Document:

Unassociated Document

    Exhibit
      10.4

     

    NEITHER
      THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
      BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
      MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
      OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
      SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
      AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN
      CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
      SECURITIES.

    

    COMMON
      STOCK PURCHASE WARRANT

    

    To
      Purchase 2,000,000 Shares of Common Stock of

     

    SURGE
      GLOBAL ENERGY, INC.

     

    THIS
      COMMON STOCK PURCHASE WARRANT (the “Warrant”)
      certifies that, for value received, Gemini Master Fund Limited (the
“Holder”),
      is
      entitled, upon the terms and subject to the limitations on exercise and the
      conditions hereinafter set forth, at any time on or after the date hereof (the
      “Initial
      Exercise Date”)
      and on
      or prior to the close of business on the later of (i) the date which is six
      months after the Initial Exercise Date and (ii) the date which is 45 days after
      the Effective Date (such date shall be referred to herein as the “Termination
      Date”)
      but
      not thereafter, to subscribe for and purchase from Surge Global Energy, Inc.,
      a
      Delaware corporation (the “Company”),
      up to
      2,000,000 shares (the “Warrant
      Shares”)
      of
      Common Stock, par value $0.001 per share, of the Company (the “Common
      Stock”).
      The
      purchase price of one share of Common Stock under this Warrant shall be equal
      to
      the Exercise Price, as defined in Section 2(b). 

     

    Section
      1. Definitions.
      Capitalized terms used and not otherwise defined herein shall have the meanings
      set forth in that certain Securities Purchase Agreement (the “Purchase
      Agreement”),
      dated
      as of November 28, 2006, between the Company and the purchaser signatory
      thereto.

     

    Section
      2. Exercise.

     

    a) Exercise
      of Warrant.
      Exercise of the purchase rights represented by this Warrant may be made, in
      whole or in part, at any time or times on or after the Initial Exercise Date
      and
      on or before the Termination Date by delivery to the Company of a duly executed
      facsimile copy of the Notice of Exercise Form annexed hereto (or such other
      office or agency of the Company as it may designate by notice in writing to
      the
      registered Holder at the address of such Holder appearing on the books of the
      Company); provided,
      however,
      within
      5 Trading Days of the date said Notice of Exercise is delivered to the Company,
      the Holder shall have surrendered this Warrant to the Company and the Company
      shall have received payment of the aggregate Exercise Price of the shares
      thereby purchased by wire transfer or cashier’s check drawn on a United States
      bank.

     

    
      
        
        

      

      
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    b) Exercise
      Price.
      The
      exercise price of the Common Stock under this Warrant shall be $0.50 subject
      to
      adjustment hereunder (the “Exercise
      Price”).

     

    c) Cashless
      Exercise.
      If at
      any time after one year from the date of issuance of this Warrant there is
      no
      effective Registration Statement registering, or no current prospectus available
      for, the resale of the Warrant Shares by the Holder, then this Warrant may
      also
      be exercised at such time by means of a “cashless exercise” in which the Holder
      shall be entitled to receive a certificate for the number of Warrant Shares
      equal to the quotient obtained by dividing [(A-B) (X)] by (A),
      where:

     

    (A)
      = the
      VWAP on the Trading Day immediately preceding the date of such
      election;

    

    (B)
      = the
      Exercise Price of this Warrant, as adjusted; and 

    

    (X)
      = the
      number of Warrant Shares issuable upon exercise of this Warrant in accordance
      with the terms of this Warrant by means of a cash exercise rather than a
      cashless exercise.

    

    Notwithstanding
      anything herein to the contrary, on the Termination Date, this Warrant shall
      be
      automatically exercised via cashless exercise pursuant to this Section
      2(c).

    

    d) Exercise
      Limitations.
      

     

    Holder’s
      Restrictions.
      The
      Company shall not effect any exercise of this Warrant, and a Holder shall not
      have the right to exercise any portion of this Warrant, pursuant to Section
      2(c)
      or otherwise, to the extent that after giving effect to such issuance after
      exercise, such Holder (together with such Holder’s affiliates, and any other
      person or entity acting as a group together with such Holder or any of such
      Holder’s affiliates), as set forth on the applicable Notice of Exercise, would
      beneficially own in excess of the Beneficial Ownership Limitation (as defined
      below).  For purposes of the foregoing sentence, the number of shares of
      Common Stock beneficially owned by such Holder and its affiliates shall include
      the number of shares of Common Stock issuable upon exercise of this Warrant
      with
      respect to which the determination of such sentence is being made, but shall
      exclude the number of shares of Common Stock which would be issuable upon (A)
      exercise of the remaining, nonexercised portion of this Warrant beneficially
      owned by such Holder or any of its affiliates and (B) exercise or conversion
      of
      the unexercised or nonconverted portion of any other securities of the Company
      (including, without limitation, any other Warrants) subject to a limitation
      on
      conversion or exercise analogous to the limitation contained herein beneficially
      owned by such Holder or any of its affiliates.  Except as set forth in the
      preceding sentence, for purposes of this Section 2(d), beneficial ownership
      shall be calculated in accordance with Section 13(d) of the Exchange Act
      and  

    
      
        
        

      

      
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    the
      rules
      and regulations promulgated thereunder, it being acknowledged by a Holder that
      the Company is not representing to such Holder that such calculation is in
      compliance with Section 13(d) of the Exchange Act and such Holder is solely
      responsible for any schedules required to be filed in accordance therewith.
      To
      the extent that the limitation contained in this Section 2(d) applies, the
      determination of whether this Warrant is exercisable (in relation to other
      securities owned by such Holder) and of which a portion of this Warrant is
      exercisable shall be in the sole discretion of a Holder, and the submission
      of a
      Notice of Exercise shall be deemed to be each Holder’s determination of whether
      this Warrant is exercisable (in relation to other securities owned by such
      Holder) and of which portion of this Warrant is exercisable, in each case
      subject to such aggregate percentage limitation, and the Company shall have
      no
      obligation to verify or confirm the accuracy of such determination. In addition,
      a determination as to any group status as contemplated above shall be determined
      in accordance with Section 13(d) of the Exchange Act and the rules and
      regulations promulgated thereunder. For purposes of this Section 2(d), in
      determining the number of outstanding shares of Common Stock, a Holder may
      rely
      on the number of outstanding shares of Common Stock as reflected in (x) the
      Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more
      recent public announcement by the Company or (z) any other notice by the Company
      or the Company’s Transfer Agent setting forth the number of shares of Common
      Stock outstanding.  Upon the written or oral request of a Holder, the
      Company shall within two Trading Days confirm orally and in writing to such
      Holder the number of shares of Common Stock then outstanding.  In any case,
      the number of outstanding shares of Common Stock shall be determined after
      giving effect to the conversion or exercise of securities of the Company,
      including this Warrant, by such Holder or its affiliates since the date as
      of
      which such number of outstanding shares of Common Stock was reported. The
“Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the
      Common Stock outstanding immediately after giving effect to the issuance of
      shares of Common Stock issuable upon exercise of this Warrant. The Beneficial
      Ownership Limitation provisions of this Section 2(d) may be waived by such
      Holder, at the election of such Holder, upon not less than 61 days’ prior notice
      to the Company to change the Beneficial Ownership Limitation to 9.99% of the
      number of shares of the Common Stock outstanding immediately after giving effect
      to the issuance of shares of Common Stock upon exercise of this Warrant, and
      the
      provisions of this Section 2(d) shall continue to apply. Upon such a change
      by a
      Holder of the Beneficial Ownership Limitation from such 4.99% limitation to
      such
      9.99% limitation, the Beneficial Ownership Limitation may not be waived by
      such
      Holder. The provisions of this paragraph shall be implemented in a manner
      otherwise than in strict conformity with the terms of this Section 2(d) to
      correct this paragraph (or any portion hereof) which may be defective or
      inconsistent with the intended Beneficial Ownership Limitation herein contained
      or to make changes or supplements necessary or desirable to properly give effect
      to such limitation. The limitations contained in this paragraph shall apply
      to a
      successor holder of this Warrant.

    
      
        
        

      

      
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    e) Mechanics
      of Exercise.
      

     

    i. Authorization
      of Warrant Shares.
      The
      Company covenants that all Warrant Shares which may be issued upon the exercise
      of the purchase rights represented by this Warrant will, upon exercise of the
      purchase rights represented by this Warrant, be duly authorized, validly issued,
      fully paid and nonassessable and free from all taxes, liens and charges in
      respect of the issue thereof (other than taxes in respect of any transfer
      occurring contemporaneously with such issue). 

     

    ii. Delivery
      of Certificates Upon Exercise.
      Certificates for shares purchased hereunder shall be transmitted by the transfer
      agent of the Company to the Holder by crediting the account of the Holder’s
      prime broker with the Depository Trust Company through its Deposit and
      Withdrawals at Custodian (“DWAC”)
      system
      if the Company is a participant in such system, and otherwise by physical
      delivery to the address specified by the Holder in the Notice of Exercise within
      three (3) Trading Days from the delivery to the Company of the Notice of
      Exercise Form, surrender of this Warrant and payment of the aggregate Exercise
      Price as set forth above (“Warrant
      Share Delivery Date”).
      This
      Warrant shall be deemed to have been exercised on the date the Exercise Price
      is
      received by the Company. The Warrant Shares shall be deemed to have been issued,
      and Holder or any other person so designated to be named therein shall be deemed
      to have become a holder of record of such shares for all purposes, as of the
      date the Warrant has been exercised by payment to the Company of the Exercise
      Price and all taxes required to be paid by the Holder, if any, pursuant to
      Section 2(e)(vii) prior to the issuance of such shares, have been paid.

     

    iii. Delivery
      of New Warrants Upon Exercise.
      If this
      Warrant shall have been exercised in part, the Company shall, at the time of
      delivery of the certificate or certificates representing Warrant Shares, deliver
      to Holder a new Warrant evidencing the rights of Holder to purchase the
      unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
      in all other respects be identical with this Warrant.

    
      
        
        

      

      
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    iv. Rescission
      Rights.
      If the
      Company fails to cause its transfer agent to transmit to the Holder a
      certificate or certificates representing the Warrant Shares pursuant to this
      Section 2(e)(iv) by the Warrant Share Delivery Date, then the Holder will have
      the right to rescind such exercise.

     

    v. Compensation
      for Buy-In on Failure to Timely Deliver Certificates Upon
      Exercise.
      In
      addition to any other rights available to the Holder, if the Company fails
      to
      cause its transfer agent to transmit to the Holder a certificate or certificates
      representing the Warrant Shares pursuant to an exercise on or before the Warrant
      Share Delivery Date, and if after such date the Holder is required by its broker
      to purchase (in an open market transaction or otherwise) shares of Common Stock
      to deliver in satisfaction of a sale by the Holder of the Warrant Shares which
      the Holder anticipated receiving upon such exercise (a “Buy-In”),
      then
      the Company shall (1) pay in cash to the Holder the amount by which (x) the
      Holder’s total purchase price (including brokerage commissions, if any) for the
      shares of Common Stock so purchased exceeds (y) the amount obtained by
      multiplying (A) the number of Warrant Shares that the Company was required
      to
      deliver to the Holder in connection with the exercise at issue times (B) the
      price at which the sell order giving rise to such purchase obligation was
      executed, and (2) at the option of the Holder, either reinstate the portion
      of
      the Warrant and equivalent number of Warrant Shares for which such exercise
      was
      not honored or deliver to the Holder the number of shares of Common Stock that
      would have been issued had the Company timely complied with its exercise and
      delivery obligations hereunder. For example, if the Holder purchases Common
      Stock having a total purchase price of $11,000 to cover a Buy-In with respect
      to
      an attempted exercise of shares of Common Stock with an aggregate sale price
      giving rise to such purchase obligation of $10,000, under clause (1) of the
      immediately preceding sentence the Company shall be required to pay the Holder
      $1,000. The Holder shall provide the Company written notice indicating the
      amounts payable to the Holder in respect of the Buy-In, together with applicable
      confirmations and other evidence reasonably requested by the Company. Nothing
      herein shall limit a Holder’s right to pursue any other remedies available to it
      hereunder, at law or in equity including, without limitation, a decree of
      specific performance and/or injunctive relief with respect to the Company’s
      failure to timely deliver certificates representing shares of Common Stock
      upon
      exercise of the Warrant as required pursuant to the terms hereof.

     

    vi. No
      Fractional Shares or Scrip.
      No
      fractional shares or scrip representing fractional shares shall be issued upon
      the exercise of this Warrant. As to any fraction of a share which Holder would
      otherwise be entitled to purchase upon such exercise, the Company shall pay
      a
      cash adjustment in respect of such final fraction in an amount equal to such
      fraction multiplied by the Exercise Price.

    
      
        
        

      

      
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    vii. Charges,
      Taxes and Expenses.
      Issuance of certificates for Warrant Shares shall be made without charge to
      the
      Holder for any issue or transfer tax or other incidental expense in respect
      of
      the issuance of such certificate, all of which taxes and expenses shall be
      paid
      by the Company, and such certificates shall be issued in the name of the Holder
      or in such name or names as may be directed by the Holder; provided,
      however,
      that in
      the event certificates for Warrant Shares are to be issued in a name other
      than
      the name of the Holder, this Warrant when surrendered for exercise shall be
      accompanied by the Assignment Form attached hereto duly executed by the Holder;
      and the Company may require, as a condition thereto, the payment of a sum
      sufficient to reimburse it for any transfer tax incidental thereto.

     

    viii. Closing
      of Books.
      The
      Company will not close its stockholder books or records in any manner which
      prevents the timely exercise of this Warrant, pursuant to the terms
      hereof.

     

    Section
      3. Certain Adjustments.

     

    a) Stock
      Dividends and Splits.
      If the
      Company, at any time while this Warrant is outstanding: (A) pays a stock
      dividend or otherwise make a distribution or distributions on shares of its
      Common Stock or any other equity or equity equivalent securities payable in
      shares of Common Stock (which, for avoidance of doubt, shall not include any
      shares of Common Stock issued by the Company pursuant to this Warrant), (B)
      subdivides outstanding shares of Common Stock into a larger number of shares,
      (C) combines (including by way of reverse stock split) outstanding shares of
      Common Stock into a smaller number of shares, or (D) issues by reclassification
      of shares of the Common Stock any shares of capital stock of the Company, then
      in each case the Exercise Price shall be multiplied by a fraction of which
      the
      numerator shall be the number of shares of Common Stock (excluding treasury
      shares, if any) outstanding immediately before such event and of which the
      denominator shall be the number of shares of Common Stock outstanding
      immediately after such event and the number of shares issuable upon exercise
      of
      this Warrant shall be proportionately adjusted. Any adjustment made pursuant
      to
      this Section 3(a) shall become effective immediately after the record date
      for
      the determination of stockholders entitled to receive such dividend or
      distribution and shall become effective immediately after the effective date
      in
      the case of a subdivision, combination or re-classification.

    
      
        
        

      

      
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    b) Subsequent
      Equity Sales.
      If the
      Company or any Subsidiary thereof, as applicable, at any time while this Warrant
      is outstanding, shall offer, sell, grant any option to purchase or offer, sell
      or grant any right to reprice its securities, or otherwise dispose of or issue
      any Common Stock or Common Stock Equivalents entitling any Person to acquire
      shares of Common Stock, at an effective price per share less than the then
      Exercise Price such issuances collectively, a “Dilutive
      Issuance”),
      as
      adjusted hereunder (if the holder of the Common Stock or Common Stock
      Equivalents so issued shall at any time, whether by operation of purchase price
      adjustments, reset provisions, floating conversion, exercise or exchange prices
      or otherwise, or due to warrants, options or rights per share which is issued
      in
      connection with such issuance, be entitled to receive shares of Common Stock
      at
      an effective price per share which is less than the Exercise Price, such
      issuance shall be deemed to have occurred for less than the Exercise Price
      on
      such date of the adjustment of the Dilutive Issuance), the then-existing
      Exercise Price shall be reduced by multiplying the Exercise Price in effect
      immediately prior to such Dilutive Issuance by a fraction, the numerator of
      which is the number of shares of Common Stock outstanding immediately prior
      to
      such Dilutive Issuance plus the number of shares of Common Stock which could
      be
      purchased at the current Exercise Price on the date of such Dilutive Issuance
      with the aggregate consideration received or receivable by the Company in
      connection with such Dilutive Issuance and the denominator of which is the
      number of shares of Common Stock outstanding immediately prior to such Dilutive
      Issuance plus the number of shares of Common Stock to be so issued or sold.
      Such
      adjustment shall be made whenever such Common Stock or Common Stock Equivalents
      are issued. Notwithstanding the foregoing, no adjustments shall be made, paid
      or
      issued under this Section 3(b) in respect of an Exempt Issuance. The Company
      shall notify the Holder in writing, no later than the Trading Day following
      the
      issuance of any Common Stock or Common Stock Equivalents subject to this
      section, indicating therein the applicable issuance price, or of applicable
      reset price, exchange price, conversion price and other pricing terms (such
      notice the “Dilutive
      Issuance Notice”).
      For
      purposes of clarification, whether or not the Company provides a Dilutive
      Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
      Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
      entitled to receive a number of Warrant Shares based upon the Base Share Price
      regardless of whether the Holder accurately refers to the Base Share Price
      in
      the Notice of Exercise. 

     

    c) Pro
      Rata Distributions.
      If the
      Company, at any time prior to the Termination Date, shall distribute to all
      holders of Common Stock (and not to Holders of the Warrants) evidences of its
      indebtedness or assets (including cash and cash dividends) or rights or warrants
      to subscribe for or purchase any security other than the Common Stock (which
      shall be subject to Section 3(b)), then in each such case the Exercise Price
      shall be adjusted by multiplying the Exercise Price in effect immediately prior
      to the record date fixed for determination of stockholders entitled to receive
      such distribution by a fraction of which the denominator shall be the VWAP
      determined as of the record date mentioned above, and of which the numerator
      shall be such VWAP on such record date less the then per share fair market
      value
      at such record date of the portion of such assets or evidence of indebtedness
      so
      distributed applicable to one outstanding share of the Common Stock as
      determined by the Board of Directors in good faith. In either case the
      adjustments shall be described in a statement provided to the Holder of the
      portion of assets or evidences of indebtedness so distributed or such
      subscription rights applicable to one share of Common Stock. Such adjustment
      shall be made whenever any such distribution is made and shall become effective
      immediately after the record date mentioned above.

    
      
        
        

      

      
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    d) Fundamental
      Transaction.
      If, at
      any time while this Warrant is outstanding, (A) the Company effects any merger
      or consolidation of the Company with or into another Person, (B) the Company
      effects any sale of all or substantially all of its assets in one or a series
      of
      related transactions, (C) any tender offer or exchange offer (whether by the
      Company or another Person) is completed pursuant to which holders of Common
      Stock are permitted to tender or exchange their shares for other securities,
      cash or property, or (D) the Company effects any reclassification of the Common
      Stock or any compulsory share exchange pursuant to which the Common Stock is
      effectively converted into or exchanged for other securities, cash or property
      (in any such case, a “Fundamental
      Transaction”),
      then,
      upon any subsequent exercise of this Warrant, the Holder shall have the right
      to
      receive, for each Warrant Share that would have been issuable upon such exercise
      immediately prior to the occurrence of such Fundamental Transaction, at the
      option of the Holder, (a) upon exercise of this Warrant, the number of shares
      of
      Common Stock of the successor or acquiring corporation or of the Company, if
      it
      is the surviving corporation, and any additional consideration (the
“Alternate
      Consideration”)
      receivable upon or as a result of such reorganization, reclassification, merger,
      consolidation or disposition of assets by a Holder of the number of shares
      of
      Common Stock for which this Warrant is exercisable immediately prior to such
      event or (b) if the Company is acquired in an all cash transaction, cash equal
      to the value of this Warrant as determined in accordance with the Black-Scholes
      option pricing formula. For purposes of any such exercise, the determination
      of
      the Exercise Price shall be appropriately adjusted to apply to such Alternate
      Consideration based on the amount of Alternate Consideration issuable in respect
      of one share of Common Stock in such Fundamental Transaction, and the Company
      shall apportion the Exercise Price among the Alternate Consideration in a
      reasonable manner reflecting the relative value of any different components
      of
      the Alternate Consideration. If holders of Common Stock are given any choice
      as
      to the securities, cash or property to be received in a Fundamental Transaction,
      then the Holder shall be given the same choice as to the Alternate Consideration
      it receives upon any exercise of this Warrant following such Fundamental
      Transaction. To the extent necessary to effectuate the foregoing provisions,
      any
      successor to the Company or surviving entity in such Fundamental Transaction
      shall issue to the Holder a new warrant consistent with the foregoing provisions
      and evidencing the Holder’s right to exercise such warrant into Alternate
      Consideration. The terms of any agreement pursuant to which a Fundamental
      Transaction is effected shall include terms requiring any such successor or
      surviving entity to comply with the provisions of this Section 3(d) and insuring
      that this Warrant (or any such replacement security) will be similarly adjusted
      upon any subsequent transaction analogous to a Fundamental
      Transaction.

     

    e) Calculations.
      All
      calculations under this Section 3 shall be made to the nearest cent or the
      nearest 1/100th of a share, as the case may be. For purposes of this Section
      3,
      the number of shares of Common Stock deemed to be issued and outstanding as
      of a
      given date shall be the sum of the number of shares of Common Stock (excluding
      treasury shares, if any) issued and outstanding.

     

    f) Voluntary
      Adjustment By Company.
      The
      Company may at any time during the term of this Warrant reduce the then current
      Exercise Price to any amount and for any period of time deemed appropriate
      by
      the Board of Directors of the Company.

    
      
        
        

      

      
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    g) Notice
      to Holders.
      

     

    i. Adjustment
      to Exercise Price.
      Whenever the Exercise Price is adjusted pursuant to this Section 3, the Company
      shall promptly mail to each Holder a notice setting forth the Exercise Price
      after such adjustment and setting forth a brief statement of the facts requiring
      such adjustment. If the Company issues a variable rate security, despite the
      prohibition thereon in the Purchase Agreement, the Company shall be deemed
      to
      have issued Common Stock or Common Stock Equivalents at the lowest possible
      conversion or exercise price at which such securities may be converted or
      exercised in the case of a Variable Rate Transaction (as defined in the Purchase
      Agreement), to the extent ascertainable at the time of issuance. 

     

    ii. Notice
      to Allow Exercise by Holder.
      If (A)
      the Company shall declare a dividend (or any other distribution) on the Common
      Stock; (B) the Company shall declare a special nonrecurring cash dividend on
      or
      a redemption of the Common Stock; (C) the Company shall authorize the granting
      to all holders of the Common Stock rights or warrants to subscribe for or
      purchase any shares of capital stock of any class or of any rights; (D) the
      approval of any stockholders of the Company shall be required in connection
      with
      any reclassification of the Common Stock, any consolidation or merger to which
      the Company is a party, any sale or transfer of all or substantially all of
      the
      assets of the Company, of any compulsory share exchange whereby the Common
      Stock
      is converted into other securities, cash or property; (E) the Company shall
      authorize the voluntary or involuntary dissolution, liquidation or winding
      up of
      the affairs of the Company; then, in each case, the Company shall cause to
      be
      mailed to the Holder at its last address as it shall appear upon the Warrant
      Register of the Company, at least 20 calendar days prior to the applicable
      record or effective date hereinafter specified, a notice stating (x) the date
      on
      which a record is to be taken for the purpose of such dividend, distribution,
      redemption, rights or warrants, or if a record is not to be taken, the date
      as
      of which the holders of the Common Stock of record to be entitled to such
      dividend, distributions, redemption, rights or warrants are to be determined
      or
      (y) the date on which such reclassification, consolidation, merger, sale,
      transfer or share exchange is expected to become effective or close, and the
      date as of which it is expected that holders of the Common Stock of record
      shall
      be entitled to exchange their shares of the Common Stock for securities, cash
      or
      other property deliverable upon such reclassification, consolidation, merger,
      sale, transfer or share exchange; provided,
      that
      the failure to mail such notice or any defect therein or in the mailing thereof
      shall not affect the validity of the corporate action required to be specified
      in such notice. The Holder is entitled to exercise this Warrant during the
      20-day period commencing on the date of such notice to the effective date of
      the
      event triggering such notice.

    
      
        
        

      

      
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    Section
      4. Transfer
      of Warrant.

     

    a) Transferability.
      Subject
      to compliance with any applicable securities laws and the conditions set forth
      in Sections 5(a) and 4(d) hereof and to the provisions of Section 4.1 of the
      Purchase Agreement, this Warrant and all rights hereunder are transferable,
      in
      whole or in part, upon surrender of this Warrant at the principal office of
      the
      Company, together with a written assignment of this Warrant substantially in
      the
      form attached hereto duly executed by the Holder or its agent or attorney and
      funds sufficient to pay any transfer taxes payable upon the making of such
      transfer. Upon such surrender and, if required, such payment, the Company shall
      execute and deliver a new Warrant or Warrants in the name of the assignee or
      assignees and in the denomination or denominations specified in such instrument
      of assignment, and shall issue to the assignor a new Warrant evidencing the
      portion of this Warrant not so assigned, and this Warrant shall promptly be
      cancelled. A Warrant, if properly assigned, may be exercised by a new holder
      for
      the purchase of Warrant Shares without having a new Warrant issued.

     

    b) New
      Warrants.
      This
      Warrant may be divided or combined with other Warrants upon presentation hereof
      at the aforesaid office of the Company, together with a written notice
      specifying the names and denominations in which new Warrants are to be issued,
      signed by the Holder or its agent or attorney. Subject to compliance with
      Section 4(a), as to any transfer which may be involved in such division or
      combination, the Company shall execute and deliver a new Warrant or Warrants
      in
      exchange for the Warrant or Warrants to be divided or combined in accordance
      with such notice.

     

    c) Warrant
      Register.
      The
      Company shall register this Warrant, upon records to be maintained by the
      Company for that purpose (the “Warrant
      Register”),
      in
      the name of the record Holder hereof from time to time. The Company may deem
      and
      treat the registered Holder of this Warrant as the absolute owner hereof for
      the
      purpose of any exercise hereof or any distribution to the Holder, and for all
      other purposes, absent actual notice to the contrary.

     

    d) Transfer
      Restrictions.
      If,
      at the
time
      of
      the surrender of this Warrant in connection with any transfer of this Warrant,
      the transfer of this Warrant shall not be registered pursuant to an effective
      registration
      statement under the Securities Act
      and
under
      applicable state securities or blue sky laws, the Company may require, as a
      condition of allowing such transfer (i) that the Holder or transferee of this
      Warrant, as the case may be, furnish to the Company a written opinion of counsel
      (which opinion shall be in form, substance and scope customary for opinions
      of
      counsel in comparable transactions) to the effect that such transfer may be
      made
      without
      registration under
      the
      Securities Act and under applicable state securities or blue sky laws, (ii)
      that
      the holder or transferee execute and deliver to the Company an investment letter
      in form and substance acceptable to the Company and (iii) that the transferee
      be
      an “accredited
      investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8)
      promulgated under the Securities Act or a qualified institutional buyer as
      defined in Rule 144A(a) under the Securities Act.

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    Section
      5. Miscellaneous.

     

    a) Title
      to Warrant.
      Prior
      to the Termination Date and subject to compliance with applicable laws and
      Section 4 of this Warrant, this Warrant and all rights hereunder are
      transferable, in whole or in part, at the office or agency of the Company by
      the
      Holder in person or by duly authorized attorney, upon surrender of this Warrant
      together with the Assignment Form annexed hereto properly endorsed. The
      transferee shall sign an investment letter in form and substance reasonably
      satisfactory to the Company.

     

    b) No
      Rights as Shareholder Until Exercise.
      This
      Warrant does not entitle the Holder to any voting rights or other rights as
      a
      shareholder of the Company prior to the exercise hereof. Upon the surrender
      of
      this Warrant and the payment of the aggregate Exercise Price (or by means of
      a
      cashless exercise), the Warrant Shares so purchased shall be and be deemed
      to be
      issued to such Holder as the record owner of such shares as of the close of
      business on the later of the date of such surrender or payment.

     

    c) Loss,
      Theft, Destruction or Mutilation of Warrant.
      The
      Company covenants that upon receipt by the Company of evidence reasonably
      satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
      or any stock certificate relating to the Warrant Shares, and in case of loss,
      theft or destruction, of indemnity or security reasonably satisfactory to it
      (which, in the case of the Warrant, shall not include the posting of any bond),
      and upon surrender and cancellation of such Warrant or stock certificate, if
      mutilated, the Company will make and deliver a new Warrant or stock certificate
      of like tenor and dated as of such cancellation, in lieu of such Warrant or
      stock certificate.

     

    d) Saturdays,
      Sundays, Holidays, etc.
      If the
      last or appointed day for the taking of any action or the expiration of any
      right required or granted herein shall be a Saturday, Sunday or a legal holiday,
      then such action may be taken or such right may be exercised on the next
      succeeding day not a Saturday, Sunday or legal holiday.

     

    e) Authorized
      Shares.
      

     

    The
      Company covenants that during the period the Warrant is outstanding, it will
      reserve from its authorized and unissued Common Stock a sufficient number of
      shares to provide for the issuance of the Warrant Shares upon the exercise
      of
      any purchase rights under this Warrant. The Company further covenants that
      its
      issuance of this Warrant shall constitute full authority to its officers who
      are
      charged with the duty of executing stock certificates to execute and issue
      the
      necessary certificates for the Warrant Shares upon the exercise of the purchase
      rights under this Warrant. The Company will take all such reasonable action
      as
      may be necessary to assure that such Warrant Shares may be issued as provided
      herein without violation of any applicable law or regulation, or of any
      requirements of the Trading Market upon which the Common Stock may be listed.
      

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    Except
      and to the extent as waived or consented to by the Holder, the Company shall
      not
      by any action, including, without limitation, amending its certificate of
      incorporation or through any reorganization, transfer of assets, consolidation,
      merger, dissolution, issue or sale of securities or any other voluntary action,
      avoid or seek to avoid the observance or performance of any of the terms of
      this
      Warrant, but will at all times in good faith assist in the carrying out of
      all
      such terms and in the taking of all such actions as may be necessary or
      appropriate to protect the rights of Holder as set forth in this Warrant against
      impairment. Without limiting the generality of the foregoing, the Company will
      (a) not increase the par value of any Warrant Shares above the amount payable
      therefor upon such exercise immediately prior to such increase in par value,
      (b)
      take all such action as may be necessary or appropriate in order that the
      Company may validly and legally issue fully paid and nonassessable Warrant
      Shares upon the exercise of this Warrant, and (c) use commercially reasonable
      efforts to obtain all such authorizations, exemptions or consents from any
      public regulatory body having jurisdiction thereof as may be necessary to enable
      the Company to perform its obligations under this Warrant.

     

    Before
      taking any action which would result in an adjustment in the number of Warrant
      Shares for which this Warrant is exercisable or in the Exercise Price, the
      Company shall obtain all such authorizations or exemptions thereof, or consents
      thereto, as may be necessary from any public regulatory body or bodies having
      jurisdiction thereof.

     

    f) Jurisdiction.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Warrant shall be determined in accordance with the provisions of the
      Purchase Agreement.

     

    g) Restrictions.
      The
      Holder acknowledges that the Warrant Shares acquired upon the exercise of this
      Warrant, if not registered, will have restrictions upon resale imposed by state
      and federal securities laws.

     

    h) Nonwaiver
      and Expenses.
      No
      course of dealing or any delay or failure to exercise any right hereunder on
      the
      part of Holder shall operate as a waiver of such right or otherwise prejudice
      Holder’s rights, powers or remedies, notwithstanding the fact that all rights
      hereunder terminate on the Termination Date. If the Company willfully and
      knowingly fails to comply with any provision of this Warrant, which results
      in
      any material damages to the Holder, the Company shall pay to Holder such amounts
      as shall be sufficient to cover any costs and expenses including, but not
      limited to, reasonable attorneys’ fees, including those of appellate
      proceedings, incurred by Holder in collecting any amounts due pursuant hereto
      or
      in otherwise enforcing any of its rights, powers or remedies
      hereunder.

     

    i) Notices.
      Any
      notice, request or other document required or permitted to be given or delivered
      to the Holder by the Company shall be delivered in accordance with the notice
      provisions of the Purchase Agreement.

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    j) Limitation
      of Liability.
      No
      provision hereof, in the absence of any affirmative action by Holder to exercise
      this Warrant or purchase Warrant Shares, and no enumeration herein of the rights
      or privileges of Holder, shall give rise to any liability of Holder for the
      purchase price of any Common Stock or as a stockholder of the Company, whether
      such liability is asserted by the Company or by creditors of the
      Company.

     

    k) Remedies.
      Holder,
      in addition to being entitled to exercise all rights granted by law, including
      recovery of damages, will be entitled to specific performance of its rights
      under this Warrant. The Company agrees that monetary damages would not be
      adequate compensation for any loss incurred by reason of a breach by it of
      the
      provisions of this Warrant and hereby agrees to waive the defense in any action
      for specific performance that a remedy at law would be adequate.

     

    l) Successors
      and Assigns.
      Subject
      to applicable securities laws, this Warrant and the rights and obligations
      evidenced hereby shall inure to the benefit of and be binding upon the
      successors of the Company and the successors and permitted assigns of Holder.
      The provisions of this Warrant are intended to be for the benefit of all Holders
      from time to time of this Warrant and shall be enforceable by any such Holder
      or
      holder of Warrant Shares.

     

    m) Amendment.
      This
      Warrant may be modified or amended or the provisions hereof waived with the
      written consent of the Company and the Holder.

     

    n) Severability.
      Wherever possible, each provision of this Warrant shall be interpreted in such
      manner as to be effective and valid under applicable law, but if any provision
      of this Warrant shall be prohibited by or invalid under applicable law, such
      provision shall be ineffective to the extent of such prohibition or invalidity,
      without invalidating the remainder of such provisions or the remaining
      provisions of this Warrant.

     

    o) Headings.
      The
      headings used in this Warrant are for the convenience of reference only and
      shall not, for any purpose, be deemed a part of this Warrant.

    

    ********************

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
      officer thereunto duly authorized.

     

    

    Dated:
      November 28, 2006

     

    
      	
              SURGE
                GLOBAL ENERGY, INC.

               

            
	
              By:__________________________________________

            
	Name:  
	
              Title:
                
 

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    NOTICE
      OF EXERCISE

    

    TO: SURGE
      GLOBAL ENERGY, INC.

    

    (1) The
      undersigned hereby elects to purchase ________ Warrant Shares of the Company
      pursuant to the terms of the attached Warrant (only if exercised in full),
      and
      tenders herewith payment of the exercise price in full, together with all
      applicable transfer taxes, if any.

     

    (2) Payment
      shall take the form of (check applicable box):

     

    [
      ] in
      lawful money of the United States; or

     

    [
      ] the
      cancellation of such number of Warrant Shares as is necessary, in accordance
      with the formula set forth in subsection 2(c), to exercise this Warrant with
      respect to the maximum number of Warrant Shares purchasable pursuant to the
      cashless exercise procedure set forth in subsection 2(c).

     

    (3) Please
      issue a certificate or certificates representing said Warrant Shares in the
      name
      of the undersigned or in such other name as is specified below:

     

    _______________________________

     

    

    The
      Warrant Shares shall be delivered to the following:

    

    _______________________________

     

    _______________________________

     

    _______________________________

    

    (4)
      Accredited
      Investor.
      The
      undersigned is an “accredited investor” as defined in Regulation D promulgated
      under the Securities Act of 1933, as amended.

    

    [SIGNATURE
      OF HOLDER]

     

    Name
      of
      Investing Entity:
      _______________________________________________________________________

    Signature
      of Authorized Signatory of Investing Entity:
      _________________________________________________

    Name
      of
      Authorized Signatory:
      ___________________________________________________________________

    Title
      of
      Authorized Signatory:
      ____________________________________________________________________

    Date:
      _______________________________________________________________________________________

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ASSIGNMENT
      FORM

    

    (To
      assign the foregoing warrant, execute

    this
      form
      and supply required information. 

    Do
      not
      use this form to exercise the warrant.)

    

    

    FOR
      VALUE
      RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
      assigned to

     

    

    ________________________________________________________________________________________________________________
      whose address is

    

    ______________________________________________________________________________________________________________________________.

     

    

    _____________________________________________________________________________________________________________________________

    

    Dated:
      ____________________, _________

    

    

    Holder’s
      Signature: _____________________________________________

    

    Holder’s
      Address: _____________________________________________

     

    _______________________________________

    

    

    

    Signature
      Guaranteed:
      _______________________________________________________________

    

    

    NOTE:
      The
      signature to this Assignment Form must correspond with the name as it appears
      on
      the face of the Warrant, without alteration or enlargement or any change
      whatsoever, and must be guaranteed by a bank or trust company. Officers of
      corporations and those acting in a fiduciary or other representative capacity
      should file proper evidence of authority to assign the foregoing
      Warrant.

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    NEITHER
      THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
      BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
      MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
      OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
      SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
      AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN
      CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
      SECURITIES.

    

    COMMON
      STOCK PURCHASE WARRANT

    

    To
      Purchase 1,000,000 Shares of Common Stock of

     

    SURGE
      GLOBAL ENERGY, INC.

     

    THIS
      COMMON STOCK PURCHASE WARRANT (the “Warrant”)
      certifies that, for value received, Mark C. Fritz (the “Holder”),
      is
      entitled, upon the terms and subject to the limitations on exercise and the
      conditions hereinafter set forth, at any time on or after the date hereof (the
      “Initial
      Exercise Date”)
      and on
      or prior to the close of business on the later of (i) the date which is six
      months after the Initial Exercise Date and (ii) the date which is 45 days after
      the Effective Date (such date shall be referred to herein as the “Termination
      Date”)
      but
      not thereafter, to subscribe for and purchase from Surge Global Energy, Inc.,
      a
      Delaware corporation (the “Company”),
      up to
      1,000,000 shares (the “Warrant
      Shares”)
      of
      Common Stock, par value $0.001 per share, of the Company (the “Common
      Stock”).
      The
      purchase price of one share of Common Stock under this Warrant shall be equal
      to
      the Exercise Price, as defined in Section 2(b). 

     

    Section
      1. Definitions.
      Capitalized terms used and not otherwise defined herein shall have the meanings
      set forth in that certain Securities Purchase Agreement (the “Purchase
      Agreement”),
      dated
      as of November 28, 2006, between the Company and the purchaser signatory
      thereto.

     

    Section
      2. Exercise.

     

    a) Exercise
      of Warrant.
      Exercise of the purchase rights represented by this Warrant may be made, in
      whole or in part, at any time or times on or after the Initial Exercise Date
      and
      on or before the Termination Date by delivery to the Company of a duly executed
      facsimile copy of the Notice of Exercise Form annexed hereto (or such other
      office or agency of the Company as it may designate by notice in writing to
      the
      registered Holder at the address of such Holder appearing on the books of the
      Company); provided,
      however,
      within
      5 Trading Days of the date said Notice of Exercise is delivered to the Company,
      the Holder shall have surrendered this Warrant to the Company and the Company
      shall have received payment of the aggregate Exercise Price of the shares
      thereby purchased by wire transfer or cashier’s check drawn on a United States
      bank.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    b) Exercise
      Price.
      The
      exercise price of the Common Stock under this Warrant shall be $0.50 subject
      to
      adjustment hereunder (the “Exercise
      Price”).

     

    c) Cashless
      Exercise.
      If at
      any time after one year from the date of issuance of this Warrant there is
      no
      effective Registration Statement registering, or no current prospectus available
      for, the resale of the Warrant Shares by the Holder, then this Warrant may
      also
      be exercised at such time by means of a “cashless exercise” in which the Holder
      shall be entitled to receive a certificate for the number of Warrant Shares
      equal to the quotient obtained by dividing [(A-B) (X)] by (A),
      where:

     

    (A)
      = the
      VWAP on the Trading Day immediately preceding the date of such
      election;

    

    (B)
      = the
      Exercise Price of this Warrant, as adjusted; and 

    

    (X)
      = the
      number of Warrant Shares issuable upon exercise of this Warrant in accordance
      with the terms of this Warrant by means of a cash exercise rather than a
      cashless exercise.

    

    Notwithstanding
      anything herein to the contrary, on the Termination Date, this Warrant shall
      be
      automatically exercised via cashless exercise pursuant to this Section
      2(c).

    

    d) Exercise
      Limitations.
      

     

    Holder’s
      Restrictions.
      The
      Company shall not effect any exercise of this Warrant, and a Holder shall not
      have the right to exercise any portion of this Warrant, pursuant to Section
      2(c)
      or otherwise, to the extent that after giving effect to such issuance after
      exercise, such Holder (together with such Holder’s affiliates, and any other
      person or entity acting as a group together with such Holder or any of such
      Holder’s affiliates), as set forth on the applicable Notice of Exercise, would
      beneficially own in excess of the Beneficial Ownership Limitation (as defined
      below).  For purposes of the foregoing sentence, the number of shares of
      Common Stock beneficially owned by such Holder and its affiliates shall include
      the number of shares of Common Stock issuable upon exercise of this Warrant
      with
      respect to which the determination of such sentence is being made, but shall
      exclude the number of shares of Common Stock which would be issuable upon (A)
      exercise of the remaining, nonexercised portion of this Warrant beneficially
      owned by such Holder or any of its affiliates and (B) exercise or conversion
      of
      the unexercised or nonconverted portion of any other securities of the Company
      (including, without limitation, any other Warrants) subject to a limitation
      on
      conversion or exercise analogous to the limitation contained herein beneficially
      owned by such Holder or any of its affiliates.  Except as set forth in the
      preceding sentence, for purposes of this Section 2(d), beneficial ownership
      shall be calculated in accordance with Section 13(d) of the Exchange Act
      and  

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    the
      rules
      and regulations promulgated thereunder, it being acknowledged by a Holder that
      the Company is not representing to such Holder that such calculation is in
      compliance with Section 13(d) of the Exchange Act and such Holder is solely
      responsible for any schedules required to be filed in accordance therewith.
      To
      the extent that the limitation contained in this Section 2(d) applies, the
      determination of whether this Warrant is exercisable (in relation to other
      securities owned by such Holder) and of which a portion of this Warrant is
      exercisable shall be in the sole discretion of a Holder, and the submission
      of a
      Notice of Exercise shall be deemed to be each Holder’s determination of whether
      this Warrant is exercisable (in relation to other securities owned by such
      Holder) and of which portion of this Warrant is exercisable, in each case
      subject to such aggregate percentage limitation, and the Company shall have
      no
      obligation to verify or confirm the accuracy of such determination. In addition,
      a determination as to any group status as contemplated above shall be determined
      in accordance with Section 13(d) of the Exchange Act and the rules and
      regulations promulgated thereunder. For purposes of this Section 2(d), in
      determining the number of outstanding shares of Common Stock, a Holder may
      rely
      on the number of outstanding shares of Common Stock as reflected in (x) the
      Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more
      recent public announcement by the Company or (z) any other notice by the Company
      or the Company’s Transfer Agent setting forth the number of shares of Common
      Stock outstanding.  Upon the written or oral request of a Holder, the
      Company shall within two Trading Days confirm orally and in writing to such
      Holder the number of shares of Common Stock then outstanding.  In any case,
      the number of outstanding shares of Common Stock shall be determined after
      giving effect to the conversion or exercise of securities of the Company,
      including this Warrant, by such Holder or its affiliates since the date as
      of
      which such number of outstanding shares of Common Stock was reported. The
“Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the
      Common Stock outstanding immediately after giving effect to the issuance of
      shares of Common Stock issuable upon exercise of this Warrant. The Beneficial
      Ownership Limitation provisions of this Section 2(d) may be waived by such
      Holder, at the election of such Holder, upon not less than 61 days’ prior notice
      to the Company to change the Beneficial Ownership Limitation to 9.99% of the
      number of shares of the Common Stock outstanding immediately after giving effect
      to the issuance of shares of Common Stock upon exercise of this Warrant, and
      the
      provisions of this Section 2(d) shall continue to apply. Upon such a change
      by a
      Holder of the Beneficial Ownership Limitation from such 4.99% limitation to
      such
      9.99% limitation, the Beneficial Ownership Limitation may not be waived by
      such
      Holder. The provisions of this paragraph shall be implemented in a manner
      otherwise than in strict conformity with the terms of this Section 2(d) to
      correct this paragraph (or any portion hereof) which may be defective or
      inconsistent with the intended Beneficial Ownership Limitation herein contained
      or to make changes or supplements necessary or desirable to properly give effect
      to such limitation. The limitations contained in this paragraph shall apply
      to a
      successor holder of this Warrant.

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    e) Mechanics
      of Exercise.
      

     

    i. Authorization
      of Warrant Shares.
      The
      Company covenants that all Warrant Shares which may be issued upon the exercise
      of the purchase rights represented by this Warrant will, upon exercise of the
      purchase rights represented by this Warrant, be duly authorized, validly issued,
      fully paid and nonassessable and free from all taxes, liens and charges in
      respect of the issue thereof (other than taxes in respect of any transfer
      occurring contemporaneously with such issue). 

     

    ii. Delivery
      of Certificates Upon Exercise.
      Certificates for shares purchased hereunder shall be transmitted by the transfer
      agent of the Company to the Holder by crediting the account of the Holder’s
      prime broker with the Depository Trust Company through its Deposit and
      Withdrawals at Custodian (“DWAC”)
      system
      if the Company is a participant in such system, and otherwise by physical
      delivery to the address specified by the Holder in the Notice of Exercise within
      three (3) Trading Days from the delivery to the Company of the Notice of
      Exercise Form, surrender of this Warrant and payment of the aggregate Exercise
      Price as set forth above (“Warrant
      Share Delivery Date”).
      This
      Warrant shall be deemed to have been exercised on the date the Exercise Price
      is
      received by the Company. The Warrant Shares shall be deemed to have been issued,
      and Holder or any other person so designated to be named therein shall be deemed
      to have become a holder of record of such shares for all purposes, as of the
      date the Warrant has been exercised by payment to the Company of the Exercise
      Price and all taxes required to be paid by the Holder, if any, pursuant to
      Section 2(e)(vii) prior to the issuance of such shares, have been paid.

     

    iii. Delivery
      of New Warrants Upon Exercise.
      If this
      Warrant shall have been exercised in part, the Company shall, at the time of
      delivery of the certificate or certificates representing Warrant Shares, deliver
      to Holder a new Warrant evidencing the rights of Holder to purchase the
      unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
      in all other respects be identical with this Warrant.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    iv. Rescission
      Rights.
      If the
      Company fails to cause its transfer agent to transmit to the Holder a
      certificate or certificates representing the Warrant Shares pursuant to this
      Section 2(e)(iv) by the Warrant Share Delivery Date, then the Holder will have
      the right to rescind such exercise.

     

    v. Compensation
      for Buy-In on Failure to Timely Deliver Certificates Upon
      Exercise.
      In
      addition to any other rights available to the Holder, if the Company fails
      to
      cause its transfer agent to transmit to the Holder a certificate or certificates
      representing the Warrant Shares pursuant to an exercise on or before the Warrant
      Share Delivery Date, and if after such date the Holder is required by its broker
      to purchase (in an open market transaction or otherwise) shares of Common Stock
      to deliver in satisfaction of a sale by the Holder of the Warrant Shares which
      the Holder anticipated receiving upon such exercise (a “Buy-In”),
      then
      the Company shall (1) pay in cash to the Holder the amount by which (x) the
      Holder’s total purchase price (including brokerage commissions, if any) for the
      shares of Common Stock so purchased exceeds (y) the amount obtained by
      multiplying (A) the number of Warrant Shares that the Company was required
      to
      deliver to the Holder in connection with the exercise at issue times (B) the
      price at which the sell order giving rise to such purchase obligation was
      executed, and (2) at the option of the Holder, either reinstate the portion
      of
      the Warrant and equivalent number of Warrant Shares for which such exercise
      was
      not honored or deliver to the Holder the number of shares of Common Stock that
      would have been issued had the Company timely complied with its exercise and
      delivery obligations hereunder. For example, if the Holder purchases Common
      Stock having a total purchase price of $11,000 to cover a Buy-In with respect
      to
      an attempted exercise of shares of Common Stock with an aggregate sale price
      giving rise to such purchase obligation of $10,000, under clause (1) of the
      immediately preceding sentence the Company shall be required to pay the Holder
      $1,000. The Holder shall provide the Company written notice indicating the
      amounts payable to the Holder in respect of the Buy-In, together with applicable
      confirmations and other evidence reasonably requested by the Company. Nothing
      herein shall limit a Holder’s right to pursue any other remedies available to it
      hereunder, at law or in equity including, without limitation, a decree of
      specific performance and/or injunctive relief with respect to the Company’s
      failure to timely deliver certificates representing shares of Common Stock
      upon
      exercise of the Warrant as required pursuant to the terms hereof.

     

    vi. No
      Fractional Shares or Scrip.
      No
      fractional shares or scrip representing fractional shares shall be issued upon
      the exercise of this Warrant. As to any fraction of a share which Holder would
      otherwise be entitled to purchase upon such exercise, the Company shall pay
      a
      cash adjustment in respect of such final fraction in an amount equal to such
      fraction multiplied by the Exercise Price.

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    vii. Charges,
      Taxes and Expenses.
      Issuance of certificates for Warrant Shares shall be made without charge to
      the
      Holder for any issue or transfer tax or other incidental expense in respect
      of
      the issuance of such certificate, all of which taxes and expenses shall be
      paid
      by the Company, and such certificates shall be issued in the name of the Holder
      or in such name or names as may be directed by the Holder; provided,
      however,
      that in
      the event certificates for Warrant Shares are to be issued in a name other
      than
      the name of the Holder, this Warrant when surrendered for exercise shall be
      accompanied by the Assignment Form attached hereto duly executed by the Holder;
      and the Company may require, as a condition thereto, the payment of a sum
      sufficient to reimburse it for any transfer tax incidental thereto.

     

    viii. Closing
      of Books.
      The
      Company will not close its stockholder books or records in any manner which
      prevents the timely exercise of this Warrant, pursuant to the terms
      hereof.

     

    Section
      3. Certain Adjustments.

     

    a) Stock
      Dividends and Splits.
      If the
      Company, at any time while this Warrant is outstanding: (A) pays a stock
      dividend or otherwise make a distribution or distributions on shares of its
      Common Stock or any other equity or equity equivalent securities payable in
      shares of Common Stock (which, for avoidance of doubt, shall not include any
      shares of Common Stock issued by the Company pursuant to this Warrant), (B)
      subdivides outstanding shares of Common Stock into a larger number of shares,
      (C) combines (including by way of reverse stock split) outstanding shares of
      Common Stock into a smaller number of shares, or (D) issues by reclassification
      of shares of the Common Stock any shares of capital stock of the Company, then
      in each case the Exercise Price shall be multiplied by a fraction of which
      the
      numerator shall be the number of shares of Common Stock (excluding treasury
      shares, if any) outstanding immediately before such event and of which the
      denominator shall be the number of shares of Common Stock outstanding
      immediately after such event and the number of shares issuable upon exercise
      of
      this Warrant shall be proportionately adjusted. Any adjustment made pursuant
      to
      this Section 3(a) shall become effective immediately after the record date
      for
      the determination of stockholders entitled to receive such dividend or
      distribution and shall become effective immediately after the effective date
      in
      the case of a subdivision, combination or re-classification.

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    b) Subsequent
      Equity Sales.
      If the
      Company or any Subsidiary thereof, as applicable, at any time while this Warrant
      is outstanding, shall offer, sell, grant any option to purchase or offer, sell
      or grant any right to reprice its securities, or otherwise dispose of or issue
      any Common Stock or Common Stock Equivalents entitling any Person to acquire
      shares of Common Stock, at an effective price per share less than the then
      Exercise Price such issuances collectively, a “Dilutive
      Issuance”),
      as
      adjusted hereunder (if the holder of the Common Stock or Common Stock
      Equivalents so issued shall at any time, whether by operation of purchase price
      adjustments, reset provisions, floating conversion, exercise or exchange prices
      or otherwise, or due to warrants, options or rights per share which is issued
      in
      connection with such issuance, be entitled to receive shares of Common Stock
      at
      an effective price per share which is less than the Exercise Price, such
      issuance shall be deemed to have occurred for less than the Exercise Price
      on
      such date of the adjustment of the Dilutive Issuance), the then-existing
      Exercise Price shall be reduced by multiplying the Exercise Price in effect
      immediately prior to such Dilutive Issuance by a fraction, the numerator of
      which is the number of shares of Common Stock outstanding immediately prior
      to
      such Dilutive Issuance plus the number of shares of Common Stock which could
      be
      purchased at the current Exercise Price on the date of such Dilutive Issuance
      with the aggregate consideration received or receivable by the Company in
      connection with such Dilutive Issuance and the denominator of which is the
      number of shares of Common Stock outstanding immediately prior to such Dilutive
      Issuance plus the number of shares of Common Stock to be so issued or sold.
      Such
      adjustment shall be made whenever such Common Stock or Common Stock Equivalents
      are issued. Notwithstanding the foregoing, no adjustments shall be made, paid
      or
      issued under this Section 3(b) in respect of an Exempt Issuance. The Company
      shall notify the Holder in writing, no later than the Trading Day following
      the
      issuance of any Common Stock or Common Stock Equivalents subject to this
      section, indicating therein the applicable issuance price, or of applicable
      reset price, exchange price, conversion price and other pricing terms (such
      notice the “Dilutive
      Issuance Notice”).
      For
      purposes of clarification, whether or not the Company provides a Dilutive
      Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
      Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
      entitled to receive a number of Warrant Shares based upon the Base Share Price
      regardless of whether the Holder accurately refers to the Base Share Price
      in
      the Notice of Exercise. 

     

    c) Pro
      Rata Distributions.
      If the
      Company, at any time prior to the Termination Date, shall distribute to all
      holders of Common Stock (and not to Holders of the Warrants) evidences of its
      indebtedness or assets (including cash and cash dividends) or rights or warrants
      to subscribe for or purchase any security other than the Common Stock (which
      shall be subject to Section 3(b)), then in each such case the Exercise Price
      shall be adjusted by multiplying the Exercise Price in effect immediately prior
      to the record date fixed for determination of stockholders entitled to receive
      such distribution by a fraction of which the denominator shall be the VWAP
      determined as of the record date mentioned above, and of which the numerator
      shall be such VWAP on such record date less the then per share fair market
      value
      at such record date of the portion of such assets or evidence of indebtedness
      so
      distributed applicable to one outstanding share of the Common Stock as
      determined by the Board of Directors in good faith. In either case the
      adjustments shall be described in a statement provided to the Holder of the
      portion of assets or evidences of indebtedness so distributed or such
      subscription rights applicable to one share of Common Stock. Such adjustment
      shall be made whenever any such distribution is made and shall become effective
      immediately after the record date mentioned above.

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    d) Fundamental
      Transaction.
      If, at
      any time while this Warrant is outstanding, (A) the Company effects any merger
      or consolidation of the Company with or into another Person, (B) the Company
      effects any sale of all or substantially all of its assets in one or a series
      of
      related transactions, (C) any tender offer or exchange offer (whether by the
      Company or another Person) is completed pursuant to which holders of Common
      Stock are permitted to tender or exchange their shares for other securities,
      cash or property, or (D) the Company effects any reclassification of the Common
      Stock or any compulsory share exchange pursuant to which the Common Stock is
      effectively converted into or exchanged for other securities, cash or property
      (in any such case, a “Fundamental
      Transaction”),
      then,
      upon any subsequent exercise of this Warrant, the Holder shall have the right
      to
      receive, for each Warrant Share that would have been issuable upon such exercise
      immediately prior to the occurrence of such Fundamental Transaction, at the
      option of the Holder, (a) upon exercise of this Warrant, the number of shares
      of
      Common Stock of the successor or acquiring corporation or of the Company, if
      it
      is the surviving corporation, and any additional consideration (the
“Alternate
      Consideration”)
      receivable upon or as a result of such reorganization, reclassification, merger,
      consolidation or disposition of assets by a Holder of the number of shares
      of
      Common Stock for which this Warrant is exercisable immediately prior to such
      event or (b) if the Company is acquired in an all cash transaction, cash equal
      to the value of this Warrant as determined in accordance with the Black-Scholes
      option pricing formula. For purposes of any such exercise, the determination
      of
      the Exercise Price shall be appropriately adjusted to apply to such Alternate
      Consideration based on the amount of Alternate Consideration issuable in respect
      of one share of Common Stock in such Fundamental Transaction, and the Company
      shall apportion the Exercise Price among the Alternate Consideration in a
      reasonable manner reflecting the relative value of any different components
      of
      the Alternate Consideration. If holders of Common Stock are given any choice
      as
      to the securities, cash or property to be received in a Fundamental Transaction,
      then the Holder shall be given the same choice as to the Alternate Consideration
      it receives upon any exercise of this Warrant following such Fundamental
      Transaction. To the extent necessary to effectuate the foregoing provisions,
      any
      successor to the Company or surviving entity in such Fundamental Transaction
      shall issue to the Holder a new warrant consistent with the foregoing provisions
      and evidencing the Holder’s right to exercise such warrant into Alternate
      Consideration. The terms of any agreement pursuant to which a Fundamental
      Transaction is effected shall include terms requiring any such successor or
      surviving entity to comply with the provisions of this Section 3(d) and insuring
      that this Warrant (or any such replacement security) will be similarly adjusted
      upon any subsequent transaction analogous to a Fundamental
      Transaction.

     

    e) Calculations.
      All
      calculations under this Section 3 shall be made to the nearest cent or the
      nearest 1/100th of a share, as the case may be. For purposes of this Section
      3,
      the number of shares of Common Stock deemed to be issued and outstanding as
      of a
      given date shall be the sum of the number of shares of Common Stock (excluding
      treasury shares, if any) issued and outstanding.

     

    f) Voluntary
      Adjustment By Company.
      The
      Company may at any time during the term of this Warrant reduce the then current
      Exercise Price to any amount and for any period of time deemed appropriate
      by
      the Board of Directors of the Company.

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    g) Notice
      to Holders.
      

     

    i. Adjustment
      to Exercise Price.
      Whenever the Exercise Price is adjusted pursuant to this Section 3, the Company
      shall promptly mail to each Holder a notice setting forth the Exercise Price
      after such adjustment and setting forth a brief statement of the facts requiring
      such adjustment. If the Company issues a variable rate security, despite the
      prohibition thereon in the Purchase Agreement, the Company shall be deemed
      to
      have issued Common Stock or Common Stock Equivalents at the lowest possible
      conversion or exercise price at which such securities may be converted or
      exercised in the case of a Variable Rate Transaction (as defined in the Purchase
      Agreement), to the extent ascertainable at the time of issuance. 

     

    ii. Notice
      to Allow Exercise by Holder.
      If (A)
      the Company shall declare a dividend (or any other distribution) on the Common
      Stock; (B) the Company shall declare a special nonrecurring cash dividend on
      or
      a redemption of the Common Stock; (C) the Company shall authorize the granting
      to all holders of the Common Stock rights or warrants to subscribe for or
      purchase any shares of capital stock of any class or of any rights; (D) the
      approval of any stockholders of the Company shall be required in connection
      with
      any reclassification of the Common Stock, any consolidation or merger to which
      the Company is a party, any sale or transfer of all or substantially all of
      the
      assets of the Company, of any compulsory share exchange whereby the Common
      Stock
      is converted into other securities, cash or property; (E) the Company shall
      authorize the voluntary or involuntary dissolution, liquidation or winding
      up of
      the affairs of the Company; then, in each case, the Company shall cause to
      be
      mailed to the Holder at its last address as it shall appear upon the Warrant
      Register of the Company, at least 20 calendar days prior to the applicable
      record or effective date hereinafter specified, a notice stating (x) the date
      on
      which a record is to be taken for the purpose of such dividend, distribution,
      redemption, rights or warrants, or if a record is not to be taken, the date
      as
      of which the holders of the Common Stock of record to be entitled to such
      dividend, distributions, redemption, rights or warrants are to be determined
      or
      (y) the date on which such reclassification, consolidation, merger, sale,
      transfer or share exchange is expected to become effective or close, and the
      date as of which it is expected that holders of the Common Stock of record
      shall
      be entitled to exchange their shares of the Common Stock for securities, cash
      or
      other property deliverable upon such reclassification, consolidation, merger,
      sale, transfer or share exchange; provided,
      that
      the failure to mail such notice or any defect therein or in the mailing thereof
      shall not affect the validity of the corporate action required to be specified
      in such notice. The Holder is entitled to exercise this Warrant during the
      20-day period commencing on the date of such notice to the effective date of
      the
      event triggering such notice.

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    Section
      4. Transfer
      of Warrant.

     

    a) Transferability.
      Subject
      to compliance with any applicable securities laws and the conditions set forth
      in Sections 5(a) and 4(d) hereof and to the provisions of Section 4.1 of the
      Purchase Agreement, this Warrant and all rights hereunder are transferable,
      in
      whole or in part, upon surrender of this Warrant at the principal office of
      the
      Company, together with a written assignment of this Warrant substantially in
      the
      form attached hereto duly executed by the Holder or its agent or attorney and
      funds sufficient to pay any transfer taxes payable upon the making of such
      transfer. Upon such surrender and, if required, such payment, the Company shall
      execute and deliver a new Warrant or Warrants in the name of the assignee or
      assignees and in the denomination or denominations specified in such instrument
      of assignment, and shall issue to the assignor a new Warrant evidencing the
      portion of this Warrant not so assigned, and this Warrant shall promptly be
      cancelled. A Warrant, if properly assigned, may be exercised by a new holder
      for
      the purchase of Warrant Shares without having a new Warrant issued.

     

    b) New
      Warrants.
      This
      Warrant may be divided or combined with other Warrants upon presentation hereof
      at the aforesaid office of the Company, together with a written notice
      specifying the names and denominations in which new Warrants are to be issued,
      signed by the Holder or its agent or attorney. Subject to compliance with
      Section 4(a), as to any transfer which may be involved in such division or
      combination, the Company shall execute and deliver a new Warrant or Warrants
      in
      exchange for the Warrant or Warrants to be divided or combined in accordance
      with such notice.

     

    c) Warrant
      Register.
      The
      Company shall register this Warrant, upon records to be maintained by the
      Company for that purpose (the “Warrant
      Register”),
      in
      the name of the record Holder hereof from time to time. The Company may deem
      and
      treat the registered Holder of this Warrant as the absolute owner hereof for
      the
      purpose of any exercise hereof or any distribution to the Holder, and for all
      other purposes, absent actual notice to the contrary.

     

    d) Transfer
      Restrictions.
      If,
      at the
time
      of
      the surrender of this Warrant in connection with any transfer of this Warrant,
      the transfer of this Warrant shall not be registered pursuant to an effective
      registration
      statement under the Securities Act
      and
under
      applicable state securities or blue sky laws, the Company may require, as a
      condition of allowing such transfer (i) that the Holder or transferee of this
      Warrant, as the case may be, furnish to the Company a written opinion of counsel
      (which opinion shall be in form, substance and scope customary for opinions
      of
      counsel in comparable transactions) to the effect that such transfer may be
      made
      without
      registration under
      the
      Securities Act and under applicable state securities or blue sky laws, (ii)
      that
      the holder or transferee execute and deliver to the Company an investment letter
      in form and substance acceptable to the Company and (iii) that the transferee
      be
      an “accredited
      investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8)
      promulgated under the Securities Act or a qualified institutional buyer as
      defined in Rule 144A(a) under the Securities Act.

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    Section
      5. Miscellaneous.

     

    a) Title
      to Warrant.
      Prior
      to the Termination Date and subject to compliance with applicable laws and
      Section 4 of this Warrant, this Warrant and all rights hereunder are
      transferable, in whole or in part, at the office or agency of the Company by
      the
      Holder in person or by duly authorized attorney, upon surrender of this Warrant
      together with the Assignment Form annexed hereto properly endorsed. The
      transferee shall sign an investment letter in form and substance reasonably
      satisfactory to the Company.

     

    b) No
      Rights as Shareholder Until Exercise.
      This
      Warrant does not entitle the Holder to any voting rights or other rights as
      a
      shareholder of the Company prior to the exercise hereof. Upon the surrender
      of
      this Warrant and the payment of the aggregate Exercise Price (or by means of
      a
      cashless exercise), the Warrant Shares so purchased shall be and be deemed
      to be
      issued to such Holder as the record owner of such shares as of the close of
      business on the later of the date of such surrender or payment.

     

    c) Loss,
      Theft, Destruction or Mutilation of Warrant.
      The
      Company covenants that upon receipt by the Company of evidence reasonably
      satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
      or any stock certificate relating to the Warrant Shares, and in case of loss,
      theft or destruction, of indemnity or security reasonably satisfactory to it
      (which, in the case of the Warrant, shall not include the posting of any bond),
      and upon surrender and cancellation of such Warrant or stock certificate, if
      mutilated, the Company will make and deliver a new Warrant or stock certificate
      of like tenor and dated as of such cancellation, in lieu of such Warrant or
      stock certificate.

     

    d) Saturdays,
      Sundays, Holidays, etc.
      If the
      last or appointed day for the taking of any action or the expiration of any
      right required or granted herein shall be a Saturday, Sunday or a legal holiday,
      then such action may be taken or such right may be exercised on the next
      succeeding day not a Saturday, Sunday or legal holiday.

     

    e) Authorized
      Shares.
      

     

    The
      Company covenants that during the period the Warrant is outstanding, it will
      reserve from its authorized and unissued Common Stock a sufficient number of
      shares to provide for the issuance of the Warrant Shares upon the exercise
      of
      any purchase rights under this Warrant. The Company further covenants that
      its
      issuance of this Warrant shall constitute full authority to its officers who
      are
      charged with the duty of executing stock certificates to execute and issue
      the
      necessary certificates for the Warrant Shares upon the exercise of the purchase
      rights under this Warrant. The Company will take all such reasonable action
      as
      may be necessary to assure that such Warrant Shares may be issued as provided
      herein without violation of any applicable law or regulation, or of any
      requirements of the Trading Market upon which the Common Stock may be listed.
      

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    Except
      and to the extent as waived or consented to by the Holder, the Company shall
      not
      by any action, including, without limitation, amending its certificate of
      incorporation or through any reorganization, transfer of assets, consolidation,
      merger, dissolution, issue or sale of securities or any other voluntary action,
      avoid or seek to avoid the observance or performance of any of the terms of
      this
      Warrant, but will at all times in good faith assist in the carrying out of
      all
      such terms and in the taking of all such actions as may be necessary or
      appropriate to protect the rights of Holder as set forth in this Warrant against
      impairment. Without limiting the generality of the foregoing, the Company will
      (a) not increase the par value of any Warrant Shares above the amount payable
      therefor upon such exercise immediately prior to such increase in par value,
      (b)
      take all such action as may be necessary or appropriate in order that the
      Company may validly and legally issue fully paid and nonassessable Warrant
      Shares upon the exercise of this Warrant, and (c) use commercially reasonable
      efforts to obtain all such authorizations, exemptions or consents from any
      public regulatory body having jurisdiction thereof as may be necessary to enable
      the Company to perform its obligations under this Warrant.

     

    Before
      taking any action which would result in an adjustment in the number of Warrant
      Shares for which this Warrant is exercisable or in the Exercise Price, the
      Company shall obtain all such authorizations or exemptions thereof, or consents
      thereto, as may be necessary from any public regulatory body or bodies having
      jurisdiction thereof.

     

    f) Jurisdiction.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Warrant shall be determined in accordance with the provisions of the
      Purchase Agreement.

     

    g) Restrictions.
      The
      Holder acknowledges that the Warrant Shares acquired upon the exercise of this
      Warrant, if not registered, will have restrictions upon resale imposed by state
      and federal securities laws.

     

    h) Nonwaiver
      and Expenses.
      No
      course of dealing or any delay or failure to exercise any right hereunder on
      the
      part of Holder shall operate as a waiver of such right or otherwise prejudice
      Holder’s rights, powers or remedies, notwithstanding the fact that all rights
      hereunder terminate on the Termination Date. If the Company willfully and
      knowingly fails to comply with any provision of this Warrant, which results
      in
      any material damages to the Holder, the Company shall pay to Holder such amounts
      as shall be sufficient to cover any costs and expenses including, but not
      limited to, reasonable attorneys’ fees, including those of appellate
      proceedings, incurred by Holder in collecting any amounts due pursuant hereto
      or
      in otherwise enforcing any of its rights, powers or remedies
      hereunder.

     

    i) Notices.
      Any
      notice, request or other document required or permitted to be given or delivered
      to the Holder by the Company shall be delivered in accordance with the notice
      provisions of the Purchase Agreement.

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    j) Limitation
      of Liability.
      No
      provision hereof, in the absence of any affirmative action by Holder to exercise
      this Warrant or purchase Warrant Shares, and no enumeration herein of the rights
      or privileges of Holder, shall give rise to any liability of Holder for the
      purchase price of any Common Stock or as a stockholder of the Company, whether
      such liability is asserted by the Company or by creditors of the
      Company.

     

    k) Remedies.
      Holder,
      in addition to being entitled to exercise all rights granted by law, including
      recovery of damages, will be entitled to specific performance of its rights
      under this Warrant. The Company agrees that monetary damages would not be
      adequate compensation for any loss incurred by reason of a breach by it of
      the
      provisions of this Warrant and hereby agrees to waive the defense in any action
      for specific performance that a remedy at law would be adequate.

     

    l) Successors
      and Assigns.
      Subject
      to applicable securities laws, this Warrant and the rights and obligations
      evidenced hereby shall inure to the benefit of and be binding upon the
      successors of the Company and the successors and permitted assigns of Holder.
      The provisions of this Warrant are intended to be for the benefit of all Holders
      from time to time of this Warrant and shall be enforceable by any such Holder
      or
      holder of Warrant Shares.

     

    m) Amendment.
      This
      Warrant may be modified or amended or the provisions hereof waived with the
      written consent of the Company and the Holder.

     

    n) Severability.
      Wherever possible, each provision of this Warrant shall be interpreted in such
      manner as to be effective and valid under applicable law, but if any provision
      of this Warrant shall be prohibited by or invalid under applicable law, such
      provision shall be ineffective to the extent of such prohibition or invalidity,
      without invalidating the remainder of such provisions or the remaining
      provisions of this Warrant.

     

    o) Headings.
      The
      headings used in this Warrant are for the convenience of reference only and
      shall not, for any purpose, be deemed a part of this Warrant.

    

    ********************

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
      officer thereunto duly authorized.

     

    

    Dated:
      November 28, 2006

     

    
      	
              SURGE
                GLOBAL ENERGY, INC.

               

            
	
              By:__________________________________________

            
	Name:  
	
              Title:
                
 

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    NOTICE
      OF EXERCISE

    

    TO: SURGE
      GLOBAL ENERGY, INC.

    

    (1) The
      undersigned hereby elects to purchase ________ Warrant Shares of the Company
      pursuant to the terms of the attached Warrant (only if exercised in full),
      and
      tenders herewith payment of the exercise price in full, together with all
      applicable transfer taxes, if any.

     

    (2) Payment
      shall take the form of (check applicable box):

     

    [
      ] in
      lawful money of the United States; or

     

    [
      ] the
      cancellation of such number of Warrant Shares as is necessary, in accordance
      with the formula set forth in subsection 2(c), to exercise this Warrant with
      respect to the maximum number of Warrant Shares purchasable pursuant to the
      cashless exercise procedure set forth in subsection 2(c).

     

    (3) Please
      issue a certificate or certificates representing said Warrant Shares in the
      name
      of the undersigned or in such other name as is specified below:

     

    _______________________________

     

    

    The
      Warrant Shares shall be delivered to the following:

    

    _______________________________

     

    _______________________________

     

    _______________________________

    

    (4)
      Accredited
      Investor.
      The
      undersigned is an “accredited investor” as defined in Regulation D promulgated
      under the Securities Act of 1933, as amended.

    

    [SIGNATURE
      OF HOLDER]

     

    Name
      of
      Investing Entity:
      _______________________________________________________________________

    Signature
      of Authorized Signatory of Investing Entity:
      _________________________________________________

    Name
      of
      Authorized Signatory:
      ___________________________________________________________________

    Title
      of
      Authorized Signatory:
      ____________________________________________________________________

    Date:
      _______________________________________________________________________________________

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ASSIGNMENT
      FORM

    

    (To
      assign the foregoing warrant, execute

    this
      form
      and supply required information. 

    Do
      not
      use this form to exercise the warrant.)

    

    

    FOR
      VALUE
      RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
      assigned to

     

    

    ________________________________________________________________________________________________________________
      whose address is

    

    ______________________________________________________________________________________________________________________________.

     

    

    _____________________________________________________________________________________________________________________________

    

    Dated:
      ____________________, _________

    

    

    Holder’s
      Signature: _____________________________________________

    

    Holder’s
      Address: _____________________________________________

     

    _______________________________________

    

    

    

    Signature
      Guaranteed:
      _______________________________________________________________

    

    

    NOTE:
      The
      signature to this Assignment Form must correspond with the name as it appears
      on
      the face of the Warrant, without alteration or enlargement or any change
      whatsoever, and must be guaranteed by a bank or trust company. Officers of
      corporations and those acting in a fiduciary or other representative capacity
      should file proper evidence of authority to assign the foregoing
      Warrant.Stock Purchase Agreement

    Exhibit
      10.5

    STOCK
      PURCHASE AGREEMENT

     

    among

     

    COLD
      FLOW ENERGY ULC,

     

    SURGE
      GLOBAL ENERGY, INC.,

     

    PEACE
      OIL CORP.

     

    and

     

    SHAREHOLDERS
      OF 

    PEACE
      OIL CORP.

     

    Dated
      as of November 30, 2006

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE
      OF CONTENTS

     

    
      	ARTICLE 1. THE
              TRANSACTION 	
              1

            
	
              1.1

            	Purchase and Sale of Shares	
              1

            
	
              1.2

            	Amount
              and Closing	
              1

            
	ARTICLE 2. CONSIDERATION
              FOR TRANSFER	
              2

            
	
              2.1

            	Purchase Price, Payment	
              2

            
	
              2.2

            	Allocation
              of Purchase Price	
              2

            
	ARTICLE 3.
              PURCHASER’S SECURITIES	
              3

            
	
              3.1

            	Exchangeable Shares	
              3

            
	
              3.2

            	Other
              Agreements	
              3

            
	ARTICLE 4. CLOSING
              AND
              CLOSING DELIVERIES	
              3

            
	
              4.1

            	Closing; Time and Place	
              3

            
	
              4.2

            	Deliveries
              by Shareholders	
              3

            
	
              4.3

            	Deliveries
              by Purchaser	
              4

            
	ARTICLE 5. REPRESENTATIONS
              AND WARRANTIES OF SHAREHOLDERS	
              5

            
	
              5.1

            	Organization and Good Standing	
              5

            
	
              5.2

            	Authority;
              Binding Nature of Agreements	
              5

            
	
              5.3

            	No
              Conflicts; Required Consents	
              5

            
	
              5.4

            	Brokers	
              6

            
	
              5.5

            	Shares	
              6

            
	
              5.6

            	Shareholder
              Legal Proceedings	
              6

            
	
              5.7

            	Residence
              of Shareholders	
              6

            
	
              5.8

            	Private
              Placement	
              6

            
	
              5.9

            	Full
              Disclosure	
              9

            
	ARTICLE 6. REPRESENTATIONS
              AND WARRANTIES OF PURCHASER	
               9

            
	
              6.1

            	Organization and Good Standing	
               9

            
	
              6.2

            	Capitalization.	
              9

            
	
              6.3

            	Authority;
              Binding Nature of Agreements	
              9

            
	
              6.4

            	No
              Conflicts; Required Consents	
              10

            
	
              6.5

            	Brokers	
              10

            
	
              6.6

            	Exchangeable
              Shares	
              10

            
	
              6.7

            	Investment
              Company	
              10

            

    

     

    
      
        
        

      

      
        -i-

        
          

        

      

      
        
        

      

    

     

    
      	
              6.8

            	Foreign
              Issuer; No Substantial U.S. Market	
              10

            
	
              6.9

            	Business
              of Purchaser	
              10

            
	
              6.10

            	Full
              Disclosure	
              10

            
	ARTICLE 7. REPRESENTATIONS
              AND WARRANTIES CONCERNING TARGET COMPANY	
              11

            
	
              7.1

            	Organization, Good Standing,
              Qualification	
              11

            
	
              7.2

            	Private
              Issues	
              12

            
	
              7.3

            	Charter
              Documents; Books and Records.	
              12

            
	
              7.4

            	Capitalization	
              12

            
	
              7.5

            	No
              Conflicts; Required Consents	
              13

            
	
              7.6

            	No
              Subsidiaries	
              13

            
	
              7.7

            	Financial
              Statements	
              14

            
	
              7.8

            	Absence
              of Undisclosed Liabilities	
              14

            
	
              7.9

            	Absence
              of Changes	
              14

            
	
              7.10

            	Transactions
              with Affiliates	
              14

            
	
              7.11

            	Bank
              Accounts	
              15

            
	
              7.12

            	Material
              Contracts	
              15

            
	
              7.13

            	Insurance	
              18

            
	
              7.14

            	Assets	
              18

            
	
              7.15

            	Real
              Property. Target Company owns no real property	
              19

            
	
              7.16

            	Intellectual
              Property	
              19

            
	
              7.17

            	Operation
              of Assets	
              19

            
	
              7.18

            	Target
              Company Products and Services	
              19

            
	
              7.19

            	Employees
              and Consultants	
              19

            
	
              7.20

            	Target
              Company Benefit Plans	
              20

            
	
              7.21

            	Compliance
              with Laws	
              21

            
	
              7.22

            	Governmental
              Approvals	
              21

            
	
              7.23

            	Proceedings
              and Orders	
              21

            
	
              7.24

            	Environmental
              Matters	
              22

            
	
              7.25

            	Taxes	
              22

            
	
              7.26

            	Brokers	
              23

            
	
              7.27

            	No
              Other Agreement	
              23

            
	
              7.28

            	Foreign
              Corrupt Practices	
              24

            

    

     

    
      
        
        

      

      
        -ii-

        
          

        

      

      
        
        

      

    

     

    
      	
              7.29

            	No
              Prepayments	
              24

            
	
              7.30

            	Production
              Sales Contracts	
              24

            
	
              7.31

            	Calls
              on Production	
              24

            
	
              7.32

            	Wells	
              24

            
	
              7.33

            	Leases	
              24

            
	
              7.34

            	Oil
              and Gas	
              25

            
	
              7.35

            	Derivative
              Transactions and Hedging	
              25

            
	
              7.36

            	Investment
              Company	
              25

            
	
              7.37

            	Disclosure	
              25

            
	ARTICLE 8. REPRESENTATIONS
              AND WARRANTIES CONCERNING SURGE	
              26

            
	
              8.1

            	Organization, Good Standing,
              Qualification	
              26

            
	
              8.2

            	Capitalization	
              26

            
	
              8.3

            	Authority;
              Binding Nature of Agreements	
              27

            
	
              8.4

            	No
              Conflicts; Required Consents	
              27

            
	
              8.5

            	No
              Subsidiaries	
              27

            
	
              8.6

            	Surge
              SEC Reports	
              27

            
	
              8.7

            	Surge
              Financial Statements	
              28

            
	
              8.8

            	Absence
              of Undisclosed Liabilities	
              28

            
	
              8.9

            	Absence
              of Changes	
              28

            
	
              8.10

            	Transactions
              with Affiliates	
              28

            
	
              8.11

            	Compliance
              with Laws	
              29

            
	
              8.12

            	Governmental
              Approvals	
              29

            
	
              8.13

            	Proceedings
              and Orders	
              29

            
	
              8.14

            	Environmental
              Matters	
              29

            
	
              8.15

            	Taxes	
              30

            
	
              8.16

            	Brokers	
              30

            
	
              8.17

            	Foreign
              Corrupt Practices	
              30

            
	
              8.18

            	Oil
              and Gas	
              31

            
	
              8.19

            	Derivative
              Transactions and Hedging	
              31

            
	
              8.20

            	Investment
              Company; Shell Company	
              31

            
	
              8.21

            	Surge
              Securities	
              31

            
	
              8.22

            	Full
              Disclosure	
              31

            

    

     

    
      
        
        

      

      
        -iii-

        
          

        

      

      
        
        

      

    

     

    
      	ARTICLE 9. PRE-CLOSING
              COVENANTS	
              32

            
	
              9.1

            	Target Company’s Conduct of the Business
              Prior to Closing	
              32

            
	
              9.2

            	Restrictions
              on Target Company’s Conduct of the Business Prior to Closing	
              33

            
	
              9.3

            	No
              Solicitation	
              35

            
	
              9.4

            	Certain
              Notifications	
              36

            
	
              9.5

            	Updating
              the Disclosure Schedules	
              37

            
	
              9.6

            	Access
              to Information	
              38

            
	
              9.7

            	Best
              Efforts	
              38

            
	
              9.8

            	Compliance
              with Privacy Laws	
              38

            
	ARTICLE 10. POST
              CLOSING
              COVENANTS	
              39

            
	
              10.1

            	Cooperation	
              39

            
	
              10.2

            	Area
              of Exclusion	
              39

            
	
              10.3

            	Nondisclosure	
              40

            
	
              10.4

            	Registration
              Statement	
              40

            
	
              10.5

            	General
              Release	
              41

            
	
              10.6

            	Private
              Placement	
              41

            
	ARTICLE 11. CONDITIONS
              TO
              CLOSING	
              41

            
	
              11.1

            	Conditions to Purchaser’s Obligation to
              Close	
              41

            
	
              11.2

            	Conditions
              to Shareholders’ Obligation to Close	
              43

            
	
              11.3

            	Conditions
              to Obligations of Each Party to Close	
              43

            
	ARTICLE 12.
              TERMINATION	
              44

            
	
              12.1

            	Circumstances for Termination	
              44

            
	
              12.2

            	Effect
              of Termination	
              44

            
	ARTICLE 13.
              INDEMNIFICATION	
              44

            
	
              13.1

            	Survival of Representations and
              Covenants	
              44

            
	
              13.2

            	Indemnification
              By Shareholders	
              45

            
	
              13.3

            	Indemnification By Purchaser and
              Surge	
              46

            
	
              13.4

            	Environmental Indemnity	
              47

            
	
              13.5

            	No Contribution	
              47

            
	
              13.6

            	Defense of Third Party Claim	
              47

            
	
              13.7

            	Exercise Of Remedies By Indemnitees
              Other
              Than Parties To This Agreement	
              48

            
	
              13.8

            	Interest	
              48

            

    

     

    
      
        
        

      

      
        -iv-

        
          

        

      

      
        
        

      

    

     

    
      	ARTICLE 14. MISCELLANEOUS
              PROVISIONS	
              49

            
	
              14.1

            	Further Assurances	
              49

            
	
              14.2

            	Fees and Expenses	
              49

            
	
              14.3

            	Attorneys’ Fees	
              50

            
	
              14.4

            	Notices	
              50

            
	
              14.5

            	Governing Law	
              51

            
	
              14.6

            	Successors and Assigns	
              52

            
	
              14.7

            	Remedies Cumulative; Specific
              Performance	
              52

            
	
              14.8

            	Public Announcements	
              52

            
	
              14.9

            	Headings	
              52

            
	
              14.10

            	Counterparts	
              52

            
	
              14.11

            	Waiver	
              52

            
	
              14.12

            	Disclosure Schedule	
              53

            
	
              14.13

            	Parties in Interest	
              53

            
	
              14.14

            	Entire Agreement	
              53

            
	
              14.15

            	Amendments	
              53

            
	
              14.16

            	Severability	
              53

            
	
              14.17

            	Construction	
              53

            
	
              14.18

            	Time is of the Essence	
              54

            
	
              14.19

            	Survival	
              54

            
	
              14.20

            	Compelled Disclosure of Information	
              54

            

    

     

    
      
        
        

      

      
        -v-

        
          

        

      

      
        
        

      

    

    EXHIBITS
      AND SCHEDULES

     

    
      	Exhibits	 
	 	 
	Exhibit A	Certain Definitions
	Exhibit 1.2	Escrow Agreement
	Exhibit 3.1	Articles of Amendment of
              Purchaser
	Exhibit 3.2(a)	Form of Support Agreement
	Exhibit 3.2(b)	Form of Exchange Agreement
	Exhibit 4.2(b)	General Release - Shareholders
	Exhibit 4.2(e)	Legal Opinion of Target Company
              Counsel
	Exhibit 4.3(e)	Legal Opinion of Purchaser
              Counsel
	Exhibit 4.3(f)	Legal Opinion of Surge Counsel
	Exhibit 10.2	Exclusion Area
	Exhibit 10.5	General Release - Target Company
	Exhibit 10.6	Form of Subscription Agreement
	 	 
	Schedules	 
	 	 
	Schedule 1	Schedule of Shareholders
	Schedule 2	Purchaser Disclosure Schedule
	Schedule 3	Target Disclosure Schedule
	Schedule 4	Surge Disclosure Schedule
	 	 

     

    
      
        
        

      

      
        -vi-

        
          

        

      

      
        
        

      

    

    

    STOCK
      PURCHASE AGREEMENT

     

    THIS
      STOCK PURCHASE AGREEMENT
      (the
“Agreement”)
      is
      made and entered as of November 30, 2006, by and among COLD
      FLOW ENERGY ULC,
      a
      corporation incorporated under the laws of Alberta, Canada (“Purchaser”),
      SURGE
      GLOBAL ENERGY, INC.,
      a
      corporation incorporated under the laws of Delaware (“Surge”),
      PEACE
      OIL CORP.,
      a
      corporation incorporated under the laws of Alberta, Canada (“Target
      Company”),
      and
      Shareholders of
      Target
      Company (each, a “Shareholder”
and
      collectively, “Shareholders”)
      identified on Schedule 1
      hereto
      (the “Schedule
      of Shareholders”).
      Capitalized terms used in this Agreement are defined on Exhibit A
      hereto.

     

    RECITALS

     

    A.    Shareholders
      are the legal and beneficial owners of 800 Class “A” Shares and 6,333,332 Class
“I” Shares in the capital stock of Target Company, in the amounts indicated
      opposite their names on the Schedule of Shareholders, which constitute all
      of
      the issued and outstanding shares in the capital of Target Company (the
“Shares”).

     

    B.    Purchaser
      desires to purchase from Shareholders, and Shareholders desire to sell to
      Purchaser, all of the Shares on the terms and subject to the conditions set
      forth in this Agreement.

     

    AGREEMENT

     

    NOW,
      THEREFORE,
      in
      consideration of the foregoing recitals and the mutual representations,
      warranties, covenants and promises contained herein, the adequacy and
      sufficiency of which are hereby acknowledged, the parties hereto agree as
      follows:

     

    ARTICLE
      1.

     

    THE
      TRANSACTION

     

    1.1    Purchase
      and Sale of Shares.
      At the
      Closing, each Shareholder shall sell, assign, transfer and deliver to Purchaser,
      and Purchaser shall purchase from each Shareholder, such Shareholder’s
      respective Shares, free and clear of any Encumbrances, on the terms and subject
      to the conditions of this Agreement.

     

    1.2    Amount
      and Closing.
      On or
      before December 4, 2006, Purchaser shall deliver to Burstall Winger LLP, in
      its
      capacity as escrow agent (the “Escrow
      Agent”),
      a
      certified cheque or bank draft in the amount of $150,000 (the “Initial
      Deposit”)
      to be
      held by Escrow Agent in accordance with this Agreement and an escrow agreement,
      substantially in the form attached hereto as Exhibit 1.2
      (the
“Escrow
      Agreement”).
      In
      addition:

     

    (a)    If
      the
      Closing has not occurred on or before January 18, 2007, and Purchaser
      elects, in its sole and absolute discretion, to extend the Closing Date to
      March 2, 2007, in Purchaser’s sole discretion, Purchaser shall deliver to
      Escrow Agent a certified cheque or bank draft in the amount of $450,000 on
      or
      before January 18, 2007 (the “Additional
      Deposit”
and,
      together with the Initial Deposit, collectively, the “Escrow
      Amount”)
      to be
      held by Escrow Agent in accordance with this Agreement and the Escrow Agreement
      (in which case the Closing shall be extended to, and occur no later than,
      March 2, 2007);

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    (b)    At
      Closing, the Escrow Amount and the interest earned thereon from the date
      following receipt up to but excluding the Closing Date shall be applied in
      partial satisfaction of the Purchase Price payable by Purchaser at Closing
      pro
      rata to the account of each Shareholder in proportion to their respective
      allocations of the Purchase Price as set out in the Schedule of
      Shareholders;

     

    (c)    If
      Closing does not occur because (i) Purchaser has wrongfully terminated this
      Agreement, (ii) one or both of the conditions in Sections 11.1(f)
      or
11.1(g)
      have not
      been satisfied or waived, or (iii) Purchaser has wrongfully repudiated or
      failed to perform one or more of its obligations hereunder, Shareholders shall,
      as their sole and exclusive remedy, be paid the Escrow Amount and all interest
      earned thereon by the Escrow Agent in full satisfaction for all damages, costs,
      losses and liabilities suffered or incurred by Shareholders as a consequence
      of
      such wrongful termination, repudiation or failure by Purchaser. In this regard,
      the Escrow Amount and such interest shall be forfeited to Shareholders as
      liquidated damages, and constitutes a genuine pre-estimate by Shareholders
      and
      Purchaser of liquidated damages suffered to be suffered by Shareholders by
      virtue of the failure of Purchaser to close and complete the transaction
      contemplated herein in accordance with the terms of this Agreement;
      and

     

    (d)    If
      Closing does not occur for any reason or circumstance other than (i) as
      described in Section 1.2(c)
      or
      (ii) as a result of the non-satisfaction of the conditions in Sections 11.1(f)
      or
11.1(g),
      Purchaser shall be entitled to the return of the Escrow Amount and all interest
      earned thereon, and the Escrow Agent shall pay the Escrow Amount and such
      interest to Purchaser.

     

    ARTICLE
      2.

     

    CONSIDERATION
      FOR TRANSFER

     

    2.1    Purchase
      Price, Payment.
      As full
      consideration for the sale, assignment, transfer and delivery of the Shares
      by
      Shareholders to Purchaser, Purchaser shall deliver (or cause to be delivered)
      to
      Shareholders, at the Closing, an aggregate $16,350,000 (the “Purchase
      Price”),
      payable in the following manner:

     

    (a)    A
      wire
      transfer of immediately available funds in an aggregate amount of $6,350,000,
      less the Escrow Amount and accrued interest; and

     

    (b)    Certificates
      for an aggregate 8,965,390 exchangeable shares in the capital of Purchaser
      (the
“Exchangeable
      Shares”).

     

    2.2    Allocation
      of Purchase Price.
      The
      Purchase Price shall be allocated among Shareholders in the proportion set
      out
      under the column entitled “Allocation of Purchase Price” adjacent to each
      Shareholder’s name as set forth on the Schedule of Shareholders.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      3.

     

    PURCHASER'S
      SECURITIES

     

    3.1    Exchangeable
      Shares.
      Purchaser will, prior to the Closing, authorize the sale and issuance 8,965,390
      Exchangeable Shares having the rights, privileges, preferences and restrictions
      set forth in the draft Articles of Amendment of Purchaser attached hereto as
      Exhibit 3.1.

     

    3.2    Other
      Agreements.Purchaser
      and Surge covenant to enter into the Support Agreement and the Exchange
      Agreement on or prior to the Closing substantially on the terms and in the
      form
      of the Support Agreement attached hereto as Exhibit 3.2(a)
      and in
      the form of the Exchange Agreement attached hereto as Exhibit 3.2(b),
      respectively, and Purchaser and Surge agree not to modify the Support Agreement
      and the Exchange Agreement without the prior written consent of the Shareholder
      Representative, which consent may not be unreasonably withheld or
      delayed.

     

    ARTICLE
      4.

     

    CLOSING
      AND CLOSING DELIVERIES

     

    4.1    Closing;
      Time and Place.
      The
      closing of the purchase and sale of the Shares hereunder (the “Closing”)
      shall
      occur at the offices of Stikeman Elliott LLP, 4300 Bankers Hall West,
      888-3rd
      Street,
      S.W., Calgary, Alberta T2P 5C5, at 10:00 A.M. (local time) on the latest to
      occur of: (i) January 18, 2007, (ii) if Purchaser pays the
      Additional Deposit to the Escrow Agent in accordance with Section 1.2,
      March 2, 2007, and (iii) such other date as mutually agreed to by the
      Parties.

     

    For
      purposes of this Agreement, “Closing
      Date”
shall
      mean the date as of which the Closing actually takes place, and “Effective
      Time”
shall
      mean the time as of which the Closing actually takes place.

     

    4.2    Deliveries
      by Shareholders.
      At the
      Closing, Shareholders shall deliver, or cause to be delivered, to Purchaser
      the
      following items, duly executed by each Shareholder and Target Company, as
      applicable, all of which shall be in a form and substance reasonably acceptable
      to Purchaser and Purchaser’s counsel:

     

    (a)    Stock
      Certificates.
      Stock
      certificates representing the Shares, duly endorsed in blank or accompanied
      by
      duly executed assignments or irrevocable security transfer powers of attorney
      separate from the certificate(s) endorsing the certificates in Purchaser’s
      name;

     

    (b)    General
      Release.
      Releases in the form of Exhibit 4.2(b),
      executed by Shareholders;

     

    (c)    Resignations.
      Resignations of all of the directors and officers of Target
      Company;

     

    (d)    Receipts.
      Receipts from Shareholders for their portion of the Purchase Price;

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (e)    Opinion
      of Counsel.
      An
      opinion of counsel for Shareholders and Target Company substantially in the
      form
      of Exhibit 4.2(e);
      

     

    (f)    Certificate
      of Representations, Warranties and Covenants.
      A
      certificate executed by Target Company’s President, certifying the matters in
Section 11.1(a)
      (the
“Closing
      Certificate”);
      and

     

    (g)    Shareholder
      Loans.
      All
      promissory notes made by Target Company in favor of any and all Shareholders,
      marked “cancelled,” and if there is no promissory note, an acknowledgement by
      each such Shareholder that all Shareholder loans made to the Target Company
      have
      been paid in full by the Target Company as of the Effective Time.

     

    4.3    Deliveries
      by Purchaser.
      At the
      Closing, Purchaser shall deliver the following items, duly executed by
      Purchaser, as applicable, all of which shall be in a form and substance
      reasonably acceptable to the Requisite Shareholders:

     

    (a)    Wire
      Transfer.
      A wire
      transfer to Burstall Winger LLP on behalf of Shareholders on or before the
      Closing Date, in an amount equal to the amount set forth in Section 2.1(a)
      and
      representing, together with the Escrow Amount and any accrued interest thereon,
      the aggregate cash component of the Purchase Price to be allocated among
      Shareholders pursuant to Section 2.2;

     

    (b)    Stock
      Certificates.
      Stock
      certificates for the Exchangeable Shares representing each Shareholder’s
      allocable portion of the Purchase Price to be paid in Exchangeable Shares as
      determined in accordance with Section 2.2;

     

    (c)    Certificate
      of Representations and Warranties.
      A
      Certificate executed by Purchaser’s President, certifying the matters in
Section 11.2(a);
      and

     

    (d)    Opinion
      of Counsel.
      An
      opinion of counsel for Purchaser substantially in the form of Exhibit 4.3(e);

     

    (e)    Opinion
      of Counsel.
      An
      opinion of counsel for Surge substantially in the form of Exhibit 4.3(f);

     

    (f)    Other
      Agreements.
      The
      Exchange Agreement and the Support Agreement, each of which shall be fully
      executed; and

     

    (g)    Shareholder
      Loans.
      A wire
      transfer to Burstall Winger LLP on behalf of Shareholders, in an amount equal
      to
      $250,000 and representing the aggregate outstanding Shareholder loans to the
      Target Company as of the Effective Time.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      5.

     

    REPRESENTATIONS
      AND WARRANTIES OF SHAREHOLDERS

     

    Each
      Shareholder, severally and not jointly, represents and warrants to Purchaser
      as
      of the date hereof as follows:

     

    5.1    Organization
      and Good Standing.
      Shareholder (if an Entity) is duly organized, validly existing and in good
      standing under the laws of its jurisdiction of organization.

     

    5.2    Authority;
      Binding Nature of Agreements.
      Shareholder has all requisite power and authority (including full corporate
      or
      other Entity power and authority) to execute and deliver this Agreement and
      all
      other Transaction Agreements to which it is a party and to carry out the
      provisions of this Agreement and the other Transaction Agreements. The
      execution, delivery and performance by Shareholder of this Agreement and the
      other Transaction Agreements have been approved by all requisite action on
      the
      part of Shareholder. This Agreement has been duly and validly executed and
      delivered by Shareholder. Each of this Agreement and the other Transaction
      Agreements constitutes, or upon execution and delivery, will constitute, the
      legal, valid and binding obligation of Shareholder, enforceable against
      Shareholder in accordance with its terms, except as may be limited by
      bankruptcy, insolvency, reorganization, moratorium and other similar laws and
      equitable principles related to or limiting creditors’ rights generally and by
      general principles of equity.

     

    5.3    No
      Conflicts; Required Consents.
      The
      execution, delivery and performance of this Agreement or any other Transaction
      Agreement by Shareholder do not and will not (with or without notice or lapse
      of
      time):

     

    (a)    conflict
      with, violate or result in any Breach of, or render Shareholders in default
      of,
      or result in the termination or in a right of termination or cancellation of,
      or
      accelerate the performance required by or result in being declared void,
      voidable or without further binding effect, (i) if Shareholder is an
      Entity, any provision of its charter, bylaws or other governing documents;
      (ii) if Shareholder is an Entity, any resolutions adopted by Shareholder’s
      stockholders, board of directors or committees thereof (or other similar
      governing body), or partners or members if Shareholder is a partnership or
      limited liability company; (iii) any of the terms or requirements of any
      Governmental Approval held by Shareholder or any of its employees or that
      otherwise relates to Shareholder’s business; (iv) any provision of a
      Contract to which Shareholder is a party; or (v) result in the imposition
      or creation of an Encumbrance on or with respect to the Shares.

     

    (b)    give
      any
      Governmental Authority or other Person the right to (i) challenge the
      Transaction; (ii) exercise any remedy or obtain any relief under any Legal
      Requirement or any Order to which Target Company or any of its Assets are
      subject; or (iii) declare a default of, exercise any remedy under,
      accelerate the performance of, cancel, terminate or modify any Contract to
      which
      Shareholder or Target Company is a party; or

     

    (c)    require
      Shareholder to obtain any Consent or make or deliver any filing or notice to
      a
      Governmental Authority.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    5.4    Brokers.
      Granite
      Financial Group, Inc. has been engaged to act as the exclusive investment
      banking advisor of the Target Company (the “Granite
      Engagement”).
      Except for the Granite Engagement, Shareholders have not retained any broker
      or
      finder or incurred any liability or obligation for any brokerage fees,
      commissions or finders fees with respect to this Agreement or the
      Transaction.

     

    5.5    Shares.
      Each
      Shareholder is the true, lawful registered and beneficial owner of the Shares
      set forth next to Shareholder’s name on the Schedule of Shareholders with good
      legal and beneficial title thereto, and as of the Closing, Shareholder will
      convey such Shares to Purchaser free and clear of any restrictions on transfer
      (as contained in the articles of Target Company or otherwise), Taxes,
      Encumbrances, options, warrants, purchase rights, contracts, commitments,
      equities, claims, and demands. Shareholder has the exclusive right to sell,
      assign and transfer the Shares owned by it as provided in this Agreement. The
      Shares set forth next to Shareholder’s name on the Schedule of Shareholders
      constitute all of the Shares of capital stock of Target Company owned
      beneficially or of record by Shareholder. Shareholder is not a party to, nor
      is
      there any, option, warrant, purchase right, or other contract or commitment
      (other than this Agreement) that could require Shareholder to sell, transfer
      or
      otherwise dispose of any capital stock of Target Company. Shareholder is not
      a
      party to any voting trust, proxy, or other agreement or understanding with
      respect to the voting of any capital stock of Target Company.

     

    5.6    Shareholder
      Legal Proceedings.
      There
      is no Proceeding pending or threatened against any of Shareholders before any
      Governmental Authority that questions the validity of this Agreement or the
      other Transaction Agreements.

     

    5.7    Residence
      of Shareholders.
      Shareholder is not a non-resident of Canada for purposes of the Tax
      Act.

     

    5.8    Private
      Placement.

     

    (a)    Each
      Shareholder (i) is not located in the United States, (ii) is not a
      U.S. Person, (iii) is not acquiring the Exchangeable Shares and will not
      acquire the Surge Securities for the account or benefit of a U.S. Person or
      a
      person in the United States, and (iv) did not execute or deliver this
      Agreement in the United States.

     

    (b)    Each
      Shareholder understands and agrees that if it decides to offer, sell, pledge
      or
      otherwise transfer any of the Surge Securities, it will not offer, sell, pledge
      or otherwise transfer any of such securities, directly or indirectly, unless
      such securities are registered for resale under the Securities Act and under
      any
      applicable state securities laws, if required, or: (i) the transfer is to
      Surge; (ii) the transfer is made outside the United States in accordance
      with the provisions of Regulation S and in compliance with applicable local
      laws
      and regulations; (iii) the transfer is made in compliance with an exemption
      from registration under the Securities Act provided by Rule 144 thereunder,
      if available, and in accordance with applicable state securities laws; or
      (iv) the transfer is made in another transaction that does not require
      registration under the Securities Act or any applicable state securities laws
      after the seller furnishes to Surge an opinion of outside counsel in form and
      substance reasonably satisfactory to Surge or other evidence reasonably
      satisfactory to Surge to such effect. Each Shareholder acknowledges and agrees
      that it will not engage in any hedging transactions with regard to the Surge
      Securities unless in compliance with the Securities Act. Each Shareholder
      acknowledges and agrees that a legend reflecting the restrictions and
      limitations on transfer and hedging set forth in this Section
      5.8(b)
      will be
      placed on the certificates representing the Surge Securities, and all
      certificates issued in exchange therefor or in substitution thereof, until
      such
      time as it is no longer required under the Securities Act or applicable state
      securities laws. Each Shareholder consents to Surge making a notation on its
      records or giving instructions to any transfer agent for the Surge Securities
      in
      order to implement the restrictions on transfer set forth and described
      herein.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (c)    Each
      Shareholder understands and acknowledges that the Exchangeable Shares and the
      Surge Securities have not been registered under the Securities Act or the
      securities laws of any state of the United States and that the issuance of
      such
      securities contemplated hereby will be made in reliance upon an exclusion from
      such registration requirements and, in the case of the Surge Securities, such
      securities will be “restricted securities” within the meaning of Rule 144 under
      the Securities Act. Each Shareholder is familiar with Rule 144 promulgated
      under
      the Securities Act, as presently in effect, and understands the resale
      limitations imposed thereby and by the Securities Act. SHAREHOLDER UNDERSTANDS
      AND ACKNOWLEDGES HEREIN THAT AN INVESTMENT IN THE EXCHANGEABLE SHARES AND SURGE
      SECURITIES INVOLVES AN EXTREMELY HIGH DEGREE OF RISK AND MAY RESULT IN A
      COMPLETE LOSS OF ITS INVESTMENT. Shareholder has no immediate need for liquidity
      in connection with this investment, does not anticipate that Shareholder will
      be
      required to sell its Exchangeable Shares or Surge Securities in the foreseeable
      future.

     

    (d)    Without
      in any way limiting the representations set forth above, each Shareholder
      further understands and agrees not to make any disposition of all or any portion
      of the Exchangeable Shares unless and until the transferee has agreed in writing
      for the benefit of Purchaser and Surge to make the representations and
      agreements set forth in this Section 5.8
      and be
      bound by the provisions of Section
      10.6.

     

    (e)    Each
      Shareholder understands and acknowledges that upon the original issuance of
      the
      Surge Securities, and until such time as the same is no longer required under
      applicable requirements of the Securities Act or applicable state securities
      laws, certificates representing the Surge Securities and all certificates issued
      in exchange therefor or in substitution thereof, may bear the following
      legend:

     

    “THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
      SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE LAWS OF ANY
      STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES,
      AGREES FOR THE BENEFIT OF THE CORPORATION THAT SUCH SECURITIES MAY BE OFFERED,
      SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION,
      (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH THE PROVISIONS OF
      REGULATION S UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE
      LOCAL LAWS AND REGULATIONS, (C) IN COMPLIANCE WITH THE EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF
      AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR
      (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE
      SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS AFTER THE SELLER
      FURNISHES TO THE CORPORATION AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
      REASONABLY SATISFACTORY TO THE CORPORATION OR OTHER EVIDENCE REASONABLY
      SATISFACTORY TO THE CORPORATION TO SUCH EFFECT. HEDGING TRANSACTIONS INVOLVING
      THE SECURITIES REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE
      WITH
      THE SECURITIES ACT.”

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
provided,
      that, if any of the Surge Securities are being sold pursuant to Rule 144 of
      the
      Securities Act, the legend may be removed by delivery to Surge’s transfer agent
      of an opinion of counsel in form and substance satisfactory to the Surge, to
      the
      effect that the legend is no longer required under applicable requirements
      of
      the Securities Act or state securities laws.

     

    (f)    Each
      Shareholder acknowledges that it is not relying upon any Person other than
      Purchaser and its officers and directors in making Shareholder’s investment or
      decision to invest in the Exchangeable Shares and the Surge Securities
      exchangeable therefor.

     

    (g)    Each
      Shareholder has had the opportunity to obtain independent tax and investment
      advice respecting entering into this Agreement and completing the transactions
      contemplated hereby.

     

    (h)    Each
      Shareholder is acquiring the Exchangeable Shares and will acquire the Surge
      issuable upon exchange of the Exchangeable Shares for investment for such
      Shareholder’s own account, not as a nominee or agent and not with a view to the
      resale or distribution of any part thereof in violation of United States federal
      or state securities laws.

     

    (i)    Each
      Shareholder has received all the information it considers necessary or
      appropriate for deciding whether to obtain the Exchangeable Shares as
      consideration in this Transaction. Each Shareholder has had an opportunity
      to
      ask questions and receive answers from Purchaser regarding the rights,
      preferences and privileges under the Exchangeable Shares and the business,
      properties, prospects and financial condition of Purchaser and
      Surge.

     

    (j)    Each
      Shareholder has such knowledge and experience in financial or business matters
      that it is capable of evaluating the merits and risks of owning the Exchangeable
      Shares and the Surge Securities. Each Shareholder acknowledges that such
      Shareholder’s ownership of the Exchangeable Shares involves a high degree of
      risk and that such Shareholder is able, without materially impairing its
      financial condition, to hold the Exchangeable Shares for an indefinite period
      of
      time and to suffer a complete loss of its investment.

     

    (k)    Each
      Shareholder understands that the representations, warranties , covenants and
      acknowledgements set forth in this Section 5.8
      constitute a material inducement to Purchaser and Surge to enter into this
      Agreement.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

      5.9    Full
        Disclosure.
        None of
        the representations and warranties contained in this Article 5,
        when
        all such representations and warranties are read together in their entirety,
        (i) contains any untrue statement of fact or (ii) omits or will omit
        to state any fact necessary to make such representations and warranties (in
        light of the circumstances under which they were made) not
        misleading.

    

     

    ARTICLE
      6.

     

    REPRESENTATIONS
      AND WARRANTIES OF PURCHASER 

     

    Except
      as
      specifically set forth in Schedule 2
      (the
“Purchaser
      Disclosure Schedule”)
      attached to this Agreement (the parts of which are numbered to correspond to
      the
      applicable Section numbers of this Agreement), Purchaser hereby represents
      and
      warrants as of the date hereof to Shareholders as follows:

     

    6.1    Organization
      and Good Standing.
      Purchaser is a corporation duly incorporated, validly existing and in good
      standing under the ABCA.

     

    6.2    Capitalization.

     

    (a)    The
      authorized capital of Purchaser consists of an unlimited number of Common Shares
      and an unlimited number of Exchangeable Shares (collectively, “Purchaser
      Stock”),
      of
      which 1,000 Common Shares designated in the name of Surge and no Exchangeable
      Shares are and will be, immediately prior to Closing, issued and outstanding.
      No
      other shares of capital stock or securities of Purchaser are issued or
      outstanding.

     

    (b)    There
      is
      no: (i) outstanding security, instrument or obligation that is or may
      become convertible into or exchangeable for any Purchaser Stock or that has
      the
      right to vote on any matters on which shareholders of Purchaser may vote;
      (iii) Contract under which Purchaser is or may become obligated to sell,
      issue or otherwise dispose of or redeem, purchase or otherwise acquire any
      of
      its securities; or (iv) stockholder agreement, voting trust or other
      agreement, arrangement or understanding that may affect the exercise of voting
      or any other rights with respect to the securities of Purchaser.

     

    (c)    The
      Exchangeable Shares to be issued pursuant to Section 2.1(b),
      upon
      issuance in consideration for the Shares in the manner contemplated herein,
      shall be validly issued as fully paid and non-assessable shares in the capital
      stock of Purchaser in full compliance with all applicable securities laws and
      other applicable Legal Requirements and will be free and clear of all
      Encumbrances, other than Encumbrances created by the Transaction Agreements
      or
      imposed by federal, state or local securities law or any other regulatory
      Encumbrances.

     

    6.3    Authority;
      Binding Nature of Agreements.
      Purchaser has all requisite corporate power and authority to execute and deliver
      this Agreement and all other Transaction Agreements to which it is a party
      and
      to carry out the provisions of this Agreement and the other Transaction
      Agreements. The execution, delivery and performance by Purchaser of this
      Agreement and the other Transaction Agreements have been approved by all
      requisite action on the part of Purchaser. This Agreement has been duly and
      validly executed and delivered by Purchaser. Each of this Agreement and the
      other Transaction Agreements constitutes, or upon execution and delivery, will
      constitute, the legal, valid and binding obligation of Purchaser, enforceable
      against Purchaser in accordance with its terms, except as may be limited by
      bankruptcy, insolvency, reorganization, moratorium and other similar laws and
      equitable principles related to or limiting creditors’ rights generally and by
      general principles of equity.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    6.4    No
      Conflicts; Required Consents.
      The
      execution, delivery and performance of this Agreement or any other Transaction
      Agreement by Purchaser do not and will not (with or without notice or lapse
      of
      time):

     

    (a)    conflict
      with, violate or result in any Breach of (i) any of the provisions of
      Purchaser’s articles of incorporation, articles of amendment or bylaws;
      (ii) any resolutions adopted by Purchaser’s stockholders, or its board of
      directors or committees thereof; (iii) any of the terms or requirements of
      any Governmental Approval held by Purchaser or any of its employees or that
      otherwise relates to Purchaser’s business; (iv) any provision of a Contract
      to which Purchaser is a party; or (v) any federal, provincial, local or foreign
      order, writ, injunction, decree, statute, rule or regulation to Purchaser or
      any
      of its assets.

     

    (b)    give
      any
      Governmental Authority or other Person the right to (i) challenge the
      Transaction; (ii) exercise any remedy or obtain any relief under any Legal
      Requirement or any Order to which Purchaser or any of its assets is subject;
      or
      (iii) declare a default of, exercise any remedy under, accelerate the
      performance of, cancel, terminate or modify any Contract to which Purchaser
      is a
      party; or

     

    (c)    require
      Purchaser to obtain any Consent or make or deliver any filing or notice to
      a
      Governmental Authority.

     

    6.5    Brokers.
      Purchaser has not retained any broker or finder or incurred any liability or
      obligation for any brokerage fees, commissions or finder’s fees with respect to
      this Agreement or the Transaction.

     

    6.6    Exchangeable
      Shares.
      The
      Exchangeable Shares will, when issued and delivered in accordance with this
      Agreement, be duly authorized and validly issued as fully paid and
      non-assessable Exchangeable Shares.

     

    6.7    Investment
      Company.
      Purchaser is not, and as a result of the issuance of the Exchangeable Shares
      contemplated hereby will not be, an “investment company,” as such term is
      defined in the Investment Company Act of 1940, as amended.

     

    6.8    Foreign
      Issuer; No Substantial U.S. Market.
      Purchaser is a “foreign issuer,” as such term is defined in Regulation S under
      the Securities Act, with no “substantial U.S. market interest,” as such term is
      defined in Regulation S under the Securities Act, in the Exchangeable
      Shares.

     

    6.9    Business
      of Purchaser.
      Purchaser was incorporated on June 1, 2006, and has no material assets or
      material liabilities and to Purchaser’s Knowledge will not have any material
      assets or material liabilities prior to Closing other than as contemplated
      by
      this Agreement or the Transaction Agreements.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    6.10   Full
      Disclosure.
      

     

    (a)    None
      of
      the representations and warranties contained in this Article 6, when all
      such representations and warranties are read together in their entirety,
      (i) contains any untrue statement of fact or (ii) omits or will omit
      to state any fact necessary to make such representations and warranties (in
      light of the circumstances under which they were made) not
      misleading.

     

    (b)  Target
      Company make no representations or warranties (whether in contract or in tort)
      except as expressly set forth in this Agreement.

     

    (c)  Each
      of
      the Shareholders confirms that such Shareholder has not relied on any covenants,
      representations or warranties outside this Agreement (whether in contract or
      in
      tort) and in particular, and without limitation, each of the Shareholders hereby
      expressly negate any representations or warranties by Purchaser and Surge not
      contained in this Agreement, the Closing Certificate or the Disclosure Schedule,
      whether contained in any information memorandum or otherwise.

     

    (d)  The
      maximum cumulative liability of Purchaser and Surge to Shareholders as a result
      of any misrepresentations or breach of warranty contained in this Agreement
      shall not exceed the Purchase Price.

     

    Each
      representation and warranty set forth in this Agreement is not qualified in
      any
      way whatsoever except as explicitly provided therein, will not merge on Closing
      or by reason of the execution and delivery of any Contract at the Closing,
      will
      remain in force on and immediately after the Effective Time, is given with
      the
      intention that liability is not limited to Breaches discovered before Closing,
      is separate and independent and is not limited by reference to any other
      representation or warranty or any other provision of this Agreement, and is
      made
      and given with the intention of inducing Shareholders to enter into this
      Agreement.

     

    ARTICLE
      7.

     

    REPRESENTATIONS
      AND WARRANTIES CONCERNING TARGET COMPANY

     

    Except
      as
      specifically set forth in Schedule 3
      (the
“Target
      Disclosure Schedule”)
      attached to this Agreement (the parts of which are numbered to correspond to
      the
      individual Section numbers of this Article 7),
      Target
      Company hereby represents and warrants to Purchaser as follows: 

     

    7.1    Organization,
      Good Standing, Qualification.
      Part
      7.1
      sets
      forth Target Company’s jurisdiction of incorporation and each jurisdiction in
      which Target Company is qualified to do business. Target Company (i) is a
      corporation duly incorporated, validly existing and in good standing under
      the
      ABCA; (ii) is duly qualified and licensed to conduct business and is in
      corporate and tax good standing under the laws of each jurisdiction in which
      the
      nature of its business, the operation of its Assets or the ownership or leasing
      of its properties requires such qualification or licensing; (iii) has full
      corporate power and authority required to own, lease, use and operate its
      Assets, to carry on its business as now being conducted and as presently
      proposed to be conducted, and to perform its obligations under all
      Contracts.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    7.2    Private
      Issues.
      Target
      Company is a “private issuer” as defined in National Instrument 45-106
      Prospectus and Registration Exemptions adopted by the Canadian Securities
      Administrators.

     

    7.3    Charter
      Documents; Books and Records.

     

    (a)    Target
      Company has made available to Purchaser accurate, correct and complete copies
      of
      (i) the certificate and articles of incorporation and bylaws of Target
      Company, including all amendments thereto, as presently in effect; (ii) all
      stock records of Target Company, including Target Company’s stock ledger and
      copies of any stock certificates issued by Target Company; (iii) all
      minutes and other records of all meetings and other proceedings (including
      any
      actions taken by written consent or otherwise without a meeting) of the
      stockholders of Target Company, Target’s Board and all committees of Target’s
      Board (collectively, the “Resolutions”);
      and
      (iv) all books of account and other financial records of Target
      Company.

     

    (b)    The
      minute books of Target Company accurately and completely reflect all material
      corporate actions of its stockholders, Target’s Board and any committees of the
      Target’s Board. The register of shareholders and register of transfers of Target
      Company contained in its minute books are complete and accurate in all material
      respects since the date Target Company was formed. The books of account and
      other financial records of Target Company are accurate and complete and have
      been maintained in accordance with sound business practices.

     

    (c)    Target
      Company is not in violation of any of the provisions of its certificate of
      incorporation, bylaws or Resolutions, and to the Knowledge of Shareholders,
      no
      condition or circumstance exists that likely would (with or without notice
      or
      lapse of time) constitute or result directly or indirectly in such a
      violation.

     

    (d)    Part
      7.3(d)
      accurately sets forth (i) the names of the members of the Target’s Board,
      (ii) the names of the members of each committee of the Target’s Board, and
      (iii) the names and titles of Target Company’s officers.

     

    7.4    Capitalization.

     

    (a)    The
      authorized capital of Target Company consists of an unlimited number of Class
      “A”, Class “B”, Class “C”, Class “D”, Class “E”, Class “F”, Class “G”, Class
“H”, Class “I”, Class “J”, Class “K”, and Class “L” shares of common stock
      (collectively, “Target
      Company’s Stock”),
      of
      which 800 Class “A” and 6,333,332 Class “I” shares (“Outstanding
      Target Company Stock”)
      are
      and will be, immediately prior to Closing, issued and outstanding. All shares
      of
      the Outstanding Target Company Stock are owned by Shareholders in the amounts
      indicated on the Schedule of Shareholders and are being sold to Purchaser
      hereunder. No other shares of capital stock or securities of Target Company
      are
      issued or outstanding. All Outstanding Target Company Stock has been duly
      authorized and validly issued, is fully paid and non-assessable, is been issued
      in full compliance with all applicable securities laws and other applicable
      Legal Requirements and is free and clear of all Encumbrances.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (b)    There
      is
      no: (i) outstanding pre-emptive right, subscription, commitment, option,
      call, warrant or other right to acquire any securities of Target Company,
      including the Shares; (ii) outstanding security, instrument or obligation
      that is or may become convertible into or exchangeable for any securities of
      Target Company, including the Shares or that has the right to vote on any
      matters on which shareholders of Target Company may vote; (iii) Contract
      under which Target Company is or may become obligated to sell, issue or
      otherwise dispose of or redeem, purchase or otherwise acquire any of its
      securities, including the Shares; or (iv) stockholder agreement, voting
      trust or other agreement, arrangement or understanding that may affect the
      exercise of voting or any other rights with respect to the securities of Target
      Company, including the Shares.

     

    7.5    No
      Conflicts; Required Consents.
      The
      execution, delivery and performance of this Agreement or any other Transaction
      Agreement by Target Company do not and will not (with or without notice or
      lapse
      of time):

     

    (a)    conflict
      with, violate or result in any Breach of (i) any of the provisions of
      Target Company’s articles of incorporation or bylaws; (ii) any Resolutions;
      (iii) any of the terms or requirements of any Governmental Approval held by
      Target Company or any of its Employees or that otherwise relates to the business
      or assets of Target Company; (iv) any provision of any Contract to which
      Target Company is a party; or (v) any federal, provincial, local or foreign
      order, writ, injunction, decree, statute, rule or regulation to Target Company
      or any of its Assets.

     

    (b)    give
      any
      Governmental Authority or other Person the right to (i) challenge the
      Transaction; (ii) exercise any remedy or obtain any relief under any Legal
      Requirement or any Order to which Target Company, or any of Target Company’s
      assets, is subject; (iii) declare a default of, exercise any remedy under,
      accelerate the performance of, cancel, terminate, modify or receive any payment
      under any Contract to which Target Company is a party; or (iv) revoke,
      suspend or modify any Governmental Approval;

     

    (c)    cause
      Target Company or Purchaser to become subject to, or to become liable for the
      payment of, any Tax, or cause any of Target Company’s assets or properties to be
      reassessed or revalued by any Tax Authority or other Governmental
      Authority;

     

    (d)    result
      in
      the imposition or creation of any Encumbrance upon or with respect to any of
      Target Company’s Assets; or

     

    (e)    require
      Target Company to obtain any Consent or make or deliver any filing or notice
      to
      a Governmental Authority.

     

    7.6    No
      Subsidiaries.
      Target
      Company does not own any shares of capital stock or other securities of, or
      control, directly or indirectly, any other Entity and has never owned,
      beneficially or otherwise, any shares or other securities of, or any direct
      or
      indirect equity interest in, any Entity.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    7.7    Financial
      Statements.

     

    (a)    Target
      Company has made available to Purchaser the following financial statements
      (collectively, the “Financial
      Statements”):
      the
      audited balance sheet, and the related statements of operations, changes in
      shareholders’ equity, and cash flows, of Target Company as at September 30,
      2006, together with the notes thereto.

     

    (b)    All
      of
      the Financial Statements (i) are true, accurate and complete in all
      respects; (ii) are consistent with the Books and Records of Target Company;
      (iii) present fairly and accurately the financial condition of Target
      Company as of the date thereof and the results of operations, changes in
      shareholder’s equity and cash flows of Target Company for the periods covered
      thereby; and (iv) have been prepared in accordance with GAAP, applied on a
      consistent basis throughout the periods covered.

     

    7.8    Absence
      of Undisclosed Liabilities.

     

    (a)  Target
      Company has no Liabilities other than (i) those set forth in the Financial
      Statements; (ii) accounts payable and accrued salaries that have been
      incurred by Target Company since September 30, 2006, in the Ordinary Course
      of Business; and (iii) those Liabilities under the Title and Operating
      Documents and the Contracts identified in Part 7.12(a).

     

    (b)  Target
      Company will not have any indebtedness for borrowed money at the Closing and
      will specifically have repaid in full and discharged those certain loans from
      Shareholders specified in Part 7.8(b).

     

    7.9    Absence
      of Changes.
      Since
      September 30, 2006, (i) Target Company has conducted its business and
      operations in the Ordinary Course of Business; (ii) no event or
      circumstance has occurred that could reasonably have, or result in, a Material
      Adverse Effect on Target Company, the Assets or the Tangibles; and
      (iii) Target Company has not taken any action, agreed to take any action,
      or omitted to take any action that would constitute a Breach of Sections 9.1
      or
9.2
      if such
      action or omission were taken between the date of this Agreement and the
      Effective Time.

     

    7.10   Transactions
      with Affiliates.
      Except
      as set forth in the Financial Statements, no Affiliate (a) owns, directly
      or indirectly, any debt, equity or other interest in any Entity with which
      Target Company is affiliated, has a business relationship or competes other
      than
      Affiliates that own less than five percent (5%) of the issued and outstanding
      capital stock of a publicly-traded competitor of Target Company; (b) is
      indebted to Target Company, nor is Target Company indebted (or committed to
      make
      loans or extend or guarantee credit) to any Affiliate other than with respect
      to
      any of Target Company’s obligations to pay accrued salaries, reimbursable
      expenses or other standard employee benefits; (c) has any direct or
      indirect interest in any asset, property or other right used in the conduct
      of
      or otherwise related to the business or operations of Target Company;
      (d) has any claim or right against Target Company, and no event has
      occurred, and no condition or circumstance exists, that might (with or without
      notice or lapse of time) directly or indirectly give rise to or serve as a
      basis
      for any claim or right in favor of any Affiliate against Target Company;
      (e) is a party to any Contract or has had any direct or indirect interest
      in, any Contract, transaction or business dealing of any nature involving Target
      Company; or (f) received from or furnished to Target Company any goods or
      services (with or without consideration) since September 30, 2006.

     

    
      
        
        

      

      
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    7.11    Bank
      Accounts. Part
      7.11
      sets
      forth an accurate and complete list of all Bank Accounts, including the names
      and addresses of the financial institutions in which Target Company has a Bank
      Account and the names of all persons authorized to draw thereon or with access
      thereto.

     

    7.12    Material
      Contracts.

     

    (a)    Part
      7.12(a)
      and
Part
      7.33
      sets
      forth an accurate, correct and complete list of all Contracts (the “Material
      Contracts”)
      to
      which (x) any of the descriptions set forth below may apply and
      (y) which involve any payment or obligation or any series of payments or
      obligations which equal or exceed, or could reasonably be expected to equal
      or
      exceed, $50,000 individually or in the aggregate during the term of such
      Contract, except as otherwise indicated below:

     

    (i)    Real
      property leases, personal property leases, insurance, Contracts affecting any
      Target Intellectual Property, Contracts with contractors;

     

    (ii)   Governmental
      Approvals;

     

    (iii)   Any
      Contract for capital expenditures or for the purchase of goods or services,
      except those incurred in the Ordinary Course of Business and to be performed
      in
      three (3) months or less;

     

    (iv)    Any
      Contract obligating Target Company to sell or deliver any product or service
      at
      a price which does not cover the cost (including labor, materials and production
      overhead) plus the customary profit margin associated with such product or
      service;

     

    (v)    Any
      Contract involving financing or borrowing of money, or evidencing indebtedness,
      any liability for borrowed money, any obligation for the deferred purchase
      price
      of property (excluding normal trade payables) or guaranteeing in any way any
      Contract in connection with any Person;

     

    (vi)    Any
      joint
      venture, partnership, cooperative arrangement or any other Contract involving
      a
      sharing of profits (the proviso in Section
      7.12(a)(y)
      above
      shall not apply);

     

    (vii)    Any
      Contract affecting any right, title or interest in or to real
      property;

     

    (viii)   Any
      Contract with any Governmental Authority;

     

    (ix)    Any
      Contract with respect to the discharge, storage or removal of effluent, waste
      or
      pollutants;

     

    
      
        
        

      

      
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    (x)     
Any
      Contract relating to any license or royalty arrangement;

     

    (xi)    Any
      power
      of attorney, proxy or similar instrument (the proviso in Section 7.12(a)(y)
      above shall not apply);

     

    (xii)    any
      Contract among shareholders of Target Company (including, without limitation,
      any voting trust agreement, unanimous shareholder agreement or share pooling
      agreement) (the proviso in Section
      7.12(a)(y)
      above
      shall not apply); 

     

    (xiii)    Any
      Contract for the manufacture, service or maintenance of any product of Target
      Company;

     

    (xiv)    Any
      Contract for the purchase or sale of any Assets other than in the Ordinary
      Course of Business or for the option or preferential rights to purchase or
      sell
      any assets;

     

    (xv)    Any
      requirement or output Contract;

     

    (xvi)    Any
      Contract to indemnify any Person or to share in or contribute to the liability
      of any Person (the proviso in Section
      7.12(a)(y)
      above
      shall not apply);

     

    (xvii)    Any
      Contract for the purchase or sale of foreign currency or otherwise involving
      foreign exchange transactions;

     

    (xviii)    Any
      Contract containing covenants not to compete in any line of business or with
      any
      Person in any geographical area (the proviso in Section 7.12(a)(y)
      above
      shall not apply);

     

    (xix)    
Any
      Contract related to the acquisition of a business or the equity of any other
      Entity;

     

    (xx)    
Any
      other
      Contract that involves future payments, performance of services or delivery
      of
      goods or materials to or by Target Company, or that otherwise is material to
      the
      business or prospects of Target Company; 

     

    (xxi)    Any
      agreement for the purchase, sale, transportation, processing, gathering or
      storage of electric power, natural gas, natural gas liquids, crude oil or
      condensate, or any financial product instrument related thereto, involving
      annual revenues to or payments by any of the Companies in excess of $50,000,
      in
      the aggregate;

     

    (xxii)    Any
      production sharing agreement, balancing agreement, farm-out or farm-in
      agreement, enhanced oil recovery agreement, utilization and pooling agreement
      or
      other similar contract or agreement relating to the exploration, development
      and
      production of Petroleum Substances (the proviso in Section 7.12(a)(y)
      above
      shall not apply);

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (xxiii)    Any
      take-or-pay agreement or other similar agreement that entitles purchasers of
      production to receive delivery of Petroleum Substances without paying
      therefor;

     

    (xxiv)    Any
      agreement for the sale of any working interests in any oil or gas leases which
      involves payment to any of the Companies; and

     

    (xxv)    Any
      proposed arrangement of a type that, if entered into, would be a Contract
      described in any of (i) through (xxiv) above.

     

    (b)    Target
      Company has made available to Purchaser accurate, correct and complete copies
      of
      all Material Contracts, including all amendments, supplements, modifications
      and
      waivers thereof. All Material Contracts are in writing. All nonmaterial
      contracts of Target Company do not, in the aggregate, represent a material
      portion of the Liabilities of Target Company.

     

    (c)    To
      the
      Knowledge of Target Company, each Material Contract is currently valid and
      in
      full force and effect, and is enforceable by Target Company in accordance with
      its terms.

     

    (d)    To
      the
      Knowledge of Target Company, Target Company is not in default, and no party
      has
      notified Target Company that it is in default, under any Material Contract.
      No
      event has occurred, and no circumstance or condition exists, that might (with
      or
      without notice or lapse of time or as a result of the Transaction)
      (a) result in a violation or Breach of any of the provisions of any
      Material Contract; (b) give any Person the right to declare a default or
      exercise any remedy under any Material Contract; (c) give any Person the
      right to accelerate the maturity or performance of any Material Contract or
      to
      cancel, terminate or modify any Material Contract; or (d) otherwise have a
      Material Adverse Effect on Target Company in connection with any Material
      Contract;

     

    (e)    Target
      Company has not waived any of its rights under any Material Contract;
      and

     

    (f)    
To
      the
      Knowledge of Target Company, no other party to such Material Contract is in
      default in any respect therein.

     

    (g)    To
      the
      Knowledge of Target Company, each Person against which Target Company has or
      may
      acquire any rights under any Contract is (i) solvent and (ii) able to
      satisfy such Person’s material obligations and liabilities to Target
      Company.

     

    (h)    The
      performance of the Material Contracts will not result in any violation of or
      failure by Target Company to comply with any Legal Requirement.

     

    (i)    
The
      Material Contracts constitute all of the Contracts necessary to enable Target
      Company to conduct its business and operations in the manner in which such
      business and operations are currently being conducted.

     

    
      
        
        

      

      
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    7.13    Insurance.
       Part
      7.13
      sets
      forth an accurate and complete list of all insurance policies, self-insurance
      arrangements and fidelity bonds, currently in effect, that insure Target Company
      and its business and Assets (collectively, the “Insurance
      Policies”).
      Target Company has made available to Purchaser true, correct and complete copies
      of all Insurance Policies. Each Insurance Policy is valid, binding, and in
      full
      force and effect. Target Company is not in Breach of any Insurance Policy,
      and
      no event has occurred which, with notice or the lapse of time, would constitute
      such a Breach, or permit termination, modification, or acceleration, of any
      Insurance Policy. Target Company has not received any notice of cancellation
      or
      non-renewal of any Insurance Policy. The consummation of the Transaction will
      not cause a Breach, termination, modification, or acceleration of any Insurance
      Policy. There is no claim under any Insurance Policy that has been improperly
      filed or as to which any insurer has questioned, disputed or denied
      liability.

     

    7.14    Assets.

     

    (a)    
Target
      Company does not warrant title to Assets that are not Tangibles, but does
      warrant that, except for Permitted Encumbrances, the Assets are now and at
      the
      Closing Date will be free and clear of Encumbrances or other burdens created
      by,
      through or under it or of which it is otherwise actually aware.

     

    (b)    Target
      Company has good and marketable title to, is the equitable owner of the
      Tangibles, including: (i) all Tangibles owned and reflected on the
      Financial Statements; and (ii) all other Tangibles reflected in its Books
      and Records as being owned by Target Company. The Tangibles are owned by Target
      Company free and clear of all Encumbrances of any kind or nature, except for
      Permitted Encumbrances. The joint venture created between Target Company and
      North Peace Energy Inc. pursuant to the Joint Venture Agreement is the legal
      owner of the Tangibles and has good and marketable title to such
      Tangibles.

     

    (c)    To
      the
      Knowledge of Target Company, all Tangibles are (i) in good operating
      condition and repair, ordinary wear and tear excepted; (ii) suitable and
      adequate for continued use in the manner in which they are presently being
      used;
      (iii) adequate to meet all present requirements of Target Company; and
      (iv) free of patent defects.

     

    (d)    Target
      Company: 

     

    (i)    is
      not in
      default or will be in default on the completion of the Transaction under any
      Title and Operating Document; or

     

    (ii)   has
      failed to comply with, perform, observe or satisfy, in any material respect,
      any
      term, condition, obligation or liability which has heretofore arisen under
      the
      provisions of any Title and Operating Document;

     

    which
      defaults or failures could reasonably be expected to have a Material Adverse
      Effect on Target Company.

     

    (e)    as
      set
      forth in Part
      7.14(e)
      and
      except for operating costs incurred in Ordinary Course of the Business, there
      are no outstanding authorizations for expenditure or other financial commitments
      respecting the Assets which are due as at the date hereof pursuant to which
      individual expenditures of greater than $20,000 may be required by Target
      Company after the Effective Time.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    7.15    Real
      Property.
      Target
      Company owns no real property.

     

    7.16    Intellectual
      Property.
      Target
      Company does not own, license or otherwise possesses any rights to use, any
      trademarks, trade names, service marks, service names, mark registrations,
      logos, assumed names, registered and unregistered copyrights, patents or
      applications and registrations (collectively, the “Intellectual
      Property”).
      There
      are no pending or, to the Knowledge of Target Company, threatened claims by
      any
      person alleging infringement by Target Company for use of Intellectual Property.
      The conduct of the business of Target Company does not infringe any Intellectual
      Property rights of any Person. 

     

    7.17    Operation
      of Assets.

     

    (a)     
      Except
      as
      provided in Part
      7.17(a),
      to
      Target Company’s Knowledge, Target Company is not a party to a Contract
      containing area of mutual interest or area of exclusion provisions applicable
      to
      or binding on Target Company that materially restricts the right of Target
      Company to continue its business as currently conducted after
      Closing.

     

    (b)     
      No
      officer, director or consultant of Target Company, any associate or Affiliate
      of
      any such person or any party not at arm’s length to Target Company will own or
      will have or be entitled to any royalty, net profits interest, carried interest
      or other encumbrance of any nature whatsoever which are based on production
      from
      the Assets or any revenue or rights attributed thereto.

     

    (c)     
      To
      Target
      Company’s Knowledge, all operations in respect of the Assets have been conducted
      in accordance with good oilfield practices in Canada in effect at the time
      that
      the operations were conducted.

     

    (d)     
      Target
      Company has obtained all material permits, licenses and other authorizations
      which are required under Legal Requirements to own or operate the
      Assets.

     

    7.18   Target
      Company Products and Services.
      As of
      the date of this Agreement, Target Company has never manufactured, processed,
      distributed, shipped or sold any products to third parties.

     

    7.19    Employees
      and Consultants.
      

     

    (a)     
      No
      Employee of Target Company has been granted the right to continued employment
      by
      Target Company or to any material compensation following termination of
      employment with Target Company.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    (b)     
      Part
      7.19(b)
      sets
      forth an accurate, correct and complete list of all (i) Employees of Target
      Company, including each Employee’s name, title or position, present annual
      compensation (including bonuses, commissions and deferred compensation), accrued
      and unused paid vacation and other paid leave, years of service, interests
      in
      any incentive compensation plan, and estimated entitlements to receive
      supplementary retirement benefits or allowances (whether pursuant to a
      contractual obligation or otherwise) and (ii) individuals who are currently
      performing services for Target Company related to the business of Target Company
      who are classified as “consultants” or “independent contractors.” Part
      7.20(b)
      sets
      forth all (i) bonuses, severance payments, termination pay and other
      special compensation of any kind paid to, accrued with respect to, or that
      would
      be payable to (as a result of the Transaction), any present or former contractor
      since September 30, 2006; (ii) increases in any Employee’s wage or salary
      since September 30, 2006 or (iii) increases or changes in any other
      benefits or insurance provided to any Employees since September 30,
      2006.

     

    (c)     
      Target
      Company has no collective bargaining agreements with any of its employees.
      There
      is no labor union organizing or election activity pending or, to the Knowledge
      of Shareholders or Target Company, threatened with respect to Target
      Company.

     

    7.20   Target
      Company Benefit Plans.
      

     

    (a)     
Target
      Company:

     

    (i)    has
      never
      established or maintained any employee Benefit Plans;

     

    (ii)    is
      not a
      party to or bound by or subject to any agreement or arrangement with respect
      to
      Benefit Plans;

     

    (iii)   is
      not a
      party to or bound by or subject to any collective bargaining agreement or
      arrangement with any labor union or employee association; or

     

    (iv)   is
      not a
      party to or bound by or subject to any written employment agreement, written
      or
      oral, consulting or service agreement with or respecting its
      Employees.

     

    (b)    No
      collective bargaining agreement is currently being negotiated by Target Company
      with respect to any Employee. There are no certification proceedings outstanding
      in respect of the Employees and, to the Knowledge of Shareholders, there are
      no
      attempts to organize or certify any of the Employees. There is no current or
      pending labor strike, dispute, work slowdown or work stoppage against Target
      Company or, to the Knowledge of Shareholders, threatened against Target Company.
      To the Knowledge of Shareholders, no trade union or employee association has
      applied to have Target Company declared a related or successor employer pursuant
      to any Legal Requirement.

     

    (c)    Target
      Company has complied with all Legal Requirements related to the employment
      of
      its employees, including provisions related to wages, hours, leaves of absence,
      equal opportunity, occupational health and safety, workers’ compensation,
      severance, employee handbooks or manuals, collective bargaining and the payment
      of social security and other Taxes. Target Company has no Liability under any
      Legal Requirements related to employment and attributable to an event occurring
      or a state of facts existing prior to the date thereof.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

       

      7.21    Compliance
        with Laws.

       

      (a)     
        Target
        Company is, and at all times since the date of its incorporation has been,
        in
        full compliance, with each Legal Requirement that is applicable to Target
        Company or any of Target Company’s properties, Assets, operations or businesses,
        and no event has occurred, and no condition or circumstance exists, that
        could
        reasonably be expected to (with or without notice or lapse of time) constitute,
        or result directly or indirectly in, a default under, a Breach or violation
        of,
        or a failure to comply with, any such Legal Requirement. Target Company has
        not
        received any notice from any third party regarding any actual, alleged or
        potential violation of any Legal Requirement.

       

      (b)     
        To
        the
        Knowledge of Target Company and Shareholders, no Governmental Authority has
        proposed or is considering any Legal Requirement that could reasonably be
        expected to affect Target Company or Target Company’s Assets, operations or
        businesses, or Target Company’s rights thereto, except to the extent that any
        such Legal Requirement, if adopted or otherwise put into effect, individually
        or
        in the aggregate, will not have a Material Adverse Effect on Target
        Company.

    

     

    7.22    Governmental
      Approvals.

     

    (a)     
      Target
      Company has all Governmental Approvals that are necessary or appropriate in
      connection with Target Company’s ownership and use of its Assets or operation of
      its businesses. Target Company has made all filings with, and given all
      notifications to, all Government Authorities as required by all applicable
      Legal
      Requirements. Each such Governmental Approval, filing and notification is valid
      and in full force and effect, and there is not, to the Knowledge of Target
      Company, pending or threatened any Proceeding which could result in the
      suspension, termination, revocation, cancellation, limitation or impairment
      of
      any such Governmental Approval, filing or notification. No violations have
      been
      recorded in respect of any Governmental Approvals, and neither Shareholders
      nor
      Target Company knows of no meritorious basis therefor. No fines or penalties
      are
      due and payable in respect of any Governmental Approval or any violation
      thereof.

     

    (b)     
      Target
      Company has delivered or made available to Purchaser accurate and complete
      copies of all of the Governmental Approvals, filings and notifications,
      including all renewals thereof and all amendments thereto.

     

    (c)      
      No
      material Governmental Approvals are required on the part of Shareholders or
      Target Company in connection with the Transaction.

     

    7.23    Proceedings
      and Orders.

     

    (a)     
      There
      is
      no Proceeding pending or, to the Knowledge of Target Company or Shareholders,
      threatened against or affecting Target Company, any of Target Company’s Assets,
      operations or businesses, or Target Company’s rights relating thereto. To
      Shareholders’ or Target Company’s Knowledge, no event has occurred, and no
      condition or circumstance exists, that might directly or indirectly give rise
      to
      or serve as a basis for the commencement of any such Proceeding.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

       

      (b)     
        Neither
        Target Company, its officers, directors, agents or employees, nor any of
        Target
        Company’s Assets, operations or businesses), nor Target Company’s rights
        relating to any of the foregoing, is subject to any Order or any proposed
        Order.

       

      (c)     
        No
        Proceeding has ever been commenced by or has ever been pending against Target
        Company.

       

      7.24   Environmental
        Matters.

       

      (a)     
Except
        as
        would not, individually or in the aggregate, have a Material Adverse Effect,
        (i) Target Company and, to Shareholders and Target Company’s Knowledge,
        Target Company has conducted its business in accordance with good oilfield
        practice and in compliance with all applicable Environmental Laws and holds
        all
        applicable environmental Permits, (ii) there has been no release of any
        Hazardous Substance by Target Company in any manner that could reasonably
        be
        expected to give rise to any remedial obligation or corrective action
        requirement under applicable Environmental Laws, (iii) Target Company has
        not received in writing any environmental protection order, enforcement order,
        control order, stop order, remedial order or other administrative complaints,
        directions or sanctions issued, filed, or imposed by a Governmental Entity
        pursuant to Environmental Law and having the force of law, or any notices,
        demand letters or requests for information from any federal, state, local
        or
        foreign or provincial Governmental Entity asserting that Target Company may
        be
        in violation of, or liable under, any Environmental Law, (iv) to
        Shareholders and Target Company’s Knowledge no Hazardous Substance has been
        disposed of, released or transported in violation of any applicable
        Environmental Law, or in a manner giving rise to any liability under
        Environmental Law, from any properties while owned or operated by Target
        Company
        or as a result of any operations or activities of Target Company and (v) 
neither Target Company nor any of its properties are, or, to the Knowledge
        of
        Shareholders and Target Company, threatened to become, subject to any
        liabilities relating to any suit, settlement, court order, administrative
        order,
        regulatory requirement, judgment or written claim asserted or arising under
        any
        Environmental Law or any agreement relating to Environmental
        Liabilities.

       

      (b)     
        On
        or
        before the Closing, Target Company shall make available to Purchaser all
        Environmental Documentation in the possession or control of Shareholders
        or
        Target Company in respect of the Assets produced for or received by Shareholders
        or Target Company. 

       

      7.25    Taxes.

       

      (a)     
        Target
        Company has timely filed all Tax Returns that it was required to file, and
        such
        Tax Returns are true, correct and complete in all respects. All Taxes shown
        to
        be payable on such Tax Returns or on subsequent assessments with respect
        thereto
        have been paid in full on a timely basis, and no other Taxes are payable
        by
        Target Company with respect to any period ending prior to the date of this
        Agreement, whether or not shown due or reportable on such Tax Returns, other
        than Taxes for which adequate accruals have been provided in its Financial
        Statements. Target Company has withheld and paid all Taxes required to have
        been
        withheld and paid in connection with amounts paid or owing to any employee,
        independent contractor, creditor, stockholder, or other third party. Target
        Company has no liability for unpaid Taxes accruing after the date of its
        latest
        Financial Statements except for Taxes incurred in the ordinary course of
        business. There are no liens for Taxes on the properties of Target Company,
        other than liens for Taxes not yet due and payable.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      (b)    Part
        7.25(b)
        lists
        all Tax Returns filed by Target Company for all taxable periods since its
        inception, indicates those Tax Returns that have been audited or appealed,
        and
        indicates those Tax Returns that currently are subject of audit. To the
        Knowledge of Shareholders and Target Company, no other audit or appeal of
        any
        Tax Return is currently pending or threatened. No claim has ever been made
        by
        any Governmental Authority in a jurisdiction where Target Company does not
        file
        Tax Returns that it is or may be subject to taxation by that jurisdiction.
        Target Company has delivered or made available to Purchaser correct and complete
        copies of all Tax Returns filed, examination reports, and statements of
        deficiencies assessed or agreed to by Target Company since its inception.
        Target
        Company has not waived any statute of limitations in respect of any Tax or
        agreed to an extension of time with respect to any Tax assessment or
        deficiency.

       

      (c)    
Target
        Company is not a party to or bound by any tax indemnity agreement, tax sharing
        agreement or similar contract. Target Company is not a party to any joint
        venture, partnership, or other arrangement or contract which could be treated
        as
        a partnership for United States federal income tax purposes.

       

      (d)    
Target
        Company is not obligated under any agreement, contract or arrangement that
        may
        result in the payment of any amount that would not be deductible by Target
        Company.

       

      (e)    
Target
        Company is a taxable Canadian corporation (as defined in the Tax Act), and
        is
        duly registered under Subdivision (d) of Division V of Part IX of the Excise
        Tax
        Act (Canada) with respect to the goods and services tax.

       

      (f)     
        Target
        Company has not acquired property from a non-arm’s length Person, within the
        meaning of the Tax Act, for consideration, the value of which is less than
        the
        fair market value of the property acquired in circumstances which would subject
        it to a liability under section 160 of the Tax Act.

       

      (g)     
        For
        all
        transactions between Target Company and any non-resident Person with whom
        any of
        them was not dealing at arm’s length during a taxation year ending on or before
        the Effective Time, each has made or obtained records or documents that meet
        the
        requirements of paragraphs 247(4)(a) to (c) of the Tax Act.

       

      7.26    Brokers.
        Except
        for the Granite Engagement, Target Company has not retained any broker or
        finder
        or incurred any liability or obligation for any brokerage fees, commissions
        or
        finders fees with respect to this Agreement or the Transaction.

       

      7.27    No
        Other Agreement.
        Neither
        Target Company nor any of its Representatives has entered into any Contract
        with
        respect to the sale or other disposition of any Assets or capital stock of
        Target Company except as set forth in this Agreement.

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      7.28    Foreign
        Corrupt Practices.Neither
        Target Company, nor any of its Representatives has (i) directly or
        indirectly, used any funds for unlawful contributions, gifts, entertainment
        or
        other unlawful expenses related to foreign or domestic political activity,
        (ii) made any unlawful payment to foreign or domestic government officials
        or employees or to any foreign or domestic political parties or campaigns
        from
        corporate funds, (iii) failed to disclose fully any contribution made by
        Target Company (or made by any person acting on its behalf of which Target
        Company is aware) which is in violation of law.

       

      7.29    No
        Prepayments.
        There
        have been no advances, take or pay or other prepayments with respect to the
        Assets that would obligate Target Company or Purchaser to deliver Petroleum
        Substances from the Assets after the Closing without receiving full payment
        therefor.

       

      7.30    Production
        Sales Contracts. 
        There
        are no production sales contracts pertaining to the Assets that cannot be
        cancelled at any time upon ninety (90) calendar days (or less) prior
        notice.

       

      7.31    Calls
        on
        Production.None
        of
        the Assets are subject to any calls on production.

       

      7.32    Wells.As
        of the
        date of this Agreement, Target Company has drilled only the wells set forth
        in
Part 7.32.

       

      7.33    Leases.
        Part
        7.33
        sets
        forth a correct and complete list of all Leases which Target Company owns
        or in
        which it has an interest, either directly, as a joint venturer or otherwise.
        Company owns, holds, posses or lawfully uses in the operation of the business
        all Leases necessary for the business as it is presently conducted and necessary
        for ownership and full use of the Assets. To Target Company’s Knowledge and
        except as set forth in Part 7.33
        and for
        such matters that would not and would not reasonably be expected to,
        individually or in the aggregate, have a Material Adverse Effect:

       

      (a)     
The
        Leases have been maintained according to their terms, in material compliance
        with all arrangements to which the Leases are subject;

       

      (b)     
The
        Leases are presently in full force and effect as currently set forth
        therein;

       

      (c)     
No
        other
        party to any Lease is in breach or default with respect to any of its
        obligations thereunder; and

       

      (d)     
There
        has
        not occurred any event, fact or circumstance that, with or without notice
        or
        lapse of time or both, may contravene, conflict with, or result in a violation
        or breach of, or result in the loss of any benefit to which Target Company
        is
        entitled under, or give Target Company or any other Person the right to declare
        a default or exercise any remedy under, or to accelerate the maturity or
        performance of any obligation under, or to cancel, terminate, or modify,
        any
        Lease.

    

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    7.34       
      Oil
      and Gas.

     

    (a)    As
      of the
      date of this Agreement, Target Company has no oil or gas production. Target
      Company has not entered into any agreement or accepted any payment regarding
      the
      sale of any Petroleum Substances.

     

    (b)   The
      Target Company has no third party reports containing information contrary to
      the
      information set forth in the report prepared by Sproule Associates Limited
      dated
      as of June 30, 2006, and delivered by Target Company to Purchaser for review.
      The Target Company has no third party reports estimating or evaluating Target
      Company’s oil or gas reserves or undeveloped lands.

     

    (c)   All
      rentals, royalties and other payments payable by Target Company have been
      properly and timely paid and there is no existing default (or event that, with
      notice or lapse of time or both, would become a default) under any oil and
      gas
      leases or other agreements, except, in each case, as individually or in the
      aggregate has not had, and would not be reasonably likely to have or result
      in,
      a Material Adverse Effect on Target Company.

     

    7.35       Derivative
      Transactions and Hedging.
      No
      Derivative Transactions (including each outstanding Petroleum Substances or
      financial hedging position attributable to the Petroleum Substances production
      of Target Company) have been entered into by Target Company or for the account
      of any of its customers as of the date of this Agreement.

     

    7.36        Investment
      Company.
      Target
      Company is not an “investment company,” a company “controlled” by an “investment
      company,” or an “investment adviser” within the meaning of the Investment
      Company Act of 1940, as amended, or the Investment Advisers Act of 1940, as
      amended.

     

    7.37       
      Disclosure.
      

     

    (a)    None
      of
      the representations and warranties contained in this Article 7, when all
      such representations and warranties are read together in their entirety,
      (i) contains any untrue statement of fact or (ii) omits or will omit
      to state any fact necessary to make such representations and warranties (in
      light of the circumstances under which they were made) not
      misleading.

     

    (b)    Target
      Company and Shareholders make no representations or warranties (whether in
      contract or in tort) except as expressly set forth in this
      Agreement.

     

    (c)    Except
      for the representations and warranties contained in this Agreement, Purchaser
      acknowledges that it is acquiring the Assets pursuant hereto on a “as is, where
      is” basis. Purchaser confirms that it has not relied on any covenants,
      representations or warranties outside this Agreement (whether in contract or
      in
      tort) and in particular, and without limitation, Target Company and Shareholders
      hereby expressly negate any representations or warranties by them not contained
      in this Agreement, the Closing Certificate or the Disclosure Schedule, whether
      contained in any information memorandum or otherwise, with respect
      to:

    
       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

         

        (i)    any
          data
          or information supplied by them to Purchaser or its
          representatives;

         

        (ii)    the
          quality, quantity or recoverability of Petroleum Substances within or under
          the
          Lands or any lands pooled or unitized therewith;

         

        (iii)    the
          value
          of the Assets or the future cash therefrom; or

         

        (iv)    the
          quality, condition, fitness or merchantability of any tangible depreciable
          equipment or property interests in which are comprised in the
          Assets.

      

       

      (d)    The
        maximum cumulative liability of Shareholders to Purchaser as a result of
        any
        misrepresentations or breach of warranty contained in Article 7
        shall
        not exceed the Purchase Price.

       

      (e)    Each
        representation and warranty set forth in this Agreement is not qualified
        in any
        way whatsoever except as explicitly provided therein, will not merge on Closing
        or by reason of the execution and delivery of any Contract at the Closing,
        will
        remain in force on and immediately after the Effective Time, is given with
        the
        intention that liability is not limited to Breaches discovered before Closing
        (except as otherwise limited by the provisions of Section
        1.2(c)),
        is
        separate and independent and is not limited by reference to any other
        representation or warranty or any other provision of this Agreement, and
        is made
        and given with the intention of inducing Purchaser to enter into this
        Agreement.

       

      ARTICLE
        8.  

       

      REPRESENTATIONS
        AND WARRANTIES CONCERNING SURGE

       

      Except
        as
        disclosed in (i) Surge’s Annual Report on Form 10-KSB for the year ending
        December 31, 2005, and any Surge SEC Reports filed subsequent to such Form
        10-KSB, and (ii) the disclosure letter delivered by Surge to Target Company
        dated as of the date hereof and attached as Schedule 4
        to this
        Agreement (the “Surge
        Disclosure Schedule”)
        (the
        parts of which are numbered to correspond to the individual Section numbers
        of
        this Article 8),
        and
        except to the extent the public announcement of the transactions contemplated
        by
        the Transaction Agreements affects Surge’s financial conditions, results of
        operations, expenses, assets or liabilities constitutes an exception to any
        of
        the following representations and warranties, Surge hereby represents and
        warrants to Target Company as follows: 

       

      8.1   Organization,
        Good Standing, Qualification.
        Surge
        is a corporation duly incorporated, validly existing and in good standing
        under
        the laws of Delaware.

       

      8.2   Capitalization.

       

      (a)    The
        capitalization of Surge is as set forth on Part 8.2.
        All
        such outstanding shares have been duly authorized and validly issued and
        are
        fully paid and non-assessable. No other shares of capital stock or securities
        of
        Surge are issued or outstanding.

       

      (b)    Other
        than the Support Agreement and the Exchange Agreement, each of which will
        be
        executed prior to the Closing, there is no: (i) outstanding security,
        instrument or obligation that is or may become convertible into or exchangeable
        for any Surge Stock or that has the right to vote on any matters on which
        shareholders of Surge may vote; (iii) Contract under which Surge is or may
        become obligated to sell, issue or otherwise dispose of or redeem, purchase
        or
        otherwise acquire any of its securities; or (iv) stockholder agreement,
        voting trust or other agreement, arrangement or understanding that may affect
        the exercise of voting or any other rights with respect to the securities
        of
        Surge.

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

         

        8.3    Authority;
          Binding Nature of Agreements.
          Surge
          has all requisite corporate power and authority to execute and deliver
          this
          Agreement and all other Transaction Agreements to which it is a party and
          to
          carry out the provisions of this Agreement and the other Transaction Agreements.
          The execution, delivery and performance by Surge of this Agreement and
          the other
          Transaction Agreements have been approved by all requisite action on the
          part of
          Surge. This Agreement has been duly and validly executed and delivered
          by Surge.
          Each of this Agreement and the other Transaction Agreements constitutes,
          or upon
          execution and delivery, will constitute, the legal, valid and binding obligation
          of Surge, enforceable against Surge in accordance with its terms, except
          as may
          be limited by bankruptcy, insolvency, reorganization, moratorium and other
          similar laws and equitable principles related to or limiting creditors’ rights
          generally and by general principles of equity.

         

        8.4    No
          Conflicts; Required Consents.
          The
          execution, delivery and performance of this Agreement or any other Transaction
          Agreement by Surge do not and will not (with or without notice or lapse
          of
          time):

         

        (a)    conflict
          with, violate or result in any Breach of (i) any of the provisions of
          Surge’s certificate of incorporation or bylaws; (ii) any resolutions
          adopted by Surge’s stockholders, or its board of directors or committees
          thereof; (iii) any of the terms or requirements of any Governmental
          Approval held by Surge or any of its employees or that otherwise relates
          to
          Surge’s business; (iv) any provision of a Contract to which Surge is a
          party; or (v) any federal, state, local or foreign order, writ, injunction,
          decree, statute, rule or regulation to Surge or any of its assets.

         

        (b)    give
          any
          Governmental Authority or other Person the right to (i) challenge the
          Transaction; (ii) exercise any remedy or obtain any relief under any Legal
          Requirement or any Order to which Surge or any of its assets is subject;
          (iii) declare a default of, exercise any remedy under, accelerate the
          performance of, cancel, terminate or modify any Contract to which Surge
          is a
          party; or (iv) revoke, suspend or modify any Governmental Approval;
          or

         

        (c)    require
          Surge to obtain any Consent or make or deliver any filing or notice to
          a
          Governmental Authority.

         

        8.5    No
          Subsidiaries.
          Other
          than Purchaser, Signet and Cynthia, Surge does not own any shares of capital
          stock or other securities of, or control, directly or indirectly, any other
          Entity and has never owned, beneficially or otherwise, any shares or other
          securities of, or any direct or indirect equity interest in, any
          Entity.

         

        8.6    Surge
          SEC Reports.
          Surge
          has filed all forms, reports, schedules, statements and other documents
          (including all exhibits, notes, and schedules thereto and documents incorporated
          by reference therein) required to be filed by it under the Securities Act
          and
          Exchange Act during the 12 months immediately preceding the date of this
          Agreement (collectively, as supplemented and amended since the time of
          filing,
          the “Public
          Disclosure Documents”).
          The
          Public Disclosure Documents (i) at the time filed, with respect to all of
          the Public Disclosure Documents other than registration statements filed
          under
          the Securities Act, or at the time of their respective effective dates,
          with
          respect to registration statements filed under the Securities Act, complied
          as
          to form in all material respects with the applicable requirements of the
          Securities Act or the Exchange Act, as the case may be, and (ii) did not at
          the time filed or at the time of their respective effective dates, as the
          case
          may be (or if amended or superseded by a filing prior to the date of this
          Agreement, then on the date of such filing), contain any untrue statement
          of a
          material fact or omit to state a material fact required to be stated in
          such
          Public Disclosure Documents or necessary in order to make the statements
          in such
          Public Disclosure Documents, in the light of the circumstances under which
          they
          were made, not misleading.

      

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

         

        8.7    Surge
          Financial Statements

         

        (a)    
Each
          of
          the financial statements (including, in each case, any related notes) contained
          in the Public Disclosure Documents at the time filed or at the time of
          their
          respective effective dates, as the case may be, complied as to form in
          all
          material respects with the applicable published rules and regulations of
          the SEC
          with respect thereto, was prepared in accordance with United States generally
          accepted accounting principles applied on a consistent basis throughout
          the
          periods involved (except as may be indicated in the notes to such financial
          statements or, in the case of unaudited statements, as permitted by Form
          10-QSB
          of the SEC) and fairly presented the financial position of Surge at the
          respective dates and the results of its operations and cash flows for the
          periods indicated, except that the unaudited interim financial statements
          were
          or are subject to normal and recurring year-end adjustments.

         

        8.8    Absence
          of Undisclosed Liabilities.
          Surge
          has no Liabilities other than (i) those set forth in the Financial
          Statements; and (ii) accounts payable and accrued salaries that have been
          incurred by Surge since September 30, 2006, in the Ordinary Course of
          Business.

         

        8.9    Absence
          of Changes.
          Since
          September 30, 2006, (i) Surge has conducted its business and operations in
          the Ordinary Course of Business; and (ii) no event or circumstance has
          occurred that could reasonably have, or result in, a Material Adverse Effect
          on
          Surge.

         

        8.10        
          Transactions
          with Affiliates.
          Except
          as set forth in the Financial Statements, no officer or director of Surge
          (a) owns, directly or indirectly, any debt, equity or other interest in any
          Entity with which Surge is affiliated, has a business relationship or competes
          other than officers or directors of Surge that own less than five percent
          (5%)
          of the issued and outstanding capital stock of a publicly-traded competitor
          of
          Surge; (b) is indebted to Surge, nor is Surge indebted (or committed to
          make loans or extend or guarantee credit) to any officer or director of
          Surge
          other than with respect to any of Surge’s obligations to pay accrued salaries,
          reimbursable expenses or other standard employee benefits; (c) has any
          direct or indirect interest in any asset, property or other right used
          in the
          conduct of or otherwise related to the business or operations of Surge;
          (d) has any claim or right against Surge, and no event has occurred, and no
          condition or circumstance exists, that might (with or without notice or
          lapse of
          time) directly or indirectly give rise to or serve as a basis for any claim
          or
          right in favor of any officer or director of Surge against Surge; (e) is a
          party to any Contract or has had any direct or indirect interest in, any
          Contract, transaction or business dealing of any nature involving Surge;
          or
          (f) received from or furnished to Surge any goods or services (with or
          without consideration) since September 30, 2006.

      

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

         

        8.11       
          Compliance
          with Laws.

         

        (a)    Surge
          is,
          and at all times since the date of its incorporation has been, in full
          compliance with each Legal Requirement that is applicable to Surge or any
          of
          Surge’s properties, assets, operations or businesses, and no event has occurred,
          and no condition or circumstance exists, that could reasonably be likely
          to
          (with or without notice or lapse of time) constitute, or result directly
          or
          indirectly in, a default under, a Breach or violation of, or a failure
          to comply
          with, any such Legal Requirement. Surge has not received any notice from
          any
          third party regarding any actual, alleged or potential violation of any
          Legal
          Requirement.

         

        (b)    To
          the
          Knowledge of Surge, no Governmental Authority has proposed or is considering
          any
          Legal Requirement that could reasonably be likely to affect Surge or Surge’s
          Assets, operations or businesses, or Surge’s rights thereto, except to the
          extent that any such Legal Requirement, if adopted or otherwise put into
          effect,
          individually or in the aggregate, will not have a Material Adverse Effect
          on
          Surge.

         

        8.12         
          Governmental
          Approvals.
          Surge
          has all Governmental Approvals that are necessary or appropriate in connection
          with Surge’s operation of its businesses. Surge has made all filings with, and
          given all notifications to, all Government Authorities as required by all
          applicable Legal Requirements. Each such Governmental Approval, filing
          and
          notification is valid and in full force and effect, and there is not pending
          or
          threatened any Proceeding which could result in the suspension, termination,
          revocation, cancellation, limitation or impairment of any such Governmental
          Approval, filing or notification. No violations have been recorded in respect
          of
          any Governmental Approvals, and to the Knowledge of Surge, there is no
          meritorious basis therefor. No fines or penalties are due and payable in
          respect
          of any Governmental Approval or any violation thereof.

         

        8.13        
          Proceedings
          and Orders.

         

        (a)    There
          is
          no Proceeding pending or, to the Knowledge of Surge, threatened against
          or
          affecting Surge. To Surge’s Knowledge, no event has occurred, and no condition
          or circumstance exists, that might directly or indirectly give rise to
          or serve
          as a basis for the commencement of any such Proceeding.

         

        (b)    Neither
          Surge, its officers, directors, agents or employees, is subject to any
          Order or
          any proposed Order.

         

        (c)    No
          Proceeding has ever been commenced by or has ever been pending against
          Surge.

         

        8.14       
          Environmental
          Matters.
          Except
          as would not, individually or in the aggregate, have a Material Adverse
          Effect,
          (i) to Surge’s Knowledge, Surge has conducted its business in accordance
          with good oilfield practice and in compliance with all applicable Environmental
          Laws and holds all applicable environmental Permits, (ii) there has been no
          release of any Hazardous Substance by Surge in any manner that could reasonably
          be expected to give rise to any remedial obligation or corrective action
          requirement under applicable Environmental Law, (iii) Surge has not
          received in writing any environmental protection order, enforcement order,
          control order, stop order, remedial order or other administrative complaints,
          directions or sanctions issued, filed, or imposed by a Governmental Entity
          pursuant to Environmental Law and having the force of law, or any notices,
          demand letters or requests for information from any federal, state, local
          or
          foreign or provincial Governmental Entity asserting that Surge may be in
          violation of, or liable under, any Environmental Law, (iv) to Surge’s
          Knowledge, no Hazardous Substance has been disposed of, released or transported
          in violation of any applicable Environmental Law, or in a manner giving
          rise to
          any liability under Environmental Law, from any properties while owned
          or
          operated by Surge or as a result of any operations or activities of Surge
          and
          (v)  neither Surge nor any of its properties are, or, to the Knowledge of
          Surge, threatened to become, subject to any liabilities relating to any
          suit,
          settlement, court order, administrative order, regulatory requirement,
          judgment
          or written claim asserted or arising under any Environmental Law or any
          agreement relating to environmental liabilities.

      

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

         

        8.15       
          Taxes.

         

        (a)    Surge
          has
          timely filed all Tax Returns that it was required to file, and such Tax
          Returns
          are true, correct and complete in all respects. All Taxes shown to be payable
          on
          such Tax Returns or on subsequent assessments with respect thereto have
          been
          paid in full on a timely basis, and no other Taxes are payable by Surge
          with
          respect to any period ending prior to the date of this Agreement, whether
          or not
          shown due or reportable on such Tax Returns, other than Taxes for which
          adequate
          accruals have been provided in its Financial Statements. Surge has withheld
          and
          paid all Taxes required to have been withheld and paid in connection with
          amounts paid or owing to any employee, independent contractor, creditor,
          stockholder, or other third party. Surge has no liability for unpaid Taxes
          accruing after the date of its latest Financial Statements except for Taxes
          incurred in the ordinary course of business. There are no liens for Taxes
          on the
          properties of Surge, other than liens for Taxes not yet due and
          payable.

         

        (b)    Surge
          is
          not a party to or bound by any tax indemnity agreement, tax sharing agreement
          or
          similar contract. Surge is not a party to any joint venture, partnership,
          or
          other arrangement or contract which could be treated as a partnership for
          United
          States federal income tax purposes.

         

        8.16        
          Brokers.
          Surge
          has not retained any broker or finder or incurred any liability or obligation
          for any brokerage fees, commissions or finder’s fees with respect to this
          Agreement or the Transaction.

         

        8.17        
          Foreign
          Corrupt Practices.
          Surge
          has
          not (i) directly or indirectly, used any funds for unlawful contributions,
          gifts, entertainment or other unlawful expenses related to foreign or domestic
          political activity, (ii) made any unlawful payment to foreign or domestic
          government officials or employees or to any foreign or domestic political
          parties or campaigns from corporate funds, (iii) failed to disclose fully
          any contribution made by Surge (or made by any person acting on its behalf
          of
          which Surge is aware) which is in violation of law.

         

        8.18        
          Oil
          and Gas.

         

        (a)    Surge
          has
          no oil or gas production and has not entered into any agreement or accepted
          any
          payment regarding the sale of any Petroleum Substances. 

         

        (b)    Surge
          has
          no report estimating proved oil and gas reserves of Surge.

      

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

         

        (c)    All
          rentals, royalties and other payments payable by Surge have been properly
          and
          timely paid and there is no existing default (or event that, with notice
          or
          lapse of time or both, would become a default) under any oil and gas leases
          or
          other agreements, except, in each case, as individually or in the aggregate
          has
          not had, and would not be reasonably likely to have or result in, a Material
          Adverse Effect on Surge.

         

        (d)    All
          equipment, personal property, fixtures and real property improvements included
          in Surge’s assets, including all gathering lines, pipelines, meter stations,
          compressors and compressor stations, valves, pumps, tanks and other equipment,
          are in operable state adequate to maintain normal operations in a manner
          consistent with the past practices of Surge. Surge has title to or an interest
          in its respective personal property sufficient to allow Surge to conduct
          its
          business, as currently being conducted, without material adverse
          interference.

         

        8.19       
          Derivative
          Transactions and Hedging.
          No
          Derivative Transactions (including each outstanding Petroleum Substances
          or
          financial hedging position attributable to the Petroleum Substances production
          of Surge) have been entered into by Surge.

         

        8.20     
             Investment
          Company; Shell Company.
          Surge
          is not, and as a result of the issuance of the Surge Securities contemplated
          hereby will not be, an “investment company,” as such term is defined in the
          Investment Company Act of 1940, as amended. Surge is not a “shell company” as
          such term is defined in Rule 12b-2 of the Exchange Act.

         

        8.21       
           Surge
          Securities.
          The
          Surge Securities are duly authorized and reserved for issuance and, upon
          issuance, shall be validly issued as fully paid and non-assessable shares
          in
          the capital stock of Surge in full compliance with all applicable United
          States federal and state and Canadian securities laws and other applicable
          Legal
          Requirements and will be free and clear of all Encumbrances.

         

        8.22        
          Full
          Disclosure.
          

         

        (a)    None
          of
          the representations and warranties contained in this Article 8,
          when
          all such representations and warranties are read together in their entirety,
          (i) contains any untrue statement of fact or (ii) omits or will omit
          to state any fact necessary to make such representations and warranties
          (in
          light of the circumstances under which they were made) not
          misleading.

         

        (b)    Surge
          make no representations or warranties (whether in contract or in tort)
          except as
          expressly set forth in this Agreement.

      

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

         

        (c)    Each
          of
          the Shareholders confirms that such Shareholder has not relied on any covenants,
          representations or warranties outside this Agreement (whether in contract
          or in
          tort) and in particular, and without limitation, each of the Shareholders
          hereby
          expressly negate any representations or warranties by Purchaser and Surge
          not
          contained in this Agreement, the Closing Certificate or the Disclosure
          Schedule,
          whether contained in any information memorandum or otherwise.

         

        (d)    The
          maximum cumulative liability of Purchaser and Surge to Shareholders as
          a result
          of any misrepresentations or breach of warranty contained in this Agreement
          shall not exceed the Purchase Price.

         

        Each
          representation and warranty set forth in this Agreement is not qualified
          in any
          way whatsoever except as explicitly provided therein, will not merge on
          Closing
          or by reason of the execution and delivery of any Contract at the Closing,
          will
          remain in force on and immediately after the Effective Time, is given with
          the
          intention that liability is not limited to Breaches discovered before Closing,
          is separate and independent and is not limited by reference to any other
          representation or warranty or any other provision of this Agreement, and
          is made
          and given with the intention of inducing Shareholders to enter into this
          Agreement.

      

       

      ARTICLE
        9.  

       

      PRE-CLOSING
        COVENANTS

       

      9.1    Target
        Company’s Conduct of the Business Prior to Closing.
        During
        the period from the date of this Agreement through the Closing Date (the
        “Pre-Closing
        Period”),
        Target
        Company shall, and shall cause its Representatives to:

       

      (a)    Conduct
        its business and operations only in the Ordinary Course of Business and only
        as
        contemplated and authorized by the Joint Venture Agreement, except as otherwise
        specifically permitted by this Agreement;

       

      (b)    Pay
        all
        of its Liabilities and Taxes when due, subject to good faith disputes over
        such
        Liabilities or Taxes;

       

      (c)    Maintain
        insurance coverage in amounts adequate to cover the reasonably anticipated
        risks
        of Target Company;

       

      (d)    Use
        Best
        Efforts to (i) preserve intact all rights of Target Company and the current
        business organization of Target Company, (ii) keep available the services
        of the current officers, employees and agents of Target Company,
        (iii) maintain good relationships with employees, licensors, licensees,
        suppliers, contractors, distributors, customers, and others having business
        dealings with Target Company, and (iv) operate, or cause to be operated,
        the Assets in a good and workmanlike manner and in the usual, regular and
        ordinary manner consistent with past practices;

       

      (e)    Confer
        with Purchaser concerning operational matters of a material nature;

       

      (f)    Report
        periodically to Purchaser concerning the status of the business, operations
        and
        finances of Target Company; 

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

         

        (g)    Preserve
          in full force and effect all Title and Operating Documents, insurance and
          agreements that relate to the Assets; and 

         

        (h)    Consult
          with Purchaser prior to voting under any operating, joint venture, partnership
          or similar agreement or electing to non-consent any operation under an
          operating
          agreement, including the Joint Venture Agreement.

         

        9.2    Restrictions
          on Target Company’s Conduct of the Business Prior to
          Closing.
          During
          the Pre-Closing Period, Target Company shall not, and shall cause its
          Representatives not to:

         

        (a)    Enter
          into, create, incur or assume (i) any borrowings under capital leases or
          (ii) any obligations which would have a Material Adverse Effect on Target
          Company or Purchaser’s ability to conduct Target Company’s business and
          operations in substantially the same manner and condition as currently
          conducted
          by Target Company;

         

        (b)    Acquire
          by merging or consolidating with, or by purchasing any equity securities
          or
          assets (which are material, individually or in the aggregate, to Target
          Company)
          of, or by any other manner, any business or any Entity;

         

        (c)    Sell,
          transfer, lease, license or otherwise encumber any of its Assets;

         

        (d)    Enter
          into any agreements or commitments with another Person, except on commercially
          reasonable terms in the Ordinary Course of Business; 

         

        (e)    Violate
          any Legal Requirement applicable to Target Company;

         

        (f)    Violate,
          terminate or amend any Contract or Governmental Approval;

         

        (g)    Commence
          a Proceeding other than for injunctive relief on the grounds that Target
          Company
          has suffered immediate and irreparable harm not compensable in money damages
          if
          Target Company has obtained the prior written consent of Purchaser, such
          consent
          not to be unreasonably withheld; 

         

        (h)    Declare,
          authorize or pay any dividends on, make any other distributions with respect
          to,
          or redeem, repurchase or otherwise acquire any of its capital
          stock;

         

        (i)    Purchase,
          lease, license or otherwise acquire any assets, except for supplies acquired
          by
          Target Company in the Ordinary Course of Business;

         

        (j)    Make
          any
          capital expenditure in excess of $50,000, individually or in the aggregate,
          except for operations conducted pursuant to the Joint Venture Agreement
          or
          pursuant to AFEs specified in Part 7.14(e);

         

        (k)    Write
          off
          as uncollectible, or establish any extraordinary reserve with respect to,
          any
          indebtedness;

      

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

         

        (l)    Provide
          any credit, loan, advance, guaranty, endorsement, indemnity, warranty or
          mortgage to any Person, including any of the customers, stockholders, officers,
          employees or directors of Target Company;

         

        (m)    Borrow
          from any Person by way of a loan, advance, guaranty, endorsement, indemnity,
          or
          warranty;

         

        (n)    Discharge
          any Encumbrance, indebtedness or other Liability in excess of $50,000,
          individually or in the aggregate, except for Liabilities reflected or reserved
          against in the Financial Statements and accounts payable in the Ordinary
          Course
          of Business;

         

        (o)    Change
          its credit practices, accounting methods or practices or standards used
          to
          maintain its books, accounts or business records;

         

        (p)    Change
          the terms of its accounts or other payables or take any action directly
          or
          indirectly to cause or encourage any acceleration or delay in the payment,
          collection or generation of its accounts;

         

        (q)    Incur
          or
          become subject to any Liability or Encumbrance, contingent or otherwise,
          except
          current Liabilities in the Ordinary Course of Business or pursuant to the
          Title
          and Operating Documents;

         

        (r)    Make
          any
          material change affecting Target Company’s business or operations, including
          (i) changes in wholesaler alignments, inventory levels, management
          organization or personnel arrangements with sales brokers, market research
          projects, working capital levels (payables and receivables); (ii) changes
          in discretionary costs, such as maintenance and repairs, research and
          development, and training; (iii) any capital expenditures or deferrals of
          capital expenditures; (iv) deviations from operating budgets or plans on
          sales and profitability; or (v) other than in the Ordinary Course of
          Business, change any of its business policies, including, pricing, purchasing,
          production, personnel, sales, returns, budget or product acquisition
          policies;

         

        (s)    Amend
          its
          Certificate of Incorporation or Bylaws;

         

        (t)    Split,
          combine or reclassify any of its capital stock or issue or authorize the
          issuance of any other securities in lieu of, or in substitution for, shares
          of
          its capital stock;

         

        (u)    Issue,
          sell, dispose of or encumber, or authorize the issuance, sale, disposition
          or
          encumbrance of, any shares of its capital stock or grant, enter into or
          accept
          any options, warrants, convertible securities or other rights to acquire
          any
          shares of such capital stock or any other ownership interest in Target
          Company;

         

        (v)    Hire
          any
          new employee other than in the Ordinary Course of Business, terminate any
          officer or key employee of Target Company, increase the annual level of
          compensation of any existing employee, establish or adopt any Benefit Plan,
          or
          grant any bonuses, benefits or other forms of direct or indirect compensation
          to
          any employee, officer, director or consultant;

      

       

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

         

        (w)    Make
          any
          severance payments to any employee, officer or director, except payments
          made
          pursuant to written agreements outstanding as of the date of this
          Agreement;

         

        (x)    Make
          or
          change any election in respect of Taxes, adopt or change any accounting
          method
          in respect of Taxes, file any amendment to a Tax Return, enter into any
          closing
          agreement, settle any claim or assessment in respect of Taxes, or consent
          to any
          extension or waiver of the limitation period applicable to any claim or
          assessment in respect of Taxes;

         

        (y)    Fail
          to
          maintain Target Company’s assets and properties in good repair, order and
          condition, reasonable wear and tear excepted; 

         

        (z)    
Enter
          into any “non-compete” or similar agreement that would materially restrict the
          businesses of Target Company following the Closing or that would in any
          way
          restrict the businesses of Purchaser or its affiliates or take any action
          that
          may impose new or additional material regulatory requirements on Target
          Company
          or any affiliate of Purchaser;

         

        (aa)    Become
          a
          party to any Derivative Transaction;

         

        (bb)    Take
          any
          action or undertake any commitment which would have, or which would reasonably
          be expected to have, an adverse effect on the Petroleum and Natural Gas
          Rights
          (including failing to make payments or fund any obligation or working interest
          which would result in, or which would reasonably be expected to result
          in, a
          reduction in the Petroleum and Natural Gas Rights);

         

        (cc)    Fail
          to
          provide Purchaser with any details relating to any proposed acquisition
          of or
          application for Lands, including full details of any minimum exploration
          commitment in connection therewith, except to the extent it would violate
          applicable law to do so;

         

        (dd)    Amend
          or
          otherwise modify any of the Leases or the Joint Venture Agreement as each
          is in
          effect as of the date of this Agreement; and

         

        (ee)    Enter
          into any Contract or agree, in writing or otherwise, to take any of the
          actions
          described in Section 9.2(a)
          through
          (dd) above, or any action that would make any of its representations or
          warranties contained in this Agreement untrue or incorrect in any material
          respect or prevent it from performing or cause it not to perform its covenants
          hereunder.

         

        9.3    No
          Solicitation.
          During
          the Pre-Closing period, neither Target Company nor any of Shareholders
          shall,
          directly or indirectly, (i) initiate, solicit or encourage (including by
          way of furnishing information regarding Target Company’s business or operations)
          any inquiries, or make any statements to third parties which may reasonably
          be
          expected to lead to any proposal concerning the sale of Target Company,
          the
          business or operations of Target Company (whether by way of merger, purchase
          of
          capital shares, purchase of assets or otherwise) (a “Competing
          Transaction”);
          or
          (ii) hold any discussions or enter into any agreements with, or provide any
          information or respond to, any third party concerning a proposed Competing
          Transaction or cooperate in any way with, agree to, assist or participate
          in,
          solicit, consider, entertain, facilitate or encourage any effort or attempt
          by
          any third party to do or seek any of the foregoing. If at any time the
          Pre-Closing Period, Target Company or any Shareholder is approached in
          any
          manner by a third party concerning a Competing Transaction (a “Competing
          Party”),
          Target Company shall promptly inform Purchaser regarding such contact and
          furnish Purchaser with a copy of any inquiry or proposal, or, if not in
          writing,
          a description thereof, including the name of such Competing Party, and
          Target
          Company shall keep Purchaser informed of the status and details of any
          future
          notices, requests, correspondence or communications related thereto, except
          to
          the extent disclosure of such information will result in a breach of the
          fiduciary duties of Target Company’s board of directors.

      

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

         

        9.4    Certain
          Notifications.
          

         

        (a)    Target
          Company.
          During
          the Pre-Closing Period, Target Company shall promptly notify Purchaser
          in
          writing regarding any:

         

        (i)    Action
          taken by Target Company not in the Ordinary Course of Business and any
          circumstance or event that could reasonably be expected to have a Material
          Adverse Effect on the business and operations of Target Company;

         

        (ii)    Fact,
          circumstance, event, or action by a Shareholder or Target Company
          (i) which, if known on the date of this Agreement, would have been required
          to be disclosed in or pursuant to this Agreement; or (ii) the existence,
          occurrence, or taking of which would result in any of the representations
          and
          warranties of any Shareholder or Target Company contained in this Agreement
          or
          in any Transaction Agreement not being true and correct when made or at
          Closing;

         

        (iii)    Breach
          of
          any covenant or obligation of any Shareholder or Target Company hereunder;
          and

         

        (iv)    Circumstance
          or event which will result in, or could reasonably be expected to result
          in, the
          failure of any Shareholder or Target Company to timely satisfy any of the
          closing conditions specified in Article 11
          of this
          Agreement.

      

       

      (b)    Purchaser
        and Surge.
        During
        the Pre-Closing Period, Purchaser and Surge shall promptly notify Target
        Company
        in writing regarding any:

       

      (i)    Action
        taken by Purchaser or Surge not in the Ordinary Course of Business and any
        circumstance or event that could reasonably be expected to have a Material
        Adverse Effect on the business and operations of Purchaser or
        Surge;

       

      (ii)    Fact,
        circumstance, event, or action by Purchaser or Surge (i) which, if known on
        the date of this Agreement, would have been required to be disclosed in or
        pursuant to this Agreement; or (ii) the existence, occurrence, or taking of
        which would result in any of the representations and warranties of Purchaser
        or
        Surge contained in this Agreement or in any Transaction Agreement not being
        true
        and correct when made or at Closing;

       

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

         

        (iii)    Breach
          of
          any covenant or obligation of Purchaser or Surge hereunder;

         

        (iv)    Circumstance
          or event which will result in, or could reasonably be expected to result
          in, the
          failure of Purchaser or Surge to timely satisfy any of the closing conditions
          specified in Article 11
          of this
          Agreement; and

         

        (v)    Promptly
          disclose the terms and conditions of any issuance of equity by either Purchaser
          or Surge, provided such disclosure would (i) not result in a breach of the
          provisions of any agreement relating thereto, (ii) be a violation of
          applicable securities laws, (iii) result in any breach of the fiduciary
          duties of the board of directors of either Purchaser or Surge, and
          (iv) prior to receiving any such information, Target Company shall execute
          a confidentiality agreement mutually acceptable to Target Company and Surge
          regarding the disclosure and use of such information. Target Company shall
          have
          an opportunity to promptly and reasonably comment to Purchaser or Surge,
          as
          applicable, on any information disclosed pursuant to this Section 9.4(b)(v);
          however, any terms and conditions relating to any issuance of equity by
          Purchaser or Surge, as applicable, shall be determined and agreed to in
          the sole
          and absolute discretion of Purchaser or Surge, as applicable.

      

       

      9.5    Updating
        the Disclosure Schedules.
        

       

      (a)    Target
        Company Disclosure Schedule.
        If any
        event, condition, fact or circumstance that is required to be disclosed pursuant
        to Section
        9.4(a)
        would
        require a change to the Target Disclosure Schedule if the Target Disclosure
        Schedule were dated as of the date of the occurrence, existence or discovery
        of
        such event, condition, fact or circumstance, then Target Company shall promptly
        deliver to Purchaser an update to the Target Disclosure Schedule specifying
        such
        change and shall use its Best Efforts to remedy same, as applicable;
provided,
        however,
        that no
        such update shall be deemed to supplement or amend the Target Disclosure
        Schedule for the purpose of (i) determining the accuracy of any of the
        representations and warranties made by Target Company or any of Shareholders
        in
        this Agreement or (ii) determining whether any of the conditions set forth
        in Article
        11
        have
        been satisfied.

       

      (b)    Purchaser
        and Surge Disclosure Schedules.
        If any
        event, condition, fact or circumstance that is required to be disclosed pursuant
        to Section
        9.4(b)
        would
        require a change to either Purchaser Disclosure Schedule or the Surge Disclosure
        Schedule if either such Disclosure Schedule were dated as of the date of
        the
        occurrence, existence or discovery of such event, condition, fact or
        circumstance, then Purchaser and Surge shall promptly deliver to Target Company
        an update to each such Disclosure Schedule specifying such change and shall
        use
        its Best Efforts to remedy same, as applicable; provided,
        however,
        that no
        such update shall be deemed to supplement or amend any such Disclosure Schedule
        for the purpose of (i) determining the accuracy of any of the
        representations and warranties made by Purchaser or Surge in this Agreement
        or
        (ii) determining whether any of the conditions set forth in Article 11
        have
        been satisfied.

       

      
        
          
          

        

        
          37

          
            

          

        

        
          
          

        

         

        9.6    Access
          to Information.
          During
          the Pre-Closing Period, Target Company shall: (i) afford Purchaser and its
          Representatives and prospective lenders and their Representatives (collectively,
          “Purchaser
          Advisors”)
          free
          and complete access during regular business hours, and in a manner so as
          not to
          interfere with the normal business operations of Target Company, to all
          premises, properties (including subsurface testing), personnel, Persons
          having
          business relationships with Target Company (including suppliers, licensors,
          auditors and engineers), Books and Records (including Tax records), Contracts,
          Assets and documents of or pertaining to Target Company; (ii) furnish
          Purchaser and Purchaser’s Advisors with all financial, operating and other data
          and information related to the business and operations of Target Company
          (including copies thereof), as Purchaser may reasonably request; and
          (iii) otherwise cooperate and assist, to the extent reasonably requested by
          Purchaser’s and Purchaser’s Advisors, with Purchaser and Purchaser Advisors’
investigation of the business and operations of Target Company. No information
          or knowledge obtained in any investigation pursuant to this Section 9.6
          shall
          affect or be deemed to modify any representation or warranty contained
          herein or
          the conditions to the obligations of the parties to consummate the
          Transaction.

         

        9.7    Best
          Efforts.
          During
          the Pre-Closing Period, each of Purchaser, Surge, Target Company and
          Shareholders shall use their respective Best Efforts to cause to be fulfilled
          and satisfied all of the conditions to Closing set forth in Article 11
          to which
          they are responsible for satisfying.

         

        9.8    Compliance
          with Privacy Laws.

         

        (a)    Each
          of
          Shareholders acknowledges and confirms that Target Company has complied
          in all
          material respects at all times with Privacy Laws which govern the collection,
          use and disclosure of Personal Information disclosed to Purchaser pursuant
          to or
          in connection with this Agreement (the “Disclosed
          Personal Information”).
          Each of
          Shareholders hereby covenants and agrees to advise Purchaser of all purposes
          for
          which Disclosed Personal Information was initially collected from or in
          respect
          of the Employee to which that Disclosed Personal Information relates and
          all
          additional purposes where such Shareholder has notified the Employee of
          that
          additional purpose, and disclosure of Personal Information, if any, unless
          that
          use or disclosure is permitted or authorized by law, without notice to,
          or
          consent from, that Employee; provided, however, that in such case Shareholder
          shall have advised Purchaser of the legislative provisions on which Shareholder
          is relying.

         

        (b)    Before
          Closing, none of the parties shall use the Disclosed Personal Information
          for
          any purposes other than those related to the performance of this Agreement
          and
          the completion of the Transaction.

         

        (c)    Each
          of
          the parties acknowledges and confirms that the disclosure of Personal
          Information is necessary for the purposes of determining if the parties
          shall
          proceed with the Transaction, and that the disclosure of Personal Information
          relates solely to the carrying on of the business, or the completion of
          the
          Transaction.

         

        (d)    Purchaser
          shall at all times keep strictly confidential all Disclosed Personal Information
          provided to it, and shall instruct those employees responsible for processing
          such Disclosed Personal Information to protect the confidentiality of that
          information in a manner consistent with Purchaser’s obligations hereunder.
          Purchaser shall ensure that access to the Disclosed Personal Information
          shall
          be restricted to those employees or service providers of Purchaser who
          have a
          bona fide need to access that information in order to fulfill their obligations
          in the course of their employment or in providing services to
          Purchaser.

      

       

      
        
          
          

        

        
          38

          
            

          

        

        
          
          

        

         

        (e)    The
          parties shall fully co-operate with one another, with the Employees to
          whom the
          Personal Information relates, and any Governmental Authority charged with
          enforcement of Privacy Laws, in responding to inquiries, complaints, requests
          for access, and claims in respect of Disclosed Personal
          Information.

         

        (f)    Purchaser
          undertakes, after Closing, to utilize the Disclosed Personal Information
          only
          for those purposes for which the Disclosed Personal Information was initially
          collected from or in respect of the applicable Employees.

         

        (g)    If
          Closing does not occur, on the request of any Shareholder, Purchaser shall
          forthwith cease all use of the Disclosed Personal Information acquired
          by
          Purchaser in connection with this Agreement and will return to such Shareholder
          or, at such Shareholder’s request, destroy in a secure manner, the Disclosed
          Personal Information (and any copies thereof) and provide such Shareholder
          with
          a certificate of a senior officer of Purchaser confirming such
          destruction.

      

       

      ARTICLE
        10. 

       

      POST
        CLOSING COVENANTS

       

      10.1   Cooperation.
        After
        the Closing, upon the request of Purchaser, each of Shareholders shall
        (i) execute and deliver any and all further materials, documents and
        instruments of conveyance, transfer or assignment as may reasonably be requested
        by Purchaser to effect, record or verify the transfer to, and vesting in
        Purchaser, of Shareholders’ right, title and interest in and to the Shares, free
        and clear of all Encumbrances, in accordance with the terms of this Agreement;
        and (ii) cooperate with Purchaser, at Purchaser’s expense, to enforce the
        terms of any Contracts, including terms relating to confidentiality and
        Intellectual Property Rights, and to contest or defend against any Proceeding
        relating to the Transaction or to the operation of Target Company’s business and
        operations before the Effective Time. After the Closing, Seller shall (a)
        cooperate with Purchaser in its efforts to continue and maintain for the
        benefit
        of Purchaser those business relationships of Target Company existing prior
        to
        the Closing and relating to the business to be operated by Target Company
        after
        the Closing; and (b) promptly deliver to Purchaser (i) any mail,
        packages and other communications addressed to Target Company relating to
        Target
        Company and (ii) any cash or other property that any Shareholder receives
        and that properly belongs to Target Company, including any insurance proceeds,
        payments with respect to Receivables, and interest payable thereon. No
        Shareholder or any of its officers, employees, agents or stockholders shall
        take
        any action that would tend to diminish the value of Target Company after
        the
        Closing or that would interfere with the business of Target Company or Purchaser
        to be engaged in after the Closing, including disparaging the name or business
        of Target Company, Purchaser or Surge.

       

      10.2   Area
        of Exclusion. As
        of the Closing Date, an area of exclusion is hereby established for a period
        of
        two (2) years from the Effective Time to include any interest in Oil Sands
        Rights underlying those lands within the boundaries of the area outlined
        in blue
        on Exhibit 10.2
        (the
“Exclusion
        Area”).
        Each
        of Shareholders, for themselves and for each of their respective Affiliates,
        hereby agrees that if such Shareholder or any of such Shareholder’s Affiliates
        acquires any right or interest within the Exclusion Area during the such
        two (2)
        year term other than a right or interest made available through Surge or
        Purchaser, within 30 days of that acquisition, 100% of such right or interest
        shall be immediately offered to Purchaser for a like amount of the consideration
        expended by Shareholder, or its Affiliate, for such right or interest, whether
        such consideration be monetary, incurred obligations or otherwise.

       

      
        
          
          

        

        
          39

          
            

          

        

        
          
          

        

         

        10.3    Nondisclosure.
           After
          the
          Effective Time, except as may be required for Tax purposes or other regulatory
          purposes, neither Shareholders nor any of their respective successors and
          assigns shall (a) retain any document, databases or other media embodying
          any confidential or proprietary know-how which constitutes the assets or
          properties of Target Company or use, publish or disclose to any third person
          any
          such confidential or proprietary know-how. In the event of any termination
          of
          this Agreement, (i) Shareholders shall treat, and cause Target Company to
          treat, as confidential and proprietary and shall not disclose or use, directly
          or indirectly, in any manner whatsoever, or permit others under its control
          to
          disclose or to use, any information concerning Purchaser, Surge or their
          respective businesses or products obtained pursuant to or in connection
          with the
          Transaction which are the subject matter of this Agreement, unless such
          information is or becomes a matter of public knowledge through no fault
          of any
          Shareholder or Target Company and (ii) Shareholders shall promptly return,
          and cause Target Company to return, to Purchaser or Surge, as applicable,
          upon
          written request all written information and documents received from any
          other
          party, its affiliates, accountants or counsel, in connection with such
          Transaction, including all copies thereof. The provisions of this Section 10.3
          shall
          survive any termination of this Agreement.

         

        10.4    Registration
          Statement. 

         

        (a)     
          Within
          45
          days following the Closing, Surge covenants to prepare and file with the
          SEC a
          registration statement on Form SB-2 (“SB-2
          Registration Statement”)
          registering the Surge Securities for resale by Shareholders. Surge covenants
          to
          keep the SB-2 Registration Statement effective for up to two years following
          the
          date the SB-2 Registration Statement becomes effective or, if earlier,
          until
          Shareholders have completed the distribution related thereto. Surge shall
          prepare and file with the SEC such amendments and supplements to the SB-2
          Registration Statement and the prospectus used in connection with such
          SB-2
          Registration Statement as may be necessary to comply with the provisions
          of the
          Securities Act with respect to the disposition of all securities covered
          by the
          SB-2 Registration Statement. Surge shall furnish to Shareholders such number
          of
          copies of a prospectus in conformity with the requirements of the Securities
          Act, and such other documents as they may reasonably request in order to
          facilitate the disposition of the Surge Securities owned by them. Surge
          shall
          notify each Shareholder by written notice to the address set forth on the
          books
          of Purchaser (unless Purchaser is notified in writing of a different address
          for
          a Shareholder) at any time when a prospectus relating thereto is required
          to be
          delivered under the Securities Act of the happening of any event as a result
          of
          which the prospectus included in the SB-2 Registration Statement as then
          in
          effect, includes an untrue statement of a material fact or omits to state
          a
          material fact required to be stated therein or necessary to make the statements
          therein not misleading in the light of the circumstances then
          existing.

      

       

      
        
          
          

        

        
          40

          
            

          

        

        
          
          

        

         

        (b)     
          Notwithstanding
          anything to the contrary in Section 10.4(a),
          if
          Surge becomes eligible to register the Surge Securities on Form S-3, Purchaser
          shall cause Surge to (i) prepare and file with the SEC a registration
          statement on Form S-3 (“S-3
          Registration Statement”)
          registering the Surge Securities for resale by Shareholders; and (ii) Surge
          shall keep the S-3 Registration Statement effective for a period of up
          to three
          years following the date the SB-2 Registration Statement (as opposed to
          the S-3
          Registration Statement) became effective or, if earlier, until Shareholders
          have
          completed the distribution related thereto. At such time as the SEC declares
          the
          S-3 Registration Statement effective, Surge shall no longer have any obligations
          under Section 10.4(a).
          Surge
          shall furnish to Shareholders such number of copies of a prospectus in
          conformity with the requirements of the Securities Act, and such other
          documents
          as they may reasonably request in order to facilitate the disposition of
          the
          Surge Securities owned by them. Surge shall notify each Shareholder by
          written
          notice to the address set forth on the books of Purchaser (unless Purchaser
          is
          notified in writing of a different address for a Shareholder) at any time
          when a
          prospectus relating thereto is required to be delivered under the Securities
          Act
          of the happening of any event as a result of which the prospectus included
          in
          the S-3 Registration Statement as then in effect, includes an untrue statement
          of a material fact or omits to state a material fact required to be stated
          therein or necessary to make the statements therein not misleading in the
          light
          of the circumstances then existing.

         

        (c)     
          It
          shall
          be a condition precedent to the obligations of Surge to take any action
          under
          this Section 10.4
          that the
          selling Shareholders shall furnish to Surge such information regarding
          themselves, the Surge Securities held by them and the intended method of
          disposition of such securities as may be reasonably requested by Surge
          and as
          shall be required to effect the registration of their Surge
          Securities.

         

        10.5    General
          Release.
          Promptly following the Effective Time, the Target Company shall execute
          and
          deliver a release in the form of Exhibit 10.5
          to the
          Shareholder Representative.

         

        10.6    Private
          Placement

         

        (l)      
          Each
          time
          a Shareholder desires to acquire Surge Securities in exchange for Exchangeable
          Shares, such Shareholder shall provide Surge with a Subscription Agreement
          substantially in the form of Exhibit 10.6
          to this
          Agreement. Surge is hereby required to refuse to register any transfer
          of any
          Surge Securities issued to Shareholders (and all certificates issued in
          exchange
          therefor or in substitution thereof) not made in accordance with the provisions
          of Regulation S, pursuant to registration under the Securities Act, or
          pursuant
          to an available exemption from registration.

      

       

      ARTICLE
        11.

       

      CONDITIONS
        TO CLOSING

       

      11.1    Conditions
        to Purchaser’s Obligation to Close.
        Purchaser’s obligation to purchase the Shares and to take the other actions
        required to be taken by Purchaser at the Closing shall be subject to the
        satisfaction, on or prior to the Effective Time, of each of the following
        conditions, any of which may be waived by Purchaser in writing:

       

      
        
          
          

        

        
          41

          
            

          

        

        
          
          

        

         

        (a)     
          Representations,
          Warranties and Covenants.
          (i) Each of the representations and warranties made by Target Company and
          Shareholders in this Agreement and in each of the Transaction Agreements
          shall
          have been true and correct in all material respects (considered collectively
          and
          individually) as of the date of this Agreement and shall be true and correct
          in
          all material respects (considered collectively and individually) as of
          the
          Effective Time (or, to the extent such representations and warranties speak
          only
          as of an earlier date, they shall be true and correct in all material respects
          as of such earlier date); (ii) each of the representations and warranties
          of Target Company and Shareholders in this Agreement that contain an express
          materiality qualification shall have been true and correct in all respects
          (considered collectively and individually) as of the date of this Agreement
          and
          shall be true and correct in all respects (considered collectively and
          individually) as of the Effective Time (or, to the extent such representations
          and warranties speak only as of an earlier date, they shall be true and
          correct
          in all respects as of such earlier date); and (iii) Target Company and
          Shareholders shall have performed, in all material respects (considered
          collectively and individually), all covenants and obligations in this Agreement
          required to be performed by Target Company and Shareholders as of the Effective
          Time;

         

        (b)     
          Documents.
          Target
          Company and Shareholders shall have delivered, or caused to be delivered,
          to
          Purchaser all of the documents and agreements set forth in Section 4.2;

         

        (c)     
          Consents.
          Target
          Company and Shareholders shall have delivered, or cause to be delivered,
          to
          Purchaser all Consents identified in each Disclosure Schedule and all other
          Consents required for (i) the consummation of the Transaction; and
          (ii) to prevent a Breach or termination of any Contract, and each such
          Consent shall be in full force and effect; 

         

        (d)     
          Opinion
          of Counsel.
          Shareholders shall have delivered to Purchaser an Opinion of Shareholders’
counsel, substantially in the form attached hereto as Exhibit 4.2(e);
          and

         

        (e)     
          Shareholder
          Approval.
          To the
          extent required under applicable Legal Requirements or the Certificate
          of
          Incorporation or Bylaws of any Shareholder, this Agreement and the consummation
          of the Transaction shall have been approved and adopted by the requisite
          vote of
          the stockholders of such Shareholder;

         

        (f)     
          No
          Proceedings.
          Since
          the date of this Agreement, no third party Proceeding shall have been commenced
          or threatened against Purchaser, or against any Representative of Purchaser
          (a) involving any challenge to, or seeking Damages or other relief in
          connection with, the Transaction; or (b) that may have the effect of
          preventing, delaying, making illegal, imposing limitations or conditions
          on or
          otherwise interfering with the Transaction;

         

        (g)     
          Financing.
          Purchaser shall have obtained on terms and conditions satisfactory to it
          all of
          the financing it needs to consummate the Transaction and fund the working
          capital requirements of Target Company after the Closing;

         

        (h)     
          Stock
          Ownership and Sale Proceeds.
          Since
          the date of this Agreement, no claim shall have been made or threatened
          by any
          Person asserting that such Person (a) is the holder or the beneficial owner
          of, or has the right to acquire or obtain beneficial ownership of, any
          stock of,
          or any other voting, equity, or ownership interest in, Target Company (including
          the Shares), or (b) is entitled to all or any portion of the Purchase Price
          payable for the Shares; and

      

       

      
        
          
          

        

        
          42

          
            

          

        

        
          
          

        

         

        (i)     
          No
          Prohibition.
          Neither
          the consummation nor the performance of the Transaction will, directly
          or
          indirectly (with or without notice or lapse of time), materially contravene,
          or
          conflict with, or result in a material violation of, or cause Purchaser
          or any
          Person affiliated with Purchaser to suffer any material adverse consequence
          under, (a) any applicable Legal Requirement or Order, or (b) any Legal
          Requirement or Order that has been published, introduced, or otherwise
          proposed
          by or before any Governmental Authority.

      

       

      11.2   Conditions
        to Shareholders’ Obligation to Close.
        Shareholders’ obligation to sell the Shares and to take the other actions
        required to be take by Shareholders at the Closing shall be subject to the
        satisfaction, on or prior to the Effective Time, of each of the following
        conditions, any of which may be waived by the Requisite Shareholders in
        writing:

       

      (a)     
        Representations,
        Warranties and Covenants.
        (i) Each of the representations and warranties made by Purchaser and Surge
        in this Agreement and in each of the Transaction Agreements shall have been
        true
        and correct in all material respects (considered collectively and individually)
        as of the date of this Agreement and shall be true and correct in all material
        respects (considered collectively and individually) as of the Effective Time
        (or, to the extent such representations and warranties speak as of an earlier
        date, they shall be true and correct in all material respects as of such
        earlier
        date); (ii) each of the representations and warranties of Purchaser and
        Surge in this Agreement that contain an express materiality qualification
        shall
        have been true and correct in all respects (considered collectively and
        individually) as of the date of this Agreement and shall be true and correct
        in
        all respects (considered collectively and individually) as of the Effective
        Time
        (or, to the extent such representations and warranties speak only as of an
        earlier date, they shall be true and correct in all respects as of such earlier
        date); and (iii) Purchaser and Surge shall have performed, in all material
        respects (considered collectively and individually), all covenants and
        obligations in this Agreement required to be performed by Purchaser and Surge
        as
        of the Effective Time; and

       

      (b)      
        Documents.
        Purchaser shall have delivered to Shareholders (or to Burstall Winger LLP)
        all
        of the documents, agreements and other items set forth in Section 4.3.

       

      11.3    Conditions
        to Obligations of Each Party to Close.
        The
        respective obligations of each party to this Agreement to consummate the
        Transaction shall be subject to the satisfaction, on or prior to the Effective
        Time, of each of the following condition(s), any of which may be waived by
        Purchaser or the Requisite Shareholders, as applicable, in writing:

       

      (a)     
        No
        Legal Impediments to Closing.
        There
        shall not be in effect any Order issued by any Governmental Authority preventing
        the consummation of the Transaction, seeking any Damages as a result of the
        Transaction, or otherwise affecting the right or ability of Purchaser or
        Target
        Company to own, operate or control the business and operations of Target
        Company
        and its properties, nor shall any Proceeding be pending that seeks any of
        the
        foregoing. There shall not be any Legal Requirement prohibiting Shareholders
        from selling or Purchaser from owning, operating or controlling the Shares
        or
        Target Company, or that makes this Agreement or the consummation of the
        Transaction illegal.

       

      
        
          
          

        

        
          43

          
            

          

        

        
          
          

        

         

      

      ARTICLE
        12.

       

      TERMINATION

       

      12.1    Circumstances
        for Termination.
        At any
        time prior to the Closing, this Agreement may be terminated by written notice
        explaining the reason for such termination (without prejudice to other remedies
        which may be available to the parties under this Agreement, at law or in
        equity):

       

      (a)     
        by
        the
        mutual written consent of Purchaser and the Requisite Shareholders;

       

      (b)     
        by
        either
        Purchaser or the Requisite Shareholders if (i) the non-terminating party is
        in material Breach of any material provision of this Agreement and such Breach
        shall not have been cured within thirty (30) days of receipt by such party
        of written notice from the terminating party of such Breach; and (ii) the
        terminating party is not, on the date of termination, in material Breach
        of any
        material provision of this Agreement; 

       

      (c)     
        by
        either
        Purchaser or the Requisite Shareholders if (i) the Closing has not occurred
        on or prior to the Closing Date (as determined pursuant to Section 1.2)
        for any
        reason; and (ii) the failure of the terminating party to fulfill any
        obligation under this Agreement has not been the cause of, or resulted in,
        the
        failure of the closing of the transactions contemplated by this Agreement
        to
        have occurred on or before the Closing Date (as determined pursuant to
Section 1.2);
        or

       

      (d)     
        by
        either
        Purchaser or the Requisite Shareholder if (i) satisfaction of a closing
        condition of the terminating party in Article 11
        is
        impossible; and (ii) the terminating party is not, on the date of
        termination, in material Breach of any material provision of this
        Agreement.

       

      12.2    Effect
        of Termination.
        If this
        Agreement is terminated in accordance with Section 12.1,
        all
        obligations of the parties hereunder shall terminate, except for the obligations
        set forth in this Article 12;
        provided,
        however,
        that
        nothing herein shall relieve any party from liability for the Breach of any
        of
        its representations, warranties, covenants or agreements set forth in this
        Agreement.

       

      ARTICLE
        13.

       

      INDEMNIFICATION

       

      13.1    Survival
        of Representations and Covenants.

       

      (a)     
        Subject
        to Section
        13.1(c),
        the
        representations, warranties, covenants and obligations of each party to this
        Agreement shall survive (i) the Closing; (ii) any sale or other
        disposition of any or all of the Shares by Purchaser; and (iii) the death
        or dissolution of any party to this Agreement. All of such representations,
        warranties, covenants and obligations shall remain in full force and effect
        and
        shall survive indefinitely unless a shorter period of time is set forth
        expressly in Section 13.1(c).

       

      
        
          
          

        

        
          44

          
            

          

        

        
          
          

        

         

        (b)     
          The
          representations, warranties, covenants and obligations of Shareholders,
          Target
          Company, Purchaser and Surge and the rights and remedies that may be exercised
          by the Indemnitees, shall not be limited or otherwise affected by or as
          a result
          of any information furnished to, or any investigation made by or any knowledge
          of, any of the Indemnitees or any of their Representatives.

         

        (c)     
          Subject
          to Section
          13.1(d),
          (i) all representations and warranties of Shareholders, Purchaser, Target
          Company and Surge shall survive for a period of one (1) year (i.e., 12
          calendar
          months) following the Closing Date (the “Survival
          Period”);
          provided,
          however,
          that if
          a Claim Notice (as defined below) relating to any representation or warranty
          is
          given to the indemnifying party on or prior to the applicable Survival
          Period,
          then, notwithstanding anything to the contrary contained in this Section 13.1(c),
          such
          representation or warranty shall not so expire, but rather shall remain
          in full
          force and effect until such time as such claim has been fully and finally
          resolved, either by means of a written settlement agreement executed on
          behalf
          of Shareholders and Purchaser or by means of a final, non-appealable judgment
          issued by a court of competent jurisdiction.

         

        (d)     
          Notwithstanding
          anything to the contrary contained in Section 13.1(c),
          if the
          indemnifying party had knowledge, on or prior to the Closing Date, of any
          fact,
          event or circumstance that constitutes or that has given rise or could
          be
          expected to give rise, directly or indirectly, to any Breach of any
          representation or warranty of the indemnifying party set forth in Article 5,
          in the
          case of Shareholders, Article 6
          in the
          case of Purchaser, Article 7
          in the
          case of Shareholders or Target Company, or Article
          8
          in the
          case of Surge, without disclosing such fact, event or circumstance, on
          the
          applicable Disclosure Schedule, then such representation or warranty shall
          not
          expire, but rather shall remain in full force and effect for an unlimited
          period
          of time (regardless of whether any Claim Notice relating to such representation
          or warranty is ever given).

         

        (e)     
          For
          purposes of this Agreement, a “Claim
          Notice”
          relating to a particular representation or warranty shall be deemed to
          have been
          given if any Indemnitee, acting in good faith, delivers to the indemnifying
          party a written notice stating that such Indemnitee believes that there
          is or
          has been a Breach of such representation or warranty and containing (i) a
          description in reasonable detail of the circumstances supporting such
          Indemnitee’s good faith belief that there is or has been such a Breach, and
          (ii) a non-binding, preliminary estimate of the aggregate dollar amount of
          the actual and potential Damages that have arisen and may arise as a direct
          or
          indirect result of such Breach.

         

        (f)     
          For
          purposes of this Agreement, each statement or other item of information
          set
          forth in any Disclosure Schedule shall be deemed to be a representation
          and
          warranty made in this Agreement.

      

       

      13.2   Indemnification
        By Shareholders.
        

       

      (a)     
        Shareholders,
        severally and not jointly, shall hold harmless and indemnify each of Purchaser
        Indemnitees from and against, and shall compensate and reimburse each of
        Purchaser Indemnitees for, any Damages that are directly or indirectly suffered
        or incurred by any of Purchaser Indemnitees or to which any of Purchaser
        Indemnitees may otherwise become subject at any time (regardless of whether
        or
        not such Damages relate to any third-party claim) and that arise directly
        or
        indirectly from or as a direct or indirect result of, or are directly or
        indirectly connected with:

       

      
        
          
          

        

        
          45

          
            

          

        

        
          
          

        

         

        (i)    any
          Breach of any of the representations or warranties made by Shareholders
          or
          Target Company in this Agreement, in the Closing Certificate or in any
          of the
          other Transaction Agreements;

         

        (ii)    any
          Breach of any representation, warranty, statement, information or provision
          contained in any Disclosure Schedule;

         

        (iii)    any
          Breach of any covenant or obligation of any Shareholder or Target Company
          contained in any of the Transaction Agreements; and

         

        (iv)    any
          Proceeding relating directly or indirectly to any Breach, alleged Breach,
          Liability or matter of the type referred to in clause “(i),” “(ii),”or “(iii)”
above (including any Proceeding commenced by any Indemnitee for the purpose
          of
          enforcing any of its rights under this Section 13.2).

         

        (b)    
Shareholders
          acknowledge and agree that, if Target Company suffers, incurs or otherwise
          becomes subject to any Damages as a result of or in connection with any
          inaccuracy in or breach of any representation, warranty, covenant or obligation,
          then (without limiting any of the rights of Target Company as an Indemnitee)
          Purchaser shall also be deemed, by virtue of its ownership of the stock
          of
          Target Company, to have incurred Damages as a result of and in connection
          with
          such inaccuracy or breach.

      

       

      13.3   Indemnification
        By Purchaser and Surge.

       

      Purchaser
        and Surge, jointly and severally, shall hold harmless and indemnify each
        of
        Shareholder Indemnitees from and against, and shall compensate and reimburse
        each of Shareholder Indemnitees for, any Damages that are directly or indirectly
        suffered or incurred by any of Shareholder Indemnitees or to which any of
        Shareholder Indemnitees may otherwise become subject at any time (regardless
        of
        whether or not such Damages relate to any third-party claim) and that arise
        directly or indirectly from or as a direct or indirect result of, or are
        directly or indirectly connected with:

       

      (a)    any
        Breach of any of the representations or warranties made by Purchaser or Surge
        in
        this Agreement or in the Closing Certificate;

       

      (b)    any
        Breach of any representation, warranty, statement, information or provision
        contained in any Disclosure Schedule delivered by Surge or
        Purchaser;

       

      (c)    any
        Breach of any covenant or obligation of Purchaser or Surge contained in any
        of
        the Transaction Agreements;

       

      (d)    any
        Proceeding relating directly or indirectly to any Breach, alleged Breach,
        Liability or matter of the type referred to in clause “(a),” “(b),” or
“(c)” above (including any Proceeding commenced by any Indemnitee for the
        purpose of enforcing any of its rights under this Section
        13.3).

       

      
        
          
          

        

        
          46

          
            

          

        

        
          
          

        

         

        13.4    Environmental
          Indemnity.
          Purchaser has taken into account Purchaser’s assumption of responsibility for
          Environmental Liabilities and Abandonment and Reclamation Obligations and
          the
          release of Shareholders from responsibility therefor when Purchaser evaluated
          the Assets and determined the Purchase Price. Surge, Purchaser and Target
          Company shall be liable for, and in addition indemnify Shareholders from
          and
          against all Environmental Liabilities and all Damages in respect thereto,
          arising from the conduct of Target Company on, prior to or subsequent to
          the
          Closing Date and all Abandonment and Reclamation Obligations. Surge, Purchaser
          and Target Company shall not be entitled to exercise and hereby waive any
          rights
          or remedies Surge, Purchaser or Target Company may now or in the future
          have
          against Shareholders in respect of such Environmental Liabilities or the
          Abandonment and Reclamation Obligations, whether such rights and remedies
          are
          pursuant to the common law or statute or otherwise, including without
          limitation, the right to name Shareholder as a third party to any action
          commenced by any third party against Surge, Purchaser or Target
          Company.

         

        13.5    No
          Contribution.
          Each
          Shareholder waives, and acknowledges and agrees that he shall not have
          and shall
          not exercise or assert (or attempt to exercise or assert), any right of
          contribution, right of indemnity or other right or remedy against Target
          Company
          in connection with any indemnification obligation or any other Liability
          to
          which he may become subject under or in connection with this
          Agreement.

         

        13.6    Defense
          of Third Party Claim.
          

         

        (a)     
          In
          the
          event of the assertion or commencement by any Person of any claim or Proceeding
          (whether against Purchaser, against any other Indemnitee or against any other
          Person) with respect to which any of Shareholders may become obligated
          to
          indemnify, hold harmless, compensate or reimburse any Indemnitee pursuant
          to
          this Article 13,
          Purchaser shall have the right, at its election, to designate a representative
          of Shareholders (the “Shareholder
          Representative”)
          to
          assume the defense of such claim or Proceeding at the sole expense of
          Shareholders. If Purchaser so elects to designate Shareholder Representative
          to
          assume the defense of any such claim or Proceeding:

         

        (i)    Shareholder
          Representative shall proceed to defend such claim or Proceeding in a diligent
          manner with counsel satisfactory to Purchaser;

         

        (ii)    Purchaser
          shall make available to Shareholder Representative any non-privileged documents
          and materials in the possession of Purchaser that may be necessary to the
          defense of such claim or Proceeding;

         

        (iii)    Shareholder
          Representative shall keep Purchaser informed of all material developments
          and
          events relating to such claim or Proceeding;

         

        (iv)    Purchaser
          shall have the right to participate in the defense of such claim or
          Proceeding;

      

       

      
        
          
          

        

        
          47

          
            

          

        

        
          
          

        

         

        (v)    Shareholder
          Representative shall not settle, adjust or compromise such claim or Proceeding
          without the prior written consent of Purchaser; and

         

        (vi)    Purchaser
          may at any time (notwithstanding the prior designation of Shareholder
          Representative to assume the defense of such claim or Proceeding) assume
          the
          defense of such claim or Proceeding.

      

       

      (b)     
        If
        Purchaser does not elect to designate Shareholder Representative to assume
        the
        defense of any such claim or Proceeding (or if, after initially designating
        Shareholder Representative to assume such defense, Purchaser elects to assume
        such defense), Purchaser may proceed with the defense of such claim or
        Proceeding on its own. If Purchaser so proceeds with the defense of any such
        claim or Proceeding on its own:

       

      (i)    all
        expenses relating to the defense of such claim or Proceeding (whether or
        not
        incurred by Purchaser) shall be borne and paid exclusively by
        Shareholders;

       

      (ii)    Shareholders
        shall make available to Purchaser any documents and materials in the possession
        or control of either of Shareholders that may be necessary to the defense
        of
        such claim or Proceeding;

       

      (iii)    Purchaser
        shall keep Shareholder Representative informed of all material developments
        and
        events relating to such claim or Proceeding; and

       

      (iv)    Purchaser
        shall have the right to settle, adjust or compromise such claim or Proceeding
        with the consent of Shareholder Representative; provided,
        however,
        that
        Shareholder Representative shall not unreasonably withhold such
        consent.

       

      13.7    Exercise
        Of Remedies By Indemnitees Other Than Parties To This
        Agreement.
        No
        Indemnitee (other than the parties to this Agreement or any successor thereto
        or
        assign thereof) shall be permitted to assert any indemnification claim or
        exercise any other remedy under this Agreement unless the respective party
        to
        this Agreement entitled to indemnification (or any successor thereto or assign
        thereof) shall have consented to the assertion of such indemnification claim
        or
        the exercise of such other remedy.

       

      13.8    Interest.
        Any
        Shareholder who is required to hold harmless, indemnify, compensate or reimburse
        any Indemnitee pursuant to this Article 13
        with
        respect to any Damages shall also be liable to such Indemnitee for interest
        on
        the amount of such Damages (for the period commencing as of the date on which
        Shareholder Representative received the notice in Section 13.1
        and
        ending on the date on which the liability of Shareholder to such Indemnitee
        is
        fully satisfied by such Shareholder) at a floating rate equal to the rate
        of
        interest publicly announced by Bank of America, N.T. & S.A. from time to
        time as its prime, base or reference rate.

       

      
        
          
          

        

        
          48

          
            

          

        

        
          
          

        

         

      

      ARTICLE
        14.

       

      MISCELLANEOUS
        PROVISIONS

       

      14.1    Further
        Assurances.
        Each
        party hereto shall execute and cause to be delivered to each other party
        hereto
        such instruments and other documents, and shall take such other actions,
        as such
        other party may reasonably request (prior to, at or after the Closing) or
        which
        are reasonably necessary for the purpose of carrying out or evidencing any
        of
        the transactions contemplated by this Agreement. The parties shall execute,
        if
        necessary, Form T2057 of the Tax Act to enable the Shareholders to defer,
        if
        possible and where applicable, Canadian capital gains tax arising from the
        transactions contemplated under the Agreement.

       

      14.2    Fees
        and Expenses.
        

       

      (a)     
        Shareholders
        shall bear and pay all fees, costs and expenses (including legal, accounting
        and
        other professional advisory fees and expenses) not paid in full in cash by
        the
        Target Company prior to the Effective Time that have been incurred or that
        are
        in the future incurred by, on behalf of or for the benefit of Shareholders
        or
        Target Company in connection with: (i) the negotiation, preparation,
        review, execution and delivery of any letter of intent or similar document
        relating to any of the transactions contemplated by this Agreement;
        (ii) the investigation and review conducted by Shareholders, Target Company
        and their respective Representatives with respect to the transactions
        contemplated by this Agreement; (iii) the negotiation, preparation and
        review of this Agreement, the other Transaction Agreements and all assignments,
        certificates, opinions and other instruments and documents delivered or to
        be
        delivered in connection with the transactions contemplated by this Agreement;
        (iv) the preparation and submission of any filing or notice required to be
        made or given in connection with any of the transactions contemplated by
        this
        Agreement, and the obtaining of any Consent required to be obtained in
        connection with any of the transactions contemplated by this Agreement; and
        (v) the consummation and performance of the transactions contemplated by
        this Agreement.

       

      (b)     
        Purchaser
        and Surge shall bear and pay all fees, costs and expenses (including legal,
        accounting and other professional advisory fees and expenses) that have been
        incurred or that are in the future incurred by, on behalf of or for the benefit
        of Purchaser and Surge in connection with: (i) the negotiation,
        preparation, review, execution and delivery of any letter of intent or similar
        document relating to any of the transactions contemplated by this Agreement;
        (ii) the investigation and review conducted by Purchaser, Surge and their
        respective Representatives with respect to the transactions contemplated
        by this
        Agreement; (iii) the negotiation, preparation and review of this Agreement,
        the other Transaction Agreements and all assignments, certificates, opinions
        and
        other instruments and documents delivered or to be delivered in connection
        with
        the transactions contemplated by this Agreement; (iv) the preparation and
        submission of any filing or notice required to be made or given in connection
        with any of the transactions contemplated by this Agreement, and the obtaining
        of any Consent required to be obtained in connection with any of the
        transactions contemplated by this Agreement; and (v) the consummation and
        performance of the transactions contemplated by this Agreement.

       

      
        
          
          

        

        
          49

          
            

          

        

        
          
          

        

         

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

         

        14.4    Notices.
          All
          notices, demands and other communications to be given or delivered under
          or by
          reason of the provisions of this Agreement shall be in writing and shall
          be
          deemed to have been given (i) when personally delivered, sent by telex,
          cable or telecopy (with hard copy to follow) or sent by reputable overnight
          express courier (charges prepaid), or (ii) three (3) Business Days
          following mailing by certified or registered mail, postage prepaid and
          return
          receipt requested. Unless another address is specified in writing, notices,
          demands and communications shall be sent to the addresses indicated
          below:

      

       

      If
        to
        Purchaser:

      Cold
        Flow
        Energy ULC

      c/o
        Surge
        Global Energy, Inc.

      12220
        El
        Camino Real, Suite 410

      San
        Diego, CA 92130

      Telephone: (858)
        704-5018

      Facsimile: (858)
        704-5011

      

       

      With
        a
        copy to:

      Steven
        Anapoell, Esq.

      Greenberg
        Traurig, LLP

      650
        Town
        Center Drive, 17th Floor

      Costa
        Mesa, California 92626

      Telephone: (714)
        708-6504

      Facsimile: (714)
        708-6501

       

      -
        and
        -

       

      Keith
        Chatwin, Esq.

      Stikeman
        Elliott LLP

      4300
        Bankers Hall West

      888-3rd
        Street,
        S.W.

      Calgary,
        Alberta T2P 5C5

      Telephone: (403)
        266-9000

      Facsimile: 
        (403)
        266-7822

       

      
        
          
          

        

        
          50

          
            

          

        

        
          
          

        

         

      

      If
        to
        Target Company:               
        c/o Keith Templeton

      Burstall
        Winger LLP

      1600,
        333
        - 7th
        Avenue
        S.W.

      Calgary,
        Alberta

      Telephone: (403)
        264-1915

      Facsimile: (403)
        233-2131

       

      If
        to any
        Shareholders:

       

      To
        the
        respective addresses listed on Schedule 1

       

      With
        a
        copy to:

      Keith
        Templeton

      Burstall
        Winger LLP

      1600,
        333
        - 7th
        Avenue
        S.W.

      Calgary,
        Alberta

      Telephone: (403)
        264-1915

      Facsimile: (403)
        233-2131

       

      If
        to
        Surge:

      Surge
        Global Energy, Inc.

      12220
        El
        Camino Real, Suite 410

      San
        Diego, CA 92130

      Telephone: (858)
        704-5018

      Facsimile: (858)
        704-5011

       

      With
        a
        copy to:

      Steven
        Anapoell, Esq.

      Greenberg
        Traurig, LLP

      650
        Town
        Center Drive, 17th Floor

      Costa
        Mesa, California 92626

      Telephone: (714)
        708-6504

      Facsimile: (714)
        708-6501

       

      -
        and
        -

       

      Keith
        Chatwin, Esq.

      Stikeman
        Elliott LLP

      4300
        Bankers Hall West

      888-3rd
        Street,
        S.W.

      Calgary,
        Alberta T2P 5C5

      Telephone: (403)
        266-9000

      Facsimile: 
        (403)
        266-7822

       

      14.5    Governing
        Law.
        This
        Agreement shall be construed in accordance with, and governed in all respects
        by, the laws of Alberta, Canada and the laws of Canada applicable therein
        (without giving effect to principles of conflicts of laws). 

       

      
        
          
          

        

        
          51

          
            

          

        

        
          
          

        

         

        14.6    Successors
          and Assigns.
          This
          Agreement shall inure to the benefit of, be enforceable by, and be binding
          upon:
          Surge and its successors and assigns (if any); Purchaser and its successors
          and
          assigns (if any); Shareholders, and their personal representatives, executors,
          administrators, estate, heirs, successors and assigns (if any); and Target
          Company and its successors and assigns (if any). Neither this Agreement
          nor any
          benefits, rights or obligations under this Agreement shall be assignable
          by any
          party, by operation of Legal Requirement or otherwise, without the prior
          express
          written consent of the other parties, which consent may be arbitrarily
          withheld.

         

        14.7    Remedies
          Cumulative; Specific Performance.
          Subject
          to the limitations on remedies set forth in Section 1.2(c),
          the
          rights and remedies of the parties hereto shall be cumulative and not
          alternative. The parties hereto agree that: (a) in the event of any Breach
          or threatened Breach by any party hereto of any covenant, obligation or
          other
          provision set forth in this Agreement, the other parties shall be entitled
          (in
          addition to any other remedy that may be available to them) to (i) a decree
          or order of specific performance to enforce the observance and performance
          of
          such covenant, obligation or other provision, and (ii) an injunction
          restraining such Breach or threatened Breach; and (b) neither such other
          parties nor any other Indemnitee shall be required to provide any bond
          or other
          security in connection with any such decree, order or injunction or in
          connection with any related action or Proceeding.

         

        14.8    Public
          Announcements.
          Any
          public announcement or similar publicity with respect to this Agreement
          or the
          Transaction will be issued, if at all, at such time and in such manner
          as
          Purchaser determines. Unless consented to by Purchaser in advance or required
          by
          Legal Requirements, prior to the Closing, Shareholders shall, and shall
          cause
          Target Company to, keep this Agreement strictly confidential and may not
          make
          any disclosure of this Agreement to any Person. Shareholders and Purchaser
          will
          consult with each other concerning the means by which Target Company’s
          employees, customers, and suppliers and others having dealings with Target
          Company will be informed of the Transaction, and Purchaser will have the
          right
          to be present for any such communication.

         

        14.9    Headings.
          The
          underlined headings contained in this Agreement are for convenience of
          reference
          only, shall not be deemed to be a part of this Agreement and shall not
          be
          referred to in connection with the construction or interpretation of this
          Agreement.

         

        14.10   Counterparts.
          This
          Agreement may be executed in several counterparts, each of which counterpart,
          when executed and delivered, shall constitute an original and all of which,
          when
          taken together, shall constitute one agreement and a signed counterpart
          delivered by facsimile or other electronic means shall be considered as
          valid as
          an original counterpart.

         

        14.11   Waiver.

         

        (a)       
          No
          failure on the part of any Person to exercise any power, right, privilege
          or
          remedy under this Agreement, and no delay on the part of any Person in
          exercising any power, right, privilege or remedy under this Agreement,
          shall
          operate as a waiver of such power, right, privilege or remedy; and no single
          or
          partial exercise of any such power, right, privilege or remedy shall preclude
          any other or further exercise thereof or of any other power, right, privilege
          or
          remedy. 

      

       

      
        
          
          

        

        
          52

          
            

          

        

        
          
          

        

         

        (b)     
          No
          Person
          shall be deemed to have waived any claim arising out of this Agreement,
          or any
          power, right, privilege or remedy under this Agreement, unless the waiver
          of
          such claim, power, right, privilege or remedy is expressly set forth in
          a
          written instrument duly executed and delivered on behalf of such Person;
          and any
          such waiver shall not be applicable or have any effect except in the specific
          instance in which it is given.

         

        14.12  Disclosure
          Schedule.
          In the
          event of any inconsistency between the statements in the body of this Agreement
          and those in any Disclosure Schedule (other than an exception expressly
          set
          forth as such in the Disclosure Schedule with respect to a specifically
          identified representation or warranty), the statements in the body of this
          Agreement will control.

         

        14.13  Parties
          in Interest.
          Except
          for the provisions of Article 13
          hereof,
          none of the provisions of this Agreement is intended to provide any rights
          or
          remedies to any Person other than the parties to this Agreement and their
          respective successors and assigns (if any). Without limiting the generality
          of
          the foregoing, (i) no employee of Target Company shall have any rights
          under this Agreement or under any of the other Transaction Agreements,
          and
          (ii) no creditor of Target Company or any Shareholder shall have any rights
          under this Agreement or any of the other Transaction Agreements.

         

        14.14  Entire
          Agreement.
          This
          Agreement, the Confidentiality Agreement and the other Transactional Agreements
          set forth the entire understanding of the parties relating to the subject
          matter
          hereof and thereof and supersede all prior agreements and understandings
          among
          or between any of the parties relating to the subject matter hereof and
          thereof
          (including any letter of intent).

         

        14.15  Amendments.
          This
          Agreement (including the schedules hereto) may not be amended,
          modified, altered or supplemented except by means of a written instrument
          duly
          executed and delivered by all of the parties hereto.

         

        14.16  Severability.
          In the
          event that any provision of this Agreement, or the application of any such
          provision to any Person or set of circumstances, shall be determined to
          be
          invalid, unlawful, void or unenforceable to any extent, the remainder of
          this
          Agreement, and the application of such provision to Persons or circumstances
          other than those as to which it is determined to be invalid, unlawful,
          void or
          unenforceable, shall not be impaired or otherwise affected and shall continue
          to
          be valid and enforceable to the fullest extent permitted by law.

         

        14.17  Construction.
          For
          purposes of this Agreement, including the Exhibits hereto, whenever the
          context
          requires: the singular number shall include the plural, and vice versa;
          the
          masculine gender shall include the feminine and neuter genders; the feminine
          gender shall include the masculine and neuter genders; and the neuter gender
          shall include the masculine and feminine genders. The parties hereto agree
          that
          any rule of construction to the effect that ambiguities are to be resolved
          against the drafting party shall not be applied in the construction or
          interpretation of this Agreement. As used in this Agreement, the words
“include”
and “including,” and variations thereof, shall not be deemed to be terms of
          limitation, but rather shall be deemed to be followed by the words “without
          limitation.” Except as otherwise indicated, all references in this Agreement to
“Sections” and “Exhibits” are intended to refer to Sections of this Agreement
          and Exhibits to this Agreement and have been inserted solely for convenience
          of
          reference and are not intended to be complete or accurate description of
          the
          contents thereof. All references to time in this Agreement are references
          to
          local time in Calgary, Alberta. Reference to “and” and “or” shall be deemed to
          mean “and/or.”

      

       

      
        
          
          

        

        
          53

          
            

          

        

        
          
          

        

         

        14.18  Time
          is of the Essence.
          Time
          shall be of the essence of this Agreement.

         

        14.19  Survival.
          Each
          Shareholder’s obligations and liability under this Agreement and the other
          Transaction Agreements shall survive such Shareholder’s death (and shall be
          binding upon such Shareholder’s personal representatives, executors,
          administrators, estate, heirs and successors) and shall not be limited
          in any
          way by: (i) any failure on the part of Purchaser or any other Purchaser
          Indemnitee to exercise any right or assert any claim against any Shareholder
          or
          Target Company; (ii) the dissolution or insolvency of, or the appointment
          of any receiver, conservator or liquidator for, or the commencement of
          any
          bankruptcy, reorganization, moratorium, arrangement or other proceeding
          by,
          against or with respect to, any Shareholder or Target Company; or (iii) any
          merger or consolidation of any Shareholder with or into any other
          Entity.

         

        14.20  Compelled
          Disclosure of Information.
          Notwithstanding anything to the contrary in the Confidentiality Agreement,
          in
          the event that Surge, Purchaser or any of their respective Representatives
          are
          requested pursuant to, or required by, applicable law or regulation (including,
          without limitation, any rule, regulation or policy statement of any national
          securities exchange, market or automated quotation system on which any
          of
          Surge’s or Purchaser’s securities are listed or quoted) or by legal process to
          disclose any Confidential Information, Surge or Purchaser shall provide
          Target
          Company with advanced notice of such request or requirement, to the extent
          reasonably possible, in order to enable Target Company (a) to seek an
          appropriate protective order or other remedy, (b) to consult with Surge or
          Purchaser with respect to Target Company’s taking steps to resist or narrow the
          scope of such request or legal process or (c) to waive compliance, in whole
          or in part, with the terms of the Confidentiality Agreement. In the event
          that
          such protective order or other remedy is not obtained, or Target Company
          waives
          compliance, in whole or in part, with the terms of the Confidentiality
          Agreement, Surge, Purchaser or their respective Representatives, as the
          case may
          be, shall use commercially reasonable efforts to disclose only that portion
          of
          the Confidential Information which Surge or Purchaser is legally required
          to be
          disclosed and exercise its commercially reasonable efforts to cooperate
          with
          Target Company to obtain reliable assurances that confidential treatment
          will be
          accorded to the Confidential Information so disclosed. To the extent any
          provision of this Section
          14.20
          conflicts with the provisions of the Confidentiality Agreement, the provisions
          of this Section
          14.20
          shall
          control.

      

      

       

      [Signatures
        Follow On a Separate Page]

       

      

      
        
          
          

        

        
          54

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF,
        the
        parties have signed this Agreement on the date first written above and each
        of
        the individuals signing below warrants that he or she has the authority to
        sign
        for and on behalf of the respective parties.

       

      
        	 	
                PURCHASER: 

                 

              
	 	COLD FLOW ENERGY
                ULC 
	 	
                 

                By:
                  ___________________________________________

                Name:
                  _________________________________________  

                Title:
                  __________________________________________ 

              
	 	
                 

                 

              
	 	
                SURGE: 

                 

              
	 	SURGE GLOBAL ENERGY,
                INC. 
	 	
                 

                By:
                  ___________________________________________

                Name:
                  _________________________________________  

                Title:
                  __________________________________________  

              
	 	
                 

                 

              
	 	
                TARGET COMPANY: 

                 

              
	 	PEACE OIL
                CORP. 
	 	
                 

                By:
                  ___________________________________________

                Name:
                  _________________________________________  

                Title:
                  __________________________________________   

              
	 	 
	 	
                 

                SHAREHOLDERS
                  OF PEACE OIL: 

              
	 	
                 

                1229679 ALBERTA
                  INC. 

              
	 	
                 

                By:
                  ___________________________________________

                Name:
                  _________________________________________  

                Title:
                  __________________________________________    

              
	 	 
	 	1216848 ALBERTA
                LTD. 
	 	
                 

                By:
                  ___________________________________________

                Name:
                  _________________________________________  

                Title:
                  __________________________________________     

              

      

      
 

      
        
          
          

        

        
          55

          
            

          

        

        
          
          

        

      

       

       

      
        	______________________________________________ 	______________________________________________ 
	
                Witness  

              	
                Jeff
                  Cairns individually and as trustee of the Cairns Family
                  Trust

              
	 	 
	______________________________________________ 	______________________________________________ 
	Witness 	
                Dale
                  Fisher individually and as trustee of the Fisher
                  Family Trust

              
	 	 
	______________________________________________ 	______________________________________________ 
	Witness 	Paul Jacobson as trustee of the Stouthearted
                Trust 
	 	 
	______________________________________________  	______________________________________________  
	Witness 	Peter Liu as trustee of the Liu Family
                Trust 
	 	 
	______________________________________________  	______________________________________________  
	Witness 	Edward Ma as trustee of the Ma Family
                Trust 

      

    

     

    
      
        
        

      

      
        56

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    CERTAIN
      DEFINITIONS

     

    “ABCA”
means
      the Business
      Corporations Act
      (Alberta) and the regulations promulgated thereunder, as from time to time
      amended.

     

    “Abandonment
      and Reclamation Obligations”
means
      all obligations to abandon the Wells and restore and reclaim the surface sites
      thereof, to decommission and remove the facilities and equipment comprised
      in
      the Tangibles and restore and reclaim the surface sites thereof and to reclaim
      and restore the lands to which the Surface Rights relate, including such
      obligations relating to Wells which were abandoned prior to the Effective
      Time.

     

    “Additional
      Deposit”
shall
      have the meaning specified in Section 1.2.

     

    “AFE”
shall
      mean an authorization for expense pursuant to the Joint Venture Agreement as
      set
      forth in Part
      7.14(e)
      of the
      Target Disclosure Schedule.

     

    “Affiliate”
means,
      as to a Person, any other Person controlling, controlled by or under common
      control with that Person where “control”, “controlling” or “controlled” means
      the possession, direct or indirect, of the power to direct or cause the
      direction of the management and policies of another Person, whether through
      the
      ownership of voting securities or by contract, partnership agreement, trust
      arrangement or other means, either directly or indirectly, that results in
      control in fact; provided that direct or indirect ownership of shares of a
      corporation carrying more than 50% of the voting rights shall constitute control
      of that corporation; and further provided that:

     

    (a) Target
      Company and each of its subsidiaries shall be conclusively deemed to be
      Affiliates of Shareholders as to any matter or thing relating to the period
      before the Closing; and

     

    (b) Target
      Company and each of its subsidiaries shall be conclusively deemed to be
      Affiliates of Purchaser as to any matter or thing relating to the period from
      and after the Closing.

     

    “Agreement”
shall
      mean the Stock Purchase Agreement to which this Exhibit A
      is
      attached (including each Disclosure Schedule and all other schedules and
      exhibits attached hereto or thereto), as it may be amended from time to
      time.

     

    “Assets”
means
      the Petroleum and Natural Gas Rights, the Tangibles, and the Miscellaneous
      Interests.

     

    “Bank
      Accounts”
means
      all bank accounts, lock boxes, safe deposit boxes and the contents thereof
      which
      contain any assets of Target Company.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    “Benefit
      Plans”
means
      all plans and arrangements to which Target Company is a party or by which Target
      Company is bound or under which Target Company has, or will have, any liability
      or contingent liability, relating to:

     

    (a) arrangements
      relating to retirement savings or pensions, including pension plans, pensions
      or
      supplemental pensions whether registered or unregistered, funded or unfunded,
      “registered retirement savings plans” (as defined in the Tax Act), “registered
      pension plans” (as defined in the Tax Act) and “retirement compensation
      arrangements” (as defined in the Tax Act);

     

    (b) any
      and
      all employment benefits and plans relating to disability or wage continuation
      during periods of absence from work (including short term disability and long
      term disability), hospitalization, health, medical or dental treatments or
      expenses, life insurance, death or survivor’s benefits and supplementary
      employment insurance, in each case regardless of whether or not those benefits
      are insured or self-insured; or

     

    (c) any
      and
      all employment benefits and plans relating to bonuses, incentive pay or
      compensation, performance compensation, deferred compensation, profit sharing
      or
      deferred profit sharing, share purchase, share option, stock appreciation,
      phantom stock, vacation or vacation pay, sick pay, severance or termination
      pay,
      employee loans or separation from service benefits, and any other type of
      arrangement providing for compensation additional to base pay or
      salary;

     

    with
      respect to any of its Employees or former Employees (or any dependants or
      beneficiaries of any such Employees or former Employees), other than statutory
      plans with which Target Company is required to comply, including the Canada
      Pension Plan and the Canada Employment Insurance Plan, and plans administered
      pursuant to applicable provincial health and workers’ compensation
      legislation.

     

    “Best
      Efforts”
shall
      mean the efforts that a prudent Person desiring to achieve a particular result
      would use in similar circumstances to achieve such result as expeditiously
      as
      possible; provided,
      however,
      that a
      person required to use his Best Efforts under this Agreement will not be thereby
      required to take actions that would result in a materially adverse change in
      the
      benefits to such person of this Agreement and the Transaction, or to dispose
      of
      or make any change to its business, expend any material funds or incur any
      other
      material burden.

     

    “Books
      and Records”
means
      all books and records of Target Company and its subsidiaries, including
      financial, corporate, operations and sales books, inventory and other asset
      records, books of account, sales and purchase records, the Title and Operating
      Documents, customer files, production data, equipment maintenance data,
      accounting records, sales and promotional data, advertising materials, cost
      and
      pricing information, supplier lists, customer lists, business reports, plans
      and
      projections and all other similar documents, surveys, plans, files, records,
      correspondence, and other data and information, financial or otherwise,
      including all data and information stored on computer-related or other
      electronic media.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “Breach”
shall
      mean the occurrence of any inaccuracy in or breach of, or any failure to comply
      with or perform, a representation, warranty, covenant, obligation or other
      provision of any Contract and this Agreement.

     

    “Business
      Day”
means
      any day other than (i) a Saturday or a Sunday or (ii) a day on which
      banking and savings and loan institutions are authorized or required by law
      to
      be closed in Calgary, Alberta.

     

    “Closing”
shall
      have the meaning specified in Section 4.1.

     

    “Closing
      Certificate”
shall
      have the meaning specified in Section
      4.2(f).

     

    “Closing
      Date”
shall
      have the meaning specified in Section 4.1.

     

    “Common
      Shares”
means
      common shares in the capital stock of Purchaser.

     

    “Competing
      Party”
shall
      have the meaning specified in Section 9.3.

     

    “Competing
      Transaction”
shall
      have the meaning specified in Section 9.3.

     

    “Confidentiality
      Agreement”
means
      that certain Confidentiality Agreement dated September 27, 2006, between Target
      Company and Surge.

     

    “Consent”
shall
      mean any approval, consent, ratification, permission, waiver or authorization
      (including any Governmental Approval).

     

    “Contract”
shall
      mean any agreement, contract, consensual obligation, promise, understanding,
      arrangement, commitment or undertaking of any nature (whether written or oral
      and whether express or implied), whether or not legally binding, including,
      without limitation, production sales contracts, farmout agreements, operating
      agreements, service agreements and similar arrangements.

     

    “Cynthia”
shall
      mean Cynthia Holdings Limited.

     

    “Damages”
shall
      mean and include any loss, damage, injury, decline in value, lost opportunity,
      Liability, claim, demand, settlement, judgment, award, fine, penalty, Tax,
      fee
      (including any legal fee, accounting fee, expert fee or advisory fee), charge,
      cost (including any cost of investigation) or expense of any
      nature.

     

    “Derivative
      Transaction”
means
      any swap transaction, option, warrant, forward purchase or sale transaction,
      futures transaction, cap transaction, floor transaction or collar transaction
      relating to one or more currencies, commodities, bonds, equity securities,
      loans, interest rates, catastrophe events, weather-related events,
      credit-related events or conditions or any indexes, or any other similar
      transaction (including any option with respect to any of these transactions)
      or
      combination of any of these transactions, including collateralized mortgage
      obligations or other similar instruments or any debt or equity instruments
      evidencing or embedding any such types of transactions, and any related credit
      support, collateral or other similar arrangements related to such
      transactions.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “Disclosed
      Personal Information”
shall
      have the meaning specified in Section
      9.8(a).

     

    “Disclosure
      Schedule”
means
      any of the Surge Disclosure Schedule, the Purchaser Disclosure Schedule or
      the
      Target Disclosure Schedule.

     

    “Distribution
      Compliance Period”
shall
      have the meaning specified in Section
      5.8(c).

     

    “Effective
      Time”
shall
      have the meaning specified in Section 4.1.

     

    “Employees”
means
      all individuals employed by Target Company or any of its subsidiaries, including
      those employees on long term disability leave or other absence.

     

    “Encumbrance”
shall
      mean any lien, pledge, hypothecation, charge, mortgage, security interest,
      encumbrance, equity, trust, equitable interest, claim, preference, right of
      possession, lease, tenancy, license, encroachment, covenant, infringement,
      interference, Order, proxy, option, right of first refusal, pre-emptive right,
      community property interest, legend, defect, impediment, exception, reservation,
      limitation, impairment, imperfection of title, condition or restriction of
      any
      nature (including any restriction on the voting of any security, any restriction
      on the transfer of any security or other asset, any restriction on the receipt
      of any income derived from any asset, any restriction on the use of any asset
      and any restriction on the possession, exercise or transfer of any other
      attribute of ownership of any asset).

     

    “Entity”
shall
      mean any corporation (including any non-profit corporation), general
      partnership, limited partnership, unincorporated associations, unincorporated
      syndicate, unincorporated organization, joint venture, estate, trust (or a
      natural person’s capacity as trustee, executor, administrator or other legal
      representative) or company (including any limited liability company, unlimited
      liability company or joint stock company).

     

    “Environmental
      Documentation”
means
      all environmental site assessments, environmental audits, environmental reports
      and other reports relating to the application of Environmental Law to Target
      Company or the Assets. 

     

    “Environmental
      Law”
shall
      mean any Legal Requirement relating to (i) the protection, preservation or
      restoration of the environment (including air, surface water, groundwater,
      drinking water supply, surface land, subsurface land, plant and animal life
      or
      any other natural resource), or (ii) the exposure to, or the use, storage,
      recycling, treatment, generation, transportation, processing, handling,
      labeling, production, release or disposal of Hazardous Substances, in each
      case
      as in effect at the date hereof.

     

    “Environmental
      Liabilities”
means
      all liabilities in respect of the environment which relate to the Assets or
      which arise in connection with the ownership thereof or operations pertaining
      thereto, including, without limitation, liabilities related to or arising
      from:

     

    (a) transportation,
      storage, use or disposal of toxic or hazardous substances;

     

    (b) release,
      spill, escape or emission of toxic or hazardous substances; or

     

    (c) pollution
      or contamination of or damage to the environment;

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    including,
      without limitation, liabilities to compensate Third Parties for damages and
      losses resulting from the items described in items (a), (b) and (c) above
      (including, without limitation, damage to property, personal injury and death)
      and obligations to take action to prevent or rectify damage to or otherwise
      protect the environment and, for purposes of this Agreement, “the environment”
includes, without limitation, the air, the surface and subsurface of the earth,
      bodies of water (including, without limitation, rivers, streams, lakes and
      aquifers) and plant and animal life (including humans) but does not include
      Abandonment and Reclamation Obligations.

     

    “Escrow
      Agent”
shall
      have the meaning specified in Section
      1.2;

     

    “Escrow
      Agreement”
shall
      have the meaning specified in Section 1.2.

     

    “Escrow
      Amount”
shall
      mean the sum of the Initial Deposit and the Additional Deposit, if any, plus
      all
      accrued interest on the Initial Deposit and Additional Deposit.

     

    “Exchange
      Act”
means
      the United States Securities Exchange Act of 1934, as amended.

     

    “Exchangeable
      Shares”
shall
      have the meaning specified in Section
      2.1.

     

    “Exchange
      Agreement”
means
      that certain Voting and Exchange Trust Agreement among Purchaser, Surge and
      Computershare Trust Company of Canada to be dated as of the Closing Date
      substantially in the form of Exhibit 3.2(b).

     

    “Exclusion
      Area”
shall
      have the meaning specified in Section
      10.2.

     

    “Financial
      Statements”
shall
      have the meaning specified in Section 7.7(a).

     

    “GAAP”
means
      Canadian generally accepted accounting principles in effect on the date on
      which
      they are to be applied pursuant to this Agreement, applied consistently
      throughout the relevant periods. 

     

    “Governmental
      Approval”
shall
      mean any: (a) permit, license, certificate, concession, approval, consent,
      ratification, permission, clearance, confirmation, exemption, waiver, franchise,
      certification, designation, rating, registration, variance, qualification,
      accreditation or authorization issued, granted, given or otherwise made
      available by or under the authority of any Governmental Authority or pursuant
      to
      any Legal Requirement; or (b) right under any Contract with any
      Governmental Authority.

     

    “Governmental
      Authority”
shall
      mean any: (a) nation, principality, state, commonwealth, province,
      territory, county, municipality, district or other jurisdiction of any nature;
      (b) federal, state, local, municipal, foreign or other government;
      (c) governmental or quasi governmental authority of any nature (including
      any governmental division, subdivision, department, agency, bureau, branch,
      office, commission, council, board, instrumentality, officer, official,
      representative, organization, unit, body or Entity and any court or other
      tribunal); (d) multinational organization or body; or (e) individual,
      Entity or body exercising, or entitled to exercise, any executive, legislative,
      judicial, administrative, regulatory, police, military or taxing authority
      or
      power of any nature.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    “Granite
      Engagement”
shall
      have the meaning specified in Section
      5.4.

     

    “Hazardous
      Substance”
shall
      mean any substance listed, defined, identified, designated, judicially
      interpreted, classified or regulated as hazardous, toxic, radioactive or
      dangerous under any Environmental Law. Hazardous Substance includes any
      substance to which exposure is regulated by any Governmental Authority or any
      Environmental Law as a toxic waste, pollutant, contaminant, hazardous substance,
      toxic substance, hazardous waste, special waste or petroleum or any derivative
      or byproduct thereof, radon, radioactive material, asbestos or asbestos
      containing material, urea formaldehyde, foam insulation or polychlorinated
      biphenyls.

     

    “Initial
      Deposit”
shall
      have the meaning specified in Section
      1.2.

     

    “Indemnitee”
shall
      mean Shareholder Indemnitees and Purchaser Indemnitees.

     

    “Insurance
      Policies”
shall
      have the meaning specified in Section 7.13.

     

    “Intellectual
      Property”
shall
      have the meaning specified in Section
      7.16.

     

    “Joint
      Venture Agreement”
means
      that certain Joint Venture Agreement dated December 12, 2005 between Target
      Company and North Peace Energy Inc., as in effect on the date of this Agreement,
      relating to the rights and obligations of the parties to certain
      lands.

     

    “Knowledge”
An
      individual shall be deemed to have “Knowledge” of a particular fact or other
      matter if: (i) such individual is actually aware of such fact or other
      matter or (ii) (except when Knowledge is stated to be “actual Knowledge”) a
      prudent individual could be expected to discover or otherwise become aware
      of
      such fact or other matter in the course of conducting a reasonably comprehensive
      investigation concerning the truth or existence of such fact or other matter.
      An
      Entity shall be deemed to have “Knowledge” of a particular fact or other matter
      if any of its respective directors, officers or employees, if any, with the
      authority to establish policy for such Entity has actual knowledge of such
      fact
      or other matter after due and diligent inquiry. 

     

    “Lands” means
      the
      lands set forth and described in Part 7.33, subject to restrictions and
      exclusions as to geological formations and Petroleum Substances as may appear
      in
      Part 7.33 but only insofar as rights to the Petroleum Substances underlying
      those lands are granted by the Leases.

     

    “Leases”
means
      the leases, licenses, reservations, permits and other documents of title
      including without limitation, those set forth and described in Part 7.33, by
      virtue of which the holder thereof is entitled to drill for, win, take, own
      or
      remove the Petroleum Substances within, upon or under the Lands or by virtue
      of
      which the holder thereof is deemed to be entitled to a share of Petroleum
      Substances produced or removed or a share in the proceeds from, or measured
      or
      calculated by reference to a value, price, quantity or quality of Petroleum
      Substances which are produced or the rights or options to acquire any of the
      foregoing but only to the extent that the foregoing pertains to Petroleum
      Substances within, upon or under the Lands or any lands with which the Lands
      are
      pooled or unitized and includes, if applicable, all replacements, renewals
      and
      extensions of such documents and all documents issued in substitution
      therefor.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    “Legal
      Requirement”
shall
      mean any federal, state, local, municipal, foreign or other law, statute,
      legislation, constitution, principle of common law, resolution, ordinance,
      code,
      Order, edict, decree, proclamation, treaty, convention, rule, regulation,
      permit, ruling, directive, pronouncement, requirement (licensing or otherwise),
      specification, determination, decision, opinion or interpretation (including
      Environmental Law and Privacy Laws) that is, has been or may in the future
      be
      issued, enacted, adopted, passed, approved, promulgated, made, implemented
      or
      otherwise put into effect by or under the authority of any Governmental
      Authority (whether administrative, regulatory, legislative, executive or
      otherwise).

     

    “Liability”
shall
      mean any debt, obligation, duty or liability of any nature (including any
      unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect,
      conditional, implied, vicarious, derivative, joint, several or secondary
      liability), regardless of whether such debt, obligation, duty or liability
      would
      be required to be disclosed on a balance sheet prepared in accordance with
      GAAP
      and regardless of whether such debt, obligation, duty or liability is
      immediately due and payable.

     

    “Material
      Adverse Effect”
means
      (i) with respect to Purchaser, any event, change or effect that, when taken
      individually or together with all other adverse events, changes and effects,
      is
      or is reasonably likely (a) to be materially adverse to the condition
      (financial or otherwise), properties, assets, liabilities, business, operations,
      results of operations or prospects of Purchaser or its subsidiaries, taken
      as a
      whole or (b) to prevent or materially delay consummation of the Transaction
      or otherwise to prevent Purchaser or its subsidiaries from performing their
      obligations under this Agreement and (ii) with respect to Target Company,
      any event, change or effect that, when taken individually or together with
      all
      other adverse events, changes and effects, is or is reasonably likely
      (a) to be materially adverse to the condition (financial or otherwise),
      properties, assets, liabilities, business, operations, results of operations
      or
      prospects of Target Company or (b) to prevent or materially delay
      consummation of the Transaction or otherwise to prevent Shareholders from
      performing their obligations under this Agreement.

     

    “Material
      Contracts”
shall
      have the meaning specified in Section 7.12(a).

     

    “Miscellaneous
      Interests”
means
      the entire interest of Shareholders in and to all property, assets and rights
      on
      or with respect to the Lands, other than the Petroleum and Natural Gas Rights
      and the Tangibles, to the extent such property, assets and rights are directly
      related to the Petroleum and Natural Gas Rights or the Tangibles, or any rights
      relating thereto (together with, in the case of any information that is stored
      electronically, the media on which the same is stored), including, without
      limitation, the entire interest of Shareholders in:

     

    (a)    all
      contracts, agreements, files, records and documents, to the extent that they
      relate directly to the Petroleum and Natural Gas Rights or the Tangibles,
      including, without limitation, the Sale, Processing and Transportation
      Agreements of Petroleum Substances and the Title and Operating
      Documents;

     

    (b)    the
      Surface Rights;

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (c)    all
      subsisting rights to perform operations relating to the property, assets and
      rights on or with respect to the Lands, Petroleum and Natural Gas Rights,
      Tangibles, Wells, and Surface Rights and including, without limitation, all
      easements, well, pipeline and other permits licenses and
      authorizations;

     

    (d)    all
      Petroleum Substances in the course of production from the Lands or lands with
      which the Lands are pooled or unitized but not at the Effective Time beyond
      the
      points of delivery to Purchaser of production from the Lands or lands with
      which
      the Lands are pooled or unitized; and

     

    (e)    all
      Wells
      including all wellbores and casing owned by Shareholders located on the
      Lands.

     

    “Oil
      Sands Rights”
shall
      mean crude oil, heavy oil, bitumen, crude bitumen, natural gas, condensate,
      natural gas liquids and related hydrocarbons and all other substances produced
      in association therewith (whether hydrocarbons or not).

     

    “Order”
shall
      mean any: (a) temporary, preliminary or permanent order, judgment,
      injunction, edict, decree, ruling, pronouncement, determination, decision,
      opinion, verdict, sentence, stipulation, subpoena, writ or award that is or
      has
      been issued, made, entered, rendered or otherwise put into effect by or under
      the authority of any court, administrative agency or other Governmental
      Authority or any arbitrator or arbitration panel; or (b) Contract with any
      Governmental Authority that is or has been entered into in connection with
      any
      Proceeding.

     

    “Ordinary
      Course of Business”
shall
      describe any action taken by a party if (a) such action is consistent with
      such party’s past practices and is taken in the ordinary course of such party’s
      normal day to day operations; (b) such action is taken in accordance with
      sound and prudent business practices; (c) such action is not required to be
      authorized by such party’s stockholders, board of directors or any committee
      thereof and does not require any other separate or special authorization of
      any
      nature; and (d) such action is similar in nature and magnitude to actions
      customarily taken, without any separate or special authorization, in the
      ordinary course of the normal day to day operations of other Entities that
      are
      engaged in businesses similar to such party’s business; and (e) with
      respect to Target Company, shall include any actions or spending as authorized
      or permitted by the Joint Venture Agreement.

     

    “Outstanding
      Target Company Stock”
shall
      have the meaning specified in Section
      7.4(a).

     

    “Person”
shall
      mean any individual, sole proprietorship, Entity or Governmental
      Authority.

     

    “Personal
      Information”
means
      information about an Employee, but does not include an individual’s name,
      position name or title, business telephone number, business address, business
      email or business fax number.

     

    “Permitted
      Encumbrances”
      means:

     

    (a)    liens
      for
      taxes, assessments and governmental charges for which payment is not
      due;

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (b)    undetermined
      or inchoate liens arising in the Ordinary Course of Business and incidental
      to
      current operations (including liens of carriers, warehousemen, mechanics,
      materialmen, builders, operators, processors and landlords) which have not
      been
      filed pursuant to applicable laws or in respect of which no steps or proceedings
      to enforce such lien have been initiated or which relate to obligations which
      are not due or delinquent, or if due or delinquent, any such lien which is
      being
      contested by Target Company in good faith by appropriate proceedings diligently
      pursued, provided that proceeding with that action will not create a material
      risk of the forfeiture or loss of, or interference with the use or
      operation of, a material part of the Assets;

     

    (c)    easements,
      rights of way, servitudes and other similar rights in land (including, without
      limitation, rights of way and servitudes for roads, railways, sewers, drains,
      gas and oil pipelines, gas and water mains and electric light, power, telephone,
      telegraph and cable television conduits, poles, wires and cables);

     

    (d)    the
      right
      reserved to or vested in any municipality or government or other public
      authority by the terms of any lease, license, franchise, grant or permit or
      by
      any statutory provision, to terminate any such lease, license, franchise, grant
      or permit or to require annual or other periodic payments as a condition of
      the
      continuance thereof;

     

    (e)    rights
      of
      general application reserved to or vested in any governmental authority to
      levy
      taxes on Petroleum Substances or any of them or the income therefrom, and
      governmental requirements and limitations of general application as to
      production rates or the operations of any property;

     

    (f)    royalty
      burdens, liens, adverse claims, penalties, reductions in interests, conversion
      rights upon payout and other encumbrances set out in Part 7.34 of the Target
      Disclosure Schedule under the heading “Encumbrance(s)”;

     

    (g)    the
      reservations, limitations, provisions and conditions in any original grants
      from
      the crown of any of the Lands or interests therein and statutory exceptions
      to
      title;

     

    (h)    the
      terms
      and conditions of the Leases and the Title and Operating Documents;

     

    (i)    provisions
      for penalties and forfeitures under agreements as a consequence of
      non-participation in operations; and

     

    (j)    liens
      granted in the ordinary course of business to a public utility, municipality
      or
      governmental authority with respect to operations pertaining to any of the
      Assets.

     

    “Petroleum
      and Natural Gas Rights” means
      the
      entire interest of Target Company in and to the Lands and, insofar as they
      pertain to the Lands or lands with which the Lands are pooled or unitized,
      the
      Leases and includes interests and rights known as “working interests”, “earned
      working interests”, “royalty interests”, “overriding royalty interests”, “gross
      overriding royalty interests”, “production payments”, “profit interests”, “net
      profit interests”, “income interests” “net income interests”, “economic
      interests” and other interests and fractional or undivided interests in any of
      the foregoing and fee simple, freehold, leasehold or other interests and
      non-consent penalties which Target Company is entitled to receive, including,
      without limitation, the interests of Target Company set forth in Part
      7.34.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    “Petroleum
      Substances”
means
      petroleum, natural gas and all related hydrocarbons (including liquid
      hydrocarbons) and all other mineral substances, whether solid or gaseous and
      whether hydrocarbon or not (including sulphur and hydrogen sulphide) produced
      in
      association with petroleum, natural gas or related hydrocarbons.

     

    “Pre-Closing
      Period”
shall
      have the meaning specified in Section
      9.1.

     

    “Privacy
      Laws”
means
      any and all Legal Requirements relating to privacy and the collection, use
      and
      disclosure of Personal Information in all applicable jurisdictions, including
      the Personal Information Protection and Electronic Documents Act (Canada) and
      any comparable provincial law (including the Personal Information Protection
      Act
      (Alberta)).

     

    “Proceeding”
shall
      mean any action, suit, litigation, arbitration, proceeding (including any civil,
      criminal, administrative, investigative or appellate proceeding), prosecution,
      contest, hearing, inquiry, inquest, audit, examination or investigation that
      is,
      has been or may in the future be commenced, brought, conducted or heard at
      law
      or in equity or before any Governmental Authority or any arbitrator or
      arbitration panel.

     

    “Public
      Disclosure Documents”
shall
      have the meaning specified in Section
      8.6.

     

    “Purchase
      Price”
shall
      have the meaning specified in Section 2.1.

     

    “Purchaser”
shall
      mean Cold Flow Energy ULC, a corporation incorporated pursuant to the
      ABCA.

     

    “Purchaser
      Advisors”
shall
      have the meaning specified in Section
      9.6.

     

    “Purchaser
      Disclosure Schedule”
shall
      have the meaning specified in Article 6.

     

    “Purchaser
      Indemnitees”
shall
      mean the following Persons: (a) Purchaser; (b) Surge;
      (c) Purchaser’s current and future Affiliates; (d) the respective
      Representatives of the Persons referred to in clauses “(a)” and “(c)” above; and
      (e) the respective successors and assigns of the Persons referred to in clauses
      “(a)”, “(b)”, “(c)” and “(d)” above.

     

    “Purchaser
      Stock”
shall
      have the meaning specified in Section 6.2(a).

     

    “Regulation S”
means
      Regulation S under the Securities Act.

     

    “Representatives”
shall
      mean officers, directors, employees, attorneys, accountants, advisors,
      consultants, agents, distributors, licensees, shareholders, subsidiaries and
      lenders of a party.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    “Requisite
      Shareholders”
means
      any combination of Shareholders holding collectively a majority of the Shares
      as
      set forth in the Schedule of Shareholders. 

     

    “Resolutions”
shall
      have the meaning specified in Section 7.3(a)(iii).

     

    “SB-2
      Registration Statement”
shall
      have the meaning specified in Section 10.3(a).

     

    “Schedule
      of Shareholders”
has
      the
      meaning specified in the preamble of this Agreement.

     

    “SEC”
means
      the United States Securities and Exchange Commission.

     

    “Securities”
means,
      collectively, the Exchangeable Shares and the Surge Securities for which the
      Exchangeable Shares may be exchanged under the Exchange Agreement.

     

    “Securities
      Act”
shall
      mean the United States Securities Act of 1933, as amended.

     

    “Shareholders”
has
      the
      meaning specified in the preamble of this Agreement.

     

    “Shares”
has
      the
      meaning specified in Recital A
      of this
      Agreement.

     

    “Shareholder
      Indemnitees”
shall
      mean the following Persons: (a) Shareholders and (b) the respective
      successors and assigns of Shareholders.

     

    “Shareholder
      Representative”
shall
      have the meaning specified in Section
      13.6.

     

    “Signet”
shall
      mean Signet Energy, Inc.

     

    “Support
      Agreement”
means
      that certain Support Agreement between Surge and Purchaser to be dated as of
      the
      Closing Date in the form attached as Exhibit 3.2(a).

     

    “Surface
      Rights”
means
      (i) all rights to use or occupy the surface of lands (including, but not
      limited to, the Lands) which are used or held for use in connection with the
      Petroleum and Natural Gas Rights or the Tangibles, including rights to enter
      upon, occupy or cross the surface of lands on which the Tangibles and the Wells
      are located and rights to use the surface of lands to gain access
      thereto.

     

    “Surge”
means
      Surge Global Energy, Inc., a Delaware corporation.

     

    “Surge
      Disclosure Schedule”
shall
      have the meaning specified in Article 8.

     

    “Surge
      Securities”
shall
      mean the securities to be issued by Surge in exchange for the Exchangeable
      Shares in accordance with the provisions thereof, the Support Agreement and
      the
      Exchange Agreement.

     

    “Surge
      Stock”
shall
      have the meaning specified in Section 8.2(a).

     

    “Survival
      Period”
shall
      have the meaning specified in Section 13.1(c).

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    “Tangibles”
means
      the interests of Target Company which are directly related to the Petroleum
      and
      Natural Gas Rights in all other tangible depreciable property, equipment, real
      property and assets used or intended to be used in producing, processing,
      gathering, treating, storage, measuring, transferring or injecting Petroleum
      Substances or any of them from the Lands or lands pooled or unitized therewith
      or in connection with water injection or removal operations that pertain to
      the
      Petroleum and Natural Gas Rights whether same are located on the Lands, lands
      pooled or unitized therewith or otherwise located elsewhere for the purposes
      described herein.

     

    “Target’s
      Board”
means
      the board of directors of Target Company.

     

    “Target
      Company”
means
      Peace Oil Corp., an Alberta corporation.

     

    “Target
      Company’s Stock”
shall
      have the meaning specified in Section 7.4(a).

     

    “Target
      Disclosure Schedule”
shall
      have the meaning specified in Article 7.

     

    “Tax”
(and,
      with correlative meaning, “Taxes” and “Taxable”) means any net income,
      alternative or add-on minimum tax, gross income, gross receipts, sales, use,
      ad
      valorem, transfer, franchise, profits, license, withholding, payroll,
      employment, excise, severance, stamp, occupation, premium, property,
      environmental or windfall profit tax, custom, duty or other tax, governmental
      fee or other assessment or charge of any kind whatsoever, together with any
      interest or any penalty, addition to tax or additional amount and any interest
      on such penalty, addition to tax or additional amount, imposed by any Tax
      Authority.

     

    “Tax
      Act”
means
      the Income
      Tax Act
      (Canada).

     

    “Tax
      Authority”
means
      Governmental Authority responsible for the imposition, assessment or collection
      of any Tax (domestic or foreign).

     

    “Tax
      Return”
shall
      mean any return, statement, declaration, notice, certificate or other document
      that is or has been filed with or submitted to, or required to be filed with
      or
      submitted to, any Governmental Authority in connection with the determination,
      assessment, collection or payment of any Tax or in connection with the
      administration, implementation or enforcement of or compliance with any Legal
      Requirement related to any Tax.

     

    “Title
      and Operating Documents”
means,
      to the extent directly related to the Petroleum and Natural Gas Rights or the
      Tangibles:

     

    (a)    the
      Leases;

     

    (b)    unit
      agreements, assignments, trust declarations, operating agreements, royalty
      agreements, overriding royalty agreements, gross overriding agreements,
      participation agreements, farm-in agreements, sale and purchase agreements,
      pooling agreements, common stream agreements, easements, surface leases and
      pipeline crossing agreements;

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (c)    agreements
      for construction, ownership and operation of gas plants, gas gathering systems
      and other facilities;

     

    (d)    permits,
      licenses and approvals; and

     

    (e)    other
      agreements which relate to the Petroleum and Natural Gas Rights or the Tangibles
      or the ownership, operation or exploitation thereof.

     

    “Transaction”
shall
      mean, collectively, the transactions contemplated by this
      Agreement.

     

    “Transaction
      Agreements”
shall
      mean this Agreement and all other agreements, certificates, instruments,
      documents and writings to be delivered by all or any of the following parties
      in
      connection this Transaction or as contemplated by this Agreement: Purchaser,
      Surge, Target Company and the Shareholders (and shall specifically include
      the
      Support Agreement, the Escrow Agreement and the Exchange
      Agreement).

     

    “U.S.
      Person”
means
      a
“U.S. person” as such term is defined in Rule 902(k) of Regulation S promulgated
      under the Securities Act, as presently in effect.

     

    “United
      States”
means
      the United States of America, its territories and possessions, any state of
      the
      United States and the District of Columbia.

     

    “Wells”
means
      all wells (including without limitation producing, shut-in, suspended, capped,
      abandoned, water source, injection and disposal wells, including the wellbores
      and casing therein), located on the Lands or lands pooled or unitized
      therewith.

     

    “$”
means
      dollars in lawful currency of Canada.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      1.2

     

    ESCROW
      AGREEMENT

     

    

     

    (See
      attached)

     

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      3.1

     

    ARTICLES
      OF AMENDMENT OF PURCHASER

     

    

     

    (See
      attached)

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

      COLD
        FLOW ENERGY ULC

      (hereinafter
        referred to as the "Corporation")

       

      PROVISIONS
        ATTACHING TO

      THE
        EXCHANGEABLE SHARES 

       

      The
        Exchangeable Shares in the capital of the Corporation shall have the following
        rights, privileges, restrictions and conditions:

       

      ARTICLE 1

      INTERPRETATION

       

      
        	
                1.1

                 

              	
                For
                  the purposes of these share provisions:

                 

              

      

      "ABCA"
        means
        the Business
        Corporations Act(Alberta),
        as amended from time to time;

       

      "Acquiror"
        means
        Surge Global Energy, Inc., a corporation incorporated under the laws of
Delaware;

       

      "Acquiror
        Control Transaction"
        means
        any merger, amalgamation, tender offer, material sale of shares or rights
        or
        interests therein or thereto or similar transactions involving Acquiror,
        or any
        proposal to carry out the same;

       

      "Acquiror
        Dividend Declaration Date"
        means
        the date on which the board of directors of Acquiror declares any dividend
        on
        the Acquiror Shares;

       

      "Acquiror
        Shares"
        means
        the shares in the common stock of Acquiror and any other securities into
        which
        such shares may be changed, exchanged or converted;

       

      "Acquisition
        Agreement"
        means
        the acquisition agreement by and between Acquiror, the Corporation, Peace
        and
        the Shareholders dated November
        30,
        2006,
        as amended and restated from time to time, providing for, among other things,
        the acquisition of all of the Peace Shares by the Corporation;

       

      "Affiliate"
        has the
        meaning ascribed thereto in the Securities Act, unless otherwise expressly
        stated herein;

       

      "Board
        of Directors"
        means
        the board of directors of the Corporation;

       

      "Business
        Day"
        means
        any day on which commercial banks are generally open for business in Calgary,
        Alberta, other than a Saturday, a Sunday or a day observed as a holiday in
        Calgary, Alberta under the laws of the Province of Alberta or the federal
        laws
        of Canada applicable therein;

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      

      "Canadian
        Dollar Equivalent"
        means
        in respect of an amount expressed in a currency other than Canadian dollars
        (the
        "Foreign
        Currency Amount")
        at any
        date the product obtained by multiplying:

       

      
        	
                (a)

                 

              	
                the
                  Foreign Currency Amount, by

                 

              
	
                (b)

                 

              	
                the
                  noon spot exchange rate on such date for such foreign currency
                  expressed
                  in Canadian dollars as reported by the Bank of Canada or, in the
                  event
                  such spot exchange rate is not available, such spot exchange rate
                  on such
                  date for such foreign currency expressed in Canadian dollars as
                  may be
                  deemed by the Board of Directors to be appropriate for such
                  purpose;

                 

              

      

      “Closing
        Date”
means
        the date on which the transactions contemplated by the Acquisition Agreement
        are
        completed;

       

      "Common
        Shares"
        means
        the common shares in the capital of the Corporation;

       

      "Corporation"
        means
        Cold Flow Energy ULC, a corporation incorporated under the ABCA;

       

      "Current
        Market Price"
        means,
        in respect of an Acquiror Share on any date, the Canadian Dollar Equivalent
        of
        the average of the closing bid and asked prices of Acquiror Shares during
        a
        period of 20 consecutive trading days ending not more than three trading
        days before such date on any stock exchange on which the Acquiror Shares
        are
        then listed, or, if the Acquiror Shares are not then listed on a stock exchange,
        on or through such other exchange or automated quotation system on which
        the
        Acquiror Shares are listed or quoted, as the case may be, as may be selected
        by
        the Board of Directors for such purpose; provided, however, that if in the
        opinion of the Board of Directors the public distribution or trading activity
        of
        Acquiror Shares during such period does not create a market which reflects
        the
        fair market value of an Acquiror Share, then the Current Market Price of
        an
        Acquiror Share shall be determined by the Board of Directors, in good faith
        and
        in its sole discretion, and provided further that any such selection, opinion
        or
        determination by the Board of Directors shall be conclusive and
        binding;

       

      "Exchangeable
        Shares"
        mean
        the non-voting exchangeable shares in the capital of the Corporation, having
        the
        rights, privileges, restrictions and conditions set forth
        herein;

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

      "Exchangeable
        Share Consideration"
        means,
        with respect to each Exchangeable Share, for any acquisition of, redemption
        of
        or distribution of assets of the Corporation in respect of, or purchase pursuant
        to, these share provisions, the Support Agreement or the Voting and Exchange
        Trust Agreement:

       

      
        	
                (a)

                 

              	
                the
                  Current Market Price of two Acquiror Shares deliverable in connection
                  with
                  such action; plus 

                 

              
	
                (b)

                 

              	
                a
                  cheque or cheques payable at par at any branch of the bankers of
                  the payor
                  in the amount of all declared, payable and unpaid, and all undeclared
                  but
                  payable, cash dividends deliverable in connection with such action;
                  plus
                  

                 

              
	
                (c)

                 

              	
                such
                  stock or other property constituting any declared and unpaid non-cash
                  dividends deliverable in connection with such action,

                 

              

      

      provided
        that (i) the part of the consideration which represents (a) above
        shall be fully paid and satisfied by the delivery of two Acquiror Shares,
        such
        shares to be duly issued, fully paid and non-assessable, (ii) the part of
        the consideration which represents (c) above shall be fully paid and
        satisfied by delivery of such non-cash items, (iii) any such consideration
        shall be delivered free and clear of any lien, claim, encumbrance, security
        interest or adverse claim or interest and (iv) any such consideration shall
        be paid less any tax required to be deducted and withheld therefrom and without
        interest;

       

      "Exchangeable
        Share Price"
        means,
        for each Exchangeable Share, an amount equal to the aggregate of:

       

      
        	
                (a)

                 

              	
                the
                  Current Market Price of two Acquiror Shares; plus

                 

              
	
                (b)

                 

              	
                an
                  additional amount equal to the full amount of all cash dividends
                  declared,
                  payable and unpaid, on such Exchangeable Share; plus

                 

              
	
                (c)

                 

              	
                an
                  additional amount equal to the full amount of all dividends declared
                  and
                  payable or paid on Acquiror Shares which have not been declared
                  or paid on
                  Exchangeable Shares in accordance herewith; plus

                 

              
	
                (d)

                 

              	
                an
                  additional amount representing the full amount of all non-cash
                  dividends
                  declared, payable and unpaid, on such Exchangeable Share;

                 

              

      

      "Exchangeable
        Share Voting Event"
        means
        any matter in respect of which Holders of Exchangeable Shares are entitled
        to
        vote as shareholders of the Corporation, other than an Exempt Exchangeable
        Share
        Voting Event, and, for greater certainty, excluding any matter in respect
        of
        which Holders of Exchangeable Shares are entitled to vote (or instruct the
        Trustee to vote) in their capacity as Beneficiaries under (and as that term
        is
        defined in) the Voting and Exchange Trust Agreement;

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

      "Exempt
        Exchangeable Share Voting Event"
        means
        any matter in respect of which Holders of Exchangeable Shares are entitled
        to
        vote as shareholders of the Corporation in order to approve or disapprove,
        as
        applicable, any change to, or in the rights of the Holders of, the Exchangeable
        Shares, where the approval or disapproval, as applicable, of such change
        would
        be required to maintain the equivalence of the Exchangeable Shares and the
        Acquiror Shares;

       

      "Governmental
        Entity"
        means
        any (a) multinational, federal, provincial, territorial, state, regional,
        municipal, local or other government, governmental or public department,
        central
        bank, court, tribunal, arbitral body, commission, board, bureau or agency,
        domestic or foreign, (b) subdivision, agent, commission, board, or
        authority of any of the foregoing, or (c) quasi-governmental or private
        body exercising any regulatory, expropriation or taxing authority under or
        for
        the account of any of the foregoing;

       

      "Holder"
        means,
        when used with reference to the Exchangeable Shares, the holders of Exchangeable
        Shares shown from time to time in the register maintained by or on behalf
        of the
        Corporation in respect of the Exchangeable Shares;

       

      "Liquidation
        Amount"
        has the
        meaning ascribed thereto in Section 5.1 of these share
        provisions;

       

      "Liquidation
        Date"
        has the
        meaning ascribed thereto in Section 5.1 of these share
        provisions;

       

      “Other
        Corporation”
has
        the
        meaning ascribed thereto in Section 11.3(c) of these share
        provisions;

       

      “Other
        Shares”
has
        the
        meaning ascribed thereto in Section 11.3(c) of these share
        provisions;

       

      “Peace”
means
        Peace Oil Corp., a corporation incorporated under the ABCA;

       

      “Peace
        Shares”
means
        all of the issued and outstanding shares in the capital of Peace of any class
        or
        series;

       

      "Person"
        includes any individual, firm, partnership, joint venture, venture capital
        fund,
        limited liability company, unlimited liability company, association, trust,
        trustee, executor, administrator, legal personal representative, estate,
        group,
        body corporate, corporation, unincorporated association or organization,
        Governmental Entity, syndicate or other entity, whether or not having legal
        status;

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

      "Redemption
        Date"
        means
        the date, if any, established by the Board of Directors for the redemption
        by
        the Corporation of all but not less than all of the outstanding Exchangeable
        Shares pursuant to Article 7
        of these
        share provisions, which date shall be no earlier than the third
        anniversary of the Closing Date, unless:

       

      
        	
                (a)

                 

              	
                there
                  are less than 1,000,000
                  Exchangeable Shares outstanding (other than Exchangeable Shares
                  held by
                  Acquiror and its Affiliates);

                 

              
	
                (b)

                 

              	
                an
                  Acquiror Control Transaction occurs, in which case, provided that
                  the
                  Board of Directors determines, in good faith and in its sole discretion,
                  that it is not reasonably practicable to substantially replicate
                  the terms
                  and conditions of the Exchangeable Shares in connection with such
                  an
                  Acquiror Control Transaction and that the redemption of all but
                  not less
                  than all of the outstanding Exchangeable Shares is necessary to
                  enable the
                  completion of such Acquiror Control Transaction in accordance with
                  its
                  terms, the Board of Directors may accelerate such redemption date
                  to such
                  date prior to the third
                  anniversary of the Closing Date as it may determine, upon such
                  number of
                  days' prior written notice to the registered Holders of the Exchangeable
                  Shares and the Trustee as the Board of Directors may determine
                  to be
                  reasonably practicable in such circumstances;

                 

              
	
                (c)

                 

              	
                an
                  Exchangeable Share Voting Event is proposed, in which case, provided
                  that
                  the Board of Directors has determined, in good faith and in its
                  sole
                  discretion, that it is not reasonably practicable to accomplish
                  the
                  business purpose intended by the Exchangeable Share Voting Event,
                  which
                  business purpose must be bona
                  fide
                  and not for the primary purpose of causing the occurrence of a
                  Redemption
                  Date, the redemption date shall be the Business Day prior to the
                  record
                  date for any meeting or vote of the holders of the Exchangeable
                  Shares to
                  consider the Exchangeable Share Voting Event and the Board of Directors
                  shall give such number of days' prior written notice of such redemption
                  to
                  the registered Holders of the Exchangeable Shares and the Trustee
                  as the
                  Board of Directors may determine to be reasonably practicable in
                  such
                  circumstances; or 

                 

              
	
                (d)

                 

              	
                an
                  Exempt Exchangeable Share Voting Event is proposed and the Holders
                  of the
                  Exchangeable Shares fail to take the necessary action at a meeting
                  or
                  other vote of Holders of Exchangeable Shares, to approve or disapprove,
                  as
                  applicable, the Exempt Exchangeable Share Voting Event, in which
                  case the
                  redemption date shall be the Business Day following the day on
                  which the
                  Holders of the Exchangeable Shares failed to take such
                  action,

              

      

      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

      provided,
        however, that the accidental failure or omission to give any notice of
        redemption under clauses (a), (b) or (c) above to any of such Holders of
        Exchangeable Shares shall not affect the validity of any such
        redemption;

       

      "Redemption
        Price"
        has the
        meaning ascribed thereto in Section 7.1
        of these
        share provisions;

       

      "Retracted
        Shares"
        has the
        meaning ascribed thereto in Section 6.1(a)
        of these
        share provisions;

       

      "Retraction
        Date"
        has the
        meaning ascribed thereto in Section 6.1(b)
        of these
        share provisions;

       

      "Retraction
        Price"
        has the
        meaning ascribed thereto in Section 6.1
        of these
        share provisions;

       

      "Retraction
        Request"
        has the
        meaning ascribed thereto in Section 6.1
        of these
        share provisions;

       

      "Securities
        Act"
        means
        the Securities
        Act
        (Alberta) and the rules, regulations and policies made thereunder, as now
        in
        effect and as they may be amended from time to time;

       

      “Shareholders”
means
        collectively, 1216848 Alberta Ltd., Cairns Family Trust, Fisher Family Trust,
        Liu Family Trust, Ma Family Trust, Southearted Trust, 1229697 Alberta Inc.,
        Jeff
        Cairns and Dale N. Fisher;

       

      “Subdivision”
has
        the
        meaning ascribed thereto in Section 3.2 of these share provisions;

       

      "Support
        Agreement"
        means
        the agreement dated l,
        2007
        made between Acquiror and the Corporation;

       

      "Transfer
        Agent"
        means
        such Person as may from time to time be appointed by the Corporation as the
        registrar and transfer agent for the Exchangeable Shares;

       

      "Trustee"
        means
        Computershare Trust Company of Canada or such other trustee as is chosen
        by
        Acquiror and Shareholders, acting reasonably, to act as trustee under the
        Voting
        and Exchange Trust Agreement, being a corporation organized and existing
        under
        the laws of Canada, and any successor trustee appointed under the Voting
        and
        Exchange Trust Agreement; and

      
        
          
          

        

        
          -6-

          
            

          

        

        
          
          

        

      

      "Voting
        and Exchange Trust Agreement"
        means
        the agreement dated l,
        2007
        made among Acquiror, the Corporation and the Trustee.

       

      ARTICLE 2

       

      RANKING
        OF EXCHANGEABLE SHARES

       

      
        	
                2.1

                 

              	
                The
                  Exchangeable Shares shall be entitled to a preference over the
                  Common
                  Shares and any other shares ranking junior to the Exchangeable
                  Shares with
                  respect to the payment of dividends and the distribution of assets
                  in the
                  event of the liquidation, dissolution or winding-up of the Corporation,
                  whether voluntary or involuntary, or any other distribution of
                  the assets
                  of the Corporation, among its shareholders for the purpose of winding-up
                  its affairs.

                 

              

      

      ARTICLE 3

       

      DIVIDENDS

       

      
        	
                3.1

                 

              	
                A
                  Holder of an Exchangeable Share shall be entitled to receive and
                  the Board
                  of Directors shall, subject to applicable law, on each Acquiror
                  Dividend
                  Declaration Date, declare a dividend on each Exchangeable
                  Share:

                 

              

      

       

      
        	
                (a)

                 

              	
                in
                  the case of a cash dividend declared on the Acquiror Shares, in
                  an amount
                  in cash for each Exchangeable Share in U.S. dollars, or the Canadian
                  Dollar Equivalent thereof on the Acquiror Dividend Declaration
                  Date, in
                  each case, corresponding to the cash dividend declared on each
                  Acquiror
                  Share;

                 

              
	
                (b)

                 

              	
                in
                  the case of a stock dividend declared on the Acquiror Shares, to
                  be paid
                  in Acquiror Shares, subject to Section 3.2,
                  by the issue or transfer by the Corporation of such number of Exchangeable
                  Shares for each Exchangeable Share as is equal to the number of
                  Acquiror
                  Shares to be paid on each Acquiror Share; or 

                 

              
	
                (c)

                 

              	
                in
                  the case of a dividend declared on the Acquiror Shares in property
                  other
                  than cash or Acquiror Shares, in such type and amount of property
                  for each
                  Exchangeable Share as is the same as or economically equivalent
                  to (to be
                  determined by the Board of Directors as contemplated by
                  Section 3.6)
                  the type and amount of property declared as a dividend on each
                  Acquiror
                  Share.

                 

              

      

      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

      

      Such
        dividends shall be paid out of money, assets or property of the Corporation
        properly applicable to the payment of dividends, or out of authorized but
        unissued shares of the Corporation, as applicable.

       

      
        	
                3.2

                 

              	
                In
                  the case of a stock dividend declared on the Acquiror Shares to
                  be paid in
                  Acquiror Shares, in lieu of declaring the stock dividend contemplated
                  by
                  Section 3.1(b)
                  on
                  the Exchangeable Shares, the Board of Directors may, in good faith
                  and in
                  its discretion and subject to applicable law and to obtaining all
                  required
                  regulatory approvals, subdivide, redivide or change (the "Subdivision")
                  each issued and unissued Exchangeable Share on the basis that each
                  Exchangeable Share before the subdivision becomes a number of Exchangeable
                  Shares equal to the sum of (i) one Acquiror Share and (ii) the
                  number of Acquiror Shares to be paid as a share dividend on each
                  Acquiror
                  Share. In making such Subdivision, the Board of Directors shall
                  consider
                  the effect thereof upon the then outstanding Exchangeable Shares
                  and the
                  general taxation consequences of the Subdivision to the Holders
                  of the
                  Exchangeable Shares. In such instance, and notwithstanding any
                  other
                  provision hereof, such Subdivision shall become effective on the
                  effective
                  date specified in Section 3.4
                  without any further act or formality on the part of the Board of
                  Directors
                  or of the Holders of Exchangeable Shares. For greater certainty,
                  subject
                  to applicable law, no approval of the Holders to an amendment to
                  the
                  articles of the Corporation shall be required to give effect to
                  such
                  Subdivision.

                 

              
	
                3.3

                 

              	
                Cheques
                  of the Corporation payable at par at any branch of the bankers
                  of the
                  Corporation shall be issued in respect of any cash dividends contemplated
                  by Section 3.1(a)
                  and the sending of such a cheque to each Holder of an Exchangeable
                  Share
                  shall satisfy the cash dividend represented thereby unless the
                  cheque is
                  not paid on presentation. Subject to applicable law, certificates
                  registered in the name of the registered Holder of Exchangeable
                  Shares
                  shall be issued or transferred in respect of any stock dividends
                  contemplated by Section 3.1(b)
                  or
                  any Subdivision contemplated by Section 3.2
                  and the sending of such a certificate to each Holder of an Exchangeable
                  Share shall satisfy the stock dividend represented thereby. Such
                  other
                  type and amount of property in respect of any dividends contemplated
                  by
                  Section 3.1(c)
                  shall be issued, distributed or transferred by the Corporation
                  in such
                  manner as it shall determine and the issuance, distribution or
                  transfer
                  thereof by the Corporation to each Holder of an Exchangeable Share
                  shall
                  satisfy the dividend represented thereby. No Holder of an Exchangeable
                  Share shall be entitled to recover by action or other legal process
                  against the Corporation any dividend that is represented by a cheque
                  that
                  has not been duly presented to the Corporation's bankers for payment
                  or
                  that otherwise remains unclaimed for a period of six years from
                  the date
                  on which such dividend was first payable.

                 

              

      

      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      

       

      
        	
                3.4

                 

              	
                The
                  record date for the determination of the Holders of Exchangeable
                  Shares
                  entitled to receive payment of, and the payment date for, any dividend
                  declared on the Exchangeable Shares under Section 3.1
                  shall be the same dates as the record date and payment date, respectively,
                  for the corresponding dividend declared on the Acquiror Shares.
                  The record
                  date for the determination of the Holders of Exchangeable Shares
                  entitled
                  to receive Exchangeable Shares in connection with any Subdivision
                  of the
                  Exchangeable Shares under Section 3.2
                  and the effective date of such Subdivision shall be the same dates
                  as the
                  record date and payment date, respectively, for the corresponding
                  dividend
                  declared on the Acquiror Shares.

                 

              
	
                3.5

                 

              	
                If
                  on any payment date for any dividends declared on the Exchangeable
                  Shares
                  under Section 3.1
                  the dividends are not paid in full on all of the Exchangeable Shares
                  then
                  outstanding, any such dividends that remain unpaid shall be paid
                  on the
                  earliest subsequent date or dates determined by the Board of Directors
                  on
                  which the Corporation shall have sufficient moneys, assets or property
                  properly applicable to the payment of such dividends.

                 

              
	
                3.6

                 

              	
                The
                  Board of Directors shall determine, in good faith and in its sole
                  discretion, economic equivalence for the purposes of
                  Sections 3.1
                  and 3.2
                  and Article 11,
                  and each such determination shall be conclusive and binding on
                  the
                  Corporation and its shareholders. In making each such determination,
                  the
                  following factors shall, without excluding other factors determined
                  by the
                  Board of Directors to be relevant, be considered by the Board of
                  Directors:

                 

              

      

       

      
        	
                (a)

                 

              	
                in
                  the case of any stock dividend or other distribution payable in
                  Acquiror
                  Shares, the number of such shares issued in proportion to the number
                  of
                  Acquiror Shares previously outstanding; 

                 

              
	
                (b)

                 

              	
                in
                  the case of the issuance or distribution of any rights, options
                  or
                  warrants to subscribe for or purchase Acquiror Shares (or securities
                  exchangeable for or convertible into or carrying rights to acquire
                  Acquiror Shares), the relationship between the exercise price of
                  each such
                  right, option or warrant and the Current Market Price, the volatility
                  of
                  the Acquiror Shares and the term of any such instrument;

                 

              
	
                (c)

                 

              	
                in
                  the case of the issuance or distribution of any other form of property
                  (including any shares or securities of Acquiror of any class other
                  than
                  Acquiror Shares, any rights, options or warrants other than those
                  referred
                  to in Section 3.6(b)
                  above, any evidences of indebtedness of Acquiror or any assets
                  of
                  Acquiror) the relationship between the fair market value (as determined
                  by
                  the Board of Directors in the manner above contemplated) of such
                  property
                  to be issued or distributed with respect to each outstanding Acquiror
                  Share and the Current Market Price; and 

                 

              

      

      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

       

      
        	
                (d)

                 

              	
                in
                  all such cases, the general taxation consequences of the relevant
                  event to
                  Holders of Exchangeable Shares to the extent that such consequences
                  may
                  differ from the taxation consequences to Holders of Acquiror Shares
                  as a
                  result of differences between taxation laws of Canada and the United
                  States (except for any differing consequences arising as a result
                  of
                  differing marginal taxation rates and without regard to the individual
                  circumstances of Holders of Exchangeable Shares).

                 

              

      

       

      
        	
                3.7

                 

              	
                Except
                  as provided in this Article 3,
                  the Holders of Exchangeable Shares shall not be entitled to receive
                  dividends in respect thereof.

                 

              

      

       

      ARTICLE 4

      CERTAIN
        RESTRICTIONS

       

      
        	
                4.1

                 

              	
                So
                  long as any of the Exchangeable Shares are outstanding, the Corporation
                  shall not at any time without, but may at any time with, the approval
                  of
                  the Holders of the Exchangeable Shares given as specified in
                  Section 10.2
                  of
                  these share provisions:

                 

              

      

       

      
        	
                (a)

                 

              	
                pay
                  any dividends on the Common Shares or any other shares ranking
                  junior to
                  the Exchangeable Shares with respect to the payment of dividends,
                  other
                  than stock dividends payable in Common Shares or any such other
                  shares
                  ranking junior to the Exchangeable Shares, as the case may
                  be;

                 

              
	
                (b)

                 

              	
                redeem
                  or purchase or make any capital distribution in respect of Common
                  Shares
                  or any other shares ranking junior to the Exchangeable Shares with
                  respect
                  to the payment of dividends or on any liquidation, dissolution
                  or
                  winding-up of the Corporation or any other distribution of the
                  assets of
                  the Corporation;

                 

              
	
                (c)

                 

              	
                redeem
                  or purchase or make any capital distribution in respect of any
                  other
                  shares of the Corporation ranking equally with the Exchangeable
                  Shares
                  with respect to the payment of dividends or on any liquidation,
                  dissolution or winding-up of the Corporation or any other distribution
                  of
                  the assets of the Corporation; or

                 

              
	
                (d)

                 

              	
                issue
                  any Exchangeable Shares or any other shares of the Corporation
                  ranking
                  equally with, or superior to, the Exchangeable Shares other than
                  by way of
                  stock dividends to the Holders of such Exchangeable Shares;

                 

              

      

      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      

      provided
        that the restrictions in Sections 4.1(a),
        (b),
        (c)
        and (d)
        shall
        not apply if all dividends on the outstanding Exchangeable Shares corresponding
        to dividends declared and paid to date on the Acquiror Shares shall have
        been
        declared and paid on the Exchangeable Shares.

       

      ARTICLE 5

      DISTRIBUTION
        ON LIQUIDATION

       

      
        	
                5.1

                 

              	
                In
                  the event of the liquidation, dissolution or winding-up of the
                  Corporation
                  or any other distribution of the assets of the Corporation among
                  its
                  shareholders for the purpose of winding up its affairs, a Holder
                  of
                  Exchangeable Shares shall be entitled, subject to applicable law,
                  to
                  receive from the assets of the Corporation in respect of each Exchangeable
                  Share held by such Holder on the effective date (the "Liquidation
                  Date")
                  of such liquidation, dissolution, winding-up or distribution of
                  assets,
                  before any distribution of any part of the assets of the Corporation
                  among
                  the Holders of the Common Shares or any other shares ranking junior
                  to the
                  Exchangeable Shares, an amount per share equal to the Exchangeable
                  Share
                  Price applicable on the last Business Day prior to the Liquidation
                  Date
                  (the "Liquidation
                  Amount").

                 

              
	
                5.2

                 

              	
                On
                  or promptly after the Liquidation Date, the Corporation shall cause
                  to be
                  delivered to the Holders of the Exchangeable Shares the Liquidation
                  Amount
                  for each such Exchangeable Share upon presentation and surrender
                  of the
                  certificates representing such Exchangeable Shares, together with
                  such
                  other documents and instruments as may be required to effect a
                  transfer of
                  Exchangeable Shares under the ABCA and the articles and by-laws
                  of the
                  Corporation and such additional documents and instruments as the
                  Transfer
                  Agent, if any, and the Corporation may reasonably require, at the
                  registered office of the Corporation or at any office of the Transfer
                  Agent, if any, as may be specified by the Corporation by notice
                  to the
                  Holders of the Exchangeable Shares. Payment of the total Liquidation
                  Amount for such Exchangeable Shares shall be made by delivery to
                  each
                  Holder, at the address of the Holder recorded in the register of
                  the
                  Corporation for the Exchangeable Shares or by holding for pick-up
                  by the
                  Holder at the registered office of the Corporation or at any office
                  of the
                  Transfer Agent, if any, as may be specified by the Corporation
                  by notice
                  to the Holders of Exchangeable Shares, on behalf of the Corporation
                  of the
                  Exchangeable Share Consideration representing the total Liquidation
                  Amount. On and after the Liquidation Date, the Holders of the Exchangeable
                  Shares shall cease to be Holders of such Exchangeable Shares and
                  shall not
                  be entitled to exercise any of the rights of Holders in respect
                  thereof
                  (including any rights under the Voting and Exchange Trust Agreement),
                  other than the right to receive their proportionate part of the
                  total
                  Liquidation Amount, unless payment of the total Liquidation
                  Amount for such Exchangeable Shares shall not be made upon presentation
                  and surrender of share certificates in accordance with the foregoing
                  provisions, in which case the rights of the Holders shall remain
                  unaffected until the total Liquidation Amount to which such Holders
                  are
                  entitled shall have been paid to such Holders in the manner hereinbefore
                  provided. The Corporation shall have the right at any time on or
                  before
                  the Liquidation Date to deposit or cause to be deposited the Exchangeable
                  Share Consideration in respect of the Exchangeable Shares represented
                  by
                  certificates that have not at the Liquidation Date been surrendered
                  by the
                  Holders thereof in a custodial account with any chartered bank
                  or trust
                  company in Canada. Upon such deposit being made, the rights of
                  the Holders
                  of Exchangeable Shares, after such deposit, shall be limited to
                  receiving
                  their proportionate part of the total Liquidation Amount for such
                  Exchangeable Shares so deposited, against presentation and surrender
                  of
                  the said certificates held by them, respectively, in accordance
                  with the
                  foregoing provisions. Upon such payment or deposit of such Exchangeable
                  Share Consideration, the Holders of the Exchangeable Shares shall
                  thereafter be considered and deemed for all purposes to be holders
                  of the
                  Acquiror Shares delivered to them or the custodian on their
                  behalf.

              

      

      
        
          
          

        

        
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                5.3

                 

              	
                After
                  the Corporation has satisfied its obligations to pay the Holders
                  of the
                  Exchangeable Shares the Liquidation Amount per Exchangeable Share
                  pursuant
                  to Section 5.1
                  of
                  these share provisions, such Holders shall not be entitled to share
                  in any
                  further distribution of the assets of the Corporation.

                 

              

      

      ARTICLE 6

      RETRACTION
        OF EXCHANGEABLE SHARES BY HOLDER

       

      
        	
                6.1

                 

              	
                A
                  Holder of Exchangeable Shares shall be entitled at any time, upon
                  compliance with the provisions of this Article 6,
                  to require the Corporation to redeem any or all of the Exchangeable
                  Shares
                  registered in the name of such Holder for an amount per share equal
                  to the
                  Exchangeable Share Price applicable on the last Business Day prior
                  to the
                  Retraction Date (the "Retraction
                  Price"),
                  which shall be satisfied in full by the Corporation causing to
                  be
                  delivered to such Holder the Exchangeable Share Consideration representing
                  the Retraction Price. To effect such redemption, the Holder shall
                  present
                  and surrender at the registered office of the Corporation or at
                  any office
                  of the Transfer Agent, if any, as may be specified by the Corporation
                  by
                  notice to the Holders of Exchangeable Shares, the certificate or
                  certificates representing the Exchangeable Shares which the Holder
                  desires
                  to have the Corporation redeem, together with such other documents
                  and
                  instruments as may be required to effect a transfer of Exchangeable
                  Shares
                  under the ABCA and the articles and by-laws of the Corporation
                  and such
                  additional documents and instruments as the Transfer Agent, if
                  any, and
                  the Corporation may reasonably require, and together with a duly
                  executed
                  statement (the "Retraction
                  Request")
                  in the form of Schedule “A” hereto or in such other form as may be
                  acceptable to the Corporation:

              

      

      
        
          
          

        

        
          -12-

          
            

          

        

        
          
          

        

      

       

      
        	
                (a)

                 

              	
                specifying
                  that the Holder desires to have all or any number specified therein
                  of the
                  Exchangeable Shares represented by such certificate or certificates
                  (the
                  "Retracted
                  Shares")
                  redeemed by the Corporation; and

                 

              
	
                (b)

                 

              	
                stating
                  the Business Day on which the Holder desires to have the Corporation
                  redeem the Retracted Shares (the "Retraction
                  Date"),
                  provided that the Retraction Date shall be not less than 10 Business
                  Days nor more than 15 Business Days after the date on which the
                  Retraction Request is received by the Corporation and further provided
                  that, in the event that no such Business Day is specified by the
                  Holder in
                  the Retraction Request, the Retraction Date shall be deemed to
                  be the
                  15th
                  Business Day after the date on which the Retraction Request is
                  received by
                  the Corporation.

                 

              

      

       

      
        	
                6.2

                 

              	
                Upon
                  receipt by the Corporation or the Transfer Agent, if any, in the
                  manner
                  specified in Section 6.1
                  of
                  a certificate or certificates representing the number of Retracted
                  Shares,
                  together with a Retraction Request and such additional documents
                  and
                  instruments as the Transfer Agent, if any, and the Corporation
                  may
                  reasonably require, and provided that the Retraction Request is
                  not
                  revoked by the Holder in the manner specified in Section 6.6,
                  the Corporation shall redeem the Retracted Shares effective at
                  the close
                  of business on the Retraction Date and shall cause to be delivered
                  to such
                  Holder the total Retraction Price with respect to such shares in
                  accordance with Section 6.3.
                  If only a part of the Exchangeable Shares represented by any certificate
                  is redeemed, a new certificate for the balance of such Exchangeable
                  Shares
                  shall be issued to the Holder at the expense of the
                  Corporation.

                 

              
	
                6.3

                 

              	
                The
                  Corporation shall deliver or cause the Transfer Agent, if any,
                  to deliver
                  to the relevant Holder, at the address of the Holder recorded in
                  the
                  register of the Corporation for the Exchangeable Shares or at the
                  address
                  specified in the Holder's Retraction Request or, if specified in
                  such
                  Retraction Request, by holding for pick-up by the Holder at the
                  registered
                  office of the Corporation or at any office of the Transfer Agent,
                  if any,
                  as may be specified by the Corporation by notice to such Holder
                  of
                  Exchangeable Shares, the Exchangeable Share Consideration representing
                  the
                  total Retraction Price and such delivery of such Exchangeable Share
                  Consideration to the Holder or the Transfer Agent, if any, shall
                  be deemed
                  to be payment of and shall satisfy and discharge all liability
                  for the
                  total Retraction Price to the extent that the same is represented
                  by such
                  Exchangeable Share
                  Consideration.

              

      

      
        
          
          

        

        
          -13-

          
            

          

        

        
          
          

        

      

       

      
        	
                6.4

                 

              	
                On
                  and after the close of business on the Retraction Date, the Holder
                  of the
                  Retracted Shares shall cease to be a Holder of such Retracted Shares
                  and
                  shall not be entitled to exercise any of the rights of a Holder
                  in respect
                  thereof, other than the right to receive the total Retraction Price
                  unless
                  upon presentation and surrender of certificates in accordance with
                  the
                  foregoing provisions, payment of the total Retraction Price shall
                  not be
                  made as provided in Section 6.3,
                  in which case the rights of such Holder shall remain unaffected
                  until the
                  total Retraction Price has been paid in the manner hereinbefore
                  provided.
                  On and after the close of business on the Retraction Date, provided
                  that
                  presentation and surrender of certificates and payment of the total
                  Retraction Price has been made in accordance with the foregoing
                  provisions, the Holder of the Retracted Shares so redeemed by the
                  Corporation shall thereafter be considered and deemed for all purposes
                  to
                  be the holder of Acquiror Shares delivered to it.

                 

              
	
                6.5

                 

              	
                Notwithstanding
                  any other provision of this Article 6,
                  the Corporation shall not be obligated to redeem Retracted Shares
                  specified by a Holder in a Retraction Request to the extent that
                  such
                  redemption of Retracted Shares would be contrary to solvency requirements
                  or other provisions of applicable law. If the Corporation believes,
                  acting
                  reasonably, that on any Retraction Date it would not be permitted
                  by any
                  of such provisions to redeem the Retracted Shares tendered for
                  redemption
                  on such date, the Corporation shall only be obligated to redeem
                  Retracted
                  Shares specified by a Holder in a Retraction Request to the extent
                  of the
                  maximum number that may be so redeemed (rounded down to a whole
                  number of
                  shares) as would not be contrary to such provisions and shall notify
                  the
                  Holder at least two Business Days prior to the Retraction Date
                  as to the
                  number of Retracted Shares which will not be redeemed by the Corporation.
                  In any case in which the redemption by the Corporation of Retracted
                  Shares
                  would be contrary to solvency requirements or other provisions
                  of
                  applicable law, the Corporation shall redeem the maximum number
                  of
                  Exchangeable Shares which the Board of Directors determines the
                  Corporation is permitted to redeem as of the Retraction Date on
                  a
                  pro
                  rata
                  basis and shall issue to each Holder of Retracted Shares a new
                  certificate, at the expense of the Corporation, representing the
                  Retracted
                  Shares not redeemed by the Corporation pursuant to
                  Section 6.2.
                  Provided that the Retraction Request is not revoked by the Holder
                  in the
                  manner specified in Section 6.6,
                  the Holder of any such Retracted Shares not redeemed by the Corporation
                  pursuant to Section 6.2
                  as
                  a result of solvency requirements or other provisions of applicable
                  law
                  shall be deemed by giving the Retraction Request to have instructed
                  the
                  Trustee to require Acquiror to purchase such Retracted Shares from
                  such
                  Holder on the Retraction Date or as soon as practicable thereafter
                  on
                  payment by Acquiror to such Holder of the Retraction Price for
                  each such
                  Retracted Share, all as more specifically provided in the Voting
                  and
                  Exchange Trust Agreement.

              

      

       

      
        
          
          

        

        
          -14-

          
            

          

        

        
          
          

        

      

       

      
        	
                6.6

                 

              	
                A
                  Holder of Retracted Shares may, by notice in writing given by the
                  Holder
                  to the Corporation before the close of business on the Business
                  Day
                  immediately preceding the Retraction Date, withdraw its Retraction
                  Request, in which event such Retraction Request shall be null and
                  void.

                 

              

      

      ARTICLE 7

      REDEMPTION
        OF EXCHANGEABLE SHARES BY THE CORPORATION

       

      
        	
                7.1

                 

              	
                Subject
                  to applicable law, the Corporation shall on the Redemption Date
                  redeem all
                  but not less than all of the then outstanding Exchangeable Shares
                  for an
                  amount per share equal to the Exchangeable Share Price applicable
                  on the
                  last Business Day prior to the Redemption Date (the "Redemption
                  Price").

                 

              
	
                7.2

                 

              	
                In
                  any case of a redemption of Exchangeable Shares under this Article 7,
                  the Corporation shall, at least 45 days before the Redemption Date
                  (other than a Redemption Date established in connection with an
                  Acquiror
                  Control Transaction, an Exchangeable Share Voting Event or an Exempt
                  Exchangeable Share Voting Event), send or cause to be sent to each
                  Holder
                  of Exchangeable Shares a notice in writing of the redemption by
                  the
                  Corporation of the Exchangeable Shares held by such Holder. In
                  the case of
                  a Redemption Date established in connection with an Acquiror Control
                  Transaction, an Exchangeable Share Voting Event or an Exempt Exchangeable
                  Share Voting Event, the written notice of redemption by the Corporation
                  will be sent on or before the Redemption Date, on as many days
                  prior
                  written notice as may be determined by the Board of Directors to
                  be
                  reasonably practicable in the circumstances. In any such case,
                  such notice
                  shall set out the formula for determining the Redemption Price
                  and the
                  Redemption Date. In the case of any notice given in connection
                  with a
                  possible Redemption Date, such notice will be given contingently
                  and will
                  be withdrawn if the contingency does not occur.

                 

              
	
                7.3

                 

              	
                On
                  or after the Redemption Date, the Corporation shall cause to be
                  delivered
                  to the Holders of the Exchangeable Shares to be redeemed the Redemption
                  Price for each such Exchangeable Share upon presentation and surrender
                  at
                  the registered office of the Corporation or at any office of the
                  Transfer
                  Agent, if any, as may be specified by the Corporation in the notice
                  described in Section 6.6
                  of
                  the certificates representing such Exchangeable Shares, together
                  with such
                  other documents and instruments as may be required to effect a
                  transfer of
                  Exchangeable Shares under the ABCA and the articles and by-laws
                  of the
                  Corporation and such additional documents and instruments as the
                  Transfer
                  Agent, if any, and the Corporation may reasonably require.
                  

              

      

      
        
          
          

        

        
          -15-

          
            

          

        

        
          
          

        

      

       

      
        	 	
                Payment
                  of the total Redemption Price for such Exchangeable Shares shall
                  be made
                  by delivery to each Holder, at the address of the Holder recorded
                  in the
                  securities register of the Corporation or by holding for pick-up
                  by the
                  Holder at the registered office of the Corporation or at any office
                  of the
                  Transfer Agent, if any, as may be specified by the Corporation
                  in such
                  notice, on behalf of the Corporation of the Exchangeable Share
                  Consideration representing the total Redemption Price. On and after
                  the
                  Redemption Date, the Holders of the Exchangeable Shares called
                  for
                  redemption shall cease to be Holders of such Exchangeable Shares
                  and shall
                  not be entitled to exercise any of the rights of Holders in respect
                  thereof, other than the right to receive their proportionate part
                  of the
                  total Redemption Price, unless payment of the total Redemption
                  Price for
                  such Exchangeable Shares shall not be made upon presentation and
                  surrender
                  of certificates in accordance with the foregoing provisions, in
                  which case
                  the rights of the Holders shall remain unaffected until the total
                  Redemption Price has been paid in the manner hereinbefore provided.
                  The
                  Corporation shall have the right at any time after the sending
                  of notice
                  of its intention to redeem the Exchangeable Shares as aforesaid
                  to deposit
                  or cause to be deposited the Exchangeable Share Consideration with
                  respect
                  to the Exchangeable Shares so called for redemption, or of such
                  of the
                  said Exchangeable Shares represented by certificates that have
                  not at the
                  date of such deposit been surrendered by the Holders thereof in
                  connection
                  with such redemption, in a custodial account with any chartered
                  bank or
                  trust company in Canada named in such notice. Upon the later of
                  such
                  deposit being made and the Redemption Date, the Exchangeable Shares
                  in
                  respect whereof such deposit shall have been made shall be redeemed
                  and
                  the rights of the Holders thereof after such deposit or Redemption
                  Date,
                  as the case may be, shall be limited to receiving their proportionate
                  part
                  of the total Redemption Price for such Exchangeable Shares so deposited,
                  against presentation and surrender of the said certificates held
                  by them,
                  respectively, in accordance with the foregoing provisions. Upon
                  such
                  payment or deposit of such Exchangeable Share Consideration, the
                  Holders
                  of the Exchangeable Shares shall thereafter be considered and deemed
                  for
                  all purposes to be holders of Acquiror Shares delivered to them
                  or the
                  custodian on their behalf.

              

      

       

      Article 8

      PURCHASE
        FOR CANCELLATION

       

      
        	
                8.1

                 

              	
                Subject
                  to applicable law and the articles of the Corporation and notwithstanding
                  Section 8.2,
                  the Corporation may at any time and from time to time purchase
                  for
                  cancellation all or any part of the Exchangeable Shares by private
                  agreement with any Holder of Exchangeable
                  Shares.

              

      

      
        
          
          

        

        
          -16-

          
            

          

        

        
          
          

        

      

       

      
        	
                8.2

                 

              	
                Subject
                  to applicable law and the articles of the Corporation, the Corporation
                  may
                  at any time and from time to time purchase for cancellation all
                  or any
                  part of the outstanding Exchangeable Shares by tender to all the
                  Holders
                  of record of Exchangeable Shares then outstanding or through the
                  facilities of any stock exchange on which the Exchangeable Shares
                  are
                  listed or quoted, if any, at any price per share together with
                  an amount
                  equal to all declared and unpaid dividends thereon for which the
                  record
                  date has occurred prior to the date of purchase. If in response
                  to an
                  invitation for tenders under the provisions of this
                  Section 8.2,
                  more Exchangeable Shares are tendered at a price or prices acceptable
                  to
                  the Corporation than the Corporation is prepared to purchase, the
                  Exchangeable Shares to be purchased by the Corporation shall be
                  purchased
                  as nearly as may be pro
                  rata
                  according to the number of shares tendered by each Holder who submits
                  a
                  tender to the Corporation, provided that when shares are tendered
                  at
                  different prices, the pro rating shall be effected (disregarding
                  fractions) only with respect to the shares tendered at the price
                  at which
                  more shares were tendered than the Corporation is prepared to purchase
                  after the Corporation has purchased all the shares tendered at
                  lower
                  prices. If only part of the Exchangeable Shares represented by
                  any
                  certificate shall be purchased, a new certificate for the balance
                  of such
                  shares shall be issued at the expense of the
                  Corporation.

              

      

       

      ARTICLE 9

      VOTING
        RIGHTS

       

      
        	
                9.1

                 

              	
                Except
                  as required by applicable law and by Article 10,
                  Section 11.1
                  and Section 12.2,
                  the Holders of the Exchangeable Shares shall not be entitled as
                  such to
                  receive notice of or to attend any meeting of the shareholders
                  of the
                  Corporation or to vote at any such
                  meeting.

              

      

       

      ARTICLE 10

      AMENDMENT
        AND APPROVAL

       

      
        	
                10.1

                 

              	
                The
                  rights, privileges, restrictions and conditions attaching to the
                  Exchangeable Shares may be added to, changed or removed but only
                  with the
                  approval of the Holders of the Exchangeable Shares given as hereinafter
                  specified.

              

      

       

      
        
          
          

        

        
          -17-

          
            

          

        

        
          
          

        

      

       

      
        	
                10.2

                 

              	
                Any
                  approval given by the Holders of the Exchangeable Shares to add
                  to, change
                  or remove any right, privilege, restriction or condition attaching
                  to the
                  Exchangeable Shares or any other matter requiring the approval
                  or consent
                  of the Holders of the Exchangeable Shares shall be deemed to have
                  been
                  sufficiently given if it shall have been given in accordance with
                  applicable law subject to a minimum requirement that such approval
                  be
                  evidenced by resolution passed by not less than 66-2/3% of the
                  votes cast
                  on such resolution by Holders (other than Acquiror and its Affiliates)
                  represented in person or by proxy at a meeting of Holders of Exchangeable
                  Shares duly called and held at which the Holders of at least 50%
                  of the
                  outstanding Exchangeable Shares (other than Exchangeable Shares
                  held by
                  Acquiror and its Affiliates) at that time are present or represented
                  by
                  proxy; provided that if at any such meeting the Holders of at least
                  50% of
                  the outstanding Exchangeable Shares at that time are not present
                  or
                  represented by proxy within one-half hour after the time appointed
                  for
                  such meeting, then the meeting shall be adjourned to such date
                  not less
                  than five days thereafter and to such time and place as may be
                  designated
                  by the Chair of such meeting. At such adjourned meeting, the Holders
                  of
                  Exchangeable Shares (other than Acquiror and its Affiliates) present
                  or
                  represented by proxy thereat may transact the business for which
                  the
                  meeting was originally called and a resolution passed thereat by
                  the
                  affirmative vote of not less than 66-2/3% of the votes cast on
                  such
                  resolution by Holders (other than Acquiror and its Affiliates)
                  represented
                  in person or by proxy at such meeting shall constitute the approval
                  or
                  consent of the Holders of the Exchangeable Shares. For purposes
                  of this
                  section, any spoiled votes, illegible votes, defective votes and
                  abstentions shall be deemed to be votes not
                  cast.

              

      

       

      ARTICLE 11

      RECIPROCAL
        CHANGES, ETC. IN RESPECT OF ACQUIROR SHARES

       

      
        	
                11.1

                 

              	
                Each
                  Holder of an Exchangeable Share acknowledges that the Support Agreement
                  provides, in part, that Acquiror will not, without the prior approval
                  of
                  the Corporation and the prior approval of the Holders of the Exchangeable
                  Shares given in accordance with Section 10.2
                  of
                  these share provisions:

              

      

       

      
        	
                (a)

                 

              	
                issue
                  or distribute Acquiror Shares (or securities exchangeable for or
                  convertible into or carrying rights to acquire Acquiror Shares)
                  to the
                  holders of all or substantially all of the then outstanding Acquiror
                  Shares by way of stock dividend or other distribution, other than
                  an issue
                  of Acquiror Shares (or securities exchangeable for or convertible
                  into or
                  carrying rights to acquire Acquiror Shares) to holders of Acquiror
                  Shares
                  who (i) exercise an option to receive dividends in Acquiror Shares
                  (or securities exchangeable for or convertible into or carrying
                  rights to
                  acquire Acquiror Shares) in lieu of receiving cash dividends, or
                  (ii) pursuant to any dividend reinvestment plan or scrip
                  dividend;

                 

              
	
                (b)

                 

              	
                issue
                  or distribute rights, options or warrants to the holders of all
                  or
                  substantially all of the then outstanding Acquiror Shares entitling
                  them
                  to subscribe for or to purchase Acquiror Shares (or securities
                  exchangeable for or convertible into or carrying rights to acquire
                  Acquiror Shares); or

              

      

      
        
          
          

        

        
          -18-

          
            

          

        

        
          
          

        

      

       

      
        	
                (c)

                 

              	
                issue
                  or distribute to the holders of all or substantially all of the
                  then
                  outstanding Acquiror Shares: 

                 

              

      

       

      
        	
                (i)

                 

              	
                shares
                  or securities of Acquiror of any class other than Acquiror Shares
                  (other
                  than shares convertible into or exchangeable for or carrying rights
                  to
                  acquire Acquiror Shares); 

                 

              
	
                (ii)

                 

              	
                rights,
                  options or warrants other than those referred to in
                  Section 11.1(b)
                  above; 

                 

              
	
                (iii)

                 

              	
                evidences
                  of indebtedness of Acquiror; or 

                 

              
	
                (iv)

                 

              	
                assets
                  of Acquiror,

              

      

       

      unless
        the economic equivalent on a per share basis of such rights, options, warrants,
        securities, shares, evidences of indebtedness or other assets is issued or
        distributed simultaneously to Holders of the Exchangeable Shares.

       

      
        	
                11.2

                 

              	
                Each
                  Holder of an Exchangeable Share acknowledges that the Support Agreement
                  further provides, in part, that Acquiror will not without the prior
                  approval of the Corporation and the prior approval of the Holders
                  of the
                  Exchangeable Shares given in accordance with Section 10.2:

                 

              

      

       

      
        	
                (a)

                 

              	
                subdivide,
                  redivide or change the then outstanding Acquiror Shares into a
                  greater
                  number of Acquiror Shares;

                 

              
	
                (b)

                 

              	
                reduce,
                  combine, consolidate or change the then outstanding Acquiror Shares
                  into a
                  lesser number of Acquiror Shares; or 

                 

              
	
                (c)

                 

              	
                reclassify
                  or otherwise change the Acquiror Shares or effect an amalgamation,
                  merger,
                  reorganization or other transaction affecting the Acquiror
                  Shares;

                 

              

      

       

      unless
        the same or an economically equivalent change shall simultaneously be made
        to,
        or in the rights of the Holders of, the Exchangeable Shares and such change
        is
        permitted under applicable law. The Support Agreement further provides, in
        part,
        that the provisions of the Support Agreement described in
        Section 11.1
        and this
        Section 11.2
        shall
        not be changed without the approval of the Holders of the Exchangeable Shares
        given in accordance with Section 10.2.

       

      
        	
                11.3

              	
                Notwithstanding
                  the foregoing provisions of this Article 11,
                  in the event of an Acquiror Control
                  Transaction:

              

      

      
        
          
          

        

        
          -19-

          
            

          

        

        
          
          

        

      

       

      
        	
                (a)

                 

              	
                in
                  which Acquiror merges or amalgamates with, or in which all or
                  substantially all of the then outstanding Acquiror Shares are acquired
                  by,
                  one or more other corporations to which Acquiror is, immediately
                  before
                  such merger, amalgamation or acquisition, "related" within the
                  meaning of
                  the Income
                  Tax Act (Canada)
                  (otherwise than by virtue of a right referred to in paragraph 251(5)(b)
                  thereof);

                 

              
	
                (b)

                 

              	
                which
                  does not result in an acceleration of the Redemption Date in accordance
                  with paragraph (b) of that definition; and

                 

              
	
                (c)

                 

              	
                in
                  which all or substantially all of the then outstanding Acquiror
                  Shares are
                  converted into or exchanged for shares or rights to receive such
                  shares
                  (the "Other
                  Shares")
                  of another corporation (the "Other
                  Corporation")
                  that, immediately after such Acquiror Control Transaction, owns
                  or
                  controls, directly or indirectly, Acquiror;

                 

              

      

      then
        all
        references herein to "Acquiror" shall thereafter be and be deemed to be
        references to "Other Corporation" and all references herein to "Acquiror
        Shares"
        shall thereafter be and be deemed to be references to "Other Shares" (with
        appropriate adjustments, if any, as are required to result in a Holder of
        Exchangeable Shares on the exchange, redemption or retraction of such shares
        pursuant to these share provisions or exchange of such shares pursuant to
        the
        Voting and Exchange Trust Agreement immediately subsequent to the Acquiror
        Control Transaction being entitled to receive that number of Other Shares
        equal
        to the number of Other Shares such Holder of Exchangeable Shares would have
        received if the exchange, redemption or retraction of such shares pursuant
        to
        these share provisions or exchange of such shares pursuant to the Voting
        and
        Exchange Trust Agreement had occurred immediately prior to the Acquiror Control
        Transaction and the Acquiror Control Transaction was completed) without any
        need
        to amend the terms and conditions of the Exchangeable Shares and without
        any
        further action required.

       

      ARTICLE 12

      ACTIONS
        BY THE CORPORATION UNDER SUPPORT AGREEMENT

       

      
        	
                12.1

                 

              	
                The
                  Corporation will take all such actions and do all such things as
                  shall be
                  necessary or advisable to perform and comply with and to ensure
                  performance and compliance by Acquiror and the Corporation with
                  all
                  provisions of the Support Agreement and the Voting and Exchange
                  Trust
                  Agreement applicable to Acquiror and the Corporation, respectively,
                  in
                  accordance with the terms thereof including taking all such actions
                  and
                  doing all such things as shall be necessary or advisable to enforce
                  to the
                  fullest extent possible for the direct benefit of the Corporation
                  all
                  rights and benefits in favour of the Corporation under or pursuant
                  thereto. 

              

      

      
        
          
          

        

        
          -20-

          
            

          

        

        
          
          

        

      

       

      
        	
                12.2

                 

              	
                The
                  Corporation shall not propose, agree to or otherwise give effect
                  to any
                  amendment to, or waiver or forgiveness of its rights or obligations
                  under,
                  the Support Agreement or the Voting and Exchange Trust Agreement
                  without
                  the approval of the Holders of the Exchangeable Shares given in
                  accordance
                  with Section 10.2
                  other than such amendments, waivers and/or forgiveness as may be
                  necessary
                  or advisable for the purposes of:

              

      

       

      
        	
                (a)

                 

              	
                adding
                  to the covenants of the other parties to such agreement for the
                  protection
                  of the Corporation or the Holders of the Exchangeable Shares
                  thereunder;

                 

              
	
                (b)

                 

              	
                making
                  such provisions or modifications not inconsistent with such agreement
                  as
                  may be necessary or desirable with respect to matters or questions
                  arising
                  thereunder which, in the good faith opinion of the Board of Directors,
                  it
                  may be expedient to make, provided that the Board of Directors
                  shall be of
                  the good faith opinion, after consultation with counsel, that such
                  provisions and modifications will not be prejudicial to the interests
                  of
                  the Holders of the Exchangeable Shares; or 

                 

              
	
                (c)

                 

              	
                making
                  such changes in or corrections to such agreement which, on the
                  advice of
                  counsel to the Corporation, are required for the purpose of curing
                  or
                  correcting any ambiguity or defect or inconsistent provision or
                  clerical
                  omission or mistake or manifest error contained therein, provided
                  that the
                  Board of Directors shall be of the good faith opinion, after consultation
                  with counsel, that such changes or corrections will not be prejudicial
                  to
                  the interests of the Holders of the Exchangeable Shares.

                 

              

      

      ARTICLE 13

      LEGEND;
        WITHHOLDING RIGHTS

       

      
        	
                13.1

                 

              	
                The
                  certificates evidencing the Exchangeable Shares shall contain or
                  have
                  affixed thereto a legend in form and on terms approved by the Board
                  of
                  Directors, with respect to the Support Agreement and the Voting
                  and
                  Exchange Trust Agreement (including the provisions with respect
                  to the
                  voting rights, exchange right and automatic exchange
                  thereunder).

              

      

      
        
          
          

        

        
          -21-

          
            

          

        

        
          
          

        

      

       

      
        	
                13.2

                 

              	
                The
                  Corporation, Acquiror and the Transfer Agent, if any, shall be
                  entitled to
                  deduct and withhold from any dividend or consideration otherwise
                  payable
                  to any Holder of Exchangeable Shares such amounts as the Corporation,
                  Acquiror or the Transfer Agent, if any, is required to deduct and
                  withhold
                  with respect to such payment under the Income
                  Tax Act
                  (Canada), the United States Internal Revenue Code of 1986 or any
                  provision
                  of provincial, state, territorial, local or foreign tax law, in
                  each case,
                  as amended. To the extent that amounts are so withheld, such withheld
                  amounts shall be treated for all purposes hereof as having been
                  paid to
                  the Holder of the Exchangeable Shares in respect of which such
                  deduction
                  and withholding was made, provided that such withheld amounts are
                  actually
                  remitted to the appropriate taxing authority. To the extent that
                  the
                  amount so required or permitted to be deducted or withheld from
                  any
                  payment to a Holder exceeds the cash portion of the consideration
                  otherwise payable to the Holder, the Corporation, Acquiror and
                  the
                  Transfer Agent, if any, are hereby authorized to sell or otherwise
                  dispose
                  of such portion of the consideration as is necessary to provide
                  sufficient
                  funds to the Corporation, Acquiror or the Transfer Agent, if any
                  and as
                  the case may be, to enable it to comply with such deduction or
                  withholding
                  requirement and the Corporation, Acquiror or the Transfer Agent,
                  if any,
                  shall notify the Holder thereof and remit any unapplied balance
                  of the net
                  proceeds of such sale.

              

      

       

      ARTICLE 14

      GENERAL

       

      
        	
                14.1

                 

              	
                Any
                  notice, request or other communication to be given to the Corporation
                  by a
                  Holder of Exchangeable Shares shall be in writing and shall be
                  valid and
                  effective if given by mail (postage prepaid) or by telecopy or
                  by delivery
                  to the registered office of the Corporation and addressed to the
                  attention
                  of the Secretary of the Corporation. Any such notice, request or
                  other
                  communication, if given by mail, telecopy or delivery, shall only
                  be
                  deemed to have been given and received upon actual receipt thereof
                  by the
                  Corporation. 

                 

              
	
                14.2

                 

              	
                Any
                  presentation and surrender by a Holder of Exchangeable Shares to
                  the
                  Corporation or the Transfer Agent, if any, of certificates representing
                  Exchangeable Shares in connection with the liquidation, dissolution
                  or
                  winding-up of the Corporation or the retraction or redemption of
                  Exchangeable Shares shall be made by registered mail (postage prepaid)
                  or
                  by delivery to the registered office of the Corporation or to such
                  office
                  of the Transfer Agent, if any, as may be specified by the Corporation,
                  in
                  each case, addressed to the attention of the Secretary of the Corporation.
                  Any such presentation and surrender of certificates shall only
                  be deemed
                  to have been made and to be effective upon actual receipt thereof
                  by the
                  Corporation or the Transfer Agent, if any and as the case may be.
                  Any such
                  presentation and surrender of certificates made by registered mail
                  shall
                  be at the sole risk of the Holder mailing the same. 

              

      

      
        
          
          

        

        
          -22-

          
            

          

        

        
          
          

        

      

       

      
        	
                14.3

                 

              	
                Any
                  notice, request or other communication to be given to a Holder
                  of
                  Exchangeable Shares by or on behalf of the Corporation shall be
                  in writing
                  and shall be valid and effective if given by mail (postage prepaid)
                  or by
                  delivery to the address of the Holder recorded in the register
                  of the
                  Corporation or, in the event of the address of any such Holder
                  not being
                  so recorded, then at the last address of such Holder known to the
                  Corporation. Any such notice, request or other communication, if
                  given by
                  mail, shall be deemed to have been given and received on the third
                  Business Day following the date of mailing and, if given by delivery,
                  shall be deemed to have been given and received on the date of
                  delivery.
                  Accidental failure or omission to give any notice, request or other
                  communication to one or more Holders of Exchangeable Shares shall
                  not
                  invalidate or otherwise alter or affect any action or proceeding
                  intended
                  to be taken by the Corporation pursuant thereto. 

                 

              
	
                14.4

                 

              	
                Subject
                  to the requirements of any policy statement or rule of the Canadian
                  Securities Administrators or other applicable law, for greater
                  certainty,
                  the Corporation shall not be required for any purpose under these
                  share
                  provisions to recognize or take account of Persons who are not
                  recorded as
                  such in the securities register for the Exchangeable Shares.

                 

              
	
                14.5

                 

              	
                If
                  the Corporation determines that mail service is or is threatened
                  to be
                  interrupted at the time when the Corporation is required or elects
                  to give
                  any notice to the Holders of Exchangeable Shares hereunder, the
                  Corporation shall, notwithstanding the provisions hereof, give
                  such notice
                  by means of publication in The Globe and Mail, national edition,
                  or any
                  other English language daily newspaper or newspapers of general
                  circulation in Canada, once in each of two successive weeks, and
                  notice so
                  published shall be deemed to have been given on the latest date
                  on which
                  the first publication has taken place. If, by reason of any actual
                  or
                  threatened interruption of mail service due to strike, lock-out
                  or
                  otherwise, any notice to be given to the Corporation would be unlikely
                  to
                  reach its destination in a timely manner, such notice shall be
                  valid and
                  effective only if delivered personally to the Corporation in accordance
                  with Section 14.1
                  or
                  14.2,
                  as the case may be. 

              

      

       

      
        
          
          

        

        
          -23-

          
            

          

        

        
          
          

        

      

      SCHEDULE
        “A”

      RETRACTION
        REQUEST

       

      [TO
        BE PRINTED ON EXCHANGEABLE SHARE CERTIFICATES]

       

      To:     Cold
        Flow
        Energy ULC (the "Corporation")
        

       

      This
        notice is given pursuant to Article 6
        of the
        rights, privileges, restrictions and conditions (the "Share
        Provisions")
        attaching to the Exchangeable Shares of the Corporation represented by this
        certificate and all capitalized words and expressions used in this notice
        that
        are defined in the Share Provisions have the meanings ascribed to such words
        and
        expressions in such Share Provisions.

       

      The
        undersigned hereby notifies the Corporation that the undersigned desires
        to have
        the Corporation redeem in accordance with Article 6
        of the
        Share Provisions:

       

      
        	
                [
                  ]

                 

              	
                all
                  share(s) represented by this certificate; or

                 

              
	
                [
                  ]

                 

              	
                __________share(s)
                  only represented by this certificate.

                 

              

      

      The
        undersigned hereby notifies the Corporation that the Retraction Date shall
        be
        ___________________________.

       

      
        	
                NOTE:

                 

              	
                The
                  Retraction Date must be a Business Day and must not be less than
                  10 Business Days nor more than 15 Business Days after the date
                  upon which this notice is received by the Corporation. If no such
                  Business
                  Day is specified above, the Retraction Date shall be deemed to
                  be the
                  15th
                  Business Day after the date on which this notice is received by
                  the
                  Corporation.

                 

              

      

      This
        Retraction Request may be revoked and withdrawn by the undersigned only by
        notice in writing given to the Corporation at any time before the close of
        business on the Business Day immediately preceding the Retraction
        Date.

       

      The
        undersigned acknowledges that if, as a result of solvency provisions of
        applicable law, the Corporation is unable to redeem all Retracted Shares,
        the
        undersigned will be deemed to have exercised the Exchange Right (as defined
        in
        the Voting and Exchange Trust Agreement) so as to require Acquiror to purchase
        the unredeemed Retracted Shares.

       

      The
        undersigned hereby represents and warrants to the Corporation that the
        undersigned:

      
        
          
          

        

        
          A-1

          
            

          

        

        
          
          

        

      

       

      
        	
                [
                  ]

                 

              	
                is

                 

              
	
                 

                 

              	(select
                one) 
	
                [
                  ]

                 

              	
                is
                  not

                 

              

      

      a
        resident in Canada for purposes of the Income
        Tax Act
        (Canada). THE UNDERSIGNED ACKNOWLEDGES THAT IN THE ABSENCE OF AN INDICATION
        THAT
        THE UNDERSIGNED IS A RESIDENT IN CANADA, WITHHOLDING ON ACCOUNT OF CANADIAN
        TAX
        MAY BE MADE FROM AMOUNTS PAYABLE TO THE UNDERSIGNED ON THE REDEMPTION OF
        THE
        RETRACTED SHARES.

       

      The
        undersigned hereby represents and warrants to the Corporation that the
        undersigned has good title to, and owns, the share(s) represented by this
        certificate to be acquired by the Corporation free and clear of all liens,
        claims and encumbrances.

       

      
        	  
	 	  
	 	  

	
                (Date)

              	 	
                (Signature
                  of Shareholder)

              	 	
                (Guarantee
                  of Signature)

              

      

       

      
        	
                [
                  ]

                 

              	
                Please
                  check box if the securities and any cheque(s) resulting from the
                  retraction or purchase of the Retracted Shares are to be held for
                  pick-up
                  by the shareholder from the Transfer Agent, if any, failing which
                  the
                  securities and any cheque(s) will be mailed to the last address
                  of the
                  shareholder as it appears on the register.

                 

              
	
                NOTE:

                 

              	
                This
                  panel must be completed and this certificate, together with such
                  additional documents as the Transfer Agent, if any, may require,
                  must be
                  deposited with the Transfer Agent, if any. The securities and any
                  cheque(s) resulting from the retraction or purchase of the Retracted
                  Shares will be issued and registered in, and made payable to,
                  respectively, the name of the shareholder as it appears on the
                  register of
                  the Corporation and the securities and any cheque(s) resulting
                  from such
                  retraction or purchase will be delivered to such shareholder as
                  indicated
                  above, unless the form appearing immediately below is duly
                  completed.

              

      

       

      Date:____________________________

      

        
          	
                  Name
                    of Person in Whose Name Securities or Cheque(s) Are to be Registered,
                    Issued or Delivered (please print): 

                	 

        

      

       

      
        	
                Street
                  Address or P.O. Box:

              	 
	 	 
	
                Signature
                  of Shareholder: 

              	 
	 	 
	
                City,
                  Province and Postal Code:

              	 
	 	 
	
                Signature
                  Guaranteed by:

              	 

      

       

       

      
        	
                NOTE:

                 

              	
                If
                  this Retraction Request is for less than all
                  of the shares represented by this certificate, a certificate representing
                  the remaining share(s) of the Corporation represented by this certificate
                  will be issued and registered in the name of the shareholder as
                  it appears
                  on the register of the Corporation, unless the Share Transfer Power
                  on the
                  share certificate is duly completed in respect of such
                  share(s)

              

      

       

       

    

    
      
        
        

      

      
        A-2

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      3.2(a)

     

    FORM
      OF SUPPORT AGREEMENT

     

    

     

    (See
      attached)

     

    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      

        SUPPORT
          AGREEMENT (“Agreement”)
          made
          as of the l
          day of
l,
          2007.

         

        BETWEEN:

         

        SURGE
          GLOBAL ENERGY, INC.,
          a
          corporation incorporated under the laws of Delaware
          (hereinafter referred to as “Acquiror”)

         

        -
          and
          -

         

        COLD
          FLOW ENERGY ULC,
          an
          unlimited liability company incorporated under the laws of Alberta (hereinafter
          referred to as the “Corporation”)

         

        WHEREAS:

         

        
          	
                  A.

                   

                	
                  in
                    connection with a stock purchase agreement (the “Acquisition
                    Agreement”)
                    made as of November
                    30,
                    2006 among Acquiror, Peace Oil Corp., a corporation incorporated
                    under the
                    laws of Alberta (“Peace”),
                    the Corporation and the shareholders of Peace, the Corporation
                    is to issue
                    exchangeable shares (the “Exchangeable
                    Shares”)
                    to the holders of Class “A” and Class “I” shares in the capital of Peace
                    in consideration, in part, for the acquisition of their Class
“A” and
                    Class “I” shares in the capital of Peace; and

                   

                
	
                  B.

                   

                	
                  pursuant
                    to the Acquisition Agreement, Acquiror has agreed to, and to
                    cause the
                    Corporation to, execute this Agreement.

                   

                

        

        NOW
          THEREFORE
          in
          consideration of the respective covenants and agreements provided in this
          Agreement and for other good and valuable consideration (the receipt and
          sufficiency of which are hereby acknowledged), the parties hereto covenant
          and
          agree as follows:

         

         

        ARTICLE 1

        INTERPRETATION

         

        
          	
                  1.1

                	
                  DEFINED
                    TERMS

                

        

         

        Each
          term
          denoted herein by initial capital letters and not otherwise defined herein
          shall
          have the meaning ascribed thereto in the rights, privileges, restrictions
          and
          conditions (collectively, the “Exchangeable
          Share Provisions”)
          attaching to the Exchangeable Shares attached as Exhibit 3.1 to the Acquisition
          Agreement.

         

        
          
            
            

          

          
            -1-

            
              

            

          

          
            
            

          

        

        
          	
                  1.2

                	
                  INTERPRETATION
                    NOT AFFECTED BY HEADINGS

                

        

         

        The
          division of this Agreement into articles, sections and other portions and
          the
          insertion of headings are for convenience of reference only and shall not
          affect
          the construction or interpretation hereof. Unless otherwise indicated,
          all
          references to an “Article” or “Section” followed by a number refer to the
          specified Article or Section of this Agreement. The terms “this Agreement,”
“hereof,” “herein” and “hereunder” and similar expressions refer to this
          Agreement and not to any particular Article, Section or other portion hereof
          and
          include any agreement or instrument supplementary or ancillary
          hereto.

         

        
          	
                  1.3

                	
                  RULES
                    OF CONSTRUCTION

                

        

         

        Unless
          otherwise specifically indicated or the context otherwise requires, (a)
          all
          references to “dollars” or “$” mean United States dollars, (b) words importing
          the singular shall include the plural and vice versa and words importing
          any
          gender shall include all genders, and (c) “include,” “includes” and “including”
shall be deemed to be followed by the words “without limitation.”

         

        
          	
                  1.4

                	
                  DATE
                    FOR ANY ACTION

                

        

         

        If
          the
          event that any date on which any action is required to be taken hereunder
          by any
          of the parties hereto is not a Business Day, such action shall be required
          to be
          taken on the next succeeding day that is a Business Day.

         

         

        ARTICLE 2

        COVENANTS
          OF ACQUIROR AND THE CORPORATION

         

        
          	
                  2.1

                	
                  COVENANTS
                    REGARDING EXCHANGEABLE
                    SHARES

                

        

         

        So
          long
          as any Exchangeable Shares not owned by Acquiror or its Affiliates are
          outstanding, Acquiror will:

         

        
          	
                  (a)

                   

                	
                  not
                    declare or pay any dividend on the Acquiror Shares unless (i)
                    the
                    Corporation shall (w) simultaneously declare or pay, as the case
                    may be,
                    an equivalent dividend or other distribution economically equivalent
                    thereto (as provided for in the Exchangeable Share Provisions)
                    on the
                    Exchangeable Shares (an “Equivalent
                    Dividend”)
                    and (x) the Corporation shall have sufficient money or other
                    assets or
                    authorized but unissued securities available to enable the due
                    declaration
                    and the due and punctual payment, in accordance with applicable
                    law and
                    the terms of the Exchangeable Share Provisions, of any such Equivalent
                    Dividend, or, if the dividend or other distribution is a stock
                    dividend or
                    distribution of stock, in lieu of such dividend (ii) the Corporation
                    shall (y) effect a corresponding, contemporaneous and economically
                    equivalent subdivision of the Exchangeable Shares (as provided
                    for in the
                    Exchangeable Share Provisions) (an “Equivalent
                    Stock Subdivision”),
                    and (z) have sufficient authorized but unissued securities available
                    to
                    enable the Equivalent Stock
                    Subdivision;

                

        

        
          
            
            

          

          
            -2-

            
              

            

          

          
            
            

          

        

         

        
          	
                  (b)

                   

                	
                  advise
                    the Corporation sufficiently in advance of the declaration by
                    Acquiror of
                    any dividend on Acquiror Shares and take all such other actions
                    as are
                    reasonably necessary, in cooperation with the Corporation, to
                    ensure that
                    (i) the respective declaration date, record date and payment
                    date for an
                    Equivalent Dividend on the Exchangeable Shares shall be the same
                    as the
                    declaration date, record date and payment date for the corresponding
                    dividend on the Acquiror Shares, or (ii) the record date and
                    effective
                    date for an Equivalent Stock Subdivision shall be the same as
                    the record
                    date and payment date for the stock dividend on the Acquiror
                    Shares and
                    that such dividend on the Exchangeable Shares will correspond
                    with any
                    requirement of the principal stock exchange on which the Exchangeable
                    Shares are listed, if any;

                   

                
	
                  (c)

                   

                	
                  ensure
                    that the record date for any dividend declared on Acquiror Shares
                    is not
                    less than 10 Business Days after the declaration date of such
                    dividend;

                   

                
	
                  (d)

                   

                	
                  take
                    all such actions and do all such things as are reasonably necessary
                    or
                    desirable to enable and permit the Corporation, in accordance
                    with
                    applicable law, to pay and otherwise perform its obligations
                    with respect
                    to the satisfaction of the Liquidation Amount, the Retraction
                    Price or the
                    Redemption Price in respect of each issued and outstanding Exchangeable
                    Share (other than Exchangeable Shares owned by Acquiror or its
                    Affiliates)
                    upon the liquidation, dissolution or winding-up of the Corporation
                    or any
                    other distribution of the assets of the Corporation among its
                    shareholders
                    for the purpose of winding-up its affairs, the delivery of a
                    Retraction
                    Request by a holder of Exchangeable Shares or a redemption of
                    Exchangeable
                    Shares by the Corporation, as the case may be, including all
                    such actions
                    and all such things as are necessary or desirable to enable and
                    permit the
                    Corporation to cause to be delivered Acquiror Shares to the holders
                    of
                    Exchangeable Shares in accordance with the provisions of Article
                    5, 6 or
                    7, as the case may be, of the Exchangeable Share Provisions and
                    cash in
                    respect of declared and unpaid dividends; and

                   

                
	
                  (e)

                   

                	
                  not
                    exercise its vote as a shareholder to initiate the voluntary
                    liquidation,
                    dissolution or winding-up of the Corporation or any other distribution
                    of
                    the assets of the Corporation among its shareholders for the
                    purpose of
                    winding up its affairs nor take any action or omit to take any
                    action that
                    is designed to result in the liquidation, dissolution or winding
                    up of the
                    Corporation or any other distribution of the assets of the Corporation
                    among its shareholders for the purpose of winding up its
                    affairs.

                   

                

        

        
          
            
            

          

          
            -3-

            
              

            

          

          
            
            

          

        

        
          	
                  2.2

                	
                  SEGREGATION
                    OF FUNDS

                

        

         

        Acquiror
          will cause the Corporation to deposit a sufficient amount of funds in a
          separate
          account of the Corporation and segregate a sufficient amount of such other
          assets and property as is necessary to enable the Corporation to pay dividends
          when due and to pay or otherwise satisfy its respective obligations under
          Article 5, 6 or 7 of the Exchangeable Share Provisions or, if required, to
          pay the purchase price for Acquiror Shares as contemplated by
          Section 2.5,
          as
          applicable.

         

        
          	
                  2.3

                	
                  RESERVATION
                    OF ACQUIROR SHARES

                

        

         

        Acquiror
          hereby represents, warrants and covenants in favour of the Corporation
          that
          Acquiror has reserved for issuance and will, at all times while any Exchangeable
          Shares (other than Exchangeable Shares held by Acquiror or its Affiliates)
          are
          outstanding, keep available, free from preemptive and other rights, out
          of its
          authorized and unissued capital stock such number of Acquiror Shares (or
          other
          shares or securities into which Acquiror Shares may be reclassified or
          changed
          as contemplated by Section 2.7
          hereof)
          (a) as is equal to the sum of (i) two times the number of Exchangeable
          Shares
          issued and outstanding from time to time and (ii) two times the number
          of
          Exchangeable Shares issuable upon the exercise of all rights to acquire
          Exchangeable Shares outstanding from time to time and (b) as are now and
          may
          hereafter be required to enable and permit Acquiror to meet its obligations
          under the Voting and Exchange Trust Agreement and to enable and permit
          the
          Corporation to meet its obligations hereunder and under the Exchangeable
          Share
          Provisions.

         

        
          	
                  2.4

                	
                  NOTIFICATION
                    OF CERTAIN EVENTS

                

        

         

        In
          order
          to assist Acquiror in compliance with its obligations hereunder, the Corporation
          will notify Acquiror of each of the following events at the times set forth
          below:

         

        
          	
                  (a)

                   

                	
                  in
                    the event of any determination by the Board of Directors of the
                    Corporation to institute voluntary liquidation, dissolution or
                    winding-up
                    proceedings with respect to the Corporation or to effect any
                    other
                    distribution of the assets of the Corporation among its shareholders
                    for
                    the purpose of winding up its affairs, at least 60 days prior
                    to the
                    proposed effective date of such liquidation, dissolution, winding-up
                    or
                    other distribution;

                

        

        
          
            
            

          

          
            -4-

            
              

            

          

          
            
            

          

        

         

        
          	
                  (b)

                   

                	
                  promptly,
                    upon the earlier of receipt by the Corporation of notice of and
                    the
                    Corporation otherwise becoming aware of any threatened or instituted
                    claim, suit, petition or other proceeding with respect to the
                    involuntary
                    liquidation, dissolution or winding-up of the Corporation or
                    to effect any
                    other distribution of the assets of the Corporation among its
                    shareholders
                    for the purpose of winding up its affairs;

                   

                
	
                  (c)

                   

                	
                  promptly,
                    upon receipt by the Corporation of a Retraction Request;

                   

                
	
                  (d)

                   

                	
                  promptly
                    following the date on which notice of redemption is given to
                    holders of
                    Exchangeable Shares, upon the determination of a Redemption Date
                    in
                    accordance with the Exchangeable Share Provisions; and

                   

                
	
                  (e)

                   

                	
                  promptly
                    upon the issuance by the Corporation of any Exchangeable Shares
                    or rights
                    to acquire Exchangeable Shares (other than the issuance of Exchangeable
                    Shares and rights to acquire Exchangeable Shares in exchange
                    for
                    outstanding Peace Shares pursuant to the Acquisition
                    Agreement).

                   

                

        

         

        
          	
                  2.5

                	
                  DELIVERY
                    OF ACQUIROR SHARES TO THE
                    CORPORATION

                

        

         

        In
          furtherance of its obligations under Section 2.1(d)
          hereof,
          upon notice from the Corporation of any event that requires the Corporation
          to
          cause to be delivered Acquiror Shares to any holder of Exchangeable Shares,
          Acquiror shall forthwith issue and deliver the requisite number of Acquiror
          Shares to be received by, and issued to or to the order of, the former
          holder of
          the surrendered Exchangeable Shares, as the Corporation shall direct. All
          such
          Acquiror Shares shall be duly authorized, validly issued and fully paid
          and
          non-assessable and shall be free and clear of any lien, claim or encumbrance.
          In
          consideration of the issuance and delivery of such Acquiror Share, the
          Corporation shall pay a purchase price equal to the fair market value of
          such
          Acquiror Share.

        
          
            
            

          

          
            -5-

            
              

            

          

          
            
            

          

        

        
          	
                  2.6

                	
                  QUALIFICATION
                    OF ACQUIROR SHARES

                

        

         

        Acquiror
          covenants that if any Acquiror Shares (or other shares or securities into
          which
          Acquiror Shares may be reclassified or changed as contemplated by
          Section 2.7
          hereof)
          to be issued and delivered hereunder (including for greater certainty,
          pursuant
          to the Exchangeable Share Provisions or pursuant to the Exchange Right
          or the
          Automatic Exchange Rights (each as defined in the Voting and Exchange Trust
          Agreement)) require registration or qualification with, or approval of,
          or the
          filing of any document, including any prospectus or similar document, the
          taking
          of any proceeding with, or the obtaining of any order, ruling or consent
          from,
          any governmental or regulatory authority under any Canadian or United States
          federal, provincial, territorial or state securities or other law or regulation
          or pursuant to the rules and regulations of any securities or other regulatory
          authority, or the fulfilment of any other United States or Canadian legal
          requirement (collectively, the “Applicable
          Laws”)
          before
          such shares (or other shares or securities into which Acquiror Shares may
          be
          reclassified or changed as contemplated by Section 2.7
          hereof)
          may be issued and delivered by Acquiror at the direction of the Corporation,
          if
          applicable, to the holder of surrendered Exchangeable Shares or in order
          that
          such shares (or other shares or securities into which Acquiror Shares may
          be
          reclassified or changed as contemplated by Section 2.7
          hereof)
          may be freely traded thereafter (other than any restrictions of general
          application on transfer by reason of a holder being a “control person” of
          Acquiror for purposes of Canadian provincial securities law or an “affiliate” of
          Acquiror for purposes of United States federal or state securities law),
          Acquiror will use its reasonable best efforts and in good faith expeditiously
          take all such actions and do all such things as are necessary or desirable
          and
          within its power to cause such Acquiror Shares (or other shares or securities
          into which Acquiror Shares may be reclassified or changed as contemplated
          by
          Section 2.7
          hereof)
          to be and remain duly registered, qualified or approved under United States
          and/or Canadian law, as the case may be, to the extent expressly provided
          in the
          Acquisition Agreement. Acquiror will use its reasonable best efforts and
          in good
          faith expeditiously take all such actions and do all such things as are
          reasonably necessary or desirable to cause all Acquiror Shares (or other
          shares
          or securities into which Acquiror Shares may be reclassified or changed
          as
          contemplated by Section 2.7
          hereof)
          to be delivered hereunder to be listed, quoted or posted for trading on
          all
          stock exchanges and quotation systems on which outstanding Acquiror Shares
          (or
          other shares or securities into which Acquiror Shares may be reclassified
          or
          changed as contemplated by Section 2.7
          hereof)
          are listed and are quoted or posted for trading at such time.

         

        
          	
                  2.7

                	
                  ECONOMIC
                    EQUIVALENCE

                

        

         

        So
          long
          as any Exchangeable Shares not owned by Acquiror or its Affiliates are
          outstanding:

         

        
          	
                  (a)

                   

                	
                  Acquiror
                    will not, without prior approval of the Corporation and the prior
                    approval
                    of the holders of the Exchangeable Shares given in accordance
                    with Section
                    10.2 of the Exchangeable Share
                    Provisions:

                

        

        
          
            
            

          

          
            -6-

            
              

            

          

          
            
            

          

        

         

        
          	
                  (i)

                   

                	
                  issue
                    or distribute Acquiror Shares (or securities exchangeable for
                    or
                    convertible into or carrying rights to acquire Acquiror Shares)
                    to the
                    holders of all or substantially all of the then outstanding Acquiror
                    Shares by way of stock dividend or other distribution, other
                    than an issue
                    of Acquiror Shares (or securities exchangeable for or convertible
                    into or
                    carrying rights to acquire Acquiror Shares) to holders of Acquiror
                    Shares
                    who (A) exercise an option to receive dividends in Acquiror Shares
                    (or
                    securities exchangeable for or convertible into or carrying rights
                    to
                    acquire Acquiror Shares) in lieu of receiving cash dividends,
                    or (B)
                    pursuant to any dividend reinvestment plan or scrip dividend;
                    or

                   

                
	
                  (ii)

                   

                	
                  issue
                    or distribute rights, options or warrants to the holders of all
                    or
                    substantially all of the then outstanding Acquiror Shares entitling
                    them
                    to subscribe for or to purchase Acquiror Shares (or securities
                    exchangeable for or convertible into or carrying rights to acquire
                    Acquiror Shares); or

                   

                
	
                  (iii)

                   

                	
                  issue
                    or distribute to the holders of all or substantially all of the
                    then
                    outstanding Acquiror Shares (A) shares or securities of Acquiror
                    of any
                    class other than Acquiror Shares (other than shares convertible
                    into or
                    exchangeable for or carrying rights to acquire Acquiror Shares),
                    (B)
                    rights, options or warrants other than those referred to in
                    Section 2.7(a)(ii)
                    above, (C) evidences of indebtedness of Acquiror or (D) assets
                    of
                    Acquiror,

                   

                

        

        unless
          the economic equivalent on a per share basis of such rights, options, warrants,
          securities, shares, evidences of indebtedness or other assets is issued
          or
          distributed simultaneously to holders of the Exchangeable Shares; provided
          that,
          for greater certainty, the above restrictions shall not apply to any securities
          issued or distributed by Acquiror in order to give effect to and to consummate
          the transactions contemplated by, and in accordance with, the Acquisition
          Agreement.

         

        
          	
                  (b)

                   

                	
                  Acquiror
                    will not without the prior approval of the Corporation and the
                    prior
                    approval of the holders of the Exchangeable Shares given in accordance
                    with Section 10.2 of the Exchangeable Share Provisions:

                   

                

        

         

        
          	
                  (i)

                   

                	
                  subdivide,
                    redivide or change the then outstanding Acquiror Shares into
                    a greater
                    number of Acquiror Shares; or

                   

                
	
                  (ii)

                   

                	
                  reduce,
                    combine, consolidate or change the then outstanding Acquiror
                    Shares into a
                    lesser number of Acquiror Shares; or

                   

                
	
                  (iii)

                   

                	
                  reclassify
                    or otherwise change Acquiror Shares or effect an amalgamation,
                    merger,
                    reorganization or other transaction affecting the Acquiror
                    Shares,

                   

                

        

        unless
          the same or an economically equivalent change shall simultaneously be made
          to,
          or in the rights of the holders of, the Exchangeable Shares; provided that,
          for
          greater certainty, the above restrictions shall not apply to any securities
          issued or distributed by Acquiror in order to give effect to and to consummate
          the transactions contemplated by, and in accordance with, the Acquisition
          Agreement.

        
          
            
            

          

          
            -7-

            
              

            

          

          
            
            

          

        

         

        
          	
                  (c)

                   

                	
                  Acquiror
                    will ensure that the record date for any event referred to in
                    Section 2.7(a)
                    or
                    2.7(b)
                    above, or (if no record date is applicable for such event) the
                    effective
                    date for any such event, is not less than five Business Days
                    after the
                    date on which such event is declared or announced by Acquiror
                    (with
                    contemporaneous notification thereof by Acquiror to the
                    Corporation).

                   

                
	
                  (d)

                   

                	
                  The
                    Board of Directors of the Corporation shall determine, in good
                    faith and
                    in its sole discretion, economic equivalence for the purposes
                    of any event
                    referred to in Section 2.7(a)
                    or
                    2.7(b)
                    above and each such determination shall be conclusive and binding
                    on
                    Acquiror and the holders of Exchangeable Shares. In making each
                    such
                    determination, the following factors shall, without excluding
                    other
                    factors determined by the Board of Directors of the Corporation
                    to be
                    relevant, be considered by the Board of Directors of the
                    Corporation:

                   

                

        

         

        
          	
                  (i)

                   

                	
                  in
                    the case of any stock dividend or other distribution payable
                    in Acquiror
                    Shares, the number of such shares issued as a result of any stock
                    dividend
                    or other distribution in proportion to the number of Acquiror
                    Shares
                    previously outstanding;

                   

                
	
                  (ii)

                   

                	
                  in
                    the case of the issuance or distribution of any rights, options
                    or
                    warrants to subscribe for or purchase Acquiror Shares (or securities
                    exchangeable for or convertible into or carrying rights to acquire
                    Acquiror Shares), the relationship between the exercise price
                    of each such
                    right, option or warrant and the Current Market Price, the volatility
                    of
                    the Acquiror Shares and the term of any such instrument;

                   

                
	
                  (iii)

                   

                	
                  in
                    the case of the issuance or distribution of any other form of
                    property
                    (including any shares or securities of Acquiror of any class
                    other than
                    Acquiror Shares, any rights, options or warrants other than those
                    referred
                    to in Section 2.7(d)(ii)
                    above, any evidences of indebtedness of Acquiror or any assets of
                    Acquiror), the relationship between the fair market value (as
                    determined
                    by the Board of Directors of the Corporation in the manner above
                    contemplated) of such property to be issued or distributed with
                    respect to
                    each outstanding Acquiror Share and the Current Market Price;

                   

                

        

        
          
            
            

          

          
            -8-

            
              

            

          

          
            
            

          

        

         

        
          	
                  (iv)

                   

                	
                  in
                    the case of any subdivision, redivision or change of the then
                    outstanding
                    Acquiror Shares into a greater number of Acquiror Shares or the
                    reduction,
                    combination, consolidation or change of the then outstanding
                    Acquiror
                    Shares into a lesser number of Acquiror Shares or any amalgamation,
                    merger, reorganization or other transaction affecting Acquiror
                    Shares, the
                    effect thereof upon the then outstanding Acquiror Shares; and

                   

                
	
                  (v)

                   

                	
                  in
                    all such cases, the general taxation consequences of the relevant
                    event to
                    holders of Exchangeable Shares to the extent that such consequences
                    may
                    differ from the taxation consequences to holders of Acquiror
                    Shares as a
                    result of differences between taxation laws of Canada and the
                    United
                    States (except for any differing consequences arising as a result
                    of
                    differing marginal taxation rates and without regard to the individual
                    circumstances of holders of Exchangeable Shares).

                   

                

        

         

        
          	
                  (e)

                   

                	
                  The
                    Corporation agrees that, to the extent required, upon due notice
                    from
                    Acquiror, the Corporation will use its best efforts to take or
                    cause to be
                    taken such steps as may be necessary for the purposes of ensuring
                    that
                    appropriate dividends are paid or other distributions are made
                    by the
                    Corporation, or subdivisions, redivisions or changes are made
                    to the
                    Exchangeable Shares, in order to implement the required economic
                    equivalent with respect to the Acquiror Shares and Exchangeable
                    Shares as
                    provided for in this Section 2.7.

                

        

         

        
          
            	
                    2.8

                  	
                    TENDER
                      OFFERS

                  

   

        

        For
          so
          long as Exchangeable Shares remain outstanding (not including Exchangeable
          Shares held by Acquiror and its Affiliates), in the event that a tender
          offer,
          share exchange offer, issuer bid, take-over bid or similar transaction
          with
          respect to Acquiror Shares (an “Offer”)
          is
          proposed by Acquiror or is proposed to Acquiror or its shareholders and
          is
          recommended by the Board of Directors of Acquiror, or is otherwise effected
          or
          to be effected with the consent or approval of the Board of Directors of
          Acquiror, and the Exchangeable Shares are not redeemed by the Corporation,
          Acquiror will use its reasonable best efforts expeditiously and in good
          faith to
          take all such actions and do all such things as are necessary or desirable
          to
          enable and permit holders of Exchangeable Shares (other than Acquiror and
          its
          Affiliates) to participate in such Offer to the same extent and on an
          economically equivalent basis as the holders of Acquiror Shares, without
          discrimination. Without limiting the generality of the foregoing, Acquiror
          will
          use its reasonable best efforts expeditiously and in good faith to ensure
          that
          holders of Exchangeable Shares may participate in each such Offer without
          being
          required to retract Exchangeable Shares as against the Corporation (or,
          if so
          required, to ensure that any such retraction, shall be effective only upon,
          and
          shall be conditional upon, the closing of such Offer and only to the extent
          necessary to tender or deposit to the Offer). Nothing herein shall affect
          the
          rights of the Corporation to redeem Exchangeable Shares in the event of
          an
          Acquiror Control Transaction.

        
          
            
            

          

          
            -9-

            
              

            

          

          
            
            

          

        

        
          	
                  2.9

                	
                  OWNERSHIP
                    OF OUTSTANDING SHARES

                

        

         

        Without
          the prior approval of the Corporation and the prior approval of the holders
          of
          the Exchangeable Shares given in accordance with Section 10.2 of the
          Exchangeable Share Provisions, Acquiror covenants and agrees in favour
          of the
          Corporation that, as long as any outstanding Exchangeable Shares are owned
          by
          any Person other than Acquiror or any of its Affiliates, Acquiror will
          be and
          remain the direct or indirect beneficial owner of all issued and outstanding
          voting shares in the capital of the Corporation. Notwithstanding the foregoing,
          Acquiror shall not be in violation of this section if any person or group
          of
          persons acting jointly or in concert acquires all or substantially all
          of the
          assets of Acquiror or the Acquiror Shares pursuant to any merger of Acquiror
          pursuant to which Acquiror was not the surviving corporation.

         

        
          	
                  2.10

                	
                  ACQUIROR
                    AND AFFILIATES NOT TO VOTE EXCHANGEABLE
                    SHARES

                

        

         

        Acquiror
          covenants and agrees that it will not, and will cause its Affiliates not
          to,
          exercise any voting rights which may be exercisable by holders of Exchangeable
          Shares from time to time pursuant to the Exchangeable Share Provisions
          or
          pursuant to the provisions of the ABCA (or any successor or other corporate
          statute by which the Corporation may in the future be governed) with respect
          to
          any Exchangeable Shares held by it or by its Affiliates in respect of any
          matter
          considered at any meeting of holders of Exchangeable Shares.

         

        
          	
                  2.11

                	
                  RULE
                    10B-18 PURCHASES

                

        

         

        For
          greater certainty, nothing contained in this Agreement, including the
          obligations of Acquiror contained in Section 2.8
          hereof,
          shall limit the ability of Acquiror or the Corporation to make a “Rule l0b-18
          purchase” of Acquiror Shares pursuant to Rule 10b-18 of the United States
Securities
          Exchange Act of
          1934,
          as
          amended, or any successor rule.

         

        ARTICLE 3

        ACQUIROR
          SUCCESSORS

         

        
          	
                  3.1

                	
                  CERTAIN
                    REQUIREMENTS IN RESPECT OF COMBINATION,
                    ETC.

                

        

         

        Acquiror
          shall not consummate any transaction (whether by way of reconstruction,
          reorganization, consolidation, merger, transfer, sale, lease or otherwise)
          whereby all or substantially all of its undertaking, property and assets
          would
          become the property of any other Person or, in the case of a merger, of
          the
          continuing corporation resulting therefrom unless, but may do so
          if:

        
          
            
            

          

          
            -10-

            
              

            

          

          
            
            

          

        

         

        
          	
                  (a)

                   

                	
                  such
                    other Person or continuing corporation (the “Acquiror
                    Successor”)
                    by operation of law, becomes, without more, bound by the terms
                    and
                    provisions of this Agreement or, if not so bound, executes, prior
                    to or
                    contemporaneously with the consummation of such transaction,
                    an agreement
                    supplemental hereto and such other instruments (if any) as are
                    reasonably
                    necessary or advisable to evidence the assumption by the Acquiror
                    Successor of liability for all moneys payable and property deliverable
                    hereunder and the covenant of such Acquiror Successor to pay
                    and deliver
                    or cause to be delivered the same and its agreement to observe
                    and perform
                    all the covenants and obligations of Acquiror under this Agreement;
                    

                   

                
	
                  (b)

                   

                	
                  in
                    the event that the Acquiror Shares are reclassified or otherwise
                    changed
                    as part of such transaction, the same or an economically equivalent
                    change
                    is simultaneously made to, or in the rights of the holders of,
                    the
                    Exchangeable Shares; and

                   

                
	
                  (c)

                   

                	
                  such
                    transaction shall be upon such terms and conditions as substantially
                    to
                    preserve and not to impair in any material respect any of the
                    rights,
                    duties, powers and authorities of the other parties hereunder
                    or the
                    holders of Exchangeable Shares.

                

        

         

        
          	
                  3.2

                	
                  VESTING
                    OF POWERS IN SUCCESSOR

                

        

         

        Whenever
          the conditions of Section 3.1
          have
          been duly observed and performed, the parties, if required by
          Section 3.1,
          shall
          execute and deliver the supplemental agreement provided for in
          Section 3.1(a)
          and
          thereupon the Acquiror Successor shall possess and from time to time may
          exercise each and every right and power of Acquiror under this Agreement
          in the
          name of Acquiror or otherwise and any act or proceeding by any provision
          of this
          Agreement required to be done or performed by the Board of Directors of
          Acquiror
          or any officers of Acquiror may be done and performed with like force and
          effect
          by the directors or officers of such Acquiror Successor.

         

        
          	
                  3.3

                	
                  WHOLLY-OWNED
                    SUBSIDIARIES

                

        

         

        Nothing
          herein shall be construed as preventing the amalgamation or merger of any
          wholly-owned direct or indirect subsidiary of Acquiror (other than the
          Corporation) with or into Acquiror or the winding-up, liquidation or dissolution
          of any wholly-owned subsidiary of Acquiror provided that all of the assets
          of
          such subsidiary are transferred to Acquiror or another wholly-owned direct
          or
          indirect subsidiary of Acquiror and any such transactions are expressly
          permitted by this Article 3.

        
          
            
            

          

          
            -11-

            
              

            

          

          
            
            

          

        

        
          	
                  3.4

                	
                  SUCCESSORSHIP
                    TRANSACTION

                

        

         

        Notwithstanding
          the foregoing provisions of Article 3,
          in the
          event of an Acquiror Control Transaction:

         

        
          	
                  (a)

                   

                	
                  in
                    which Acquiror merges or amalgamates with, or in which all or
                    substantially all of the then outstanding Acquiror Shares are
                    acquired by,
                    one or more other corporations to which Acquiror is, immediately
                    before
                    such merger, amalgamation or acquisition, “related” within the meaning of
                    the Income
                    Tax Act (Canada)
                    (otherwise than by virtue of a right referred to in paragraph
                    251(5)(b)
                    thereof);

                   

                
	
                  (b)

                   

                	
                  which
                    does not result in an acceleration of the Redemption Date in
                    accordance
                    with paragraph (b) of that definition; and

                   

                
	
                  (c)

                   

                	
                  in
                    which all or substantially all of the then outstanding Acquiror
                    Shares are
                    converted into or exchanged for shares or rights to receive such
                    shares
                    (the “Other
                    Shares”)
                    of another corporation (the “Other
                    Corporation”)
                    that, immediately after such Acquiror Control Transaction, owns
                    or
                    controls, directly or indirectly, Acquiror;

                   

                

        

        then
          all
          references herein to “Acquiror” shall thereafter be and be deemed to be
          references to “Other Corporation” and all references herein to “Acquiror Shares”
shall thereafter be and be deemed to be references to “Other Shares” (with
          appropriate adjustments, if any, as are required to result in a holder
          of
          Exchangeable Shares on the exchange, redemption or retraction of such shares
          pursuant to the Exchangeable Share Provisions or exchange of such shares
          pursuant to the Voting and Exchange Trust Agreement immediately subsequent
          to
          the Acquiror Control Transaction being entitled to receive that number
          of Other
          Shares equal to the number of Other Shares such holder of Exchangeable
          Shares
          would have received if the exchange, redemption or retraction of such shares
          pursuant to the Exchangeable Share Provisions or exchange of such shares
          pursuant to the Voting and Exchange Trust Agreement had occurred immediately
          prior to the Acquiror Control Transaction and the Acquiror Control Transaction
          was completed) without any need to amend the terms and conditions of the
          Exchangeable Shares and without any further action required.

        
          
            
            

          

          
            -12-

            
              

            

          

          
            
            

          

        

         

        ARTICLE 4

        GENERAL

         

        
          	
                  4.1

                	
                  TERM

                

        

         

        This
          Agreement shall come into force and be effective as of the date hereof
          and shall
          terminate and be of no further force and effect at such time as no Exchangeable
          Shares (or securities or rights convertible into or exchangeable for or
          carrying
          rights to acquire Exchangeable Shares) are held by any Person other than
          Acquiror and any of its Affiliates.

         

        
          	
                  4.2

                	
                  CHANGES
                    IN CAPITAL OF ACQUIROR AND THE
                    CORPORATION

                

        

         

        At
          all
          times after the occurrence of any event contemplated pursuant to
          Sections 2.7
          and
2.8
          hereof
          or otherwise, as a result of which either Acquiror Shares or the Exchangeable
          Shares or both are in any way changed, this Agreement shall forthwith be
          deemed
          amended and modified as necessary in order that it shall apply with full
          force
          and effect, mutatis
          mutandis,
          to all
          new securities into which Acquiror Shares or the Exchangeable Shares or
          both are
          so changed and the parties hereto shall execute and deliver an agreement
          in
          writing giving effect to and evidencing such necessary amendments and
          modifications.

         

        
          	
                  4.3

                	
                  NOTICES
                    TO PARTIES

                

        

         

        All
          notices and other communications hereunder shall be in writing and shall
          be
          deemed given when delivered personally, telecopied (which is confirmed)
          or
          dispatched (postage prepaid) to a nationally recognized overnight courier
          service with overnight delivery instructions, in each case addressed to
          the
          particular party at:

         

        If
          to
          Acquiror:

         

        Surge
          Global Energy, Inc.

        12220
          El
          Camino Real, Suite 410

        San
          Diego, California 92130

         

        Attention:
          l

        Telecopier
          Number: (l)
          l

         

        If
          to the
          Corporation:

         

        c/o
          Surge
          Global Energy, Inc.

        12220
          El
          Camino Real, Suite 410

        San
          Diego, California 92130

         

        
          
            
            

          

          
            -13-

            
              

            

          

          
            
            

          

        

        Attention:
          l

        Telecopier
          Number: (l)
          l

         

        With
          copies to:

         

        Greenberg
          Traurig, LLP

        650
          Town
          Center Drive, 17th
          Floor

        Costa
          Mesa, California 92626

         

        Attention:
          Steven Anapoell

        Telecopier
          Number: (714) 708-6501

         

        And:

         

        Stikeman
          Elliott LLP

        4300,
          888
          - 3rd
          Street
          S.W.

        Calgary,
          Alberta T2P 5C5

         

        Attention:
          Keith Chatwin

        Telecopier
          Number: (403) 266-9034

         

        or
          at
          such other address of which any party may, from time to time, advise the
          other
          parties by notice in writing given in accordance with the
          foregoing.

         

        
          	
                  4.4

                	
                  ASSIGNMENT

                

        

         

        No
          party
          hereto may assign this Agreement or any of its rights, interests or obligations
          under this Agreement (whether by operation of law or otherwise) except
          that the
          Corporation may assign in its sole discretion, any or all of its rights,
          interests and obligations hereunder to any wholly-owned subsidiary of
          Acquiror.

         

        
          	
                  4.5

                	
                  BINDING
                    EFFECT

                

        

         

        Subject
          to Section 4.4,
          this
          Agreement shall be binding upon, enure to the benefit of and be enforceable
          by
          the parties hereto and their respective successors and assigns.

         

        
          	
                  4.6

                	
                  AMENDMENTS,
                    MODIFICATIONS

                

        

         

        Subject
          to Sections 4.2,
          4.7
          and
4.11,
          this
          Agreement may not be amended or modified except by an agreement in writing
          executed by the Corporation and Acquiror and approved by the holders of
          the
          Exchangeable Shares in accordance with Section 10.2 of the Exchangeable
          Share
          Provisions.

         

        
          	
                  4.7

                	
                  MINISTERIAL
                    AMENDMENTS

                

        

         

        Notwithstanding
          the provisions of Section 4.6,
          the
          parties to this Agreement may in writing at any time and from time to time,
          without the approval of the holders of the Exchangeable Shares, amend or
          modify
          this Agreement for the purposes of:

        
          
            
            

          

          
            -14-

            
              

            

          

          
            
            

          

        

         

        
          	
                  (a)

                   

                	
                  adding
                    to the covenants of any or all parties provided that the board
                    of
                    directors of each of the Corporation and Acquiror shall be of
                    the good
                    faith opinion that such additions will not be prejudicial to
                    the rights or
                    interests of the holders of the Exchangeable Shares;

                   

                
	
                  (b)

                   

                	
                  making
                    such amendments or modifications not inconsistent with this Agreement
                    as
                    may be necessary or desirable with respect to matters or questions
                    which,
                    in the good faith opinion of the board of directors of each of
                    the
                    Corporation and Acquiror, it may be expedient to make, provided
                    that each
                    such board of directors shall be of the good faith opinion that
                    such
                    amendments or modifications will not be prejudicial to the rights
                    or
                    interests of the holders of the Exchangeable Shares; or

                   

                
	
                  (c)

                   

                	
                  making
                    such changes or corrections which, on the advice of counsel to
                    the
                    Corporation and Acquiror, are required for the purpose of curing
                    or
                    correcting any ambiguity or defect or inconsistent provision
                    or clerical
                    omission or mistake or manifest error, provided that the board
                    of
                    directors of each of the Corporation and Acquiror shall be of
                    the good
                    faith opinion that such changes or corrections will not be prejudicial
                    to
                    the rights or interests of the holders of the Exchangeable
                    Shares.

                   

                

        

         

        
          	
                  4.8

                	
                  MEETING
                    TO CONSIDER AMENDMENTS

                

        

         

        The
          Corporation, at the request of Acquiror, shall call a meeting or meetings
          of the
          holders of the Exchangeable Shares for the purpose of considering any proposed
          amendment or modification requiring approval pursuant to
          Section 4.6
          hereof;
          provided that any such meeting shall only be called for a bona fide business
          purpose and not for the principal purpose of causing a Redemption Date
          to occur
          or transpire. Any such meeting or meetings shall be called and held in
          accordance with the bylaws of the Corporation, the Exchangeable Share Provisions
          and all applicable laws.

         

        
          	
                  4.9

                	
                  AMENDMENTS
                    ONLY IN WRITING

                

        

         

        No
          amendment to or modification or waiver of any of the provisions of this
          Agreement otherwise permitted hereunder shall be effective unless made
          in
          writing and signed by all of the parties hereto.

         

        
          	
                  4.10

                	
                  GOVERNING
                    LAWS; CONSENT TO
                    JURISDICTION

                

        

         

        This
          Agreement shall be governed by and construed in accordance with the laws
          of the
          Province of Alberta and the laws of Canada applicable therein and shall
          be
          treated in all respects as an Alberta contract. Each party hereby irrevocably
          attorns to the jurisdiction of the courts of the Province of Alberta in
          respect
          of all matters arising under or in relation to this Agreement.

         

        
          
            
            

          

          
            -15-

            
              

            

          

          
            
            

          

        

        
          	
                  4.11

                	
                  SEVERABILITY

                

        

         

        If
          any
          term or other provision of this Agreement is invalid, illegal or incapable
          of
          being enforced by any rule of law or public policy, all other conditions
          and
          provisions of this Agreement shall nevertheless remain in full force and
          effect
          so long as the economic or legal substance of the transactions contemplated
          hereby is not affected in any manner materially adverse to any party. Upon
          such
          determination that any term or other provision is invalid, illegal or incapable
          of being enforced, the parties hereto shall negotiate in good faith to
          modify
          this Agreement so as to effect the original intent of the parties as closely
          as
          possible in an acceptable manner to the end that transactions contemplated
          hereby are fulfilled to the extent possible.

         

        
          	
                  4.12

                	
                  COUNTERPARTS

                

        

         

        This
          Agreement may be executed in counterparts, each of which shall be deemed
          to be
          an original but all of which together shall constitute one and the same
          instrument.

         

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

         

         

        
          	 

                  SURGE
                    GLOBAL ENERGY, INC.

                
	 

                  By: 

                	 
	 

                  Name:

                	 
	 

                  Title:

                	 
	 

                  COLD
                    FLOW ENERGY ULC

                
	 

                  By: 

                	 
	 

                  Name:

                	 
	 

                  Title:

                	 

        

        
 

      

    

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    EXHIBIT
      3.2(b)

     

    FORM
      OF EXCHANGE AGREEMENT

     

    

     

    (See
      attached)

     

    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

      

        VOTING
          AND EXCHANGE TRUST AGREEMENT
          (“Agreement”)
          made
          as of the l
          day of
l,
          2007.

         

        BETWEEN:

         

        SURGE
          GLOBAL ENERGY, INC.,
          a
          corporation incorporated under the laws of Delaware
          (hereinafter
          referred to as “Acquiror”)

         

        -
          and
          -

         

        COLD
          FLOW ENERGY ULC,
          an
          unlimited liability company incorporated under the laws of Alberta (hereinafter
          referred to as the “Corporation”)

         

        -
          and
          -

         

        COMPUTERSHARE
          TRUST COMPANY OF CANADA,
          a trust
          company incorporated under the laws of Canada (hereinafter referred to
          as the
“Trustee”)

         

        WHEREAS:

         

        
          	
                  A.

                   

                	
                  in
                    connection with the Acquisition Agreement, the Corporation is
                    required to
                    issue Exchangeable Shares to holders of Peace Shares in consideration,
                    in
                    part, for the acquisition of their Peace Shares; and

                   

                
	
                  B.

                   

                	
                  pursuant
                    to the Acquisition Agreement, Acquiror has agreed to, and to
                    cause the
                    Corporation to, execute this Agreement.

                   

                

        

        NOW
          THEREFORE
          in
          consideration of the respective covenants and agreements provided in this
          Agreement and for other good and valuable consideration (the receipt and
          sufficiency of which are hereby acknowledged), the parties hereto covenant
          and
          agree as follows:

         

        INTERPRETATION

        Section 1.1 Definitions

         

        In
          this
          Agreement, unless the context otherwise requires, the following terms shall
          have
          the following meanings respectively:

         

        “ABCA”
has
          the
          meaning ascribed thereto in the Exchangeable Share Provisions;

         

        “Acquiror
          Consent”
has
          the
          meaning ascribed thereto in Section 4.2;

        
          
            
            

          

          
            -1-

            
              

            

          

          
            
            

          

        

        “Acquiror
          Control Transaction”
has
          the
          meaning ascribed thereto in the Exchangeable Share Provisions;

         

        “Acquiror
          Meeting”
has
          the
          meaning ascribed thereto in Section 4.2;

         

        “Acquiror
          Shares”
has
          the
          meaning provided in the Exchangeable Share Provisions;

         

        “Acquiror
          Special Voting Share”
means
          one share of preferred stock of Acquiror to which that number of voting
          rights
          attach (each such voting right to be equal to the voting rights attached
          to one
          Acquiror Share) equal to two times the number of outstanding Exchangeable
          Shares
          held by Beneficiaries; 

         

        “Acquiror
          Successor”
has
          the
          meaning ascribed thereto in Section 10.1(a);

         

        “Acquisition
          Agreement”
has
          the
          meaning ascribed thereto in the Exchangeable Share Provisions;

         

        “Affiliate”
has
          the
          meaning ascribed thereto in the Exchangeable Share Provisions;

         

        “Automatic
          Exchange Rights”
means
          the benefit of the obligation of Acquiror to effect the automatic exchange
          of
          Exchangeable Shares for Acquiror Shares pursuant to Section 5.12;

         

        “Beneficiaries”
means
          the registered holders from time to time of Exchangeable Shares, other
          than
          Acquiror and its Affiliates;

         

        “Beneficiary
          Votes”
has
          the
          meaning ascribed thereto in Section 4.2;

         

        “Business
          Day”
has
          the
          meaning ascribed thereto in the Exchangeable Share Provisions;

         

        “Equivalent
          Vote Amount”
means,
          with respect to any matter, proposition or question on which holders of
          Acquiror
          Shares are entitled to vote, consent or otherwise act, the number of votes
          to
          which a holder of two Acquiror Shares is entitled with respect to such
          matter,
          proposition or question;

         

        “Exchange
          Right”
has
          the
          meaning ascribed thereto in Section 5.1;

         

        “Exchangeable
          Share Consideration”
has
          the
          meaning ascribed thereto in the Exchangeable Share Provisions;

         

        “Exchangeable
          Share Price”
has
          the
          meaning ascribed thereto in the Exchangeable Share Provisions;

        
          
            
            

          

          
            -2-

            
              

            

          

          
            
            

          

        

        “Exchangeable
          Share Provisions”
means
          the rights, privileges, restrictions and conditions attaching to the
          Exchangeable Shares;

         

        “Exchangeable
          Shares”
means
          the non-voting exchangeable shares in the capital of the Corporation, having
          the
          rights, privileges, restrictions and conditions set out in the Exchangeable
          Share Provisions;

         

        “Indemnified
          Parties”
has
          the
          meaning ascribed thereto in Section 8.1;

         

        “Insolvency
          Event”
means
          (i) the institution by the Corporation of any proceeding to be adjudicated
          a
          bankrupt or insolvent or to be wound up, or the consent of the Corporation
          to
          the institution of bankruptcy, insolvency or winding-up proceedings against
          it,
          or (ii) the filing of a petition, answer or consent seeking dissolution
          or
          winding-up under any bankruptcy, insolvency or analogous laws, including
          the
Companies
          Creditors’ Arrangement Act
          (Canada)
          and the Bankruptcy
          and Insolvency Act
          (Canada), and the failure by the Corporation to contest in good faith any
          such
          proceedings commenced in respect of the Corporation within 30 days of becoming
          aware thereof, or the consent by the Corporation to the filing of any such
          petition or to the appointment of a receiver, or (iii) the making by the
          Corporation of a general assignment for the benefit of creditors, or the
          admission in writing by the Corporation of its inability to pay its debts
          generally as they become due, or (iv) the Corporation not being permitted,
          pursuant to solvency requirements of applicable law, to redeem any Retracted
          Shares pursuant to Section 6.5 of the Exchangeable Share
          Provisions;

         

        “Liquidation
          Event”
has
          the
          meaning ascribed thereto in Section 5.12(b);

         

        “Liquidation
          Event Effective Time”
has
          the
          meaning ascribed thereto in Section 5.12(c);

         

        “List”
has
          the
          meaning ascribed thereto in Section 4.6;

         

        “Officer’s
          Certificate”
means,
          with respect to Acquiror or the Corporation, as the case may be, a certificate
          signed by any one of the authorized signatories of Acquiror or the Corporation,
          as the case may be;

         

        “Peace”
means
          Peace Oil Corp., a corporation incorporated under the ABCA;

         

        “Person”
          includes any individual, firm, partnership, joint venture, venture capital
          fund,
          limited liability company, unlimited liability company, association, trust,
          trustee, executor, administrator, legal personal representative, estate,
          group,
          body corporate, corporation, unincorporated association or organization,
          government body, syndicate or other entity, whether or not having legal
          status;

        
          
            
            

          

          
            -3-

            
              

            

          

          
            
            

          

        

        “Redemption
          Date”
has
          the
          meaning ascribed thereto in the Exchangeable Share Provisions;

         

        “Retracted
          Shares”
has
          the
          meaning ascribed thereto in Section 5.7;

         

        “Support
          Agreement”
means
          that certain support agreement made as of even date herewith between the
          Corporation and Acquiror;

         

        “Trust”
means
          the trust created by this Agreement;

         

        “Trust
          Estate”
means
          the Acquiror Special Voting Share, any other securities, the Exchange Right,
          the
          Automatic Exchange Rights and any money or other property which may be
          held by
          the Trustee from time to time pursuant to this Agreement; and

         

        “Voting
          Rights”
means
          the voting rights of the Acquiror Special Voting Share held by the
          Trustee.

         

        Section 1.2 Interpretation
          Not Affected By Headings, Etc.

         

        The
          division of this Agreement into articles, sections and other portions and
          the
          insertion of headings are for convenience of reference only and should
          not
          affect the construction or interpretation hereof. Unless otherwise indicated,
          all references to an “Article” or “Section” followed by a number refer to the
          specified Article or Section of this Agreement. The terms “this Agreement,”
“hereof”, “herein” and “hereunder” and similar expressions refer to this
          Agreement and not to any particular Article, Section or other portion
          hereof.

         

        Section 1.3 Rules
          of Construction

         

        Unless
          otherwise specifically indicated or the context otherwise requires, (a)
          all
          references to “dollars” or “$” mean United States dollars, (b) words importing
          the singular shall include the plural and vice versa and words importing
          any
          gender shall include all genders, and (c) “include,” “includes” and “including”
shall be deemed to be followed by the words “without limitation.”

         

        Section 1.4 Date
          for Any Action

         

        In
          the
          event that any date on which any action is required to be taken hereunder
          by any
          of the parties hereto is not a Business Day, such action shall be required
          to be
          taken on the next succeeding day that is a Business Day.

         

        Section 1.5 Payments

         

        All
          payments to be made hereunder will be made without interest and less any
          tax
          required by Canadian law to be deducted or withheld.

        
          
            
            

          

          
            -4-

            
              

            

          

          
            
            

          

        

         

        ARTICLE 2

        PURPOSE
          OF AGREEMENT

         

        Section 2.1 Establishment
          of Trust

         

        The
          purpose of this Agreement is to create the Trust for the benefit of the
          Beneficiaries and Acquiror, as herein provided. The Trustee will hold the
          Acquiror Special Voting Share in order to enable the Trustee to exercise
          the
          Voting Rights and will hold the Exchange Right and the Automatic Exchange
          Rights
          in order to enable the Trustee to exercise such rights, in each case as
          trustee
          for and on behalf of the Beneficiaries as provided in this Agreement. The
          Trustee will hold the Acquiror Special Voting Share for and on behalf of
          Acquiror for all other rights associated with such Acquiror Special Voting
          Share
          other than the Voting Rights.

         

         

        ARTICLE 3

        ACQUIROR
          SPECIAL VOTING SHARE

         

        Section 3.1 Issue
          and Ownership of the Acquiror Special Voting Share

         

        Acquiror
          hereby agrees to issue to, and deposit with, the Trustee the Acquiror Special
          Voting Share to be hereafter held of record by the Trustee as trustee for
          and on
          behalf of, and for the use and benefit of, the Beneficiaries and in accordance
          with the provisions of this Agreement. Acquiror hereby acknowledges receipt
          from
          the Trustee as trustee for and on behalf of the Beneficiaries of good and
          valuable consideration (and the adequacy thereof) for the issuance of the
          Acquiror Special Voting Share by Acquiror to the Trustee. During the term
          of the
          Trust and subject to the terms and conditions of this Agreement, the Trustee
          shall possess and be vested with full legal ownership of such Acquiror
          Special
          Voting Share and shall be entitled to exercise all of the rights and powers
          of
          an owner with respect to such Acquiror Special Voting Share provided that
          the
          Trustee shall:

         

        
          	
                  (a)

                   

                	
                  hold
                    such Acquiror Special Voting Share and the legal title thereto
                    as trustee
                    solely for the use and benefit of the Beneficiaries in accordance
                    with the
                    provisions of this Agreement; and

                   

                
	
                  (b)

                   

                	
                  except
                    as specifically authorized by this Agreement, have no power or
                    authority
                    to sell, transfer, vote or otherwise deal in or with such Acquiror
                    Special
                    Voting Share and such Acquiror Special Voting Share shall not
                    be used or
                    disposed of by the Trustee for any purpose other than the purposes
                    for
                    which this Trust is created pursuant to this
                    Agreement.

                

        

        
          
            
            

          

          
            -5-

            
              

            

          

          
            
            

          

        

        Section 3.2 Legended
          Share Certificates

         

        The
          Corporation will cause each certificate representing Exchangeable Shares
          to bear
          an appropriate legend notifying the Beneficiaries of their right to instruct
          the
          Trustee with respect to the exercise of the portion of the Voting Rights
          in
          respect of the Exchangeable Shares held by the Beneficiaries.

         

        Section 3.3 Safe
          Keeping of Certificate

         

        The
          physical certificate representing the Acquiror Special Voting Share shall
          at all
          times be held in safe keeping by the Trustee or its duly authorized
          agent.

         

         

        ARTICLE 4

        EXERCISE
          OF VOTING RIGHTS

         

        Section 4.1 Voting
          Rights

         

        The
          Trustee, as the holder of record of the Acquiror Special Voting Share forming
          part of the Trust Estate, shall be entitled to all of the Voting Rights,
          including the right to vote in person or by proxy the Acquiror Special
          Voting
          Share held by the Trustee on any matter, question, proposal or proposition
          whatsoever that may properly come before the shareholders of Acquiror at
          an
          Acquiror Meeting or in connection with an Acquiror Consent. The Voting
          Rights
          shall be and remain vested in and exercised by the Trustee. Subject to
          Section 6.15
          hereof:

         

        
          	
                  (a)

                   

                	
                  the
                    Trustee shall exercise the Voting Rights only on the basis of
                    instructions
                    received pursuant to this Article 4
                    from Beneficiaries entitled to instruct the Trustee as to the
                    voting
                    thereof at the time at which the Acquiror Meeting is held or
                    an Acquiror
                    Consent is sought; and 

                   

                
	
                  (b)

                   

                	
                  to
                    the extent that no instructions are received from a Beneficiary
                    with
                    respect to the Voting Rights to which such Beneficiary is entitled,
                    the
                    Trustee shall not exercise or permit the exercise of such Voting
                    Rights.

                   

                

        

        Section 4.2 Number
          of Votes

         

        With
          respect to all meetings of shareholders of Acquiror at which holders of
          Acquiror
          Shares are entitled to vote (each, an “Acquiror
          Meeting”)
          and
          with respect to all written consents sought from Acquiror’s shareholders,
          including the holders of Acquiror Shares (each, an “Acquiror
          Consent”),
          each
          Beneficiary shall be entitled to instruct the Trustee to cast and exercise,
          in
          the manner instructed, a number of votes equal to the Equivalent Vote Amount
          for
          each Exchangeable Share owned of record by such Beneficiary on the record
          date
          established by Acquiror or by applicable law for such Acquiror Meeting
          or
          Acquiror Consent, as the case may be (collectively, the “Beneficiary
          Votes”),
          in
          respect of each matter, question, proposal or proposition to be voted on
          at such
          Acquiror Meeting or consented to in connection with such Acquiror
          Consent.

        
          
            
            

          

          
            -6-

            
              

            

          

          
            
            

          

        

        Any
          Beneficiary who chooses to attend an Acquiror Meeting in person will be
          entitled
          to one vote on a show of hands.

         

        Section 4.3 Mailings
          to Shareholders

         

        With
          respect to each Acquiror Meeting and Acquiror Consent, the Trustee will
          use its
          reasonable efforts promptly to mail or cause to be mailed (or otherwise
          communicate in the same manner as Acquiror utilizes in communications to
          holders
          of Acquiror Shares subject to applicable regulatory requirements and provided
          such manner of communications is reasonably available to the Trustee) to
          each of
          the Beneficiaries named in the List, such mailing or communication to commence
          on the same day as the mailing or notice (or other communication) with
          respect
          thereto is commenced by Acquiror to its shareholders:

         

        
          	
                  (a)

                   

                	
                  a
                    copy of such notice, together with any related materials, including
                    any
                    proxy or information statement, to be provided to shareholders
                    of
                    Acquiror;

                   

                
	
                  (b)

                   

                	
                  a
                    statement that such Beneficiary is entitled to instruct the Trustee
                    as to
                    the exercise of the Beneficiary Votes with respect to such Acquiror
                    Meeting or Acquiror Consent or, pursuant to Section 4.7,
                    to attend such Acquiror Meeting and to exercise personally thereat
                    the
                    Beneficiary Votes of such Beneficiary;

                   

                
	
                  (c)

                   

                	
                  a
                    statement as to the manner in which such instructions may be
                    given to the
                    Trustee, including an express indication that instructions may
                    be given to
                    the Trustee to give:

                   

                

        

         

        
          	
                  (i)

                   

                	
                  a
                    proxy to such Beneficiary or its designee to exercise personally
                    the
                    Beneficiary Votes; or

                   

                
	
                  (ii)

                   

                	
                  a
                    proxy to a designated agent or other representative of the management
                    of
                    Acquiror to exercise such Beneficiary Votes;

                   

                

        

         

        
          	
                  (d)

                   

                	
                  a
                    statement that if no such instructions are received from the
                    Beneficiary,
                    the Beneficiary Votes to which such Beneficiary is entitled will
                    not be
                    exercised;

                   

                
	
                  (e)

                   

                	
                  a
                    form of direction whereby the Beneficiary may so direct and instruct
                    the
                    Trustee as contemplated herein; and 

                   

                

        

        
          
            
            

          

          
            -7-

            
              

            

          

          
            
            

          

        

         

        
          	
                  (f)

                   

                	
                  a
                    statement of the time and date by which such instructions must
                    be received
                    by the Trustee in order to be binding upon it, which in the case
                    of a
                    Acquiror Meeting shall not be earlier than the close of business
                    on the
                    second Business Day prior to such meeting, and of the method
                    for revoking
                    or amending such instructions.

                

        

         

        For
          the
          purpose of determining Beneficiary Votes to which a Beneficiary is entitled
          in
          respect of any Acquiror Meeting or Acquiror Consent, the number of Exchangeable
          Shares owned of record by the Beneficiary shall be determined at the close
          of
          business on the record date established by Acquiror or by applicable law
          for
          purposes of determining shareholders entitled to vote at such Acquiror
          Meeting
          or to give written consent in connection with such Acquiror Consent. Acquiror
          will notify the Trustee of any decision of the Board of Directors of Acquiror
          with respect to the calling of any Acquiror Meeting or the seeking of any
          Acquiror Consent and shall provide all necessary information and materials
          to
          the Trustee in each case promptly and in any event in sufficient time to
          enable
          the Trustee to perform its obligations contemplated by this Section 4.3.

         

        The
          materials referred to in this Section 4.3
          are to
          be provided to the Trustee by Acquiror and the materials referred to in
          Section 4.3(c),
          Section 4.3(e)
          and
Section 4.3(f)
          shall be
          subject to reasonable comment by the Trustee in a timely manner. Acquiror
          shall
          ensure that the materials to be provided to the Trustee are provided in
          sufficient time to permit the Trustee to comment as aforesaid and to send
          all
          materials to each Beneficiary at the same time as such materials are first
          sent
          to holders of Acquiror Shares. Acquiror agrees not to communicate with
          holders
          of Acquiror Shares with respect to the materials referred to in this
Section 4.3
          otherwise than by mail unless such method of communication is also reasonably
          available to the Trustee for communication with the Beneficiaries.
          Notwithstanding the foregoing, Acquiror may at its option exercise the
          duties of
          the Trustee to deliver copies of all materials to each Beneficiary as required
          by this Section 4.3
          so long
          as in each case Acquiror delivers a certificate to the Trustee stating
          that
          Acquiror has undertaken to perform the obligations set forth in this
Section 4.3.

         

        Section 4.4 Copies
          of Shareholder Information

         

        Acquiror
          will deliver to the Trustee copies of all proxy materials (including notices
          of
          Acquiror Meetings but excluding proxies to vote Acquiror Shares), information
          statements, reports (including all interim and annual financial statements)
          and
          other written communications that, in each case, are to be distributed
          from time
          to time to holders of Acquiror Shares in sufficient quantities and in sufficient
          time so as to enable the Trustee to send those materials to each Beneficiary,
          to
          the extent possible, at the same time as such materials are first sent
          to
          holders of Acquiror Shares. The Trustee will mail or otherwise send to
          each
          Beneficiary, at the expense of Acquiror, copies of all such materials (and
          all
          materials specifically directed to the Beneficiaries or to the Trustee
          for the
          benefit of the Beneficiaries by Acquiror) received by the Trustee from
          Acquiror,
          to the extent possible, at the same time as such materials are sent to
          holders
          of Acquiror Shares. The Trustee will make copies of all such materials
          available
          for inspection by any Beneficiary at the Trustee’s principal office in
Calgary,
          Alberta.
          Notwithstanding the foregoing, Acquiror at its option may exercise the
          duties of
          the Trustee to deliver copies of all materials to each Beneficiary as required
          by this Section 4.4
          so long
          as in each case Acquiror delivers a certificate to the Trustee stating
          that
          Acquiror has undertaken to perform the obligations set forth in this
Section 4.4.

        
          
            
            

          

          
            -8-

            
              

            

          

          
            
            

          

        

        Section 4.5 Other
          Materials

         

        As
          soon
          as reasonably practicable after receipt by Acquiror or holders of Acquiror
          Shares (if such receipt is known by Acquiror) of any material sent or given
          by
          or on behalf of a third party to holders of Acquiror Shares generally,
          including
          dissident proxy and information circulars (and related information and
          material)
          and tender and exchange offer circulars (and related information and material),
          Acquiror shall use its reasonable best efforts to obtain and deliver to
          the
          Trustee copies thereof in sufficient quantities so as to enable the Trustee
          to
          forward such material (unless the same has been provided directly to
          Beneficiaries by such third party) to each Beneficiary as soon as possible
          thereafter. As soon as reasonably practicable after receipt thereof, the
          Trustee
          will mail or otherwise send to each Beneficiary, at the expense of Acquiror,
          copies of all such materials received by the Trustee from Acquiror. The
          Trustee
          will also make available for inspection by any Beneficiary at the Trustee’s
          principal office in Calgary, Alberta, copies of all such materials.
          Notwithstanding the foregoing, Acquiror at its option may exercise the
          duties of
          the Trustee to deliver copies of all such materials to each Beneficiary
          as
          required by this Section 4.5
          so long
          as in each case Acquiror delivers a certificate to the Trustee stating
          that
          Acquiror has undertaken to perform the obligations set forth in this
Section 4.5.

         

        Section 4.6 List
          of Persons Entitled to Vote

         

        The
          Corporation shall, (a) prior to each annual and special Acquiror Meeting
          or the
          seeking of any Acquiror Consent and (b) forthwith upon each request made
          at any
          time by the Trustee in writing, prepare or cause to be prepared a list
          (a
“List”)
          of the
          names and addresses of the Beneficiaries arranged in alphabetical order
          and
          showing the number of Exchangeable Shares held of record by each such
          Beneficiary, in each case at the close of business on the date specified
          by the
          Trustee in such request or, in the case of a List prepared in connection
          with an
          Acquiror Meeting or an Acquiror Consent, at the close of business on the
          record
          date established by Acquiror or pursuant to applicable law for determining
          the
          holders of Acquiror Shares entitled to receive notice of and/or to vote
          at such
          Acquiror Meeting or to give consent in connection with such Acquiror Consent.
          Each such List shall be delivered to the Trustee promptly after receipt
          by the
          Corporation of such request or the record date for such meeting or seeking
          of
          consent, as the case may be, and in any event within sufficient time as
          to
          permit the Trustee to perform its obligations under this Agreement. Acquiror
          agrees to give the Corporation notice (with a copy to the Trustee) of the
          calling of any Acquiror Meeting or the seeking of any Acquiror Consent
          by
          Acquiror or its management, together with the record dates therefor,
          sufficiently prior to the date of the calling of such meeting or seeking
          of such
          consent so as to enable the Corporation to perform its obligations under
          this
Section 4.6.

        
          
            
            

          

          
            -9-

            
              

            

          

          
            
            

          

        

        Section 4.7 Entitlement
          to Direct Votes

         

        Any
          Beneficiary named in a List prepared in connection with any Acquiror Meeting
          or
          Acquiror Consent will be entitled (a) to instruct the Trustee in the manner
          described in Section 4.3
          with
          respect to the exercise of the Beneficiary Votes to which such Beneficiary
          is
          entitled or (b) to attend such meeting and personally exercise thereat
          (or to
          personally exercise with respect to any Acquiror Consent), as the proxy
          of the
          Trustee, the Beneficiary Votes to which such Beneficiary is
          entitled.

         

        Section 4.8 Voting
          by Trustee and Attendance of Trustee Representative at
          Meeting

         

        
          	
                  (a)

                   

                	
                  In
                    connection with each Acquiror Meeting and Acquiror Consent, the
                    Trustee
                    shall exercise, either in person or by proxy, in accordance with
                    the
                    instructions received from a Beneficiary pursuant to Section 4.3,
                    the Beneficiary Votes as to which such Beneficiary is entitled
                    to direct
                    the vote (or any lesser number thereof as may be set forth in
                    the
                    instructions); provided, however, that such written instructions
                    are
                    received by the Trustee from the Beneficiary prior to the time
                    and date
                    fixed by the Trustee for receipt of such instruction in the notice
                    given
                    by the Trustee to the Beneficiary pursuant to Section 4.3.

                   

                
	
                  (b)

                   

                	
                  The
                    Trustee shall cause a representative who is empowered by it to
                    sign and
                    deliver, on behalf of the Trustee, proxies for Voting Rights
                    to attend
                    each Acquiror Meeting. Upon submission by a Beneficiary (or its
                    designee)
                    of identification satisfactory to the Trustee’s representative, and at the
                    Beneficiary’s request, such representative shall sign and deliver to such
                    Beneficiary (or its designee) a proxy to exercise personally
                    the
                    Beneficiary Votes as to which such Beneficiary is otherwise entitled
                    hereunder to direct the vote, if such Beneficiary either (i)
                    has not
                    previously given the Trustee instructions pursuant to Section 4.3
                    in
                    respect of such meeting or (ii) submits to such representative
                    written
                    revocation of any such previous instructions. At such meeting,
                    upon
                    receipt of a proxy from the Trustee’s representative, the Beneficiary
                    exercising such Beneficiary Votes shall have the same rights
                    as the
                    Trustee to speak at the meeting in respect of any matter, question,
                    proposal or proposition, to vote by way of ballot at the meeting
                    in
                    respect of any matter, question, proposal or proposition, and
                    to vote at
                    such meeting by way of a show of hands in respect of any matter,
                    question
                    or proposition.

                

        

         

        
          
            
            

          

          
            -10-

            
              

            

          

          
            
            

          

        

        Section 4.9 Distribution
          of Written Materials

         

        Any
          written materials distributed by or on behalf of the Trustee pursuant to
          this
          Agreement shall be sent by mail (or otherwise communicated in the same
          manner as
          Acquiror utilizes in communications to holders of Acquiror Shares, subject
          to
          applicable regulatory requirements and provided such manner of communications
          is
          reasonably available to the Trustee) to each Beneficiary at its address
          as shown
          on the books of the Corporation. Acquiror agrees not to communicate with
          holders
          of Acquiror Shares with respect to such written material otherwise than
          by mail
          unless such method of communication is also reasonably available to the
          Trustee
          for communication with the Beneficiaries. The Corporation shall provide
          or cause
          to be provided to the Trustee for purposes of communication, on a timely
          basis
          and without charge or other expense:

         

        
          	
                  (a)

                   

                	
                  a
                    current List; and

                   

                
	
                  (b)

                   

                	
                  upon
                    the request of the Trustee, mailing labels to enable the Trustee
                    to carry
                    out its duties under this Agreement.

                   

                

        

        The
          Corporation’s obligations under this Section 4.9
          shall be
          deemed satisfied to the extent Acquiror exercises its option to perform
          the
          duties of the Trustee to deliver copies of materials to each Beneficiary
          and the
          Corporation provides the required information and materials to
          Acquiror.

         

        Section 4.10 Termination
          of Voting Rights

         

        Except
          as
          otherwise provided herein or in the Exchangeable Share Provisions, all
          of the
          rights of a Beneficiary with respect to the Beneficiary Votes exercisable
          in
          respect of the Exchangeable Shares held by such Beneficiary, including
          the right
          to instruct the Trustee as to the voting of or to vote personally such
          Beneficiary Votes, shall be deemed to be surrendered by the Beneficiary
          to
          Acquiror, and such Beneficiary Votes and the Voting Rights represented
          thereby
          shall cease and be terminated immediately, upon the delivery by such Beneficiary
          to the Trustee of the certificates representing such Exchangeable Shares
          in
          connection with the exercise by the Beneficiary of the Exchange Right or
          upon
          the occurrence of the automatic exchange of Exchangeable Shares for Acquiror
          Shares, as specified in Article 5
          (unless,
          in either case, Acquiror shall not have delivered the Exchangeable Share
          Consideration deliverable in exchange therefor to the Trustee for delivery
          to
          the Beneficiaries), or upon the redemption of Exchangeable Shares pursuant
          to
          Article 6 or Article 7 of the Exchangeable Share Provisions, or upon the
          effective date of the liquidation, dissolution or winding-up of the Corporation
          pursuant to Article 5 of the Exchangeable Share Provisions.

         

        
          
            
            

          

          
            -11-

            
              

            

          

          
            
            

          

        

         

        ARTICLE 5

        EXCHANGE
          RIGHT AND AUTOMATIC EXCHANGE

         

        Section 5.1 Grant
          and Ownership of the Exchange Right

         

        Acquiror
          hereby grants to the Trustee as trustee for and on behalf of, and for the
          use
          and benefit of, the Beneficiaries the right (the “Exchange
          Right”),
          upon
          the occurrence and during the continuance of an Insolvency Event, to require
          Acquiror to purchase from each or any Beneficiary all or any part of the
          Exchangeable Shares held by such Beneficiary and the Automatic Exchange
          Rights,
          all in accordance with the provisions of this Agreement. Acquiror hereby
          acknowledges receipt from the Trustee as trustee for and on behalf of the
          Beneficiaries of good and valuable consideration (and the adequacy thereof)
          for
          the grant of the Exchange Right and the Automatic Exchange Rights by Acquiror
          to
          the Trustee. During the term of the Trust and subject to the terms and
          conditions of this Agreement, the Trustee shall possess and be vested with
          full
          legal ownership of the Exchange Right and the Automatic Exchange Rights
          and
          shall be entitled to exercise all of the rights and powers of an owner
          with
          respect to the Exchange Right and the Automatic Exchange Rights, provided
          that
          the Trustee shall:

         

        
          	
                  (a)

                   

                	
                  hold
                    the Exchange Right and the Automatic Exchange Rights and the
                    legal title
                    thereto as trustee solely for the use and benefit of the Beneficiaries
                    in
                    accordance with the provisions of this Agreement; and

                   

                
	
                  (b)

                   

                	
                  except
                    as specifically authorized by this Agreement, have no power or
                    authority
                    to exercise or otherwise deal in or with the Exchange Right or
                    the
                    Automatic Exchange Rights, and the Trustee shall not exercise
                    any such
                    rights for any purpose other than the purposes for which the
                    Trust is
                    created pursuant to this Agreement.

                   

                

        

        Section 5.2 Legended
          Share Certificates

         

        The
          Corporation will cause each certificate representing Exchangeable Shares
          to bear
          an appropriate legend notifying the Beneficiaries of:

         

        
          	
                  (a)

                   

                	
                  their
                    right to instruct the Trustee with respect to the exercise of
                    the Exchange
                    Right in respect of the Exchangeable Shares held by a Beneficiary;
                    and

                   

                
	
                  (b)

                   

                	
                  the
                    Automatic Exchange Rights.

                   

                

        

        
          
            
            

          

          
            -12-

            
              

            

          

          
            
            

          

        

        Section 5.3 General
          Exercise of Exchange Right

         

        The
          Exchange Right shall be and remain vested in and exercisable by the Trustee.
          Subject to Section 6.15,
          the
          Trustee shall exercise the Exchange Right only on the basis of instructions
          received pursuant to this Article 5 from Beneficiaries entitled to instruct
          the
          Trustee as to the exercise thereof. To the extent that no instructions
          are
          received from a Beneficiary with respect to the Exchange Right, the Trustee
          shall not exercise or permit the exercise of the Exchange Right.

         

        Section 5.4 Purchase
          Price

         

        The
          purchase price payable by Acquiror for each Exchangeable Share to be purchased
          by Acquiror under the Exchange Right shall be an amount per share equal
          to the
          Exchangeable Share Price on the last Business Day prior to the day of closing
          of
          the purchase and sale of such Exchangeable Share under the Exchange Right.
          In
          connection with each exercise of the Exchange Right, Acquiror shall provide
          to
          the Trustee an Officer’s Certificate setting forth the calculation of the
          Exchangeable Share Price for each Exchangeable Share. The Exchangeable
          Share
          Price for each such Exchangeable Share so purchased may be satisfied only
          by
          Acquiror delivering or causing to be delivered to the Trustee, on behalf
          of the
          relevant Beneficiary, the Exchangeable Share Consideration representing
          the
          total Exchangeable Share Price. Upon payment by Acquiror of such purchase
          price
          to the Trustee for the benefit of the Beneficiary, the relevant Beneficiary
          shall cease to have any right to be paid any amount in respect of declared
          and
          unpaid dividends on each such Exchangeable Share by the
          Corporation.

         

        Section 5.5 Exercise
          Instructions

         

        Subject
          to the terms and conditions herein set forth, a Beneficiary shall be entitled,
          upon the occurrence and during the continuance of an Insolvency Event,
          to
          instruct the Trustee to exercise the Exchange Right with respect to all
          or any
          part of the Exchangeable Shares registered in the name of such Beneficiary
          on
          the books of the Corporation. To cause the exercise of the Exchange Right
          by the
          Trustee, the Beneficiary shall deliver to the Trustee, in person or by
          certified
          or registered mail, at its principal office in Calgary, Alberta or at such
          other
          places in Canada as the Trustee may from time to time designate by written
          notice to the Beneficiaries, the certificates representing the Exchangeable
          Shares which such Beneficiary desires Acquiror to purchase, duly endorsed
          in
          blank for transfer, and accompanied by such other documents and instruments
          as
          may be required to effect a transfer of Exchangeable Shares under the ABCA
          and
          the by-laws of the Corporation and such additional documents and instruments
          as
          the Trustee, the Corporation and Acquiror may reasonably require together
          with
          (a) a duly completed form of notice of exercise of the Exchange Right,
          contained
          on the reverse of or attached to the Exchangeable Share certificates, stating
          (i) that the Beneficiary thereby instructs the Trustee to exercise the
          Exchange
          Right so as to require Acquiror to purchase from the Beneficiary the number
          of
          Exchangeable Shares specified therein, (ii) that such Beneficiary has good
          title
          to and owns all such Exchangeable Shares to be acquired by Acquiror free
          and
          clear of all liens, claims, security interests and encumbrances, (iii)
          the names
          in which the certificates representing Acquiror Shares issuable in connection
          with the exercise of the Exchange Right are to be issued and (iv) the names
          and
          addresses of the persons to whom such new certificates should be delivered,
          and
          (b) payment (or evidence satisfactory to the Trustee, the Corporation and
          Acquiror of payment) of the taxes (if any) payable as contemplated by
Section 5.8
          of this
          Agreement. If only a part of the Exchangeable Shares represented by any
          certificate or certificates delivered to the Trustee are to be purchased
          by
          Acquiror under the Exchange Right, a new certificate for the balance of
          such
          Exchangeable Shares shall be issued to the holder at the expense of the
          Corporation.

        
          
            
            

          

          
            -13-

            
              

            

          

          
            
            

          

        

        Section 5.6 Delivery
          of Acquiror Shares; Effect of Exercise

         

        Promptly
          after the receipt by the Trustee of the certificates representing the
          Exchangeable Shares which the Beneficiary desires Acquiror to purchase
          under the
          Exchange Right, together with such documents and instruments of transfer
          and a
          duly completed form of notice of exercise of the Exchange Right (and payment
          of
          taxes, if any payable as contemplated by Section 5.8
          or
          evidence thereof), duly endorsed for transfer to Acquiror, the Trustee
          shall
          notify Acquiror and the Corporation of its receipt of the same, which notice
          to
          Acquiror and the Corporation shall constitute exercise of the Exchange
          Right by
          the Trustee on behalf of the Beneficiary in respect of such Exchangeable
          Shares,
          and Acquiror shall promptly thereafter deliver or cause to be delivered
          to the
          Trustee, for delivery to the Beneficiary in respect of such Exchangeable
          Shares
          (or to such other persons, if any, properly designated by such Beneficiary)
          the
          Exchangeable Share Consideration deliverable in connection with the exercise
          of
          the Exchange Right; provided, however, that no such delivery shall be made
          unless and until the Beneficiary requesting the same shall have paid (or
          provided evidence satisfactory to the Trustee, the Corporation and Acquiror
          of
          the payment of) the taxes (if any) payable as contemplated by Section 5.8
          of
          this Agreement. Immediately upon the giving of notice by the Trustee to
          Acquiror
          and the Corporation of the exercise of the Exchange Right, as provided
          in this
          Section 5.6, the closing of the transaction of purchase and sale contemplated
          by
          the Exchange Right shall be deemed to have occurred, and the Beneficiary
          of such
          Exchangeable Shares shall be deemed to have transferred to Acquiror all
          of such
          Beneficiary’s right, title and interest in and to such Exchangeable Shares and
          in the related interest in the Trust Estate and shall cease to be a holder
          of
          such Exchangeable Shares and shall not be entitled to exercise any of the
          rights
          of a holder in respect thereof, other than the right to receive his
          proportionate part of the total purchase price therefor, unless such
          Exchangeable Share Consideration is not delivered by Acquiror to the Trustee
          for
          delivery to such Beneficiary (or to such other person, if any, properly
          designated by such Beneficiary) within five Business Days of the date of
          the
          giving of such notice by the Trustee, in which case the rights of the
          Beneficiary shall remain unaffected until such Exchangeable Share Consideration
          is delivered by Acquiror and any cheque included therein is paid. Upon
          delivery
          of such Exchangeable Share Consideration by Acquiror to the Trustee, the
          Trustee
          shall deliver such Exchangeable Share Consideration to such Beneficiary
          (or to
          such other person, if any, properly designated by such Beneficiary).
          Concurrently with such Beneficiary ceasing to be a holder of Exchangeable
          Shares, the Beneficiary shall be considered and deemed for all purposes
          to be
          the holder of the Acquiror Shares delivered to it pursuant to the Exchange
          Right.

        
          
            
            

          

          
            -14-

            
              

            

          

          
            
            

          

        

        Section 5.7 Exercise
          of Exchange Right Subsequent to Retraction

         

        In
          the
          event that a Beneficiary has exercised its right under Article 6 of the
          Exchangeable Share Provisions to require the Corporation to redeem any
          or all of
          the Exchangeable Shares held by the Beneficiary (the “Retracted
          Shares”)
          and is
          notified by the Corporation pursuant to Section 6.5 of the Exchangeable
          Share
          Provisions that the Corporation will not be permitted as a result of solvency
          requirements of applicable law to redeem all such Retracted Shares, and
          provided
          that the Beneficiary has not revoked the retraction request delivered by
          the
          Beneficiary to the Corporation pursuant to Section 6.6 of the Exchangeable
          Share
          Provisions, and provided further that the Trustee has received written
          notice of
          same from the Corporation or Acquiror, the retraction request will constitute
          and will be deemed to constitute notice from the Beneficiary to the Trustee
          instructing the Trustee to exercise the Exchange Right with respect to
          those
          Retracted Shares that the Corporation is unable to redeem. In any such
          event,
          the Corporation hereby agrees with the Trustee and in favour of the Beneficiary
          promptly to forward or cause to be forwarded to the Trustee all relevant
          materials delivered by the Beneficiary to the Corporation or to the transfer
          agent of the Exchangeable Shares (including a copy of the retraction request
          delivered pursuant to Section 6.1 of the Exchangeable Share Provisions)
          in
          connection with such proposed redemption of the Retracted Shares and the
          Trustee
          will thereupon exercise the Exchange Right with respect to the Retracted
          Shares
          that the Corporation is not permitted to redeem and will require Acquiror
          to
          purchase such shares in accordance with the provisions of this Article 5.

         

        Section 5.8 Stamp
          or Other Transfer Taxes

         

        Upon
          any
          sale of Exchangeable Shares to Acquiror pursuant to the Exchange Right
          or the
          Automatic Exchange Rights, the share certificate or certificates representing
          Acquiror Shares to be delivered in connection with the payment of the purchase
          price therefor shall be issued in the name of the Beneficiary in respect
          of the
          Exchangeable Shares so sold or in such names as such Beneficiary may otherwise
          direct in writing without charge to the holder of the Exchangeable Shares
          so
          sold; provided, however, that such Beneficiary (a) shall pay (and none
          of
          Acquiror, the Corporation or the Trustee shall be required to pay) any
          documentary, stamp, transfer or other taxes that may be payable in respect
          of
          any transfer involved in the issuance or delivery of such shares to a person
          other than such Beneficiary or evidenced to the satisfaction of the such
          taxes,
          if any, have been paid.

        
          
            
            

          

          
            -15-

            
              

            

          

          
            
            

          

        

        Section 5.9 Notice
          of Insolvency Event

         

        As
          soon
          as practicable following the occurrence of an Insolvency Event or any event
          that
          with the giving of notice or the passage of time or both would be an Insolvency
          Event, the Corporation and Acquiror shall give written notice thereof to
          the
          Trustee. As soon as practicable following the receipt of notice from the
          Corporation and Acquiror of the occurrence of an Insolvency Event, or upon
          the
          Trustee becoming aware of an Insolvency Event, the Trustee will mail to
          each
          Beneficiary, at the expense of Acquiror (such funds to be received in advance),
          a notice of such Insolvency Event in the form provided by Acquiror, which
          notice
          shall contain a brief statement of the rights of the Beneficiaries with
          respect
          to the Exchange Right.

         

        Section 5.10 Qualification
          of Acquiror Shares

         

        Acquiror
          covenants that if any Acquiror Shares issuable pursuant to the Exchange
          Right or
          the Automatic Exchange Rights require registration or qualification with
          or
          approval of or the filing of any document, including any registration statement,
          prospectus or similar document, or the taking of any proceeding with or
          the
          obtaining of any order, ruling or consent from any governmental or regulatory
          authority under any Canadian or United States federal, provincial, territorial
          or state law or regulation or pursuant to the rules and regulations of
          any
          regulatory authority or stock exchange or the fulfilment of any other Canadian
          or United States federal, provincial, territorial or state legal requirement
          before such shares may be issued and delivered by Acquiror to the initial
          holder
          thereof or in order that such shares may be freely traded thereafter (other
          than
          any restrictions of general application on transfer by reason of a holder
          being
          a “control person” of Acquiror for purposes of Canadian provincial securities
          law or an “affiliate” of Acquiror for purposes of United States federal or state
          securities law), Acquiror will in good faith use its reasonable best efforts
          to
          take all such actions and do all such things as are necessary or desirable
          to
          cause such Acquiror Shares to be and remain duly registered, qualified
          or
          approved under United States and/or Canadian law, as the case may be, to
          the
          extent provided in the Acquisition Agreement. Acquiror will use its reasonable
          best efforts and in good faith expeditiously take all such actions and
          do all
          such things as are reasonably necessary or desirable to cause all Acquiror
          Shares to be delivered pursuant to the Exchange Right or the Automatic
          Exchange
          Rights to be listed, quoted or posted for trading on all stock exchanges
          and
          quotation systems on which outstanding Acquiror Shares are listed, quoted
          or
          posted for trading at such time.

        
          
            
            

          

          
            -16-

            
              

            

          

          
            
            

          

        

        Section 5.11 Acquiror
          Shares

         

        Acquiror
          hereby represents, warrants and covenants that the Acquiror Shares issuable
          to
          Beneficiaries as described herein will be duly authorized and validly issued,
          fully paid and non-assessable and shall be free and clear of any lien,
          claim or
          encumbrance.

         

        Section 5.12 Automatic
          Exchange on Liquidation of Acquiror

         

        
          	
                  (a)

                   

                	
                  Acquiror
                    will give the Trustee written notice of each of the following
                    events at
                    the time set forth below:

                   

                

        

         

        
          	
                  (i)

                   

                	
                  in
                    the event of any determination by the Board of Directors of Acquiror
                    to
                    institute voluntary liquidation, dissolution or winding-up proceedings
                    with respect to Acquiror or to effect any other distribution
                    of assets of
                    Acquiror among its shareholders for the purpose of winding up
                    its affairs,
                    at least 60 days prior to the proposed effective date of such
                    liquidation,
                    dissolution, winding-up or other distribution; and

                   

                
	
                  (ii)

                   

                	
                  promptly
                    following the earlier of (A) receipt by Acquiror of notice of,
                    and (B)
                    Acquiror otherwise becoming aware of, any threatened or instituted
                    claim,
                    suit, petition or other proceedings with respect to the involuntary
                    liquidation, dissolution or winding-up of Acquiror or to effect
                    any other
                    distribution of assets of Acquiror among its shareholders for
                    the purpose
                    of winding up its affairs, in each case where Acquiror has failed
                    to
                    contest in good faith any such proceeding commenced in respect
                    of Acquiror
                    within 30 days of becoming aware thereof.

                   

                

        

         

        
          	
                  (b)

                   

                	
                  Promptly
                    following receipt by the Trustee from Acquiror of notice of any
                    event (a
                    “Liquidation
                    Event”)
                    contemplated by Section 5.12(a)
                    above, the Trustee will give notice thereof to the Beneficiaries.
                    Such
                    notice shall be provided to the Trustee by Acquiror and shall
                    include a
                    brief description of rights of the Beneficiaries with respect
                    to the
                    Automatic Exchange Rights provided for in Section 5.12(c).

                

        

         

        
          
            
            

          

          
            -17-

            
              

            

          

          
            
            

          

        

         

        
          	
                  (c)

                   

                	
                  In
                    order that the Beneficiaries will be able to participate on a
                    pro rata
                    basis with the holders of Acquiror Shares in the distribution
                    of assets of
                    Acquiror in connection with a Liquidation Event, immediately
                    prior to the
                    effective time (the “Liquidation
                    Event Effective Time”)
                    of a Liquidation Event all of the then outstanding Exchangeable
                    Shares
                    shall be automatically exchanged for Acquiror Shares. To effect
                    such
                    automatic exchange, Acquiror shall purchase each Exchangeable
                    Share
                    outstanding immediately prior to the Liquidation Event Effective
                    Time and
                    held by Beneficiaries, and each Beneficiary shall sell the Exchangeable
                    Shares held by such Beneficiary at such time, for a purchase
                    price per
                    share equal to the Exchangeable Share Price applicable at that
                    time.
                    Acquiror shall provide the Trustee with an Officer’s Certificate in
                    connection with any automatic exchange setting forth the calculation
                    of
                    the Exchangeable Share Price for each Exchangeable Share.

                   

                
	
                  (d)

                   

                	
                  The
                    closing of the transaction of purchase and sale contemplated
                    by the
                    automatic exchange of Exchangeable Shares for Acquiror Shares
                    shall be
                    deemed to have occurred immediately prior to the Liquidation
                    Event
                    Effective Time, and each Beneficiary shall be deemed to have
                    transferred
                    to Acquiror all of the Beneficiary’s right, title and interest in and to
                    such Beneficiary’s Exchangeable Shares and the related interest in the
                    Trust Estate. Any right of each such Beneficiary to receive declared
                    and
                    unpaid dividends from the Corporation shall be deemed to be satisfied
                    and
                    discharged and each such Beneficiary shall cease to be a holder
                    of such
                    Exchangeable Shares and Acquiror shall deliver to the Beneficiary
                    the
                    Exchangeable Share Consideration deliverable upon the automatic
                    exchange
                    of Exchangeable Shares. Concurrently with such Beneficiary ceasing
                    to be a
                    holder of Exchangeable Shares, the Beneficiary shall be considered
                    and
                    deemed for all purposes to be the holder of the Acquiror Shares
                    issued
                    pursuant to the automatic exchange of Exchangeable Shares for
                    Acquiror
                    Shares and the certificates held by the Beneficiary previously
                    representing the Exchangeable Shares exchanged by the Beneficiary
                    with
                    Acquiror pursuant to such automatic exchange shall thereafter
                    be deemed to
                    represent Acquiror Shares issued to the Beneficiary by Acquiror
                    pursuant
                    to such automatic exchange. Upon the request of a Beneficiary
                    and the
                    surrender by the Beneficiary of Exchangeable Share certificates
                    deemed to
                    represent Acquiror Shares, duly endorsed in blank and accompanied
                    by such
                    instruments of transfer as Acquiror may reasonably require, Acquiror
                    shall
                    deliver or cause to be delivered to the Beneficiary certificates
                    representing Acquiror Shares of which the Beneficiary is the
                    holder.

                

        

         

        
          
            
            

          

          
            -18-

            
              

            

          

          
            
            

          

        

        Section 5.13 Withholding
          Rights

         

        Acquiror,
          the Corporation and the Trustee shall be entitled to deduct and withhold
          from
          any consideration otherwise payable under this Agreement to any holder
          of
          Exchangeable Shares or Acquiror Shares such amounts as Acquiror, the Corporation
          or the Trustee is required to deduct and withhold with respect to such
          payment
          under the Income
          Tax Act
          (Canada), the United States Internal Revenue Code of 1986 or any provision
          of
          federal, provincial, state, local or foreign tax law, in each case as amended
          or
          succeeded. The Trustee may act on the advice of counsel with respect to
          such
          matters. To the extent that amounts are so withheld, such withheld amounts
          shall
          be treated for all purposes as having been paid to the holder of the shares
          in
          respect of which such deduction and withholding was made, provided that
          such
          withheld amounts are actually remitted to the appropriate taxing authority.
          To
          the extent that the amount so required to be deducted or withheld from
          any
          payment to a holder exceeds the cash portion of the consideration otherwise
          payable to the holder, Acquiror, the Corporation and the Trustee are hereby
          authorized to sell or otherwise dispose of such portion of the consideration
          as
          is necessary to provide sufficient funds to Acquiror, the Corporation or
          the
          Trustee, as the case may be, to enable it to comply with such deduction
          or
          withholding requirement and Acquiror, the Corporation or the Trustee shall
          notify the holder thereof and remit to such holder any unapplied balance
          of the
          net proceeds of such sale. 

         

         

        ARTICLE 6

        CONCERNING
          THE TRUSTEE

         

        Section 6.1 Powers
          and Duties of the Trustee

         

        The
          rights, powers, duties and authorities of the Trustee under this Agreement,
          in
          its capacity as trustee of the Trust, shall include:

         

        
          	
                  (a)

                   

                	
                  receipt
                    and deposit of the Acquiror Special Voting Share from Acquiror
                    as trustee
                    for and on behalf of the Beneficiaries in accordance with the
                    provisions
                    of this Agreement;

                   

                
	
                  (b)

                   

                	
                  granting
                    proxies and distributing materials to Beneficiaries as provided
                    in this
                    Agreement;

                   

                
	
                  (c)

                   

                	
                  casting
                    and exercising the Beneficiary Votes in accordance with the provisions
                    of
                    this Agreement;

                   

                
	
                  (d)

                   

                	
                  receiving
                    the grant of the Exchange Right and the Automatic Exchange Rights
                    from
                    Acquiror as trustee for and on behalf of the Beneficiaries in
                    accordance
                    with the provisions of this Agreement;

                   

                

        

        
          
            
            

          

          
            -19-

            
              

            

          

          
            
            

          

        

         

        
          	
                  (e)

                   

                	
                  exercising
                    the Exchange Right and enforcing the benefit of the Automatic
                    Exchange
                    Rights, in each case in accordance with the provisions of this
                    Agreement,
                    and in connection therewith receiving from Beneficiaries Exchangeable
                    Shares and other requisite documents and distributing to such
                    Beneficiaries Acquiror Shares and cheques, if any, to which such
                    Beneficiaries are entitled upon the exercise of the Exchange
                    Right or
                    pursuant to the Automatic Exchange Rights, as the case may
                    be;

                   

                
	
                  (f)

                   

                	
                  holding
                    title to the Trust Estate;

                   

                
	
                  (g)

                   

                	
                  investing
                    any moneys forming, from time to time, a part of the Trust Estate
                    as
                    provided in this Agreement;

                   

                
	
                  (h)

                   

                	
                  taking
                    action on its own initiative or at the direction of a Beneficiary
                    or
                    Beneficiaries to enforce the obligations of Acquiror and the
                    Corporation
                    under this Agreement; and

                   

                
	
                  (i)

                   

                	
                  taking
                    such other actions and doing such other things as are specifically
                    provided in this Agreement.

                   

                

        

        In
          the
          exercise of such rights, powers, duties and authorities, the Trustee shall
          have
          (and is granted) such incidental and additional rights, powers, duties
          and
          authority not in conflict with any of the provisions of this Agreement
          as the
          Trustee, acting in good faith and in the reasonable exercise of its discretion,
          may deem necessary, appropriate or desirable to effect the purpose of the
          Trust.
          Any exercise of such discretionary rights, powers, duties and authorities
          by the
          Trustee shall be final, conclusive and binding upon all persons.

         

        The
          Trustee in exercising its rights, powers, duties and authorities hereunder
          shall
          act honestly and in good faith and with a view to the best interests of
          the
          Beneficiaries and shall exercise the care, diligence and skill that a reasonably
          prudent trustee would exercise in comparable circumstances.

         

        The
          Trustee shall not be bound to give notice or do or take any act, action
          or
          proceeding by virtue of the powers conferred on it hereby unless and until
          it
          shall be specifically required to do so under the terms hereof, nor shall
          the
          Trustee be required to take any notice of, or to do, or to take any act,
          action
          or proceeding as a result of any default or breach of any provision hereunder,
          unless and until notified in writing of such default or breach, which notices
          shall distinctly specify the default or breach desired to be brought to
          the
          attention of the Trustee, and in the absence of such notice the Trustee
          may for
          all purposes of this Agreement conclusively assume that no default or breach
          has
          been made in the observance or performance of any of the representations,
          warranties, covenants, agreements or conditions contained
          herein.

        
          
            
            

          

          
            -20-

            
              

            

          

          
            
            

          

        

        Section 6.2 No
          Conflict of Interest

         

        The
          Trustee represents to Acquiror and the Corporation that at the date of
          execution
          and delivery of this Agreement there exists no material conflict of interest
          in
          the role of the Trustee as a fiduciary hereunder and the role of the Trustee
          in
          any other capacity. The Trustee shall, within 90 days after it becomes
          aware
          that such material conflict of interest exists, either eliminate such material
          conflict of interest or resign in the manner and with the effect specified
          in
Article 10.
          If,
          notwithstanding the foregoing provisions of this Section 6.2,
          the
          Trustee has such a material conflict of interest, the validity and
          enforceability of this Agreement shall not be affected in any manner whatsoever
          by reason only of the existence of such material conflict of interest.
          If the
          Trustee contravenes the foregoing provisions of this Section 6.2,
          any
          interested party may apply to a court of competent jurisdiction for an
          order
          that the Trustee be replaced as trustee hereunder.

         

        Section 6.3 Dealings
          with Transfer Agents, Registrars, etc.

         

        Acquiror
          and the Corporation irrevocably authorize the Trustee, from time to time,
          to:

         

        
          	
                  (a)

                   

                	
                  consult,
                    communicate and otherwise deal with the respective registrars
                    and transfer
                    agents, and with any such subsequent registrar or transfer agent,
                    of the
                    Exchangeable Shares and Acquiror Shares; and

                   

                
	
                  (b)

                   

                	
                  requisition,
                    from time to time, (i) from any such registrar or transfer agent
                    any
                    information readily available from the records maintained by
                    it which the
                    Trustee may reasonably require for the discharge of its duties
                    and
                    responsibilities under this Agreement and (ii) from the transfer
                    agent of
                    Acquiror Shares, and any subsequent transfer agent of such shares,
                    the
                    share certificates issuable upon the exercise from time to time
                    of the
                    Exchange Right and pursuant to the Automatic Exchange Rights.

                   

                

        

        Acquiror
          and the Corporation irrevocably authorize their respective registrars and
          transfer agents to comply with all such requests. Acquiror covenants that
          it
          will supply its transfer agent with duly executed share certificates for
          the
          purpose of completing the exercise from time to time of the Exchange Right
          and
          the Automatic Exchange Rights.

        
          
            
            

          

          
            -21-

            
              

            

          

          
            
            

          

        

        Section 6.4 Books
          and Records

         

        The
          Trustee shall keep available for inspection by Acquiror and the Corporation
          at
          the Trustee’s principal office in Calgary, Alberta correct and complete books
          and records of account relating to the Trust created by this Agreement,
          including all relevant data relating to mailings and instructions to and
          from
          Beneficiaries and all transactions pursuant to the Exchange Right and the
          Automatic Exchange Rights. On or before January 15 in every year, so long
          as any
          Acquiror Shares are on deposit with the Trustee, the Trustee shall transmit
          to
          Acquiror and the Corporation a brief report, dated as of the preceding
          December
          31, with respect to:

         

        
          	
                  (a)

                   

                	
                  the
                    property and funds comprising the Trust Estate as of that
                    date;

                   

                
	
                  (b)

                   

                	
                  the
                    number of exercises of the Exchange Right, if any, and the aggregate
                    number of Exchangeable Shares received by the Trustee on behalf
                    of
                    Beneficiaries in consideration of the issuance by Acquiror of
                    Acquiror
                    Shares in connection with the Exchange Right, during the calendar
                    year
                    ended on such December 31; and

                   

                
	
                  (c)

                   

                	
                  any
                    action taken by the Trustee in the performance of its duties
                    under this
                    Agreement which it had not previously reported and which, in
                    the Trustee’s
                    opinion, materially affects the Trust Estate.

                   

                

        

        Section 6.5 Income
          Tax Returns and Reports

         

        The
          Trustee shall, to the extent necessary, prepare and file on behalf of the
          Trust
          appropriate United States and Canadian income tax returns and any other
          returns
          or reports as may be required by applicable law or pursuant to the rules
          and
          regulations of any securities exchange or other trading system through
          which the
          Exchangeable Shares are traded. In connection therewith, the Trustee may
          obtain
          the advice and assistance of such experts or advisors as the Trustee reasonably
          considers necessary or advisable (who may be experts or advisors to Acquiror
          or
          the Corporation). If requested by the Trustee, Acquiror or the Corporation
          shall
          retain qualified experts or advisors for the purpose of providing such
          tax
          advice or assistance.

         

        Section 6.6 Indemnification
          Prior to Certain Actions by Trustee

         

        The
          Trustee shall exercise any or all of the rights, duties, powers or authorities
          vested in it by this Agreement at the request, order or direction of any
          Beneficiary upon such Beneficiary furnishing to the Trustee reasonable
          funding,
          security or indemnity against the costs, expenses and liabilities which
          may be
          incurred by the Trustee therein or thereby, provided that no Beneficiary
          shall
          be obligated to furnish to the Trustee any such security or indemnity in
          connection with the exercise by the Trustee of any of its rights, duties,
          powers
          and authorities with respect to the Acquiror Special Voting Share held
          by the
          Trustee pursuant to Article 4,
          subject
          to Section 6.15,
          with
          respect to the Exchange Right pursuant to Article 5,
          subject
          to Section 6.15,
          and
          with respect to the Automatic Exchange Rights pursuant to Article 5,
          subject
          to Section 6.15.

        
          
            
            

          

          
            -22-

            
              

            

          

          
            
            

          

        

        None
          of
          the provisions contained in this Agreement shall require the Trustee to
          expend
          or risk its own funds or otherwise incur financial liability in the exercise
          of
          any of its rights, powers, duties, or authorities unless funded, given
          security
          or indemnified as aforesaid.

         

        Section 6.7 Action
          of Beneficiaries

         

        No
          Beneficiary shall have the right to institute any action, suit or proceeding
          or
          to exercise any other remedy authorized by this Agreement for the purpose
          of
          enforcing any of its rights or for the execution of any trust or power
          hereunder
          unless the Beneficiary has requested the Trustee to take or institute such
          action, suit or proceeding and furnished the Trustee with the funding,
          security
          or indemnity required by Section 6.6
          and the
          Trustee shall have failed to act within a reasonable time thereafter. In
          such
          case, but not otherwise, the Beneficiary shall be entitled to take proceedings
          in any court of competent jurisdiction such as the Trustee might have taken;
          it
          being understood and intended that no one or more Beneficiaries shall have
          any
          right in any manner whatsoever to affect, disturb or prejudice the rights
          hereby
          created by any such action, or to enforce any right hereunder or the Voting
          Rights, the Exchange Rights or the Automatic Exchange Rights except subject
          to
          the conditions and in the manner herein provided, and that all powers and
          trusts
          hereunder shall be exercised and all proceedings at law shall be instituted,
          had
          and maintained by the Trustee, except only as herein provided, and in any
          event
          for the equal benefit of all Beneficiaries.

         

        Section 6.8 Reliance
          Upon Declarations

         

        The
          Trustee shall not be considered to be in contravention of any of its rights,
          powers, duties and authorities hereunder if, when required, it acts and
          relies
          in good faith upon statutory declarations, certificates, opinions, Lists,
          reports or other papers or documents furnished pursuant to the provisions
          hereof
          or required by the Trustee to be furnished to it in the exercise of its
          rights,
          powers, duties and authorities hereunder if such statutory declarations,
          certificates, opinions, Lists, reports or other papers or documents comply
          with
          the provisions of Section 6.9,
          if
          applicable, and with any other applicable provisions of this
          Agreement.

         

        Section 6.9 Evidence
          and Authority to Trustee

         

        Acquiror
          and/or the Corporation shall furnish to the Trustee evidence of compliance
          with
          the conditions provided for in this Agreement relating to any action or
          step
          required or permitted to be taken by Acquiror and/or the Corporation or
          the
          Trustee under this Agreement or as a result of any obligation imposed under
          this
          Agreement, including in respect of the Voting Rights or the Exchange Right
          or
          the Automatic Exchange Rights and the taking of any other action to be
          taken by
          the Trustee at the request of or on the application of Acquiror and/or
          the
          Corporation promptly if and when:

        
          
            
            

          

          
            -23-

            
              

            

          

          
            
            

          

        

         

        
          	
                  (a)

                   

                	
                  such
                    evidence is required by any other section of this Agreement to
                    be
                    furnished to the Trustee in accordance with the terms of this
Section 6.9;
                    or

                   

                
	
                  (b)

                   

                	
                  the
                    Trustee, in the exercise of its rights, powers, duties and authorities
                    under this Agreement, gives Acquiror and/or 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 an officer’s Certificate of Acquiror and/or the
          Corporation or a statutory declaration or a certificate made by persons
          entitled
          to sign an Officer’s Certificate stating that any such condition has been
          complied with in accordance with the terms of this Agreement.

         

        Whenever
          such evidence relates to a matter other than the Voting Rights or the Exchange
          Right or the Automatic Exchange Rights or the taking of any other action
          to be
          taken by the Trustee at the request or on the application of Acquiror and/or
          the
          Corporation, and except as otherwise specifically provided herein, such
          evidence
          may consist of a report or opinion of any solicitor, attorney, auditor,
          accountant, appraiser, valuer, engineer or other expert 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
          Acquiror and/or the Corporation it shall be in the form of an Officer’s
          Certificate or a statutory declaration.

         

        Each
          statutory declaration, Officer’s Certificate, opinion or report furnished to the
          Trustee as evidence of compliance with a condition provided for in this
          Agreement shall include a statement by the person giving the
          evidence:

         

        
          	
                  (c)

                   

                	
                  declaring
                    that such person has read and understands the provisions of this
                    Agreement
                    relating to the condition in question;

                   

                
	
                  (d)

                   

                	
                  describing
                    the nature and scope of the examination or investigation upon
                    which such
                    person based the statutory declaration, certificate, statement
                    or opinion;
                    and

                   

                

        

        
          
            
            

          

          
            -24-

            
              

            

          

          
            
            

          

        

         

        
          	
                  (e)

                   

                	
                  declaring
                    that such person has made such examination or investigation as
                    such person
                    believes is necessary to enable such person to make the statements
                    or give
                    the opinions contained or expressed therein.

                   

                

        

        Section 6.10 Experts,
          Advisers and Agents

         

        The
          Trustee may:

         

        
          	
                  (a)

                   

                	
                  in
                    relation to these presents act and rely on the opinion or advice
                    of or
                    information obtained from any solicitor, attorney, auditor, accountant,
                    appraiser, valuer, engineer or other expert, whether retained
                    by the
                    Trustee or by Acquiror and/or the Corporation or otherwise, and
                    may retain
                    or employ such assistants as may be necessary to the proper discharge
                    of
                    its powers and duties and determination of its rights hereunder
                    and may
                    pay proper and reasonable compensation for all such legal and
                    other advice
                    or assistance as aforesaid; and

                   

                
	
                  (b)

                   

                	
                  employ
                    such agents and other assistants as it may reasonably require
                    for the
                    proper determination and discharge of its powers and duties hereunder,
                    and
                    may pay reasonable remuneration for all services performed for
                    it (and
                    shall be entitled to receive reasonable remuneration for all
                    services
                    performed by it) in the discharge of the trusts hereof and compensation
                    for all disbursements, costs and expenses made or incurred by
                    it in the
                    discharge of its duties hereunder and in the management of the
                    Trust.

                   

                

        

        Section 6.11 Investment
          of Moneys Held by Trustee

         

        Unless
          otherwise provided in this Agreement, any moneys held by or on behalf of
          the
          Trustee which under the terms of this Agreement may or ought to be invested
          or
          which may be on deposit with the Trustee or which may be in the hands of
          the
          Trustee may be invested and reinvested in the name or under the control
          of the
          Trustee, in trust for the Corporation, in securities in which, under the
          laws of
          the Province of Alberta, trustees are authorized to invest trust moneys,
          provided that such securities are stated to mature within two years after
          their
          purchase by the Trustee, and the Trustee shall so invest such moneys on
          the
          written direction of the Corporation. Pending the investment of any moneys
          as
          hereinbefore provided, such moneys may be deposited in the name of the
          Trustee
          in any chartered bank in Canada or, with the consent of the Corporation,
          in the
          deposit department of the Trustee or any other loan or trust company authorized
          to accept deposits under the laws of Canada or any province thereof at
          the rate
          of interest then current on similar deposits.

        
          
            
            

          

          
            -25-

            
              

            

          

          
            
            

          

        

        Section 6.12 Trustee
          Not Required to Give Security

         

        The
          Trustee shall not be required to give any bond or security in respect of
          the
          execution of the trusts, rights, duties, powers and authorities of this
          Agreement or otherwise in respect of the premises.

         

        Section 6.13 Trustee
          Not Bound to Act on Request

         

        Except
          as
          in this Agreement otherwise specifically provided, the Trustee shall not
          be
          bound to act in accordance with any direction or request of Acquiror and/or
          the
          Corporation or of the directors thereof 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 and
          rely
          upon any such copy purporting to be authenticated and believed by the Trustee
          to
          be genuine.

         

        Section 6.14 Authority
          to Carry on Business

         

        The
          Trustee represents to Acquiror and the Corporation that at the date of
          execution
          and delivery by it of this Agreement it is authorized to carry on the business
          of a trust company in each of the Provinces of Canada but if, notwithstanding
          the provisions of this Section 6.14,
          it
          ceases to be so authorized to carry on business, the validity and enforceability
          of this Agreement and the Voting Rights, the Exchange Right and the Automatic
          Exchange Rights 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 any province of Canada,
          either
          become so authorized or resign in the manner and with the effect specified
          in
Article 10.

         

        Section 6.15 Conflicting
          Claims

         

        If
          conflicting claims or demands are made or asserted with respect to any
          interest
          of any Beneficiary in any Exchangeable Shares, including any disagreement
          between the heirs, representatives, successors or assigns succeeding to
          all or
          any part of the interest of any Beneficiary in any Exchangeable Shares,
          resulting in conflicting claims or demands being made in connection with
          such
          interest, then the Trustee shall be entitled, at its sole discretion, to
          refuse
          to recognize or to comply with any such claims or demands. In so refusing,
          the
          Trustee may elect not to exercise any Voting Rights, Exchange Right or
          Automatic
          Exchange Rights subject to such conflicting claims or demands and, in so
          doing,
          the Trustee shall not be or become liable to any person on account of such
          election or its failure or refusal to comply with any such conflicting
          claims or
          demands. The Trustee shall be entitled to continue to refrain from acting
          and to
          refuse to act until:

        
          
            
            

          

          
            -26-

            
              

            

          

          
            
            

          

        

         

        
          	
                  (a)

                   

                	
                  the
                    rights of all adverse claimants with respect to the Voting Rights,
                    Exchange Right or Automatic Exchange Rights subject to such conflicting
                    claims or demands have been adjudicated by a final judgment of
                    a court of
                    competent jurisdiction and all rights of appeal have expired;
                    or

                   

                
	
                  (b)

                   

                	
                  all
                    differences with respect to the Voting Rights, Exchange Right
                    or Automatic
                    Exchange Rights subject to such conflicting claims or demands
                    have been
                    conclusively settled by a valid written agreement binding on
                    all such
                    adverse claimants, and the Trustee shall have been furnished
                    with an
                    executed copy of such agreement certified to be in full force
                    and
                    effect.

                   

                

        

        If
          the
          Trustee elects to recognize any claim or comply with any demand made by
          any such
          adverse claimant, it may in its discretion require such claimant to furnish
          such
          surety bond or other security satisfactory to the Trustee as it shall deem
          appropriate to fully indemnify it as between all conflicting claims or
          demands.

         

        Section 6.16 Acceptance
          of Trust

         

        The
          Trustee hereby accepts the Trust created and provided for by and in this
          Agreement 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
          Beneficiaries, subject to all the terms and conditions herein set
          forth.

         

        Section 6.17 Maintenance
          of Office or Agency

         

        Acquiror
          will maintain in Calgary, Alberta an office or agency where certificates
          representing Exchangeable Shares may be presented or surrendered for exchange
          by
          Beneficiaries and where notices and demands to or upon Acquiror or the
          Corporation in respect of the Exchangeable Shares may be served. Acquiror
          will
          give prompt written notice to the Trustee of the location, and any change
          in the
          location, of such office or agency. If at any time Acquiror shall fail
          to
          maintain any such office or agency or shall fail to furnish the Trustee
          with the
          address thereof, such presentations, surrenders, notices and demands may
          be
          served at the Corporate Trust Office of the Trustee, and Acquiror and the
          Corporation hereby appoint the Trustee as their agent to receive all such
          presentations, surrenders, notices and demands. Furthermore, copies of
          all
          Acquiror proxy materials will be made available for inspection by any
          Beneficiary at such office or agency.

        
          
            
            

          

          
            -27-

            
              

            

          

          
            
            

          

        

         

        ARTICLE 7

        COMPENSATION

         

        Section 7.1 Fees
          and Expenses of the Trustee

         

        Acquiror
          and the Corporation jointly and severally agree to pay the Trustee reasonable
          compensation for all of the services rendered by it under this Agreement
          and
          will reimburse the Trustee for all reasonable expenses (including taxes
          other
          than taxes based on the net income of the Trustee, fees paid to legal counsel
          and other experts and advisors and travel expenses) and disbursements,
          including
          the cost and expense of any suit or litigation of any character and any
          proceedings before any governmental agency reasonably incurred by the Trustee
          in
          connection with its duties under this Agreement; provided that Acquiror
          and the
          Corporation shall have no obligation to reimburse the Trustee for any expenses
          or disbursements paid, incurred or suffered by the Trustee in any suit
          or
          litigation in which the Trustee is determined to have acted in bad faith
          or with
          negligence, recklessness or wilful misconduct.

         

         

        ARTICLE 8

        INDEMNIFICATION
          AND LIMITATION OF LIABILITY

         

        Section 8.1 Indemnification
          of the Trustee

         

        Acquiror
          and the Corporation jointly and severally agree to indemnify and hold harmless
          the Trustee and each of its directors, officers, employees and agents appointed
          and acting in accordance with this Agreement (collectively, the “Indemnified
          Parties”)
          against all claims, losses, damages, reasonable costs, penalties, fines
          and
          reasonable expenses (including reasonable expenses of the Trustee’s legal
          counsel) which, without fraud, negligence, recklessness, wilful misconduct
          or
          bad faith on the part of such Indemnified Party, may be paid, incurred
          or
          suffered by the Indemnified Party by reason or as a result of the Trustee’s
          acceptance or administration of the Trust, its compliance with its duties
          set
          forth in this Agreement, or any written or oral instruction delivered to
          the
          Trustee by Acquiror or the Corporation pursuant hereto.

         

        In
          no
          case shall Acquiror or the Corporation be liable under this indemnity for
          any
          claim against any of the Indemnified Parties unless Acquiror and the Corporation
          shall be notified by the Trustee of the written assertion of a claim or
          of any
          action commenced against the Indemnified Parties, promptly after any of
          the
          Indemnified Parties shall have received any such written assertion of a
          claim or
          shall have been served with a summons or other first legal process giving
          information as to the nature and basis of the claim. Subject to (ii) below,
          Acquiror and the Corporation shall be entitled to participate at their
          own
          expense in the defense and, if Acquiror and the Corporation so elect at
          any time
          after receipt of such notice, either of them may assume the defense of
          any suit
          brought to enforce any such claim. The Trustee shall have the right to
          employ
          separate counsel in any such suit and participate in the defense thereof,
          but
          the fees and expenses of such counsel shall be at the expense of the Trustee
          unless: (i) the employment of such counsel has been authorized by Acquiror
          or
          the Corporation; or (ii) the named parties to any such suit include both
          the
          Trustee and Acquiror or the Corporation and the Trustee shall have been
          advised
          by counsel acceptable to Acquiror or the Corporation that there may be
          one or
          more legal defenses available to the Trustee that are different from or
          in
          addition to those available to Acquiror or the Corporation and that, in
          the
          judgment of such counsel, would present a conflict of interest were a joint
          representation to be undertaken (in which case Acquiror and the Corporation
          shall not have the right to assume the defense of such suit on behalf of
          the
          Trustee but shall be liable to pay the reasonable fees and expenses of
          counsel
          for the Trustee). This indemnity shall survive the termination of this
          Agreement
          and the resignation or removal of the Trustee.

        
          
            
            

          

          
            -28-

            
              

            

          

          
            
            

          

        

        Section 8.2 Limitation
          of Liability

         

        The
          Trustee shall not be held liable for any loss which may occur by reason
          of
          depreciation of the value of any part of the Trust Estate or any loss incurred
          on any investment of funds pursuant to this Agreement, except to the extent
          that
          such loss is attributable to the fraud, negligence, recklessness, wilful
          misconduct or bad faith on the part of the Trustee.

         

         

        ARTICLE 9

        CHANGE
          OF TRUSTEE

         

        Section 9.1 Resignation

         

        The
          Trustee, or any trustee hereafter appointed, may at any time resign by
          giving
          written notice of such resignation to Acquiror and the Corporation specifying
          the date on which it desires to resign, provided that such notice shall
          not be
          given less than thirty (30) days before such desired resignation date unless
          Acquiror and the Corporation otherwise agree and provided further that
          such
          resignation shall not take effect until the date of the appointment of
          a
          successor trustee and the acceptance of such appointment by the successor
          trustee. Upon receiving such notice of resignation, Acquiror and the Corporation
          shall promptly appoint a successor trustee, which shall be a corporation
          organized and existing under the laws of Canada or any Province thereof,
          by
          written instrument in duplicate, one copy of which shall be delivered to
          the
          resigning trustee and one copy to the successor trustee. Failing the appointment
          and acceptance of a successor trustee, a successor trustee may be appointed
          by
          order of a court of competent jurisdiction upon application of one or more
          of
          the parties to this Agreement. If the retiring trustee is the party initiating
          an application for the appointment of a successor trustee by order of a
          court of
          competent jurisdiction, Acquiror and the Corporation shall be jointly and
          severally liable to reimburse the retiring trustee for its legal costs
          and
          expenses in connection with same.

        
          
            
            

          

          
            -29-

            
              

            

          

          
            
            

          

        

        Section 9.2 Removal

         

        The
          Trustee, or any trustee hereafter appointed, may (provided a successor
          trustee
          is appointed) be removed at any time on not less than 30 days’ prior notice by
          written instrument executed by Acquiror and the Corporation, in duplicate,
          one
          copy of which shall be delivered to the trustee so removed and one copy
          to the
          successor trustee.

         

        Section 9.3 Successor
          Trustee

         

        Any
          successor trustee appointed as provided under this Agreement shall execute,
          acknowledge and deliver to Acquiror and the Corporation and to its predecessor
          trustee an instrument accepting such appointment. Thereupon the resignation
          or
          removal of the predecessor trustee shall become effective and such successor
          trustee, without any further act, deed or conveyance, shall become vested
          with
          all the rights, powers, duties and obligations of its predecessor under
          this
          Agreement, with the like effect as if originally named as trustee in this
          Agreement. However, on the written request of Acquiror and the Corporation
          or of
          the successor trustee, the trustee ceasing to act shall, upon payment of
          any
          amounts then due it pursuant to the provisions of this Agreement, execute
          and
          deliver an instrument transferring to such successor trustee all the rights
          and
          powers of the trustee so ceasing to act. Upon the request of any such successor
          trustee, Acquiror, the Corporation and such predecessor trustee shall execute
          any and all instruments in writing for more fully and certainly vesting
          in and
          confirming to such successor trustee all such rights and powers.

         

        Section 9.4 Notice
          of Successor Trustee

         

        Upon
          acceptance of appointment by a successor trustee as provided herein, Acquiror
          and the Corporation shall cause to be mailed notice of the succession of
          such
          trustee hereunder to each Beneficiary specified in a List. If Acquiror
          or the
          Corporation shall fail to cause such notice to be mailed within 10 days
          after
          acceptance of appointment by the successor trustee, the successor trustee
          shall
          cause such notice to be mailed at the expense of Acquiror and the
          Corporation.

        
          
            
            

          

          
            -30-

            
              

            

          

          
            
            

          

        

         

        ARTICLE 10

        ACQUIROR
          SUCCESSORS

         

        Section 10.1 Certain
          Requirements in Respect of Combination, etc.

         

        Acquiror
          shall not consummate any transaction (whether by way of reconstruction,
          reorganization, consolidation, merger, transfer, sale, lease or otherwise)
          whereby all or substantially all of its undertaking, property and assets
          would
          become the property of any other person or, in the case of a merger, of
          the
          continuing corporation resulting therefrom, but may do so if:

         

        
          	
                  (a)

                   

                	
                  such
                    other person or continuing corporation (herein called the “Acquiror
                    Successor”),
                    by operation of law, becomes, without more, bound by the terms
                    and
                    provisions of this Agreement or, if not so bound, executes, prior
                    to or
                    contemporaneously with the consummation of such transaction,
                    a trust
                    agreement supplemental hereto and such other instruments (if
                    any) as are
                    satisfactory to the Trustee, acting reasonably, and in the opinion
                    of
                    legal counsel to the Trustee are reasonably necessary or advisable
                    to
                    evidence the assumption by the Acquiror Successor of liability
                    for all
                    moneys payable and property deliverable hereunder (including
                    without
                    limitation one or more voting securities of such Acquiror Successor
                    to
                    allow Beneficiaries to exercise voting rights in respect of the
                    Acquiror
                    Successor substantially similar to those provided for in this
                    Agreement in
                    respect of Acquiror) and the covenant of such Acquiror Successor
                    to pay
                    and deliver or cause to be delivered the same and its agreement
                    to observe
                    and perform all the covenants and obligations of Acquiror under
                    this
                    Agreement; and

                   

                
	
                  (b)

                   

                	
                  such
                    transaction shall be upon such terms and conditions as substantially
                    to
                    preserve and not to impair in any material respect any of the
                    rights,
                    duties, powers and authorities of the Trustee or of the Beneficiaries
                    hereunder.

                   

                

        

        Section 10.2 Vesting
          of Powers in Successor

         

        Whenever
          the conditions of Section 10.1
          have
          been duly observed and performed, the Trustee, Acquiror Successor and the
          Corporation shall, if required by Section 10.1,
          execute
          and deliver the supplemental trust agreement provided for in Article 11
          and
          thereupon Acquiror Successor shall possess and from time to time may exercise
          each and every right and power of Acquiror under this Agreement in the
          name of
          Acquiror or otherwise and any act or proceeding by any provision of this
          Agreement required to be done or performed by the Board of Directors of
          Acquiror
          or any officers of Acquiror may be done and performed with like force and
          effect
          by the directors or officers of such Acquiror Successor.

         

        
          
            
            

          

          
            -31-

            
              

            

          

          
            
            

          

        

        Section 10.3 Wholly-Owned
          Subsidiaries

         

        Nothing
          herein shall be construed as preventing the amalgamation or merger of any
          wholly-owned direct or indirect subsidiary of Acquiror with or into Acquiror
          or
          the winding-up, liquidation or dissolution of any wholly-owned subsidiary
          of
          Acquiror provided that all of the assets of such subsidiary are transferred
          to
          Acquiror or another wholly-owned direct or indirect subsidiary of Acquiror
          and
          any such transactions are expressly permitted by this Article 10.

         

        Section 10.4 Successorship
          Transaction

         

        Notwithstanding
          the foregoing provisions of this Article 10,
          in the
          event of an Acquiror Control Transaction:

         

        
          	
                  (a)

                   

                	
                  in
                    which Acquiror merges or amalgamates with, or in which all or
                    substantially all of the then outstanding Acquiror Shares are
                    acquired by,
                    one or more other corporations to which Acquiror is, immediately
                    before
                    such merger, amalgamation or acquisition, “related” within the meaning of
                    the Income
                    Tax Act (Canada)
                    (otherwise than by virtue of a right referred to in paragraph
                    251(5)(b)
                    thereof);

                   

                
	
                  (b)

                   

                	
                  which
                    does not result in an acceleration of the Redemption Date in
                    accordance
                    with paragraph (b) of that definition; and

                   

                
	
                  (c)

                   

                	
                  in
                    which all or substantially all of the then outstanding Acquiror
                    Shares are
                    converted into or exchanged for shares or rights to receive such
                    shares
                    (the “Other
                    Shares”)
                    of another corporation (the “Other
                    Corporation”)
                    that, immediately after such Acquiror Control Transaction, owns
                    or
                    controls, directly or indirectly, Acquiror;

                   

                

        

        then
          (i) all
          references herein to “Acquiror” shall thereafter be and be deemed to be
          references to “Other Corporation” and all references herein to “Acquiror Shares”
shall thereafter be and be deemed to be references to “Other Shares” (with
          appropriate adjustments, if any, as are required to result in a holder
          of
          Exchangeable Shares on the exchange, redemption or retraction of such shares
          pursuant to the Exchangeable Share Provisions or exchange of such shares
          pursuant to this Agreement immediately subsequent to the Acquiror Control
          Transaction being entitled to receive that number of Other Shares equal
          to the
          number of Other Shares such holder of Exchangeable Shares would have received
          if
          the exchange, redemption or retraction of such shares pursuant to the
          Exchangeable Share Provisions or exchange of such shares pursuant to this
          Agreement had occurred immediately prior to the Acquiror Control Transaction
          and
          the Acquiror Control Transaction was completed) without any need to amend
          the
          terms and conditions of this Agreement and without any further action required;
          and (ii) Acquiror
          shall cause the Other Corporation to deposit one or more voting securities
          of
          such Other Corporation to allow Beneficiaries to exercise voting rights
          in
          respect of the Other Corporation substantially similar to those provided
          for in
          this Agreement. 

        
          
            
            

          

          
            -32-

            
              

            

          

          
            
            

          

        

         

        ARTICLE 11

        AMENDMENTS
          AND SUPPLEMENTAL TRUST AGREEMENTS

         

        Section 11.1 Amendments,
          Modifications, etc.

         

        This
          Agreement may not be amended or modified except by an agreement in writing
          executed by Acquiror, the Corporation and the Trustee and approved by the
          Beneficiaries in accordance with Section 10.2
          of the
          Exchangeable Share Provisions.

         

        Section 11.2 Ministerial
          Amendments

         

        Notwithstanding
          the provisions of Section 11.1,
          the
          parties to this Agreement may in writing, at any time and from time to
          time,
          without the approval of the Beneficiaries, amend or modify this Agreement
          for
          the purposes of

         

        
          	
                  (a)

                   

                	
                  adding
                    to the covenants of any or all parties hereto for the protection
                    of the
                    Beneficiaries hereunder provided that the Board of Directors
                    of each of
                    the Corporation and Acquiror shall be of the good faith opinion
                    that such
                    additions will not be prejudicial to the rights or interests
                    of the
                    Beneficiaries;

                   

                
	
                  (b)

                   

                	
                  making
                    such amendments or modifications not inconsistent with this Agreement
                    as
                    may be necessary or desirable with respect to matters or questions
                    which,
                    in the good faith opinion of the Board of Directors of each of
                    Acquiror
                    and the Corporation and in the opinion of the Trustee, having
                    in mind the
                    best interests of the Beneficiaries it may be expedient to make,
                    provided
                    that such Boards of Directors and the Trustee, acting on the
                    advice of
                    counsel, shall be of the opinion that such amendments and modifications
                    will not be prejudicial to the interests of the Beneficiaries;
                    or

                   

                
	
                  (c)

                   

                	
                  making
                    such changes or corrections which, on the advice of counsel to
                    Acquiror,
                    the Corporation and the Trustee, are required for the purpose
                    of curing or
                    correcting any ambiguity or defect or inconsistent provision
                    or clerical
                    omission or mistake or manifest error, provided that the Trustee,
                    acting
                    on the advice of counsel, and the Board of Directors of each
                    of Acquiror
                    and the Corporation shall be of the opinion that such changes
                    or
                    corrections will not be prejudicial to the rights and interests
                    of the
                    Beneficiaries.

                

        

         

        
          
            
            

          

          
            -33-

            
              

            

          

          
            
            

          

        

        Section 11.3 Meeting
          to Consider Amendments

         

        The
          Corporation, at the request of Acquiror, shall call a meeting or meetings
          of the
          Beneficiaries for the purpose of considering any proposed amendment or
          modification requiring approval pursuant hereto. Any such meeting or meetings
          shall be called and held in accordance with the by-laws of the Corporation,
          the
          Exchangeable Share Provisions and all applicable laws; provided that any
          such
          meeting shall only be called for a bona fide business purpose and not for
          the
          principal purpose of causing a Redemption Date to occur or
          transpire.

         

        Section 11.4 Changes
          in Capital of Acquiror and the Corporation

         

        At
          all
          times after the occurrence of any event contemplated pursuant to Section
          2.7 or
          2.8 of the Support Agreement or otherwise, as a result of which either
          Acquiror
          Shares or the Exchangeable Shares or both are in any way changed, this
          Agreement
          shall forthwith be deemed amended and modified as necessary in order that
          it
          shall apply with full force and effect, mutatis
          mutandis,
          to all
          new securities into which Acquiror Shares or the Exchangeable Shares or
          both are
          so changed.

         

        Section 11.5 Execution
          of Supplemental Trust Agreements

         

        No
          amendment to or modification or waiver of any of the provisions of this
          Agreement otherwise permitted hereunder shall be effective unless made
          in
          writing and signed by all of the parties hereto. From time to time the
          Corporation, Acquiror and the Trustee may, subject to the provisions of
          these
          presents, and they shall, when so directed by these presents, execute and
          deliver by their proper officers, trust agreements or other instruments
          supplemental hereto, which thereafter shall form part hereof, for any one
          or
          more of the following purposes:

         

        
          	
                  (a)

                   

                	
                  evidencing
                    the succession of Acquiror Successors and the covenants of and
                    obligations
                    assumed by each such Acquiror Successor in accordance with the
                    provisions
                    of Article 10
                    and the successors of any successor trustee in accordance with
                    the
                    provisions of Article 9;

                   

                
	
                  (b)

                   

                	
                  making
                    any additions to, deletions from or alterations of the provisions
                    of this
                    Agreement or the Voting Rights, the Exchange Right or the Automatic
                    Exchange Rights which, in the opinion of the Trustee, will not
                    be
                    prejudicial to the interests of the Beneficiaries or are, in
                    the opinion
                    of counsel to the Trustee, necessary or advisable in order to
                    incorporate,
                    reflect or comply with any legislation the provisions of which
                    apply to
                    Acquiror, the Corporation, the Trustee or this Agreement; and

                   

                

        

        
          
            
            

          

          
            -34-

            
              

            

          

          
            
            

          

        

         

        
          	
                  (c)

                   

                	
                  for
                    any other purposes not inconsistent with the provisions of this
                    Agreement,
                    including to make or evidence any amendment or modification to
                    this
                    Agreement as contemplated hereby, provided that, in the opinion
                    of the
                    Trustee, the rights of the Trustee and Beneficiaries will not
                    be
                    prejudiced thereby.

                

        

         

        ARTICLE 12

        TERMINATION

         

        Section 12.1 Term

         

        The
          Trust
          created by this Agreement shall continue until the earliest to occur of
          the
          following events:

         

        
          	
                  (a)

                   

                	
                  no
                    outstanding Exchangeable Shares are held by a Beneficiary;

                   

                
	
                  (b)

                   

                	
                  each
                    of Acquiror and the Corporation elects in writing to terminate
                    the Trust
                    and such termination is approved by the Beneficiaries in accordance
                    with
                    Section 10.2 of the Exchangeable Share Provisions; and

                   

                
	
                  (c)

                   

                	
                  21
                    years after the death of the last survivor of the descendants
                    of His
                    Majesty King George VI of Canada and the United Kingdom of Great
                    Britain
                    and Northern Ireland living on the date of the creation of the
                    Trust.

                   

                

        

        Section 12.2 Survival
          of Agreement

         

        This
          Agreement shall survive any termination of the Trust and shall continue
          until
          there are no Exchangeable Shares outstanding held by a Beneficiary; provided,
          however, that the provisions of Article 7
          and
Article 8
          shall
          survive any such termination of this Agreement.

         

        ARTICLE 13

        GENERAL

         

        Section 13.1 Severability

         

        If
          any
          term or other provision of this Agreement is invalid, illegal or incapable
          of
          being enforced by any rule of law or public policy, all other conditions
          and
          provisions of this Agreement shall nevertheless remain in full force and
          effect
          so long as the economic or legal substance of the transactions contemplated
          hereby is not affected in any manner materially adverse to any party. Upon
          such
          determination that any term or other provision is invalid, illegal or incapable
          of being enforced, the parties hereto shall negotiate in good faith to
          modify
          this Agreement so as to effect the original intent of the parties as closely
          as
          possible in an acceptable manner to the end that transactions contemplated
          hereby are fulfilled to the extent possible.

        
          
            
            

          

          
            -35-

            
              

            

          

          
            
            

          

        

        Section 13.2 Assignment

         

        No
          party
          hereto may assign this Agreement or any of its rights, interests or obligations
          under this Agreement (whether by operation of law or otherwise) except
          that the
          Corporation may assign in its sole discretion, any or all of its rights,
          interests and obligations hereunder to any wholly-owned subsidiary of
          Acquiror.

         

        Section 13.3 Binding
          Effect

         

        Subject
          to Section 13.2,
          this
          Agreement and the Arrangement shall be binding upon, enure to the benefit
          of and
          be enforceable by the parties hereto and their respective successors and
          assigns
          and to the benefit of the Beneficiaries.

         

        Section 13.4 Notices
          to Parties

         

        All
          notices and other communications hereunder shall be in writing and shall
          be
          deemed given when delivered personally, telecopied (which is confirmed)
          or
          dispatched (postage prepaid) to a nationally recognized overnight courier
          service with overnight delivery instructions, in each case addressed to
          the
          particular party at:

         

        
          	
                  (a)    if
                    to Acquiror or the Corporation, at:

                   

                
	 	
                  c/o
                    Surge Global Energy, Inc.

                
	 	
                  12220
                    El Camino Real, Suite 410

                
	 	
                  San
                    Diego, California 92130

                   

                
	 	
                  Attention:
                    l

                
	 	
                  Telecopier
                    Number: (l)
                    l

                   

                
	
                  With
                    copies to:

                   

                
	 	
                  Greenberg
                    Traurig, LLP

                
	 	
                  650
                    Town Center Drive, 17th
                    Floor

                
	 	
                  Costa
                    Mesa, California 92626

                   

                
	 	
                  Attention:
                    Steven Anapoell

                
	 	
                  Telecopier
                    Number: (714)
                    708-6501

                

        

        
          
            
            

          

          
            -36-

            
              

            

          

          
            
            

          

        

        

         

        
          	
                  And:

                   

                	 
	 	
                  Stikeman
                    Elliott LLP

                
	 	
                  4300,
                    888 - 3rd
                    Street S.W.

                
	 	
                  Calgary,
                    Alberta T2P 5C5

                   

                
	 	
                  Attention:
                    Keith R. Chatwin

                
	 	
                  Telecopier
                    Number: (403) 266-9034

                   

                
	
                  (b)    if
                    to the Trustee, at:

                   

                
	 	
                  Computershare
                    Trust Company of Canada

                
	 	
                  710,
                    530 - 8th
                    Avenue S.W.

                
	 	
                  Calgary,
                    Alberta

                
	 	
                  T2P
                    3S8

                   

                
	 	
                  Attention:
                    Manager, Client Services 

                
	 	
                  Telecopier
                    Number: (403) 267-6529

                   

                

        

        or
          at
          such other address of which any party may, from time to time, advise the
          other
          parties by notice in writing given in accordance with the
          foregoing.

         

        Section 13.5 Notice
          to Beneficiaries

         

        Any
          and
          all notices to be given and any documents to be sent to any Beneficiaries
          may be
          given or sent to the address of such Beneficiary shown on the register
          of
          holders of Exchangeable Shares in any manner permitted by the by-laws of
          the
          Corporation from time to time in force in respect of notices to shareholders
          and
          shall be deemed to be received (if given or sent in such manner) at the
          time
          specified in such by-laws, the provisions of which by-laws shall apply
          mutatis
          mutandis to notices or documents as aforesaid sent to such
          Beneficiaries.

         

        Section 13.6 Counterparts

         

        This
          Agreement may be executed in counterparts, each of which shall be deemed
          to be
          an original but all of which together shall constitute one and the same
          instrument.

         

        Section 13.7 Governing
          Laws; Consent to Jurisdiction

         

        This
          Agreement shall be governed by and construed in accordance with the laws
          of
          Alberta. Each party hereby irrevocably attorns to the jurisdiction of the
          courts
          of Alberta in respect of all matters arising under or in relation to this
          Agreement and Acquiror hereby appoints Stikeman Elliott LLP as its registered
          office in Alberta as attorney for service of process.

        
          
            
            

          

          
            -37-

            
              

            

          

          
            
            

          

        

        Section 13.8 United
          States Tax Characterization

         

        The
          parties hereto recognize and intend that, for United States federal, state
          and
          local income, franchise and similar tax purposes, the Trust will be disregarded
          as an entity separate from Acquiror pursuant to Treas. Reg. 301.7701-3(b),
          and
          no party shall take any position on any tax return or otherwise that is
          inconsistent with such treatment.

        
          
            
            

          

          
            -38-

            
              

            

          

          
            
            

          

        

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

         

        

          
            	
                    SURGE
                      GLOBAL ENERGY, INC.

                     

                  
	
                     

                    By:

                  	 
	 	
                    Name:

                  
	 	
                    Title:

                  
	
                     

                    By:

                  	 
	 	
                    Name:

                  
	 	
                    Title:

                  
	
                     

                    COLD
                      FLOW ENERGY ULC

                     

                  
	
                     

                    By:

                  	 
	 	
                    Name:

                  
	 	
                    Title:

                  
	
                     

                    By:

                  	 
	 	
                    Name:
                      

                  
	 	
                    Title:
                      

                  
	
                     

                    COMPUTERSHARE
                      TRUST COMPANY OF CANADA

                     

                  
	
                     

                    By:

                  	 
	 	
                    Name:
                      

                  
	 	
                    Title:
                      

                  
	
                     

                    By:

                  	 
	 	
                    Name:
                      

                  
	 	
                    Title:
                      

                  

          

        

        
 

      

    

    
      
        
        

      

      
        -39-

        
          

        

      

      
        
        

      

    

    EXHIBIT
      4.2(b)

     

    GENERAL
      RELEASE - SHAREHOLDERS

     

    

     

    (See
      attached)

     

    

     

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      4.2(e)

     

    LEGAL
      OPINION OF TARGET COMPANY COUNSEL

     

    

     

    (See
      attached)

     

    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      4.3(e)

     

    LEGAL
      OPINION OF PURCHASER COUNSEL

     

    

     

    (See
      attached)

     

    

     

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      4.3(f)

     

    LEGAL
      OPINION OF SURGE COUNSEL

     

    

     

    (See
      attached)

     

    

     

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      10.2

     

    EXCLUSION
      AREA

     

    

     

    (See
      attached)

     

    

     

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

     

    EXHIBIT
      10.5

     

    GENERAL
      RELEASE - TARGET COMPANY

     

    

     

    (See
      attached)

     

    

     

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

     

    EXHIBIT
      10.6

     

    FORM
      OF SUBSCRIPTION AGREEMENT

     

    

     

    (See
      attached)

     

    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      1

     

    SCHEDULE
      OF SHAREHOLDERS

     

    
      	
              SHAREHOLDER

            	
              NUMBER
                OF

              CLASS
                “A”

              SHARES
                HELD

            	
              NUMBER
                OF

              CLASS
                “I”

              SHARES
                HELD

            	
              ALLOCATION

              OF
                PURCHASE

              PRICE

            
	
              1216848
                Alberta Ltd.

              9702
                - 71 Avenue

              Grande
                Prairie, Alberta T8V 5E1

            	
              170

            	
              1,345,833

            	
              TBD

            
	
              Cairns
                Family Trust

              1936
                - 11th Street S.W.

              Calgary,
                Alberta T2T 3L8

            	
              170

            	
              -

            	
              TBD

            
	
              Fisher
                Family Trust

              1129
                Lansdowne Avenue S.W.

              Calgary,
                Alberta T2S 1A4

            	
              170

            	
              -

            	
              TBD

            
	
              Liu
                Family Trust

              308
                - 6211 Gilbert Road

              Richmond,
                BC V7C 3V6

            	
              36

            	
              285,000

            	
              TBD

            
	
              Ma
                Family Trust

              1500
                Bellflower Crt

              Coquitlam,
                BC V3E 2V2

            	
              84

            	
              665,000

            	
              TBD

            
	
              Stouthearted
                Trust

              Suite
                2600, 144 - 4th
                Avenue S.W.

              Calgary,
                Alberta T2P3N4

            	
              170

            	
              -

            	
              TBD

            
	
              1229697
                Alberta Inc.

              1129
                Lansdowne Avenue S.W.

              Calgary,
                Alberta T2S 1A4

            	
              -

            	
              1,345,833

            	
              TBD

            
	
              Cairns,
                Jeff

              1936
                - 11th Street S.W.

              Calgary,
                Alberta T2T 3L8

            	
              -

            	
              1,345,833

            	
              TBD

            
	
              Fisher,
                Dale N. 

              1129
                Lansdowne Avenue S.W.

              Calgary,
                Alberta T2S 1A4

            	
              -

            	
              1,345,833

            	
              TBD

            
	
              TOTAL

            	
              800

            	
              6,333,332

            	 

    

    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      2

     

    PURCHASER
      DISCLOSURE SCHEDULE

     

    

     

    (See
      attached)

     

    

     

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    

    SCHEDULE
      3

     

    TARGET
      DISCLOSURE SCHEDULE

     

    

     

    (See
      attached)

     

    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

    

    SCHEDULE
      4

     

    SURGE
      DISCLOSURE SCHEDULE

     

    

     

    (See
      attached)

     

    

    
       

      
        1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00114-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00114-of-00352.parquet"}]]