transaction shall be on such terms as
substantially preserve and do not impair, in the reasonable opinion of the
Board of Directors, any material rights or powers of the Trustee or of the
Debentureholders hereunder or under the Debentures and upon such terms as are not
prejudicial in any material manner to the interests of the Debentureholders;

 

(c)                                  no condition or event shall exist as to the
Corporation at the time of or immediately after the consummation of any such
transaction after giving full effect thereto, or immediately after the
Successor Corporation complying with the provisions of Section 14.1(a) above,
which constitutes a Default hereunder; and

 

(d)                                 such transaction has been approved by an
Extraordinary Resolution.

 

14.2                                                                        Vesting of Powers in Successor Corporation

 

Whenever
the conditions of Section 14.1 have been duly observed and performed, the
Successor Corporation shall possess and from time to time may exercise each and
every right and power of the Corporation under this Trust Indenture in the name
of the Corporation or otherwise and any act or proceeding by any provision of
this Trust Indenture required to be done or performed by any director or
officer of the Corporation may be done and performed with like force and effect
by the directors or officers of such Successor Corporation.

 

ARTICLE 15

GENERAL

 

15.1                                                                        Entire Agreement

 

Other
than the Subscription Agreement entered into by each Debentureholder and
accepted by the Corporation and the Agency Agreement between the Corporation
and MGI Securities Inc., in each case in connection with the issuance of the
Debentures, this Trust Indenture constitutes the

 

56

 

entire agreement between the parties hereto relating to the subject
matter hereof and supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties and there are no general or specific warranties, representations or
other agreements by or among the parties in connection with the entering into
of this Trust Indenture or the subject matter hereof except as specifically set
forth herein and as set out in such Subscription Agreements and Agency
Agreement.

 

15.2                                                                        Amendments

 

This
Trust Indenture may be altered or amended in accordance with the provisions
contained herein provided such changes are in writing and signed by the parties
hereto.

 

15.3                                                                        Further Assurances

 

The
parties hereto and each of them do hereby covenant and agree to do such things
and execute such further documents, agreements and assurances as may be
necessary or advisable from time to time in order to carry out the terms and
conditions of this Trust Indenture in accordance with their true intent.

 

15.4                                                                        Unenforceable Terms

 

If any
term, covenant or condition of this Trust Indenture, or the applicability
thereof to any party or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Trust Indenture or application of such term,
covenant or condition to a party or circumstance other than those to which it
is held invalid or unenforceable shall not be affected thereby and each
remaining term, covenant or condition of this Trust Indenture shall be valid
and shall be enforceable to the fullest extent permitted by law.

 

15.5                                                                        Trustee Indenture Legislation

 

(a)                                  The expression “Indenture Legislation”
means the provisions, if any, of Part 7, Division 1 of the Business Corporations Act (Alberta) and
the relevant provision of any other statute of Canada or any province or
territory thereof, and of any regulation under any such statute, relating to
trust indentures and to the rights, duties and obligations of trustees under
trust indentures and of companies issuing debt obligations under trust
indentures, to the extent that such provisions are at the time in force and
applicable to this Trust Indenture or the Corporation.

 

(b)                                 The Corporation and the Trustee agree that
each will at all times in relation to this Trust Indenture and any action to be
taken hereunder, observe and comply with and be entitled to the benefits of
Indenture Legislation.

 

(c)                                  If and to the extent that any provision of
this Trust Indenture limits, qualifies or conflicts with any mandatory
requirement of Indenture Legislation, such mandatory requirement shall prevail.

 

15.6                                                                        Severability

 

If any
one or more of the provisions or parts thereof contained in this Trust
Indenture should be or become invalid, illegal or unenforceable in any respect
in any jurisdiction, the remaining provisions or parts thereof contained herein
shall be and shall be conclusively deemed to be, as to such jurisdiction,
severable therefrom and:

 

57

 

(a)                                  the validity, legality or enforceability of
such remaining provisions or parts thereof shall not in any way be affected or
impaired by the severance of the provisions or parts thereof severed; and

 

(b)                                 the invalidity, illegality or
unenforceability of any provision or any part thereof contained in this Trust
Indenture in any jurisdiction shall not affect or impair such provision or part
thereof or any other provisions of this Trust Indenture in any other
jurisdiction.

 

15.7                                                                        Meaning of “Collateral” and “Obligations” on Amalgamation

 

The
Corporation acknowledges and agrees that in the event it amalgamates or
otherwise merges with any other Person as permitted by the terms of this Trust
Indenture, it is the intention of the parties hereto that the term “Corporation”
when used herein shall apply to each of the amalgamating companies and to the
amalgamated company, such that the Charge shall:

 

(a)                                  extend to “Collateral” (as that term is
herein defined) owned by each of the amalgamating companies and the amalgamated
company at the time of amalgamation or other merger and to any “Collateral”
thereafter owned or acquired by the amalgamated company; and

 

(b)                                 secure the “Obligations” (as that term is
herein defined) of each of the amalgamating companies and the amalgamated
company to the Trustee and the Debentureholders at the time of amalgamation and
any “Obligations” of the amalgamated company to the Trustee and the
Debentureholders thereafter arising.

 

The Charge shall attach to the “Collateral”
owned by each company amalgamating with the Corporation, and by the amalgamated
company, at the time of amalgamation, and shall attach to any “Collateral”
thereafter owned or acquired by the amalgamated company when such becomes owned
or is acquired.

 

15.8                                                                        Enurement

 

This
Trust Indenture and all its provisions shall enure to the benefit of, and shall
be binding upon, the Corporation, the Trustee, each Debentureholder and their
respective successors and permitted assigns.

 

15.9                                                                        Execution

 

This
Trust Indenture may be simultaneously executed in several counterparts
(including by telefax), each of which when so executed shall be deemed to be an
original and such counterparts together shall constitute one and the same
instrument.

 

58

 

15.10                                                                 Formal Date

 

For the
purpose of convenience this Trust Indenture may be referred to as bearing
formal date as set out on the first page hereof irrespective of the actual
date of execution hereof.

 

IN WITNESS WHEREOF the parties hereto have executed these presents under their
respective corporate seals and the hands of their proper officers in that
behalf.

 

	
   

  	
  SIGNET ENERGY INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ C.W.
  Leigh Cassidy

  
	
   

  	
   

  	
  Name: C.W.
  Leigh Cassidy

  
	
   

  	
   

  	
  Title:
  Executive Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VALIANT TRUST COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ J.
  Robert Morris

  
	
   

  	
   

  	
  Name: J.
  Robert Morris

  
	
   

  	
   

  	
  Title:
  General Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/
  Concepcion Jalbuena

  
	
   

  	
   

  	
  Name:
  Concepcion Jalbuena

  
	
   

  	
   

  	
  Title:
  Manager Income Trust

  

 

59

 

SCHEDULE A

 

To the Trust Indenture dated as
of December 20, 2005 providing for the issue of 7.0% Secured Convertible
Debentures of Signet Energy Inc.

 

PERMITTED ENCUMBRANCES

 

“Permitted
Encumbrances” means as of any
particular time in relation to the Collateral any of the following Security
Interests or rights:

 

(a)                                  Security Interests for taxes, assessments
or governmental charges and other statutory Security Interests which (i) are
not at the time due or delinquent or (ii) relate to claims being
diligently contested at the time in good faith by the Corporation;

 

(b)                                 Security Interests of any judgments
rendered, or claims filed, against the Corporation which the Corporation shall
be contesting in good faith if, and for so long as, a stay of enforcement of
such judgment or claim (if enforceable by seizure, sale or other remedy against
any property), as the case may be, shall be in effect;

 

(c)                                  builder’s, carrier’s, warehouseman’s,
mechanic’s, operator’s or other similar liens incidental to construction or
operations which (i) have not at such time been filed pursuant to law and
relate to obligations not due or delinquent or (ii) relate to obligations
being contested at the time in good faith by the Corporation;

 

(d)                                 Security Interests in favour of a public
utility or any municipality or governmental or other authority when required by
such public utility or municipality or other authority in connection with the
operations of the Corporation in the ordinary course of business, which in the
aggregate do not detract materially from the value of any part of the
Collateral or its use in the operations of the Corporation;

 

(e)                                  easements, rights-of-way, servitudes or
other similar rights in land granted to or reserved or taken by other Persons
which singly and in the aggregate do not materially detract from the value of
the land concerned or materially impair its use in the operation of the
business of the Corporation;

 

(f)                                    Security Interests incurred or created in
the ordinary course of business and in accordance with sound industry practice
in respect of any of the Collateral as security in favour of any other Person
which is conducting the exploration, development or operation of the property
to which such Security Interests relate to the costs and expenses of such
exploration, development or operation, which have not at such time been filed
pursuant to law and which relate to obligations not due or delinquent;

 

(g)                                 surface rights for railways, sewers,
drains, gas and, gas and water mains, electric light and power and telephone or
telegraph or cable television conduits, poles, wires and cables granted to or
reserved or taken by other Persons which singly and in the aggregate do not
materially detract from the value of the land concerned or materially impair
its use in the operation of the business of the Corporation;

 

(h)                                 purchase money Security Interests, upon or
in any property acquired or held by the Corporation in the ordinary course of
business, to secure the purchase price of such property or to secure
indebtedness incurred solely for the purpose of financing the acquisition of
such property and

 

 

Security Interests existing on such
property at the time of its acquisition (other than any such Security Interest
created in contemplation of such acquisition);

 

(i)                                     Security Interests incurred or, trusts or
deposits arising in connection with workers’ compensation, unemployment
insurance, pension, employment or other social benefit laws or regulations or
any judgment under such laws or regulations; provided, however (i) the
Corporation’s obligations thereunder are not at the time due or delinquent, or (ii) the
validity of which is being contested by the Corporation in good faith and by
appropriate proceedings, provided that no execution in respect of such Security
Interest, trust or deposit has been initiated or, if initiated, such execution
has been stayed, and (iii) all such failures in the aggregate have no
material adverse effect on the financial condition of the Corporation;

 

(j)                                     Security Interests securing the performance
of bids, tenders, leases, contracts (other than for the repayment of borrowed
money), statutory obligations, surety and appeal bonds and performance bonds
and other obligations of like nature, incurred as an incident to and in the
ordinary course of business;

 

(k)                                  Security Interests in favour of holders of
Permitted Senior Debt;

 

(l)                                     Security Interests in favour of the holders
of Subsequent Debentures;

 

(m)                               Security Interests hereof or otherwise in
favour of the Trustee; and

 

(n)                                 any other Security Interest consented to in
writing by the Trustee and authorized by the Debentureholders acting by
Extraordinary Resolution.

 

2

 

SCHEDULE B

 

To the Trust Indenture dated as
of December 20, 2005 providing for the issue of 7.0% Secured Convertible
Debentures of Signet Energy Inc.

 

FORM OF DEBENTURE

 

UNLESS PERMITTED
UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE
SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND A DAY AFTER THE LATER OF (i) DECEMBER 20,
2005, AND (ii) THE DATE THE CORPORATION BECAME A REPORTING ISSUER IN ANY
PROVINCE OR TERRITORY.

 

	
  No. •

  	
   

  	
  Cdn. $•

  

 

SIGNET ENERGY INC.

 

(A corporation existing under the
Business Corporations Act
(Alberta))

 

7.00% SECURED CONVERTIBLE
DEBENTURE

DUE NOVEMBER 15, 2007

 

SIGNET ENERGY INC. (the “Corporation”)
for value received hereby acknowledges itself indebted and, subject to the
provisions of the trust indenture dated as of December 20, 2005 (the “Trust Indenture”) between the Corporation
and Valiant Trust Company (the “Trustee”),
promises to pay to the registered holder hereof, on November 15, 2007 (the
“Maturity Date”) or on such
earlier date as the principal amount hereof may become due in accordance with
the provisions of the Trust Indenture, the principal sum of • Canadian Dollars (Cdn. $•) on presentation and
surrender of this Debenture at the principal office of the Trustee in Calgary,
Alberta in accordance with the terms of the Trust Indenture and, subject as
hereinafter provided, to pay interest on the principal amount hereof at the
rate of 7.00% per annum, in like money, in arrears in quarterly instalments
(less any tax required by law to be withheld therefrom) on the last day of
February, May, August and November in each year prior to the Maturity
Date, provided that the last interest payment shall fall due on the Maturity
Date and, should the Corporation at any time make default in the payment of any
principal or interest, to pay interest on the amount in default at the rate of
12% per annum, in like money and on the same dates.  For greater certainty, the first interest
payment will include interest accrued from the date of this Debenture to and
including February 28, 2006.

 

All payments of Principal Sum and Interest on
this Debenture (less any tax required by law to be withheld therefrom) shall be
made by cheque, bank draft or electronic transfer of funds made payable to each
Debentureholder as of the applicable Record Date in respect of such payment and
addressed to the Debentureholder at its last address or account, as the case
may be, appearing on the Register.

 

This Debenture is one of the Debentures of
the Corporation issued or issuable under the provisions of the Trust
Indenture.  The Debentures authorized for
issue are limited to an aggregate principal amount of Cdn. $10,000,000.  Reference is hereby expressly made to the
Trust Indenture for a description of the terms and conditions upon which the
Debentures are to be issued and held and the rights and remedies of the holders
of the Debentures and of the Corporation and of the Trustee, all to the same
effect as if the provisions of the Trust Indenture were herein set forth and to
all of which provisions the holder of this Debenture, by acceptance hereof,
assents.  To the extent that the terms
and conditions

 

 

stated in this
Debenture conflict with the provisions of the Trust Indenture, the provisions
of the Trust Indenture shall govern and prevail.  Capitalized words and phrases not otherwise
defined herein shall take on the meaning ascribed to them in the Trust
Indenture

 

The Debentures are issuable only as fully
registered Debentures in denominations of Cdn. $50,000 and in whole
multiples of Cdn. $1,000 thereafter. 
Upon compliance with the provisions of the Trust Indenture, Debentures
of any denomination may be exchanged for any other authorized denomination or
denominations, any such exchange to be for Debentures of an equivalent
aggregate principal amount.

 

Any part, being Cdn. $1,000 or whole
multiples thereof, of the principal amount of this Debenture is convertible, at
the option of the Debentureholder, upon surrender of this Debenture at the
principal office of the Trustee in Calgary, Alberta, at any time prior to 5:00 p.m.
(Calgary time) on the Business Day prior to the Maturity Date into the nearest
whole number of Common Shares (without adjustment for interest accrued hereon
or for dividends or distributions on Common Shares issuable upon conversion)
calculated by dividing the principal amount of Debentures presented for
conversion by the initial conversion price of Cdn. $1.00 (the “Conversion Price”) per Common Share, all
subject to the terms and conditions and in the manner set forth in the Trust
Indenture.  The Trust Indenture makes
provision for the adjustment of the Conversion Price as a result of certain
events therein specified and described in Article 7 of the Trust
Indenture.  No fractional Common Shares
will be issued on any conversion.  No
adjustment in the number of Common Shares to be issued upon conversion will be
made for distributions or dividends on Common Shares issuable upon conversion
or for interest accrued on any Debentures surrendered for conversion.  Upon conversion, the Debentureholder shall
also receive all accrued and unpaid interest in respect of the principal amount
converted up to the date of conversion.

 

The conversion outlined above is deemed to
occur upon the occurrence of a Going Public Transaction and where such Going
Public Transaction is completed at a price per Common Share (or cash and stock
value per share) below Cdn. $1.15 (subject to adjustment pursuant to Article 7
of the Trust Indenture), the deemed exercise of the conversion shall be
completed at a deemed price equal to the then current Conversion Price
multiplied by a ratio, the numerator of which is the price per Common Share (or
cash and stock value per share) that the Going Public Transaction was completed
at, and the denominator of which is Cdn. $1.15 (subject to adjustment pursuant
to Article 7 of the Trust Indenture).

 

This Debenture is not redeemable by the
Corporation at any time prior to the Maturity Date except in respect of a
Change of Control.  At least 14 Business
Days prior to the scheduled occurrence of a Change of Control, the Corporation
is required to make an offer (a “Change of
Control Offer”) to purchase all of the Debentures at a price equal
to either: (i) 115% of the principal amount of such Debentures (if the
Change of Control occurs on or before September 30, 2006); or (ii) 120%
of the principal amount of such Debentures (if the Change of Control occurs
after September 30, 2006), and, in each case, plus accrued and unpaid
interest up to, but excluding, the date the Debentures are repurchased. 

 

Except as specifically provided for in the
Trust Indenture, the Debentureholders shall have no right to obligate the
Corporation to repurchase the Debentures prior to the Maturity Date.

 

The indebtedness evidenced by this Debenture,
and by all other Debentures now or hereafter certified and delivered under the
Trust Indenture, is a direct secured obligation of the Corporation, and is
subordinated in right of payment, to the extent and in the manner provided in
the Trust Indenture, to the prior payment of all Permitted Senior Debt, whether
outstanding at the date of the Trust Indenture or thereafter created, incurred,
assumed or guaranteed.

 

2

 

The principal hereof may become or be
declared due and payable before the Maturity Date in the events, in the manner,
with the effect and at the times provided in the Trust Indenture.

 

The Trust Indenture contains 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 signed by the holders of a specified majority of
Debentures outstanding, which resolutions or instruments may have the effect of
amending the terms of this Debenture or the Trust Indenture.

 

This Debenture may only be transferred upon
compliance with the conditions prescribed in the Trust Indenture and in
compliance with Applicable Securities Laws. 
No transfer of this Debenture shall be valid unless made on the Register
by the registered holder hereof or his executors or administrators or other
legal representatives, or his or their attorney duly appointed by an instrument
in form and substance satisfactory to the Trustee or other registrar, and upon
compliance with such reasonable requirements as the Trustee and/or other
registrar may prescribe and upon surrender of this Debenture for
cancellation.  Thereupon a new Debenture
or Debentures in the same aggregate principal amount shall be issued to the
transferee in exchange hereof.

 

This Debenture shall not become obligatory
for any purpose until it shall have been certified by the Trustee under the
Trust Indenture.

 

IN WITNESS WHEREOF SIGNET ENERGY INC. has caused this Debenture to be signed by its authorized
representatives as of the 20th day of December, 2005.

 

 

	
   

  	
   

  	
  SIGNET
  ENERGY INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

3

 

TRUSTEE’S CERTIFICATE

 

This Debenture is one of the 7.00% Secured
Convertible Debentures due November 15, 2007 referred to in the Trust
Indenture within mentioned.

 

 

	
  VALIANT TRUST
  COMPANY

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  (Authorized Officer)

  	
   

  	
   

  

 

 

REGISTRATION PANEL

 

(No writing
hereon except by Trustee or other registrar)

 

	
  Date
  of Registration

  	
   

  	
  In
  Whose Name Registered

  	
   

  	
  Signature
  of Trustee or Registrar

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

4

 

FORM OF ASSIGNMENT

 

FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto                                                    ,
whose address and social insurance number or social security number, if
applicable, are set forth below, this Debenture (or $                             
principal amount hereof*) of SIGNET ENERGY INC., standing in the name(s) of the
undersigned in the register maintained by the Corporation with respect to such
Debenture and does hereby irrevocably authorize and direct the Trustee to
transfer such Debenture in such register, with full power of substitution in
the premises.

 

	
  Dated:

  	
   

  
	
   

  
	
  Address of Transferee:

  	
   

  
	
   

  	
  (Street
  Address, City, Province and Postal Code)

  
	
   

  	
   

  
	
  Social
  Insurance Number or Social Security Number of Transferee, if applicable:

  	
   

  
				

 

*If less than the full principal amount of
the within Debenture is to be transferred, indicate in the space provided the
principal amount (which must be $1,000 or an integral multiple thereof, unless
you hold a Debenture in a non-integral multiple of $1,000 by reason of your
having exercised your right to exchange upon the making of an Offer, in which
case such Debenture is transferable only in its entirety) to be transferred.

 

1.                                       The signature(s) to this assignment must correspond with the name(s)
as written upon the face of this Debenture in every particular without
alteration or any change whatsoever.  The
signature(s) must be guaranteed by a Canadian chartered bank, a major Canadian
trust company or by a member of an acceptable Medallion Guarantee Program.  Notarized or witnessed signatures are not
acceptable as guaranteed signatures.  The
Guarantor must affix a stamp bearing the actual words: “SIGNATURE GUARANTEED”.

 

2.                                       The registered holder of this Debenture is responsible for the
payment of any documentary, stamp or other transfer taxes that may be payable
in respect of the transfer of this Debenture.

 

3.                                       Persons signing in a representative capacity may be required to
provide proof of their authority to act.

 

 

	
  Signature of Guarantor:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Authorized Officer

  	
  Signature of transferring registered holder

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name of Institution

  	
  Name of Holder (Please print)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Capacity of Authorized Representative

  

 

5

 

CONVERSION NOTICE TO CONVERT
DEBENTURES

INTO COMMON SHARES OF THE
CORPORATION

 

TO:                            SIGNET ENERGY INC.

TO:                            VALIANT TRUST COMPANY

 

Note:                   All capitalized
terms used herein have the meaning ascribed thereto in the Trust Indenture
mentioned below, unless otherwise indicated.

 

The undersigned registered holder of 7.00%
Secured Convertible Debentures bearing Certificate No.         
irrevocably elects to convert such Debentures (or $                             
principal amount thereof*) in accordance with the terms of the Trust Indenture
referred to in such Debentures and tenders herewith the Debentures, and, if
applicable, directs that the Common Shares issuable upon a conversion be issued
and delivered to the person indicated below. 
(If Common Shares are to be issued in the name of a person other than
the holder, all requisite transfer taxes must be tendered by the undersigned).

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (Signature
  of Registered Holder)

  

 

*                                         If less than the full principal amount of the Debentures, indicate
in the space provided the principal amount (which must be $1,000 or integral
multiples thereof).

 

NOTE:            If Common Shares are to be
issued in the name of a person other than the holder, the signature must be
guaranteed by a Canadian chartered bank, a major Canadian trust company or by a
member of an acceptable Medallion Guarantee Program.  Notarized or witnessed signatures are not
acceptable as guaranteed signatures.  The
Guarantor must affix a stamp bearing the actual words: “SIGNATURE GUARANTEED”.

 

	
  (Print name in which Common Shares are to
  be issued, delivered and registered)

  
	
   

  
	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Address)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (City, Province and Postal Code)

  	
   

  
	
   

  	
   

  
	
  Name of guarantor:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Authorized signature:

  	
   

  	
   

  	
   

  
							

 

6

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