Document:

Exhibit 10.21

 

TRUST INDENTURE

 

 

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

7% Secured Convertible Debentures

AMONG

SURGE GLOBAL ENERGY (CANADA), LTD.

– and –

SURGE GLOBAL ENERGY, INC.

– and –

VALIANT TRUST COMPANY

 

 

Made as of November 15, 2005

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Article 1
  INTERPRETATION

  	
   

  	
  1

  
	
  1.1

  	
   

  	
  Definitions

  	
   

  	
  1

  
	
  1.2

  	
   

  	
  Meaning
  of Outstanding

  	
   

  	
  8

  
	
  1.3

  	
   

  	
  Headings

  	
   

  	
  8

  
	
  1.4

  	
   

  	
  Gender
  and Number

  	
   

  	
  9

  
	
  1.5

  	
   

  	
  Governing
  Law

  	
   

  	
  9

  
	
  1.6

  	
   

  	
  Day
  Not a Business Day

  	
   

  	
  9

  
	
  1.7

  	
   

  	
  Accounting
  Principles

  	
   

  	
  9

  
	
  1.8

  	
   

  	
  Interest
  Calculations

  	
   

  	
  9

  
	
  1.9

  	
   

  	
  Time
  of the Essence

  	
   

  	
  9

  
	
  1.10

  	
   

  	
  Language

  	
   

  	
  10

  
	
  1.11

  	
   

  	
  Expanded
  Meanings

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 2
  THE DEBENTURES

  	
   

  	
  10

  
	
  2.1

  	
   

  	
  Terms
  of Debentures

  	
   

  	
  10

  
	
  2.2

  	
   

  	
  Form and
  Signature of Debentures

  	
   

  	
  11

  
	
  2.3

  	
   

  	
  Issue
  of Debentures

  	
   

  	
  11

  
	
  2.4

  	
   

  	
  Certification

  	
   

  	
  12

  
	
  2.5

  	
   

  	
  Debentures
  to Rank Pari Passu

  	
   

  	
  12

  
	
  2.6

  	
   

  	
  Registration
  of Debentures

  	
   

  	
  12

  
	
  2.7

  	
   

  	
  Persons
  Entitled to Payment

  	
   

  	
  13

  
	
  2.8

  	
   

  	
  Mutilation,
  Loss, Theft or Destruction

  	
   

  	
  14

  
	
  2.9

  	
   

  	
  Exchange
  of Debentures

  	
   

  	
  14

  
	
  2.10

  	
   

  	
  Resale
  Restrictions and Legends

  	
   

  	
  14

  
	
  2.11

  	
   

  	
  Trustee
  Not Bound to Make Enquiries

  	
   

  	
  15

  
	
  2.12

  	
   

  	
  Restrictions
  on Use of Proceeds

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 3
  SECURITY

  	
   

  	
  16

  
	
  3.1

  	
   

  	
  Security

  	
   

  	
  16

  
	
  3.2

  	
   

  	
  Attachment

  	
   

  	
  16

  
	
  3.3

  	
   

  	
  Leases

  	
   

  	
  17

  
	
  3.4

  	
   

  	
  Contractual
  Rights

  	
   

  	
  17

  
	
  3.5

  	
   

  	
  Permitted
  Activities

  	
   

  	
  17

  
	
  3.6

  	
   

  	
  Liability
  of Trustee

  	
   

  	
  17

  
	
  3.7

  	
   

  	
  Mandatory
  Provisions of Applicable Law

  	
   

  	
  18

  
	
  3.8

  	
   

  	
  Waivers
  of Applicable Laws

  	
   

  	
  18

  
	
  3.9

  	
   

  	
  Further
  Assurances

  	
   

  	
  18

  
	
  3.10

  	
   

  	
  Registration

  	
   

  	
  18

  
	
  3.11

  	
   

  	
  Discharge

  	
   

  	
  19

  
	
  3.12

  	
   

  	
  Partial
  Discharge

  	
   

  	
  19

  
	
  3.13

  	
   

  	
  Additional
  Security

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 4
  SUBORDINATION OF DEBENTURES

  	
   

  	
  19

  
	
  4.1

  	
   

  	
  Subordination

  	
   

  	
  19

  
	
  4.2

  	
   

  	
  Realization

  	
   

  	
  20

  
	
  4.3

  	
   

  	
  Subrogation
  of Permitted Senior Debt

  	
   

  	
  20

  
	
  4.4

  	
   

  	
  Payment
  of Obligations Permitted

  	
   

  	
  21

  

 

 

	
  4.5

  	
   

  	
  Enforceable
  by Holders of Permitted Senior Debt

  	
   

  	
  21

  
	
  4.6

  	
   

  	
  Payment
  of Debentures Permitted

  	
   

  	
  21

  
	
  4.7

  	
   

  	
  Notice
  of Default under Permitted Senior Debt

  	
   

  	
  21

  
	
  4.8

  	
   

  	
  No
  Impairment Between Corporation and Debentureholders

  	
   

  	
  21

  
	
  4.9

  	
   

  	
  Authorization
  of Trustee to Affect Subordination

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 5
  EXERCISE OF CONVERSION RIGHT

  	
   

  	
  22

  
	
  5.1

  	
   

  	
  Conversion
  Right

  	
   

  	
  22

  
	
  5.2

  	
   

  	
  Deemed
  Conversion Upon Going Public Transaction

  	
   

  	
  23

  
	
  5.3

  	
   

  	
  Deemed
  Conversion of Exchanged Debentures

  	
   

  	
  23

  
	
  5.4

  	
   

  	
  Effect
  of Exercise of Conversion Right

  	
   

  	
  23

  
	
  5.5

  	
   

  	
  Partial
  Exercise of Conversion Right; Fractions

  	
   

  	
  23

  
	
  5.6

  	
   

  	
  Cancellation
  and Destruction of Debentures

  	
   

  	
  24

  
	
  5.7

  	
   

  	
  Expiration
  of Conversion Right

  	
   

  	
  24

  
	
  5.8

  	
   

  	
  Securities
  Restrictions

  	
   

  	
  24

  
	
  5.9

  	
   

  	
  Debentureholders
  not a Shareholder

  	
   

  	
  24

  
	
  5.10

  	
   

  	
  Charges
  for Conversion or Transfer

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 6
  EXERCISE OF EXCHANGE RIGHT

  	
   

  	
  25

  
	
  6.1

  	
   

  	
  Exchange
  Right

  	
   

  	
  25

  
	
  6.2

  	
   

  	
  Affect
  of Exercise of Exchange Right

  	
   

  	
  25

  
	
  6.3

  	
   

  	
  Partial
  Exercise of Exchange Rights; Fractions

  	
   

  	
  26

  
	
  6.4

  	
   

  	
  Cancellation
  and Destruction of Debentures

  	
   

  	
  26

  
	
  6.5

  	
   

  	
  Expiration
  of Exchange Right

  	
   

  	
  26

  
	
  6.6

  	
   

  	
  Securities
  Restrictions

  	
   

  	
  26

  
	
  6.7

  	
   

  	
  Debentureholders
  not a Shareholder

  	
   

  	
  26

  
	
  6.8

  	
   

  	
  Charges
  for Exchange or Transfer

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 7
  REDEMPTION, RETRACTION AND REPAYMENT

  	
   

  	
  27

  
	
  7.1

  	
   

  	
  Redemption

  	
   

  	
  27

  
	
  7.2

  	
   

  	
  Non-Retractable

  	
   

  	
  28

  
	
  7.3

  	
   

  	
  Repayment
  at the Maturity Date

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 8
  ADJUSTMENT ON CONVERSION PRICE

  	
   

  	
  29

  
	
  8.1

  	
   

  	
  Adjustment
  of Conversion Price

  	
   

  	
  29

  
	
  8.2

  	
   

  	
  Adjustment
  of Surge U.S. Exchange Price

  	
   

  	
  31

  
	
  8.3

  	
   

  	
  Protection
  of Trustee

  	
   

  	
  33

  
	
  8.4

  	
   

  	
  Entitlement
  to Shares on Exercise of Conversion Right

  	
   

  	
  33

  
	
  8.5

  	
   

  	
  No
  Adjustment for Stock Options

  	
   

  	
  33

  
	
  8.6

  	
   

  	
  Determination
  by Corporation’s Auditors

  	
   

  	
  34

  
	
  8.7

  	
   

  	
  Proceedings
  Prior to any Action Requiring Adjustment

  	
   

  	
  34

  
	
  8.8

  	
   

  	
  Certificate
  of Adjustment

  	
   

  	
  34

  
	
  8.9

  	
   

  	
  Notice
  of Special Matters

  	
   

  	
  34

  
	
  8.10

  	
   

  	
  No
  Action after Notice

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 9
  COVENANTS, REPRESENTATIONS AND WARRANTIES

  	
   

  	
  35

  
	
  9.1

  	
   

  	
  Positive
  Covenants

  	
   

  	
  35

  
	
  9.2

  	
   

  	
  Negative
  Covenants

  	
   

  	
  36

  
	
  9.3

  	
   

  	
  Representations
  and Warranties - Corporation

  	
   

  	
  36

  
	
  9.4

  	
   

  	
  Representations
  and Warranties - Surge U.S.

  	
   

  	
  37

  
	
  9.5

  	
   

  	
  Trustee
  May Perform Covenants

  	
   

  	
  38

  

 

ii

 

	
  9.6

  	
   

  	
  Pay
  Trustee’s Remuneration

  	
   

  	
  38

  
	
  9.7

  	
   

  	
  Certificate
  as to Interest Rate

  	
   

  	
  38

  
	
  9.8

  	
   

  	
  Certificates
  Relating to Default

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 10
  DEFAULT

  	
   

  	
  39

  
	
  10.1

  	
   

  	
  Acceleration
  of Maturity Date

  	
   

  	
  39

  
	
  10.2

  	
   

  	
  Acceleration

  	
   

  	
  40

  
	
  10.3

  	
   

  	
  Remedies
  - General

  	
   

  	
  40

  
	
  10.4

  	
   

  	
  Possession

  	
   

  	
  41

  
	
  10.5

  	
   

  	
  Judgment

  	
   

  	
  41

  
	
  10.6

  	
   

  	
  Account
  Debtors

  	
   

  	
  41

  
	
  10.7

  	
   

  	
  Receiver

  	
   

  	
  42

  
	
  10.8

  	
   

  	
  Remedies
  Not Exclusive

  	
   

  	
  43

  
	
  10.9

  	
   

  	
  Expenses

  	
   

  	
  43

  
	
  10.10

  	
   

  	
  Notice
  of Events of Default

  	
   

  	
  43

  
	
  10.11

  	
   

  	
  Waiver
  of Default

  	
   

  	
  44

  
	
  10.12

  	
   

  	
  Certificate
  re Default

  	
   

  	
  44

  
	
  10.13

  	
   

  	
  Enforcement
  by the Trustee

  	
   

  	
  45

  
	
  10.14

  	
   

  	
  No
  Suits by Debentureholders

  	
   

  	
  46

  
	
  10.15

  	
   

  	
  Application
  of Monies by Trustee

  	
   

  	
  46

  
	
  10.16

  	
   

  	
  Distribution
  of Proceeds

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 11
  MEETINGS OF DEBENTUREHOLDERS

  	
   

  	
  47

  
	
  11.1

  	
   

  	
  Right
  to Convene Meeting

  	
   

  	
  47

  
	
  11.2

  	
   

  	
  Notice
  of Meetings

  	
   

  	
  47

  
	
  11.3

  	
   

  	
  Chairperson

  	
   

  	
  47

  
	
  11.4

  	
   

  	
  Quorum

  	
   

  	
  48

  
	
  11.5

  	
   

  	
  Power
  to Adjourn

  	
   

  	
  48

  
	
  11.6

  	
   

  	
  Show
  of Hands

  	
   

  	
  48

  
	
  11.7

  	
   

  	
  Poll

  	
   

  	
  48

  
	
  11.8

  	
   

  	
  Voting

  	
   

  	
  48

  
	
  11.9

  	
   

  	
  Regulations

  	
   

  	
  49

  
	
  11.10

  	
   

  	
  Persons
  Entitled to Attend Meetings

  	
   

  	
  49

  
	
  11.11

  	
   

  	
  Powers
  Exercisable by Extraordinary Resolution

  	
   

  	
  49

  
	
  11.12

  	
   

  	
  Meaning
  of Extraordinary Resolutions

  	
   

  	
  52

  
	
  11.13

  	
   

  	
  Powers
  Cumulative

  	
   

  	
  52

  
	
  11.14

  	
   

  	
  Minutes

  	
   

  	
  53

  
	
  11.15

  	
   

  	
  Binding
  Effect of Resolutions

  	
   

  	
  53

  
	
  11.16

  	
   

  	
  Evidence
  of Rights of Debentureholder

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 12
  CONCERNING THE TRUSTEE

  	
   

  	
  53

  
	
  12.1

  	
   

  	
  No
  Conflict of Interest

  	
   

  	
  53

  
	
  12.2

  	
   

  	
  Replacement
  of Trustee

  	
   

  	
  54

  
	
  12.3

  	
   

  	
  Duties
  of Trustee

  	
   

  	
  54

  
	
  12.4

  	
   

  	
  Reliance
  Upon Declarations

  	
   

  	
  56

  
	
  12.5

  	
   

  	
  Evidence
  and Authority to Trustee

  	
   

  	
  56

  
	
  12.6

  	
   

  	
  Certificate
  of the Corporation as Evidence

  	
   

  	
  57

  
	
  12.7

  	
   

  	
  Experts,
  Advisers and Agents

  	
   

  	
  57

  
	
  12.8

  	
   

  	
  Documents
  Held by Trustee

  	
   

  	
  57

  
	
  12.9

  	
   

  	
  Investments
  of Monies by Trustee

  	
   

  	
  57

  
	
  12.10

  	
   

  	
  Trustee
  Not Ordinarily Bound

  	
   

  	
  58

  

 

iii

 

	
  12.11

  	
   

  	
  Trustee
  Not Required to Give Security

  	
   

  	
  58

  
	
  12.12

  	
   

  	
  Trustee
  Not to Be Appointed Receiver

  	
   

  	
  58

  
	
  12.13

  	
   

  	
  Trustee
  Not Bound to Act

  	
   

  	
  58

  
	
  12.14

  	
   

  	
  Conditions
  Precedent to Trustee’s Obligations to Act Hereunder

  	
   

  	
  58

  
	
  12.15

  	
   

  	
  Authority
  to Carry on Business

  	
   

  	
  59

  
	
  12.16

  	
   

  	
  Acceptance
  of Trust

  	
   

  	
  59

  
	
  12.17

  	
   

  	
  Indemnity
  of Trustee

  	
   

  	
  59

  
	
  12.18

  	
   

  	
  Environmental
  Indemnity

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 13
  NOTICES

  	
   

  	
  60

  
	
  13.1

  	
   

  	
  Notice

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 14
  SUPPLEMENTAL INDENTURES

  	
   

  	
  61

  
	
  14.1

  	
   

  	
  Supplemental
  Indenture

  	
   

  	
  61

  
	
  14.2

  	
   

  	
  Indenture
  Confirming or Evidencing Subordination

  	
   

  	
  62

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 15
  SUCCESSOR CORPORATIONS

  	
   

  	
  62

  
	
  15.1

  	
   

  	
  Successor
  Corporation to the Corporation

  	
   

  	
  62

  
	
  15.2

  	
   

  	
  Vesting
  of Powers in Successor Corporation

  	
   

  	
  63

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 16
  GENERAL

  	
   

  	
  63

  
	
  16.1

  	
   

  	
  Entire
  Agreement

  	
   

  	
  63

  
	
  16.2

  	
   

  	
  Amendments

  	
   

  	
  63

  
	
  16.3

  	
   

  	
  Further
  Assurances

  	
   

  	
  63

  
	
  16.4

  	
   

  	
  Unenforceable
  Terms

  	
   

  	
  64

  
	
  16.5

  	
   

  	
  Trustee
  Indenture Legislation

  	
   

  	
  64

  
	
  16.6

  	
   

  	
  Severability

  	
   

  	
  64

  
	
  16.7

  	
   

  	
  Meaning
  of “Collateral” and “Obligations” on Amalgamation

  	
   

  	
  64

  
	
  16.8

  	
   

  	
  Enurement

  	
   

  	
  65

  
	
  16.9

  	
   

  	
  Execution

  	
   

  	
  65

  
	
  16.10

  	
   

  	
  Formal
  Date

  	
   

  	
  66

  

 

iv

 

TRUST INDENTURE

 

THIS TRUST INDENTURE IS
MADE AS OF NOVEMBER 15, 2005

 

AMONG:

 

SURGE GLOBAL ENERGY (CANADA), LTD., a corporation existing under the laws of the Province of Alberta

 

AND:

 

SURGE GLOBAL ENERGY, INC., a corporation existing under the laws of the state of Delaware

 

AND:

 

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

 

WHEREAS:

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 1

INTERPRETATION

 

1.1                                                                               Definitions

 

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

 

 

“Acceleration Notice” means a written notice
delivered pursuant to Section 10.2 declaring all Indebtedness of the
Corporation outstanding to the Debentureholders to be due and payable;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Common Shares” means, subject to Article 8,
fully paid and non-assessable common shares in the capital of the Corporation,
as presently constituted;

 

2

 

“Conversion Date” means, as applicable, the
date on which a Debenture is surrendered, and accompanying notice is delivered,
to the Trustee for conversion in accordance with Section 5.1, or the
effective date of any deemed exercise of the Conversion Right pursuant to Section 5.2
or 5.3;

 

“Conversion Price” means the price at which
a Common Share may be issued from time to time on the conversion of the
Principal Sum of a Debenture, which is currently Cdn. $1.00 per Common Share,
subject to adjustment in accordance with the provisions of Article 8, in
which case it shall mean the adjusted price in effect at such time;

 

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

 

“Corporation” means Surge Global Energy
(Canada), Ltd. and its permitted successors and assigns;

 

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

 

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

 

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

 

“Current Market Price” means:

 

(a)                                  in respect of the Common
Shares:

 

(i)                                     prior to a Going Public
Transaction, the greater of Cdn. $1.00 per Common Share (subject to adjustment
pursuant to Article 8) and the price per Common Share established by the
Board of Directors (acting reasonably) from time to time; or

 

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

 

(b)                                 in respect of the Surge U.S.
Common Shares, the Weighted Average Price per Surge U.S. Common Share for the
15 consecutive Trading Days immediately preceding such date;

 

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

 

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

 

3

 

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

 

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

 

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

 

“Event of Default” means any of the events
of default referred to in Section 10.1;

 

“Exchange Date” means, as applicable, the
date (being either June 30 or December 31) on which a Debenture and
accompanying notice is delivered to Surge U.S. in exchange for Surge U.S. Common
Shares in accordance with Section 6.1(a);

 

“Exchange Price” means the price at which a
Surge U.S. Common Share may be issued from time to time in consideration for
the exchange of a Debenture, which is currently U.S. $1.00 per Surge U.S.
Common Share, subject to adjustment in accordance with the provisions of Article 8,
in which case it shall mean the adjusted price in effect at such time;

 

“Exchange Rate” means a fixed exchange rate
of Cdn. $1.25 equal to U.S. $1.00;

 

“Exchange Right” means the right of a
Debentureholder to deliver and exchange its Debenture for Surge U.S. Common
Shares at the Exchange Price pursuant to Section 6.1(a);

 

“Extraordinary Resolution” has the meaning
attributed to it in Section 11.12;

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

(b)                                 the sale, exchange,
reorganization or arrangement of all the Common Shares for, or the sale of all
or substantially all of the assets of the Corporation in a transaction that
results in the holders of Common Shares receiving for their Common Shares
consideration consisting of: (A) cash; and/or (B) securities which
are not subject to resale restrictions (except for those applicable to “control
persons”) in Alberta and Ontario and are listed and posted for trading on the
TSX or the TSXV;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Interest Period” means:

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

“Permitted Debt” means indebtedness for
borrowed money of the Corporation, including Permitted Senior Debt and the
Subsequent Debentures, which, in aggregate, does not exceed the principal
amount of Cdn. $25,000,000;

 

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

 

“Permitted Senior Debt” means all Senior
Debt of the Corporation which, in aggregate, does not exceed the lesser of (i) the
principal amount of Cdn. $10,000,000, and (ii) Cdn. $25,000,000
minus the principal amount of the outstanding Subsequent Debentures;

 

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

 

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

 

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

 

“Realization Event” means the occurrence of
an Event of Default and, except in the case of an Event of Default under Section 10.1(c) or
10.1(d) (where a demand is not required), the demand for payment of the
Principal Sum by the Trustee;

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

“Senior Debt Default” shall mean and include

 

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

 

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

 

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

 

“Subsequent Debentures” means up to
Cdn. $25,000,000 of secured convertible debentures which will rank equally
in terms of priority of payment and security with the Debentures, but shall
otherwise have such terms, conditions, rights and provisions (including
interest rate, interest payment date, maturity date, conversion rights and
redemption rights) as the Corporation and such debentureholders may agree,
which debentures may be evidenced by a Supplemental Indenture to this Trust
Indenture or a separate Trust Indenture, all of the foregoing without the
consent or approval of, or notice to, the Debentureholders;

 

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

 

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

 

“Successor Corporation” has the meaning
ascribed thereto in Section 15.1;

 

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

 

“Surge U.S. Common Shares” means, subject to Article 8, fully paid and
non-assessable shares of common stock of Surge U.S., as presently constituted;

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

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

 

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

 

1.2                                                                               Meaning of Outstanding

 

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

 

(i)                                     it shall be cancelled; or

 

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

 

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

 

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

 

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

 

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

 

1.3                                                                               Headings

 

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

 

8

 

1.4                                                                               Gender and Number

 

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

 

1.5                                                                               Governing Law

 

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

 

1.6                                                                               Day Not a Business Day

 

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

 

1.7                                                                               Accounting Principles

 

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

 

1.8                                                                               Interest Calculations

 

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

 

1.9                                                                               Time of the Essence

 

Time
shall be of the essence of this Trust Indenture.

 

9

 

1.10                                                                        Language

 

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

 

1.11                                                                        Expanded Meanings

 

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

 

ARTICLE 2

THE DEBENTURES

 

2.1                                                                               Terms of Debentures

 

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

 

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

 

(c)                                  As Interest on each Debenture
becomes due, the Corporation (except in case of payment on redemption pursuant
to Section 7.1, at which time payment of Interest shall be made upon
surrender of a Debenture) shall, on each Interest Payment Date, cause to be
paid to each Debentureholder an amount equal to such Interest in immediately
available funds.

 

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

 

(e)                                  Payments of the Principal Sum,
Interest, fees and other amounts payable by the Corporation pursuant to this
Trust Indenture shall be paid in Canadian dollars for value at or before 10:00 a.m.
(Calgary time) on the day such amount is due. 
If any such day is not a Business Day such amount shall be deemed for
all purposes of this Trust Indenture to be due on the immediately following
Business Day.  As Interest becomes due on
the Debentures, the Corporation shall cause to be sent, either directly or
through the Trustee, at least three (3) Business Days prior to each date
on which such Interest becomes due, by prepaid ordinary mail a cheque or by
other transfer of funds by such means as may be considered appropriate by the
Trustee for such Interest (less any tax required by law to be withheld
therefrom) payable to the order of each Debentureholder

 

10

 

as at
the Record Date and addressed to it at its last address or account, as the case
may be, appearing on the Register.  In
the case of joint Debentureholders as at the applicable Record Date, the cheque
or other such transfer of funds, as the case may be, shall be payable or issued
to the order of all such joint Debentureholders and addressed to them at the
last address or account appearing on the Register, as the case may be.  If more than one address or account appears
on the Register in respect of such joint Debentureholders, the cheque or other
such transfer of funds, as the case may be, shall be mailed or delivered, as
the case may be, to the first address or account so appearing.  In the event of non-receipt of any cheque or
funds for Interest by such Debentureholder, the Corporation will cause to be
issued, either directly or through the Trustee, to such Debentureholder a
replacement cheque or replacement transfer of funds for like amount upon being
furnished with such evidence of non-receipt as it shall reasonably require and
upon the Corporation and the Trustee being indemnified to their satisfaction,
acting reasonably.  The forwarding of
such cheque or the making of such payment by other means shall satisfy and
discharge the liability for the Interest on such Debentures to the extent of
the sum or sums represented thereby (plus the amount of any tax deducted as
aforesaid) unless such cheque if payment is so made by cheque be not paid on
presentation.  The Corporation will give
the Trustee contemporaneous notice of each payment of Interest on the
Debentures on each Interest Payment Date.

 

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

 

2.2                                                                               Form and Signature of Debentures

 

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

 

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

 

2.3                                                                               Issue of Debentures

 

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

 

11

 

2.4                                                                               Certification

 

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

 

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

 

2.5                                                                               Debentures to Rank Pari Passu

 

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

 

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

 

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

 

2.6                                                                               Registration of Debentures

 

(a)                                  The Corporation shall, at all
times while any Debentures are outstanding, cause to be kept by the Trustee at
the principal office of the Trustee in the City of Calgary and in such other
place or places as the Corporation with the approval of the Trustee may
designate, registers (“Register(s)”)
in which shall be entered the names and addresses of the Debentureholders and
the Principal Sum and certificate number of the Debentures held by them
respectively and of all

 

12

 

transfers
of Debentures.  No transfer of a
Debenture shall be valid unless made by the Debentureholder or his executors or
administrators or other legal representatives or his or their attorney duly
appointed by a Transfer in writing, upon compliance with such requirements as
the Trustee may prescribe, and unless such transfer shall have been duly
entered on one of the appropriate Registers.

 

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

 

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

 

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

 

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

 

2.7                                                                               Persons Entitled to Payment

 

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

 

13

 

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

 

2.8                                                                               Mutilation, Loss, Theft or Destruction

 

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

 

2.9                                                                               Exchange of Debentures

 

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

 

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

 

2.10                                                                        Resale Restrictions and Legends

 

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

 

(a)                                  The Debentures and Surge U.S.
Common Shares issuable on the exchange thereof have not been initially
registered under the U.S. Securities Act. 
Accordingly, all Debentures and Surge U.S. Common Shares, as the case may
be, shall bear the following legend (the “US
Legend”):

 

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S.
SECURITIES ACT”); AND MAY BE OFFERED FOR SALE, SOLD, EXCHANGED, OR
OTHERWISE TRANSFERRED OR

 

14

 

ASSIGNED FOR VALUE ONLY (A) TO THE CORPORATION; (B) IN
COMPLIANCE WITH RULE 144 OR RULE 144A UNDER THE U.S. SECURITIES ACT (C) PURSUANT
TO REGISTRATION UNDER THE U.S. SECURITIES ACT, OR (D) IN A TRANSACTION
THAT IS OTHERWISE EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND
STATE SECURITIES LAWS, PROVIDED THE CORPORATION SHALL HAVE RECEIVED AN OPINION
OF COUNSEL SATISFACTORY TO IT AS TO THE AVAILABILITY OF THE EXEMPTIONS RELIED
ON.

 

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

 

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

 

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

 

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

 

(c)                                  If Debentures or certificates
for Common Shares or Surge U.S. Common Shares bearing a US Legend and/or
Canadian Legend are presented to the Trustee for exchange, the Trustee shall
deliver to the holder thereof new certificates bearing the US Legend and/or
Canadian Legend, as applicable, in the name requested, representing the
appropriate aggregate number of securities.

 

2.11                                                                        Trustee Not Bound to Make Enquiries

 

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

 

15

 

2.12                                                                        Restrictions on Use of Proceeds

 

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

 

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

 

(b)                                 secondly, to pay Surge U.S.
Cdn. $630,000 and Deep Well Oil & Gas (Alberta), Ltd. and Northern
Alberta Oil Ltd. an aggregate of U.S. $1,000,000 contemporaneous with the
closing of the first issue of Debentures; and

 

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

 

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

 

ARTICLE 3

SECURITY

 

3.1                                                                               Security

 

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

 

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

 

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

 

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

 

3.2                                                                               Attachment

 

The
Corporation acknowledges conclusively that the Corporation and the Trustee
intend the Charge in the Collateral to attach immediately upon the execution of
this Trust Indenture, except in the case of Collateral in which the Corporation
subsequently acquires rights, in which case the Charge

 

16

 

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

 

3.3                                                                               Leases

 

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

 

3.4                                                                               Contractual Rights

 

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

 

3.5                                                                               Permitted Activities

 

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

 

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

 

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

 

3.6                                                                               Liability of Trustee

 

Neither
the Trustee nor any Receiver shall (i) be responsible or liable for any
debts contracted by it, for damages to Persons or property, for salaries or for
non-fulfilment of contracts during any period when the Trustee or any Receiver
shall manage or be in possession of the Collateral; (ii) be liable to
account as mortgagee in possession or for anything except actual receipts or be
liable for any loss

 

17

 

on realization or for any default or omission for which a mortgagee in
possession may be liable; (iii)  be bound to do, observe or perform or to
see to the observance or performance by the Corporation of any obligations or
covenants imposed upon the Corporation; or (iv) in the case of any chattel
paper, security or instrument, be obligated to preserve rights against any
other Persons.  The Corporation hereby
waives any provision of Applicable Law permitted to be waived by it which
imposes higher or greater obligations upon the Trustee or any Receiver than
aforesaid.

 

3.7                                                                               Mandatory Provisions of Applicable Law

 

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

 

3.8                                                                               Waivers of Applicable Laws

 

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

 

3.9                                                                               Further Assurances

 

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

 

3.10                                                                        Registration

 

The
Corporation will ensure that this Trust Indenture and all documents, caveats,
security notices, financing statements and financing change statements in
respect thereof, are promptly filed and re-filed, registered and re-registered
and deposited and re-deposited, in such manner, in such offices and places, and
at such times and as often as may be required by Applicable Law or as may be
necessary or desirable to perfect and preserve the Charge as a first priority
Security Interest subject only to Permitted

 

18

 

Encumbrances and will
promptly provide the Trustee with evidence (satisfactory to the Trustee) of
such filing, registration and deposit; provided that the Corporation shall have
10 Business Days following the issuance of the first Debentures hereunder to
register this Trust Indenture as a fixed charge against the resource properties
of the Corporation pursuant to the Land
Titles Act (Alberta) and the Mines
and Minerals Act (Alberta) and, upon receipt, to provide the Trustee
with evidence of such registrations.

 

3.11                                                                        Discharge

 

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

 

3.12                                                                        Partial Discharge

 

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

 

3.13                                                                        Additional Security

 

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

 

ARTICLE 4

SUBORDINATION OF DEBENTURES

 

4.1                                                                               Subordination

 

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

 

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

 

19

 

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

 

4.2                                                                               Realization

 

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

 

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

 

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

 

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

 

4.3                                                                               Subrogation of Permitted Senior Debt

 

If the
Debentureholders shall pay any amount to the holders of Permitted Senior Debt
pursuant to Sections 4.1 or 4.2, and upon the Permitted Senior Debt being
paid in full and satisfied, then to the extent that the Corporation shall then
be indebted to the Debentureholders under this Trust Indenture, the
Debentureholders shall be subrogated to the rights of the holders of Permitted
Senior Debt (without any representation or warranty from holders of the
Permitted Senior Debt) and shall be entitled to receive an assignment of any and
all of the documents representing the Permitted Senior Debt and to receive
payments or distributions of assets of the Corporation made on the Permitted
Senior Debt until the principal of, premiums and the interest thereon, shall be
paid in full, as between the Corporation and the Debentureholders, to be
applied to this Trust Indenture until the Subordinated Obligations shall have
been paid in full and satisfied, and the effect of this Section shall in
no manner reduce the amount which the Debentureholders are entitled to recover
in respect of this Trust Indenture.

 

20

 

4.4                                                                               Payment of Obligations Permitted

 

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

 

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

 

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

 

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

 

(d)                                 the exercise of a Conversion
Right or an Exchange Right;

 

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

 

4.5                                                                               Enforceable by Holders of Permitted Senior Debt

 

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

 

4.6                                                                               Payment of Debentures Permitted

 

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

 

4.7                                                                               Notice of Default under Permitted Senior Debt

 

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

 

4.8                                                                               No Impairment Between Corporation and Debentureholders

 

Nothing
herein shall impair, as between the Corporation and the Debentureholders, the
obligation of the Corporation, which is unconditional and absolute, to pay the
Debentureholders the Principal Sum and Interest on the Debentures in accordance
with its terms, nor shall anything therein or herein prevent the Trustee or the
Debentureholders from exercising all the remedies otherwise permitted by
Applicable Law or hereunder upon the occurrence of any Default or Event of
Default hereunder, even

 

21

 

if the Default or Event of Default arose by reason of the Corporation
being prohibited from making payment on the Subordinated Obligations in
accordance with the terms of this Article 4.

 

4.9                                                                               Authorization of Trustee to Affect Subordination

 

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

 

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

 

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

 

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

 

ARTICLE 5

EXERCISE OF CONVERSION RIGHT

 

5.1                                                                               Conversion Right

 

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

 

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

 

(i)                                     Common Shares; and

 

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

 

(c)                                  Subject to Section 5.5, a
Debentureholder may exercise the Conversion Right by surrendering its Debenture
to the Trustee and giving notice to the Corporation and the Trustee, prior to
the Maturity Date, specifying the following:

 

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

 

22

 

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

 

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

 

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

 

5.2                                                                               Deemed Conversion Upon Going Public Transaction

 

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

 

(b)                                 In the event that a Going
Public Transaction is completed at a price per Common Share (or cash and stock
value per share) below Cdn. $1.15 (subject to adjustment pursuant to Article 8),
the deemed exercise of the Debentureholder’s Conversion Right pursuant to Section 5.2(a) and
Section 5.1 shall be completed at a deemed Conversion Price equal to the
then current Conversion Price multiplied by a ratio, the numerator of which is
the price per Common Share (or cash and stock value per share) that the Going
Public Transaction was completed at, and the denominator of which is
Cdn. $1.15 (subject to adjustment pursuant to Article 8).

 

5.3                                                                               Deemed Conversion of Exchanged Debentures

 

Upon
the exercise of the Exchange Right pursuant to Section 6.1(a), Surge U.S.
shall, as the resultant Debentureholder, be deemed to have exercised its
Conversion Right pursuant to Section 5.1.

 

5.4                                                                               Effect of Exercise of Conversion Right

 

(a)                                  Upon the exercise of the
Conversion Right pursuant to Section 5.1, 5.2 or 5.3, and subject to Section 5.5,
the Common Shares subscribed for shall be deemed to have been issued and the
applicable Debentureholder shall be deemed to have become the holder of record
of such Common Shares on the Conversion Date unless the transfer registers of
the Corporation shall be closed on such date (including by application of any
Applicable Law), in which case the Common Shares subscribed for shall be deemed
to have been issued and such Debentureholder deemed to have become the holder
of record of such Common Shares, on the date on which such transfer registers
are reopened.

 

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

 

5.5                                                                               Partial Exercise of Conversion Right; Fractions

 

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

 

23

 

(b)                                 Notwithstanding anything
herein contained including any adjustment provided for in Article 8, the
Corporation shall not be required, upon the exercise of the Conversion Right,
to issue fractions of Common Shares or to distribute certificates which
evidence fractional Common Shares.

 

5.6                                                                               Cancellation and Destruction of Debentures

 

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

 

5.7                                                                               Expiration of Conversion Right

 

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

 

5.8                                                                               Securities Restrictions

 

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

 

5.9                                                                               Debentureholders not a Shareholder

 

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

 

5.10                                                                        Charges for Conversion or Transfer

 

In the
event the Corporation is required to deduct or withhold any tax from payments
due under the Debentures to the Debentureholder or in connection with the
exercise of the Conversion Right, the Corporation shall so deduct or withhold
and pay over to the taxing authority imposing such tax the amount required to
be deducted or withheld and the amounts otherwise payable to the
Debentureholder will be reduced accordingly.

 

24

 

ARTICLE 6

EXERCISE OF EXCHANGE RIGHT

 

6.1                                                                               Exchange Right

 

(a)                                  Upon and subject to the terms
and conditions of this Article 6, each Debentureholder shall have the
right, at its option, on June 30 and December 31 of each year prior
to the Maturity Date to deliver its Debentures, in whole or in whole multiples
of Cdn. $1,000.00, in exchange for fully paid and non-assessable Surge
U.S. Common Shares at the Exchange Price in effect on the Exchange Date in
respect of the U.S. Dollar equivalent amount of the Principal Sum of the
Debentures so delivered calculated at the Exchange Rate.

 

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

 

(i)                                     from Surge U.S., Surge U.S.
Common Shares; and

 

(ii)                                  from the Corporation, all
accrued and unpaid Interest (including overdue Interest) on the Principal Sum
of the Debentures so exchanged up to the Exchange Date;

 

(c)                                  Subject to Section 6.3, a
Debentureholder may exercise the Exchange Right by surrendering its Debenture
to the Trustee and giving notice to each of the Corporation, Surge U.S. and the
Trustee at least 3 Business Days prior to the Exchange Date, specifying the
following:

 

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

 

(ii)                                  the address of the
Debentureholder which is to appear on the share register of Surge U.S.;

 

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

 

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

 

6.2                                                                               Affect of Exercise of Exchange Right

 

(a)                                  Upon the exercise of the
Exchange Right pursuant to Section 6.1 and subject to Section 6.3,
the Surge U.S. Common Shares subscribed for shall be deemed to have been issued
and the applicable Debentureholder shall be deemed to have become the holder of
record of such Surge U.S. Common Shares on the Exchange Date unless the
transfer registers of Surge U.S. shall be closed on such date (including by
application of any Applicable Law), in which case the Surge U.S. Common Shares
subscribed for shall be deemed to have been issued and such Debentureholder
deemed to have become the holder of record of such Surge U.S. Common Shares, on
the date on which such transfer registers are reopened.

 

(b)                                 Within 5 Business Days after
the Exchange Date, Surge U.S. shall cause to be delivered to such
Debentureholder, as specified in the exercise notice referenced in Section 6.1(c),
a share certificate for the appropriate number of Surge U.S. Common Shares
acquired and a calculation of any adjustment to the original Exchange Price;
provided that such Debentureholder simultaneously surrenders its Debenture to
the Trustee for cancellation, in whole or in part, as applicable.

 

25

 

6.3                                                                               Partial Exercise of Exchange Rights; Fractions

 

(a)                                  A Debentureholder may elect to
exchange less than the whole Principal Sum (in whole multiples of Cdn.
$1,000.00) of its Debenture, in which case such Debentureholder upon such
exercise shall, in addition, be entitled to receive, without charge therefore,
a new Debenture in respect of the balance of the Principal Sum which is not exchanged.

 

(b)                                 Notwithstanding anything
herein contained including any adjustment provided for in Article 8, Surge
U.S. shall not be required, upon the exercise of the Exchange Right, to issue
fractions of Surge U.S. Common Shares or to distribute certificates which
evidence fractional Surge U.S. Common Shares;

 

6.4                                                                               Cancellation and Destruction of Debentures

 

Any
portion of a Debenture exchanged under this Article 6 shall forthwith be
cancelled by the Corporation and the Trustee and no Debenture shall be issued
in substitution for the portions so cancelled.

 

6.5                                                                               Expiration of Exchange Right

 

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

 

6.6                                                                               Securities Restrictions

 

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

 

6.7                                                                               Debentureholders not a Shareholder

 

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

 

6.8                                                                               Charges for Exchange or Transfer

 

In the
event that Surge U.S. is required to deduct or withhold any tax in connection
with the exercise of the Exchange Right, Surge U.S. shall so deduct or withhold
and pay over to the taxing

 

26

 

authority imposing such tax the amount required to be deducted or
withheld and the amounts otherwise payable to the Debentureholder will be
reduced accordingly.

 

ARTICLE 7

REDEMPTION, RETRACTION AND REPAYMENT

 

7.1                                                                               Redemption

 

The
Debentures are not redeemable by the Corporation at any time prior to the
Maturity Date except in accordance with this Section 7.1 in respect of a
Change of Control.

 

(a)                                  Contemporaneous with the
occurrence of a Change of Control, and subject to the provisions and conditions
of this Section 7.1, the Corporation shall be obligated to offer to
purchase the Debentures on the following terms and conditions:

 

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

 

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

 

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

 

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

 

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

 

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

 

27

 

provided
in this Section 7.1 and affidavits or other proofs satisfactory to the
Trustee as to the publication and/or mailing of the Change of Control Notice
shall have been lodged with it, interest on the Debentures shall cease.  If any question shall arise as to whether any
notice has been given as above provided and such deposit made, such question
shall be decided by the Trustee whose decision shall be final and binding upon
all parties in interest.

 

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

 

(v)                                 All Debentures redeemed and
paid under this Section 7.1(a) shall forthwith be delivered to the
Trustee and cancelled and no Debentures shall be issued in substitution
therefor.

 

7.2                                                                               Non-Retractable

 

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

 

7.3                                                                               Repayment at the Maturity Date

 

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

 

28

 

ARTICLE 8

ADJUSTMENT ON CONVERSION PRICE

 

8.1                                                                               Adjustment of Conversion Price

 

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

 

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

 

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

 

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

 

the
Conversion Price in effect on the effective date of such subdivision, re-division,
change, reduction, combination or consolidation, as the case may be, shall in
the case of the events referred to in (i) above, be decreased in
proportion to the number of outstanding Common Shares resulting from such
subdivision, re-division or change, or shall, in the case of the events
referred to in (ii) above, be increased in proportion to the number of
outstanding Common Shares resulting from such reduction, combination or
consolidation in each such case by multiplying the Conversion Price in effect
on such effective date by a fraction of which the numerator shall be the total
number of Common Shares outstanding immediately prior to such date and the
denominator shall be the total number of Common Shares outstanding immediately
after such date.  Such adjustment shall
be made successively whenever any event referred to in this Section 8.1(a) shall
occur;

 

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

 

29

 

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

 

(c)                                  if and whenever at any time
during the Adjustment Period, the Corporation shall fix a record date for the
making of a distribution to all or substantially all the holders of its
outstanding Common Shares of (i) shares of any class, whether of the
Corporation or any other corporation, (ii) rights, options or warrants
(excluding those referred to in Section 8.1(b) and rights, options or
warrants to subscribe for or purchase Common Shares or other securities
convertible into or exchangeable for Common Shares at a price per share, or
having a conversion or exercise price per share not less than 95% of the
Current Market Price on such record date) to subscribe for or purchase Common
Shares or other securities convertible into or exchangeable for Common Shares
for a period expiring not more than 45 days after such record date, (iii) evidences
of its Indebtedness or (iv) assets (including cash) of the Corporation or
any Subsidiary, then, in each such case, the Conversion Price shall be
decreased immediately after such record date so that it shall equal the price
determined by multiplying the Conversion Price in effect on such record date by
a fraction, of which the numerator shall be the total number of Common Shares
outstanding on such record date multiplied by the Current Market Price on such
record date, less the fair market value (as determined by the Directors, acting
reasonably, which determination shall be conclusive) of such shares, rights,
options, warrants, evidences of Indebtedness or assets so distributed, and of
which the denominator shall be the total number of Common Shares outstanding on
such record date multiplied by such Current Market Price; and Common Shares
owned by or held for the account of the Corporation or any Subsidiary shall be
deemed not to be outstanding for the purpose of any such computation; such
adjustment shall be made successively whenever such a record date is fixed; to
the extent that such distribution is not so made, the Conversion Price shall be
readjusted to the Conversion Price which would then be in effect if such record
date had not been fixed or to the Conversion Price which would then be in
effect based upon such shares or rights, options or warrants or evidences of
Indebtedness or assets actually distributed, as the case may be;

 

(d)                                 if and whenever at any time
during the Adjustment Period, there is a reclassification of the Common Shares
or a capital reorganization of the Corporation other than as described in Section 8.1(a) or
a consolidation, amalgamation, arrangement or merger of the Corporation with or
into any other body corporate, trust, partnership or other entity, or a sale or
conveyance of the property and assets of the Corporation as an entirety or
substantially as an entirety to any other body corporate, trust, partnership or
other entity, each Debentureholder shall, upon the exercise of the Conversion
Right, be entitled to receive and shall accept, in lieu of the number of Common
Shares then sought to be acquired by it, the number of Common Shares or other
securities or property of the Corporation or of the body corporate, trust,
partnership or other entity resulting from such merger, amalgamation or
consolidation, or to which such sale or conveyance may be made, as the case may
be, that each Debentureholder would have been entitled to receive on such
reclassification, capital reorganization, consolidation, amalgamation,
arrangement or merger, sale or conveyance, if, on the record date or the
effective date thereof, as the case may be, such Debentureholder had been the
registered holder of the number of Common Shares sought to be acquired by it
and to which it was entitled to acquire upon the exercise of the Conversion
Right and a contemporaneous and equal adjustment shall be made to the
Conversion Price.  To give effect to or to
evidence the provisions of this Section 8.1(d), the Corporation, its
successor, or such purchasing body corporate, partnership, trust or other
entity, as the case may be, shall, prior to or contemporaneously with any such
reclassification, capital reorganization, consolidation, amalgamation, arrangement,
merger, sale or conveyance, enter into an agreement which shall provide for the
application of the provisions set forth in this Trust Indenture with respect to
the rights and interests thereafter of the Debentureholders to the end that the
provisions set forth in this Trust Indenture shall thereafter correspondingly
be made applicable with respect to any

 

30

 

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

 

(e)                                  the adjustments provided for
in this Section 8.1 are cumulative, and shall, in the case of adjustments
to the Conversion Price be computed to the nearest whole cent and shall apply
to successive subdivisions, re-divisions, reductions, combinations,
consolidations, distributions, issues or other events resulting in any
adjustment under the provisions of this Section 8.1.

 

8.2                                                                               Adjustment of Surge U.S. Exchange Price

 

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

 

(a)                                  if and whenever at any time
during the Adjustment Period, Surge U.S. shall:

 

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

 

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

 

the
Exchange Price in effect on the effective date of such subdivision, re-division,
change, reduction, combination or consolidation, as the case may be, shall in
the case of the events referred to in (i) above, be decreased in
proportion to the number of outstanding Surge U.S. Common Shares resulting from
such subdivision, re-division or change, or shall, in the case of the events
referred to in (ii) above, be increased in proportion to the number of
outstanding Surge U.S. Common Shares resulting from such reduction, combination
or consolidation in each such case by multiplying the Exchange Price in effect
on such effective date by a fraction of which the numerator shall be the total
number of Surge U.S. Common Shares outstanding immediately prior to such date
and the denominator shall be the total number of Surge U.S. Common Shares outstanding
immediately after such date.  Such
adjustment shall be made successively whenever any event referred to in this Section 8.2(a) shall
occur;

 

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

 

31

 

such
adjustment shall be made successively whenever such a record date is fixed; to
the extent that any such rights, options or warrants are not exercised prior to
the expiration thereof, the Exchange Price shall be readjusted to the Exchange
Price which would then be in effect if such record date had not been fixed or
to the Exchange Price which would then be in effect based upon the number of
Surge U.S. Common Shares (or securities convertible or exchangeable into Surge
U.S. Common Shares) actually issued upon the exercise of such rights, options
or warrants, as the case may be;

 

(c)                                  if and whenever at any time
during the Adjustment Period, Surge U.S. shall fix a record date for the making
of a distribution to all or substantially all the holders of its outstanding
Surge U.S. Common Shares of (i) shares of any class, whether of Surge U.S.
or any other corporation, (ii) rights, options or warrants (excluding
those referred to in Section 8.2(b) and rights, options or warrants
to subscribe for or purchase Surge U.S. Common Shares or other securities
convertible into or exchangeable for Surge U.S. Common Shares at a price per
share, or having a conversion or exercise price per share not less than 95% of
the Current Market Price on such record date) to subscribe for or purchase
Surge U.S. Common Shares or other securities convertible into or exchangeable
for Surge U.S. Common Shares for a period expiring not more than 45 days
after such record date, (iii) evidences of its Indebtedness or (iv) assets
(including cash) of Surge U.S. or any Subsidiary, then, in each such case, the
Exchange Price shall be decreased immediately after such record date so that it
shall equal the price determined by multiplying the Exchange Price in effect on
such record date by a fraction, of which the numerator shall be the total
number of Surge U.S. Common Shares outstanding on such record date multiplied
by the Current Market Price on such record date, less the fair market value (as
determined by the Board of Directors of Surge U.S., acting reasonably, which
determination shall be conclusive) of such shares, rights, options, warrants,
evidences of Indebtedness or assets so distributed, and of which the
denominator shall be the total number of Surge U.S. Common Shares outstanding
on such record date multiplied by such Current Market Price; and Surge U.S.
Common Shares owned by or held for the account of Surge U.S. or any Subsidiary
shall be deemed not to be outstanding for the purpose of any such computation;
such adjustment shall be made successively whenever such a record date is
fixed; to the extent that such distribution is not so made, the Exchange Price
shall be readjusted to the Exchange Price which would then be in effect if such
record date had not been fixed or to the Exchange Price which would then be in
effect based upon such shares or rights, options or warrants or evidences of
Indebtedness or assets actually distributed, as the case may be;

 

(d)                                 if and whenever at any time
during the Adjustment Period, there is a reclassification of the Surge U.S.
Common Shares or a capital reorganization of Surge U.S. other than as described
in Section 8.2(a) or a consolidation, amalgamation, arrangement or
merger of Surge U.S. with or into any other body corporate, trust, partnership
or other entity, or a sale or conveyance of the property and assets of Surge
U.S. as an entirety or substantially as an entirety to any other body
corporate, trust, partnership or other entity, each Debentureholder shall, upon
the exercise of the Exchange Right, be entitled to receive and shall accept, in
lieu of the number of Surge U.S. Common Shares then sought to be acquired by
it, the number of Surge U.S. Common Shares or other securities or property of
Surge U.S. or of the body corporate, trust, partnership or other entity
resulting from such merger, amalgamation or consolidation, or to which such
sale or conveyance may be made, as the case may be, that each Debentureholder
would have been entitled to receive on such reclassification, capital
reorganization, consolidation, amalgamation, arrangement or merger, sale or
conveyance, if, on the record date or the effective date thereof, as the case
may be, such Debentureholder had been the registered holder of the number of Surge
U.S. Common Shares sought to be acquired by it and to which it was entitled to
acquire upon the exercise of the Exchange Right and a contemporaneous and equal
adjustment shall be made to the

 

32

 

Exchange
Price.  To give effect to or to evidence
the provisions of this Section 8.2(d), Surge U.S., its successor, or such
purchasing body corporate, partnership, trust or other entity, as the case may
be, shall, prior to or contemporaneously with any such reclassification,
capital reorganization, consolidation, amalgamation, arrangement, merger, sale
or conveyance, enter into an agreement which shall provide for the application
of the provisions set forth in this Trust Indenture with respect to the rights
and interests thereafter of the Debentureholders to the end that the provisions
set forth in this Trust Indenture shall thereafter correspondingly be made
applicable with respect to any shares, other securities or property to which
the Debentureholders are entitled on the exercise of the Exchange Right;

 

(e)                                  in any case in which it is
required that an adjustment be made to the Exchange Price, no such adjustment
shall be made if, subject to the prior approval of any applicable exchange on
which the Surge U.S. Common Shares are listed, a Debentureholder elects to
receive the rights, options or warrants referred to in Section 8.2(b) or
the shares rights, options, warrants, evidences of Indebtedness or assets
referred to in Section 8.2(c), as the case may be, in such kind and number
as it would have received if it had been a holder of Surge U.S. Common Shares
on the applicable record date or effective date, as the case may be, by virtue
of the Principal Sum having then been exchanged into Surge U.S. Common Shares
at the Exchange Price in effect on the applicable record or effective date, as
the case may be; and

 

(f)                                    the adjustments provided for
in this Section 8.2 are cumulative, and shall, in the case of adjustments
to the Exchange Price be computed to the nearest whole cent and shall apply to
successive subdivisions, re-divisions, reductions, combinations,
consolidations, distributions, issues or other events resulting in any
adjustment under the provisions of this Section 8.2.

 

8.3                                                                               Protection of Trustee

 

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

 

8.4                                                                               Entitlement to Shares on Exercise of Conversion Right

 

All
shares of any class or other securities which a Debentureholder is at the time
in question entitled to receive on the exercise of the Conversion Right or the
Exchange Right (as applicable), whether or not as a result of adjustments made
pursuant to this Article 8, shall, for the purposes of the interpretation
of this Trust Indenture, be deemed to be shares which such Debentureholder is
entitled to acquire pursuant to the exercise of the Conversion Right or the
Exchange Right (as applicable).

 

8.5                                                                               No Adjustment for Stock Options

 

Notwithstanding
anything in this Article 8, no adjustment shall be made in the Conversion
Price or Exchange Price if the issue of Common Shares or Surge U.S. Common
Shares is being made pursuant to this Trust Indenture or pursuant to any stock
option plan in force from time to time for directors, officers or employees of
the Corporation or Surge U.S.

 

33

 

8.6                                                                               Determination by Corporation’s Auditors

 

In the
event of any question arising with respect to the adjustments provided for in
this Article 8, such question shall be conclusively determined by the
Corporation’s Auditors, or such other firm of chartered accountants mutually
acceptable to the Corporation and the applicable Debentureholder, who shall
have access to all necessary records of the Corporation, and such determination
shall be binding upon the Corporation, such Debentureholder and all other
Persons interested therein.

 

8.7                                                                               Proceedings Prior to any Action Requiring Adjustment

 

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

 

8.8                                                                               Certificate of Adjustment

 

Each of
the Corporation and Surge U.S. shall from time to time immediately after the
occurrence of any event which requires an adjustment or readjustment as
provided in this Article 8, deliver a certificate of the Corporation or
Surge U.S. (as applicable) to the Trustee and the Debentureholders specifying
the nature of the event requiring the same and the amount of the adjustment
necessitated thereby and setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.

 

8.9                                                                               Notice of Special Matters

 

Each of
the Corporation and Surge U.S. covenants that it will give notice to the
Trustee and each Debentureholder of its intention to fix a record date that is
prior to the Maturity Date for the issuance of rights, options or warrants to
all or substantially all the holders of its outstanding Common Shares or Surge
U.S. Common Shares, as applicable.  Such
notice shall specify the particulars of such event, the record date for such
event and, if prepared or available as at the date that such notice is required
to be given pursuant to this Section 8.9, such notice shall be accompanied
by the material (i.e., proxy circulars, information booklets etc.) sent to the
holders of Common Shares or Surge U.S. Common Shares, as applicable in respect
of the event in question, provided that the Corporation or Surge U.S. (as the
case may be) shall only be required to specify in the notice such particulars
of the event as shall have been fixed and determined on the date on which the
notice is given.  The notice shall be
given in each case not less than 14 days prior to such applicable record
date.

 

8.10                                                                        No Action after Notice

 

Each of
the Corporation and Surge U.S. covenants that it will not close its transfer
books or take any other corporate action which might deprive the Debentureholder
of the opportunity to exercise their right of conversion or exchange (as the
case may be) pursuant thereto during the period of 14 days after the
giving of the certificate or notices set forth in Sections 8.8 and 8.9.

 

34

 

ARTICLE 9

COVENANTS, REPRESENTATIONS AND WARRANTIES

 

9.1                                                                               Positive Covenants

 

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

 

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

 

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

 

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

 

(d)                                 Compliance With Applicable
Laws:

 

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

 

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

 

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

 

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

 

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

 

35

 

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

 

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

 

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

 

9.2                                                                               Negative Covenants

 

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

 

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

 

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

 

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

 

9.3                                                                               Representations and Warranties - Corporation

 

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

 

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

 

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

 

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

 

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

 

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

 

36

 

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

 

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

 

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

 

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

 

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

 

9.4                                                                               Representations and Warranties - Surge U.S.

 

Surge U.S.
hereby represents and warrants to the Trustee and each Debentureholder and
acknowledges that the Trustee and each Debentureholder is relying on such
representations and warranties, that as at the date hereof:

 

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

 

(b)                                 the authorized capital of Surge U.S.
consists of 10,000,000 preferred shares and 75,000,000 Surge U.S. Common Shares
of which there are 33,464,463 Surge U.S. Common Shares (including 7,822,366
Surge U.S. Common Shares issued to Deep Well Oil & Gas, Inc. which will be
returned to treasury and cancelled) issued and outstanding, and other than
options to purchase 6,706,406 Surge U.S. Common Shares and warrants to purchase
1,505,000 Surge U.S. Common Shares, there are no other issued and outstanding
rights, warrants, options or other securities convertible into Surge U.S.
Common Shares;

 

(c)                                  Surge U.S. has full corporate power and
authority to execute, deliver and perform its obligations under this Trust
Indenture and to issue the Surge U.S. Common Shares issuable upon exchange of
the Debentures;

 

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

 

(e)                                  Surge U.S. does not have any right,
interest or claim to any working interest, royalty or other right acquired
under the Farmout Agreement;

 

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

 

(g)                                 no Securities Commission or any other
securities commission or similar regulatory authority has issued any order
preventing or suspending trading of any securities of Surge U.S. and the
Corporation is not in default of any requirement of any Applicable Securities
Laws; and

 

37

 

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

 

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

 

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

 

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

 

9.5                                                                               Trustee May Perform Covenants

 

If the
Corporation fails to perform any covenant on its part herein contained, the
Trustee may in its discretion, but (subject to Section 9.8) need not,
notify the Debentureholders of such failure or may but need not perform any of
said covenants capable of being performed by it and, if any such covenant
requires the payment or expenditure of money, it may but need not make such
payment or expenditure with its own funds, or with money borrowed by or
advanced to it for such purposes, but shall be under no obligation to do so and
all sums so expended or advanced shall be repayable by the Corporation in the
manner provided in Section 9.6, but no such performance or payment by the
Trustee shall be deemed to relieve the Corporation from default hereunder.

 

9.6                                                                               Pay Trustee’s Remuneration

 

The
Corporation will, from time to time, pay the Trustee’s reasonable remuneration
for its services hereunder as agreed separately by the Corporation and the
Trustee, together with all costs incurred by the Trustee pursuant to
Section 12.7, and will repay to the Trustee on demand all monies which
shall have been paid by the Trustee in and about the execution of the trusts
hereby created, including reasonable legal fees and expenses and all costs
incurred by the Trustee in complying with any laws applicable to it as a result
of its duties as Trustee hereunder, with interest at a rate which is charged
from time to time by the corporate trust department of the Trustee, from 30
days after the date of receipt of the invoice from the Trustee to the
Corporation with respect to such expenditure until repayment, and such monies
and the interest thereon, including the Trustee’s remuneration, shall be
payable out of any funds coming into the possession of the Trustee in priority
to any payment in respect of any of the Debentures or interest thereon.  The said remuneration shall continue to be
payable until the trusts hereof shall be finally wound up and whether or not
the trusts of this Trust Indenture shall be in the course of administration by
or under the direction of the court.

 

9.7                                                                               Certificate as to Interest Rate

 

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

 

38

 

9.8                                                                               Certificates Relating to Default

 

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

 

ARTICLE 10

DEFAULT

 

10.1                                                                        Acceleration of Maturity Date

 

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

 

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

 

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

 

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

 

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

 

39

 

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

 

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

 

10.2                                                                        Acceleration

 

Upon the
occurrence of an Event of Default which is continuing, the Trustee may, and
shall if so required by the Debentureholders acting by Extraordinary
Resolution, by notice in writing to the Corporation declare the Principal Sum
and all accrued Interest thereon and other amounts owing hereunder and under
the Debentures to be immediately due and payable and the same shall become
immediately due and payable and the Corporation shall forthwith pay the same to
the Trustee failing which all rights and remedies of the Trustee and the
Debentureholders hereunder or at law or equity in respect of such non-payment
shall become enforceable; provided that upon the occurrence of an Event of
Default specified in Section 10.1(c) or 10.1(d), all Indebtedness
hereunder shall automatically become due and payable without any requirement
that notice be given to the Corporation.

 

10.3                                                                        Remedies - General

 

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

 

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

 

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

 

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

 

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

 

40

 

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

 

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

 

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

 

(f)                                    in lieu of appointing a Receiver as
provided in Section 10.7, apply to any court or courts of competent jurisdiction
for the appointment of a Receiver of the Collateral or any part thereof, with
such powers as the court or courts making such appointment or appointments
shall confer.

 

10.4                                                                        Possession

 

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

 

10.5                                                                        Judgment

 

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

 

10.6                                                                        Account Debtors

 

Upon the
occurrence of a Realization Event:

 

41

 

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

 

(b)                                 Any money collected or received by the
Trustee pursuant to paragraph (a) above shall be applied in the manner set out
in Section 10.15.  The Trustee shall
not be liable or accountable for its failure to collect, realize, sell or
obtain payment of accounts, chattel paper, instruments, intangibles, choses in
action or rights to payment or any part thereof and shall not be bound to
institute proceedings for the purpose of collecting, realizing or obtaining
payment of the same or for the purpose of preserving any right to payment of
the Trustee, the Corporation or any other Person in respect thereof.

 

10.7                                                                        Receiver

 

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

 

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

 

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

 

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

 

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

 

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

 

(f)                                    every such Receiver may, with the consent
in writing of the Trustee, borrow money for the purpose of carrying on the
business of the Corporation in respect of any part of the Collateral or for the
maintenance, protection or preservation of the Collateral or any part thereof,
and any Receiver may issue certificates (in this Section called “Receiver’s Certificates”), for such sums as
will in the opinion of the Trustee be sufficient for carrying out the
foregoing, and such 

 

42

 

Receiver’s
Certificates may be payable either to order or bearer and may be payable at
such time or times as the Trustee may consider expedient, and shall bear such
interest as shall therein be declared and the Receiver may sell, pledge or
otherwise dispose of the same in such manner as the Trustee may consider
advisable and may pay such commission on the sale thereof as the Trustee may
consider reasonable, and the amounts from time to time payable by virtue of
such Receiver’s Certificates shall at the option of the Trustee form a charge
upon the Collateral in priority to this Trust Indenture;

 

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

 

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

 

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

 

10.8                                                                        Remedies Not Exclusive

 

No right,
power or remedy herein conferred upon or reserved to the Trustee or any
Receiver is intended to be exclusive of any other right, power or remedy or
remedies, and each and every right, power and remedy shall, to the extent
permitted by Applicable Law, be cumulative and shall be in addition to every
other right, power or remedy given hereunder or now or hereafter existing at
law, in equity or by statute.  Subject to
Section 10.11, the Trustee shall have the power to waive any Event of
Default, provided no such waiver shall be effective unless made in writing and
shall not constitute a waiver of any other or subsequent Event of Default.  No delay or omission of the Trustee in the
exercise of any right, power or remedy accruing upon any default shall impair
any such right, power or remedy or shall be construed to be a waiver of any
such default or an acquiescence therein. 
Every right, power and remedy given to the Trustee or to a Receiver by
this Trust Indenture or under Applicable Law may be exercised from time to time
and as often as may be deemed expedient by the Trustee or such Receiver, as
applicable.

 

10.9                                                                        Expenses

 

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

 

10.10                                                                 Notice of Events of Default

 

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

 

43

 

10.11                                                                 Waiver of Default

 

Upon the
happening of any Event of Default hereunder:

 

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

 

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

 

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

 

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

 

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

 

(v)                                 in the event of the cure or waiver of an
Event of Default of the type described in Sections 10.1(c) and 10.1(d),
the Trustee shall have received an officers’ certificate and an opinion of
Counsel that such Event of Default has been cured; and

 

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

 

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

 

10.12                                                                 Certificate re Default

 

In addition to
the Corporation’s obligations under Section 12.5(d), the Corporation shall
provide a Certificate of the Corporation to the Trustee promptly upon any such
officer obtaining knowledge of any Event of Default that has occurred and, if
applicable, describing such Event of Default and the status thereof.  The Trustee shall not be bound to give any
notice or do or take any act, action or proceeding by virtue of the powers
conferred on it hereby unless and until it shall have been required so to do
under the terms hereof; nor shall the Trustee be required to take notice of any
Event of Default hereunder, unless and until notified in writing of such Event
of Default, which notice shall distinctly specify the Event of Default desired
to be brought to the attention of the Trustee and in the absence of any such
notice the Trustee may for all purposes of this Trust Indenture conclusively
assume that no Event of Default has been made in the observance or performance
of any of the representations, warranties, covenants, agreements or conditions
contained herein.  Any such notice shall
in no way limit any discretion given to the Trustee to determine whether or not
the Trustee shall take any action with respect to any Event of Default.

 

44

 

10.13                                                                 Enforcement by the Trustee

 

(a)                                  Subject to the provisions of
Section 10.15 and to the provisions of any Extraordinary Resolution that
may be passed by the Debentureholders, in the event the Corporation shall fail
to pay to the Trustee, forthwith after the same shall have been declared to be
due and payable under Section 10.2, the Obligations, the Trustee shall
pursuant to an Extraordinary Resolution, and upon being indemnified and funded
to its reasonable satisfaction against all costs, expenses and liabilities to
be incurred, but subject to Article 4, proceed in its name as Trustee hereunder
to obtain or enforce payment of the Obligations by such proceedings authorized
by this Trust Indenture or by law or equity as the Trustee in such request
shall have been directed to take, or if such request contains no such
direction, or if the Trustee shall act without such request, then by such
proceedings authorized by this Trust Indenture or by suit at law or in equity
as the Trustee shall deem expedient.

 

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

 

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

 

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

 

45

 

10.14                                                                 No Suits by Debentureholders

 

No
Debentureholder shall have any right to institute any action, suit or
proceeding at law or in equity for the purposes of enforcing payment of the
Principal Sum or Interest on the Debentures or for the execution of any trust
or power hereunder or for the appointment of a liquidator or receiver or for a
receiving order under the Bankruptcy and
Insolvency Act (Canada) or to have the Corporation wound up or to
file or prove a claim in any liquidation or bankruptcy proceeding or for any
other remedy hereunder, unless: (i) such Debentureholder shall previously have
given to the Trustee written notice of the happening of an Event of Default
hereunder; (ii) the Debentureholders by Extraordinary Resolution shall have
made a request to the Trustee and the Trustee shall have been afforded
reasonable opportunity either itself to proceed to exercise the powers
hereinbefore granted or to institute an action, suit or proceeding in its name
for such purpose; (iii) the Debentureholders or any of them shall have
furnished to the Trustee, when so requested by the Trustee, sufficient funds or
security therefor and an indemnity satisfactory to the Trustee to cover the
costs, expenses and liabilities to be incurred therein or thereby; (iv) the
Trustee shall have failed to act within a reasonable time of receipt of such
notification, request and offer of funds and indemnity and such notification,
request and offer of funds and indemnity are hereby declared in every such
case, at the option of the Trustee, to be conditions precedent to any such
proceedings; and (v) the bringing of such action, suit or proceeding would not
be contrary to Article 4.

 

10.15                                                                 Application of Monies by Trustee

 

Except as
herein otherwise expressly provided, any money received by the Trustee from the
Corporation pursuant to the foregoing provisions of this Article 10, or as a
result of legal or other proceedings or from any trustee in bankruptcy or
liquidator of the Corporation, shall be applied, together with any other monies
in the hands of the Trustee available for such purpose as follows:

 

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

 

(b)                                 second, but subject as hereinafter in this
Section 10.15 provided, in payment, ratably and proportionately, to the
Debentureholders on account of accrued and unpaid Interest and Interest on
amounts in default; and thereafter, on account of the Principal Sum; unless
otherwise directed by Extraordinary Resolution and in that case in such order
or priority as between Principal Sum and Interest as may be directed by such
resolution;

 

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

 

provided,
however, that no payment shall be made pursuant to Section 10.15(b) above
contrary to Article 4 or with respect to the Principal Sum or Interest on any
Debenture held, directly or indirectly, by or for the benefit of the
Corporation or any Subsidiary of the Corporation (other than any Debenture
pledged for value and in good faith to a Person other than the Corporation or
any Subsidiary of the Corporation but only to the extent of such Person’s
interest therein) except subject to the prior payment in full of the Principal
Sum and Interest of all Debentures which are not so held.

 

10.16                                                                 Distribution of Proceeds

 

Payments to
Debentureholders pursuant to Section 10.15(b) shall be made as follows:

 

46

 

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

 

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

 

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

 

(d)                                 the Trustee shall not be bound to apply or
make any partial or interim payment of any monies coming into its hands if the
amount so received by it, after reserving therefrom such amount as the Trustee
may think necessary to provide for the payments mentioned in
Section 10.15(a), is less than 5% of the Principal Sum, but it may retain
the money so received by it and invest or deposit the same in accordance with
Section 12.9 until the money or the investments representing the same,
with the income derived therefrom, together with any other monies for the time
being under its control shall be at least 5% of the Principal Sum.  The foregoing shall not apply to a final
payment or distribution hereunder.

 

ARTICLE 11

MEETINGS OF DEBENTUREHOLDERS

 

11.1                                                                        Right to Convene Meeting

 

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

 

11.2                                                                        Notice of Meetings

 

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

 

11.3                                                                        Chairperson

 

A Person, who
need not be a Debentureholder, nominated in writing by the Trustee shall be
chairperson of the meeting and if no Person is so nominated, or if the Person
so nominated is not 

 

47

 

present within
15 minutes from the time fixed for the holding of the meeting, the
Debentureholders present in Person or by proxy shall, by majority vote, choose
a Person present to be chairperson.

 

11.4                                                                        Quorum

 

Subject to the
provisions of Section 11.12, at any meeting of the Debentureholders a
quorum shall consist of Debentureholders present in person or by proxy and
representing 25% of the Principal
Sum of the Debentures outstanding.  If a
quorum of the Debentureholders shall not be present within 30 minutes from
the time fixed for holding any meeting, the meeting, if summoned pursuant to a
Debentureholders’ Request, shall be dissolved; but in any other case the
meeting shall be adjourned to the same day in the next week (unless such day is
not a Business Day in which case it shall be adjourned to the first Business
Day thereafter) at the same time and place and no notice shall be required to
be given with respect to such adjourned meeting. At the adjourned meeting, the
Debentureholders present in Person or by proxy shall form a quorum and may
transact the business for which the meeting was originally convened
notwithstanding that they may not represent 25% of the Principal Sum of the
Debentures outstanding.  Any business may
be brought before or dealt with at an adjourned meeting which might have been
brought before or dealt with at the original meeting in accordance with the
notice calling the same.  No business
shall be transacted at any meeting other than an adjourned meeting unless the
required quorum is present at the commencement of business.

 

11.5                                                                        Power to Adjourn

 

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

 

11.6                                                                        Show of Hands

 

Every question
submitted to a meeting shall, subject to Section 11.7, be decided in the
first instance by a majority of the votes given on a show of hands.  At any such meeting, unless a poll is duly
demanded as herein provided, a declaration by the chairperson that a resolution
has been carried or carried unanimously or by a particular majority or lost or
not carried by a particular majority shall be conclusive evidence of the fact.  The chairperson of any meeting shall be
entitled both on a show of hands and on a poll, to vote with respect to the
Debentures, if any, held by him or the Debentureholder whose proxy he holds.

 

11.7                                                                        Poll

 

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

 

11.8                                                                        Voting

 

On a show of
hands, every Person who is present and entitled to vote, whether as a
Debentureholder or as proxy for one or more Debentureholders or both, shall
have one vote.  On a poll, each
Debentureholder present in Person or represented by a proxy duly appointed by
an instrument in 

 

48

 

writing shall
be entitled to one vote with respect to each Cdn. $1,000 Principal Sum of
Debentures of which he shall then be the holder or the proxy for such Debentureholder.  A proxy need not be a Debentureholder.  In the case of joint registered
Debentureholders, any one of them present in Person or by proxy at the meeting
may vote in the absence of the other or others; but in case more than one of
them shall be present in Person or by proxy, they shall vote together with
respect to the Debentures of which they are joint registered holders.

 

11.9                                                                        Regulations

 

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

 

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

 

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

 

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

 

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

 

11.10                                                                 Persons Entitled to Attend Meetings

 

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

 

11.11                                                                 Powers Exercisable by Extraordinary Resolution

 

Subject to
receipt of all regulatory approvals required by Applicable Securities Law in
addition to the powers conferred upon them by any other provision of this Trust
Indenture or by Applicable Law, but subject to the provisions of
Section 14.1 and the rights of Debentureholders generally under this Trust
Indenture, a meeting of the Debentureholders shall have the following powers
exercisable from time to time by Extraordinary Resolution:

 

49

 

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

 

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

 

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

 

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

 

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

 

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

 

(g)                                 power to direct any Debentureholder who has
brought any action, suit or proceeding to stay or discontinue or otherwise deal
with the same, upon payment of the costs, charges and expenses reasonably and
properly incurred by such Debentureholder in connection therewith if the taking
of such suit, action or proceeding shall have been permitted by
Section 10.14;

 

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

 

(i)                                     power to appoint a committee with power and
authority (subject to such limitations, if any, as may be prescribed in any
such Extraordinary Resolution) to exercise, and to direct the Trustee to
exercise, on behalf of the Debentureholders, such of the powers of the
Debentureholders as are exercisable by extraordinary or other resolution as
shall be included in the resolution appointing the committee.  The Extraordinary Resolution making such
appointment may provide for payment of the expenses and disbursements of and
compensation to such committee.  Such
committee shall consist of such number of Persons as shall be prescribed in the
resolution appointing it and the members need not be Debentureholders.  Every such committee may elect its
chairperson and may make regulations respecting its quorum, the calling of its
meetings, the filing of vacancies occurring in its number and its procedure generally.  Such regulations may provide that the
committee may act at a meeting at which a quorum is present or may act by
minutes signed by the number of members thereof necessary to constitute a
quorum.  All acts of any such committee
within the authority delegated to it shall be binding upon all 

 

50

 

Debentureholders.  Neither the committee nor any member thereof
shall be liable for any loss arising from or in connection with any action
taken or omitted to be taken by it in good faith;

 

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

 

(k)                                  power to authorize the Trustee or any other
Person or Persons to (i) bid at any sale of the Corporation’s properties or
assets or any part thereof; (ii) borrow the monies required to make any deposit
at said sale or pay the balance of the purchase price and to hypothecate,
mortgage, pledge, charge, cede and transfer the property or assets so purchased
as security for the repayment of the monies so borrowed and interest thereon,
or itself, himself or themselves, as the case may be, to advance such monies
(in which event it, he or they shall have a lien upon the property or assets so
purchased for the amount so advanced and interest thereon); (iii) hold any
property or assets to be purchased (subject to any hypothec, mortgage, pledge,
charge or lien to secure any monies so borrowed or advanced) in trust for all
the Debentureholders at the time of such sale pro
rata in proportion to the amounts due to them thereon respectively
for principal and interest before such sale, and to sell, transfer and convey
the whole or any part or parts of the property or assets so purchased for such
consideration in cash or in the shares, bonds, debentures or other securities
or obligations pursuant to the provisions of Section 11.11(j); (iv) until
the sale, transfer or conveyance of the whole of such property or assets so
purchased, to maintain and operate such part of said property and assets as has
not been disposed of, and for such purposes to borrow monies and to
hypothecate, mortgage, pledge, charge, cede and transfer the property or assets
so purchased, or any part thereof, as security for the repayment of the monies
so borrowed and interest thereon, or itself, himself or themselves, as the case
may be, to advance such monies (in which event it, he or they shall have a lien
upon the property or assets so purchased for the amount so advanced and
interest thereon); and (v) otherwise deal with such property and assets and the
proceeds of any sale, transfer or conveyance thereof as the Debentureholders
may by such Extraordinary Resolution direct;

 

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

 

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

 

(n)                                 power to amend, alter or repeal any
Extraordinary Resolution previously passed or sanctioned by the
Debentureholders or by any committee appointed pursuant to
Section 11.11(i); and

 

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

 

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

 

(a)                                  reduce the Principal Sum of the Debentures;

 

51

 

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

 

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

 

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

 

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

 

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

 

(g)                                 amend Section 11.11 or 11.12.

 

11.12                                                                 Meaning of Extraordinary Resolutions

 

(a)                                  The expression “Extraordinary Resolution” when used in this Trust Indenture
means, subject as hereinafter in this Article provided, a resolution proposed
to be passed as an Extraordinary Resolution at a meeting of Debentureholders
(including an adjourned meeting) duly convened for the purpose and held in
accordance with the provisions of this Article 11 at which the Debentureholders
of not less than 25% in principal amount of the Debentures outstanding are
present in Person or by proxy and passed by the affirmative votes of the
Debentureholders of not less than 66 2/3% of the principal amount of
Debentures represented at the meeting and voted on a poll upon such resolution.

 

(b)                                 All actions which may be taken and all
powers that may be exercised by the Debentureholders at a meeting held as
hereinbefore in this Article 11 provided may also be taken and exercised by the
Debentureholders of not less than 50% in principal amount of the outstanding
Debentures in the case of such actions and powers not requiring an
Extraordinary Resolution and not less than 66 2/3% of the
principal amount of the outstanding Debentures in the case of such actions and
powers requiring an Extraordinary Resolution, by an instrument in writing
signed in one or more counterparts and the expression Extraordinary Resolution
when used in this Trust Indenture shall include an instrument so signed.

 

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

 

11.13                                                                 Powers Cumulative

 

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

 

52

 

11.14                                                                 Minutes

 

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

 

11.15                                                                 Binding Effect of Resolutions

 

Every
resolution and every Extraordinary Resolution passed in accordance with the
provisions of this Article 11 at a meeting of Debentureholders shall be binding
upon all the Debentureholders, whether present at or absent from such meeting,
and every instrument in writing signed by Debentureholders in accordance with
Section 11.12(b) shall be binding upon all Debentureholders, whether
signatories thereto or not, and each and every Debentureholder and the Trustee
(subject to the provisions for its indemnity herein contained) shall be bound
to give effect accordingly to every such resolution, Extraordinary Resolution
and instrument in writing.

 

11.16                                                                 Evidence of Rights of Debentureholder

 

Any request,
direction, notice, consent or other instrument which this Trust Indenture may
require or permit to be signed or executed by the Debentureholders may be in
any number of counterparts and may be signed or executed by such
Debentureholders in Person or by attorney duly appointed in writing.  Proof of the execution of any such request or
other instrument or of a writing appointing any such attorney or (subject to
the provisions of this Article 11 with regard to voting at meetings of
Debentureholders) of the holding by any Person of Debentures shall be
sufficient for any purpose of this Trust Indenture if made in the following
manner, namely, the fact and date of execution by any Person of such request or
other instrument or writing may be proved by the certificate of any notary
public, or other officer authorized to take acknowledgments of deeds to be
recorded at the place where such certificate is made, that the Person signing
such request or other instrument in writing acknowledged to him the execution
thereof or by affidavit of a witness of such execution or in any other manner
which the Trustee may consider adequate.

 

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

 

ARTICLE 12

CONCERNING THE TRUSTEE

 

12.1                                                                        No Conflict of Interest

 

The Trustee
represents to the Corporation that at the date of execution and delivery by it
of this Trust Indenture there exists no material conflict of interest in the
role of the Trustee as a fiduciary hereunder. 
If, notwithstanding the provisions of this Section 12.1, such a
material conflict of interest exists, the validity and enforceability of this
Trust Indenture, and the Debentures issued hereunder, shall not be affected in
any manner whatsoever by reason only that such material conflict of interest
exists but the Trustee shall, within 90 days after ascertaining that it
has a material conflict of interest, either 

 

53

 

eliminate such
material conflict of interest or resign in the manner and with the effect
specified in Section 12.2.

 

12.2                                                                        Replacement of Trustee

 

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

 

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

 

12.3                                                                        Duties of Trustee

 

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

 

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

 

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

 

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

 

54

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(e)                                  Subject to Section 12.3(a), except for
its acts of gross negligence or wilful misconduct, the Trustee shall not be
liable for any act done or step taken or omitted by it in good faith, or for
any mistake of fact or law and the Corporation agrees, at all times, to
indemnify and save harmless the Trustee and its agents from and against all
liability, claims, demands, action, suits or other proceedings by whomsoever
made, prosecuted or brought and from all loss, costs, damages and expenses in
any manner based upon, occasioned by or attributable to any act of the Trustee
in the execution of its duties hereunder.

 

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

 

55

 

judgement, is
improper or unauthorized, or which is not required to be effected pursuant to
the terms of this Trust Indenture.

 

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

 

12.4                                                                        Reliance Upon Declarations

 

In the
exercise of its rights, duties and obligations hereunder the Trustee may, if
acting in good faith, rely, as to the truth of the statements and accuracy of
the opinions expressed therein, upon statutory declarations, opinions, reports
or certificates furnished pursuant to and in accordance with any covenants,
conditions and requirements of this Trust Indenture.  The Trustee shall not be liable for or by
reason of any statements or recitals in this Trust Indenture or in the
Debentures (except in the Certificate of the Trustee thereon and except as
provided in Section 12.15) or be required to verify the same, but all such statements
or recitals are and shall be deemed to be made by the Corporation.  The Trustee shall not in any way be
responsible for the consequence of any breach on the part of the Corporation of
any of the Corporation’s covenants contained herein.

 

12.5                                                                        Evidence and Authority to Trustee

 

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

 

Such evidence
shall consist of:

 

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

 

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

 

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

 

56

 

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

 

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

 

12.6                                                                        Certificate of the Corporation as Evidence

 

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

 

12.7                                                                        Experts, Advisers and Agents

 

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

 

12.8                                                                        Documents Held by Trustee

 

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

 

12.9                                                                        Investments of Monies by Trustee

 

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

 

57

 

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

 

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

 

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

 

12.10                                                                 Trustee Not Ordinarily Bound

 

Except as
specifically provided in this Trust Indenture, the Trustee shall not, subject
to Section 12.3, be bound to give notice to any Person of the execution
hereof, nor to do, observe or perform or see to the observance or performance
by the Corporation of any of the obligations herein imposed upon the
Corporation or of the covenants on the part of the Corporation herein contained
unless the Trustee shall have been required to do so by an Extraordinary
Resolution, and then only after it shall have been funded and indemnified to
its satisfaction against all actions, proceedings, claims and demands to which
it may render itself liable and all costs, charges, damages and expenses which
it may incur by so doing, nor in any way or at any time or on any conditions to
supervise or interfere with the conduct of the Corporation’s business.

 

12.11                                                                 Trustee Not Required to Give Security

 

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

 

12.12                                                                 Trustee Not to Be Appointed Receiver

 

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

 

12.13                                                                 Trustee Not Bound to Act

 

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

 

12.14                                                                 Conditions Precedent to Trustee’s Obligations to Act Hereunder

 

(a)                                  The obligation of the Trustee to commence
or continue any act, action or proceeding for the purpose of enforcing the
rights of the Trustee and of the Debentureholders hereunder shall be
conditional upon the Debentureholders furnishing, when required by notice in
writing by the 

 

58

 

Trustee,
sufficient funds to commence or continue such act, action or proceeding and an
indemnity reasonably satisfactory to the Trustee to protect and hold harmless
the Trustee against the costs, charges and expenses and liabilities to be
incurred thereby and any loss and damage it may suffer by reason thereof.

 

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

 

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

 

12.15                                                                 Authority to Carry on Business

 

The Trustee
represents to the Corporation that at the date of execution and delivery by it
of this Trust Indenture it is authorized to carry on the business of a trust
company in Alberta.  If the Trustee
ceases to be so authorized to carry on business, the validity and
enforceability of this Trust Indenture and the Debentures shall not be affected
in any manner whatsoever by reason only of such event but the Trustee shall
within 90 days after ceasing to be authorized to carry on the business of
a trust company in Alberta either become so authorized or resign in the manner
and with the effect specified in Section 12.2.

 

12.16                                                                 Acceptance of Trust

 

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

 

12.17                                                                 Indemnity of Trustee

 

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

 

12.18                                                                 Environmental Indemnity

 

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

 

59

 

damage (and
including liabilities of the Indemnified Parties to third parties for the third
parties’ foreseeable and unforeseeable consequential damages) incurred as a
result of:

 

(i)                                     the administration of the trust created
hereby;

 

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

 

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

 

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

 

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

 

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

 

(b)                                 For purposes of this Section, “liability”
shall include (i) liability of an Indemnified Party for costs and expenses of
abatement and remediation of spills and releases of contaminants, (ii)
liability of an Indemnified Party to a third party to reimburse the third party
for bodily injuries, property damages and other injuries or damages which the
third party suffers, including (to the extent, if any, that the Indemnified
Party is liable therefor) foreseeable and unforeseeable consequential damages
suffered by the third party, (iii) liability of the Indemnified Party for
damage suffered by the third party, (iv) liability of an Indemnified Party for
damage to or impairment of the environment, and (v) liability of an Indemnified
Party for courts costs, expenses of alternative dispute resolution proceedings,
and fees and disbursements of expert consultants and legal counsel on a
solicitor and client basis.

 

ARTICLE 13

NOTICES

 

13.1                                                                        Notice

 

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

 

(a)                                  to the Corporation at:

 

Surge Global
Energy (Canada), Ltd.

#1800, 144 – 4th
Avenue SW

Calgary,
Alberta

T2P 3N4

 

Attention:                                         C.W. Leigh Cassidy

Telecopier:                                     (403)
238-5339

 

60

 

(b)                                 to Surge U.S. at:

 

Surge Global Energy, Inc.

12220 El Camino Real, Suite 410

San Diego, California

92130

 

Attention:                                         David Perez

Telecopier:                                     (858) 704-5011

 

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

 

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

 

Valiant Trust
Company

Suite 310, 606
– 4th Street S.W.

Calgary,
Alberta

T2P 1T1

 

Attention:                                         Manager, Corporate Trust

Telecopier:                                     (403)
233-2857

 

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

 

ARTICLE 14

SUPPLEMENTAL INDENTURES

 

14.1                                                                        Supplemental Indenture

 

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

 

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

 

61

 

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

 

(c)                                  giving effect to any Extraordinary
Resolution passed as provided in Article 11;

 

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

 

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

 

(ii)                                  qualify as Permitted Debt hereunder;

 

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

 

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

 

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

 

14.2                                                                        Indenture Confirming or Evidencing Subordination

 

From time to
time the Trustee may, and shall when requested by a holder of Permitted Senior
Debt, execute, acknowledge and deliver by its proper officers, such deeds,
documents, instruments or indentures as may be reasonably required by such
holder of Permitted Senior Debt, to confirm, evidence or give effect to any of
the provisions of Article 4 of this Trust Indenture or to ensure that any
holders of Permitted Senior Debt receive the full benefit of the provisions of
Article 4.

 

ARTICLE 15

SUCCESSOR CORPORATIONS

 

15.1                                                                        Successor Corporation to the Corporation

 

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

 

(a)                                  the Successor Corporation shall execute,
prior to or contemporaneously with the consummation of any such transaction, an
indenture supplemental hereto, together with such instruments as are
satisfactory to the Trustee, acting reasonably, as in the opinion of Counsel
are necessary or advisable to evidence the assumption by the Successor Corporation
of the obligations of the 

 

62

 

Corporation
hereunder and under the Debentures and the covenant of the Successor
Corporation to observe and perform all of the covenants and obligations of the
Corporation under this Trust Indenture;

 

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

 

(c)                                  no condition or event shall exist as to the
Corporation at the time of or immediately after the consummation of any such
transaction after giving full effect thereto, or immediately after the
Successor Corporation complying with the provisions of Section 15.1(a)
above, which constitutes a Default hereunder; and

 

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

 

15.2                                                                        Vesting of Powers in Successor Corporation

 

Whenever the
conditions of Section 15.1 have been duly observed and performed, the
Successor Corporation shall possess and from time to time may exercise each and
every right and power of the Corporation under this Trust Indenture in the name
of the Corporation or otherwise and any act or proceeding by any provision of
this Trust Indenture required to be done or performed by any director or
officer of the Corporation may be done and performed with like force and effect
by the directors or officers of such Successor Corporation.

 

ARTICLE 16

GENERAL

 

16.1                                                                        Entire Agreement

 

Other than the
Subscription Agreement entered into by each Debentureholder and accepted by the
Corporation and Surge U.S. and the Agency Agreement among the Corporation,
Surge U.S. and MGI Securities Inc., in each case in connection with the
issuance of the Debentures, this Trust Indenture constitutes the entire
agreement between the parties hereto relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties and there
are no general or specific warranties, representations or other agreements by
or among the parties in connection with the entering into of this Trust
Indenture or the subject matter hereof except as specifically set forth herein
and as set out in such Subscription Agreements and Agency Agreement.

 

16.2                                                                        Amendments

 

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

 

16.3                                                                        Further Assurances

 

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

 

63

 

16.4                                                                        Unenforceable Terms

 

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

 

16.5                                                                        Trustee Indenture Legislation

 

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

 

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

 

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

 

16.6                                                                        Severability

 

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

 

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

 

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

 

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

 

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

 

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

 

64

 

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

 

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

 

16.8                                                                        Enurement

 

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

 

16.9                                                                        Execution

 

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

 

65

 

16.10                                                                 Formal Date

 

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

 

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

 

	
   

  	
  SURGE GLOBAL ENERGY (CANADA), LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ David Perez

  
	
   

  	
   

  	
  Name:

  	
  David Perez

  
	
   

  	
   

  	
  Title:  

  	
  Chairman of the Board

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SURGE GLOBAL ENERGY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ David Perez

  
	
   

  	
   

  	
  Name:

  	
  David Perez

  
	
   

  	
   

  	
  Title:  

  	
  Chief Operating Officer and

  Chairman of the Board

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  VALIANT TRUST COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ J. Robert Morris

  
	
   

  	
   

  	
  Name:

  	
  J. Robert Morris

  
	
   

  	
   

  	
  Title:  

  	
  General Manager

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ Concepcion Jalbuena

  
	
   

  	
   

  	
  Name:

  	
  Concepcion Jalbuena

  
	
   

  	
   

  	
  Title:  

  	
  Manager, Income Trusts

  

 

66

 

SCHEDULE A

 

To the
Trust Indenture dated as of November 15, 2005 providing for the issue of 7.0%
Secured Convertible Debentures of Surge Global Energy (Canada), Ltd.

 

PERMITTED ENCUMBRANCES

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

SCHEDULE B

 

To the
Trust Indenture dated as of November 15, 2005 providing for the issue of 7.0%
Secured Convertible Debentures of Surge Global Energy (Canada), Ltd.

 

FORM OF DEBENTURE

 

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

 

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

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS
SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND A
DAY AFTER THE LATER OF (i) NOVEMBER 15, 2005, AND (ii) THE DATE THE CORPORATION
BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.

 

	
  No. ·

  	
   

  	
  Cdn. $·

  

 

SURGE GLOBAL ENERGY
(CANADA), LTD.

 

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

 

7.00% SECURED
CONVERTIBLE DEBENTURE

DUE NOVEMBER 15, 2007

 

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

 

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

 

 

addressed
to the Debentureholder at its last address or account, as the case may be,
appearing on the Register.

 

This Debenture
is one of the Debentures of the Corporation issued or issuable under the
provisions of the Trust Indenture.  The
Debentures authorized for issue are limited to an aggregate principal amount of
Cdn. $10,000,000.  Reference is hereby
expressly made to the Trust Indenture for a description of the terms and
conditions upon which the Debentures are to be issued and held and the rights
and remedies of the holders of the Debentures and of the Corporation, Surge
U.S. and of the Trustee, all to the same effect as if the provisions of the
Trust Indenture were herein set forth and to all of which provisions the holder
of this Debenture, by acceptance hereof, assents.  To the extent that the terms and conditions
stated in this Debenture conflict with the provisions of the Trust Indenture,
the provisions of the Trust Indenture shall govern and prevail.  Capitalized words and phrases not otherwise
defined herein shall take on the meaning ascribed to them in the Trust
Indenture

 

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

 

Any part,
being Cdn. $1,000 or whole multiples thereof, of the principal amount of this
Debenture is convertible, at the option of the Debentureholder, upon surrender
of this Debenture at the principal office of the Trustee in Calgary, Alberta,
at any time prior to 5:00 p.m. (Calgary time) on the Business Day prior to the
Maturity Date into the nearest whole number of Common Shares (without
adjustment for interest accrued hereon or for dividends or distributions on
Common Shares issuable upon conversion) calculated by dividing the principal
amount of Debentures presented for conversion by the initial conversion price
of Cdn. $1.00 (the “Conversion Price”)
per Common Share, all subject to the terms and conditions and in the manner set
forth in the Trust Indenture.  The Trust
Indenture makes provision for the adjustment of the Conversion Price as a
result of certain events therein specified and described in Article 8 of
the Trust Indenture.  No fractional
Common Shares will be issued on any conversion. 
No adjustment in the number of Common Shares to be issued upon
conversion will be made for distributions or dividends on Common Shares
issuable upon conversion or for interest accrued on any Debentures surrendered
for conversion.  Upon conversion, the
Debentureholder shall also receive all accrued and unpaid interest in respect
of the principal amount converted up to the date of conversion.

 

The conversion
outlined above is deemed to occur upon the occurrence of a Going Public
Transaction and where such Going Public Transaction is completed at a price per
Common Share (or cash and stock value per share) below Cdn. $1.15 (subject to
adjustment pursuant to Article 8 of the Trust Indenture), the deemed exercise
of the conversion shall be completed at a deemed price equal to the then
current Conversion Price multiplied by a ratio, the numerator of which is the
price per Common Share (or cash and stock value per share) that the Going
Public Transaction was completed at, and the denominator of which is Cdn. $1.15
(subject to adjustment pursuant to Article 8 of the Trust Indenture).

 

Any part,
being Cdn. $1,000 or whole multiples thereof, of the principal amount of this
Debenture, is exchangeable on June 30 and December 31 of each year prior to the
Maturity Date, at the option of the Debentureholder, upon surrender of this
Debenture at the principal office of the Trustee in Calgary, Alberta, and upon
providing each of the Corporation, Surge U.S. and the Trustee with at least 3
Business Days notice, into the nearest whole number of Surge U.S. Common Shares
(without adjustment for interest accrued hereon or for dividends or
distributions on Surge U.S. Common Shares issuable upon exchange) calculated by
dividing the principal amount of Debentures presented for exchange by the
initial exchange price of U.S. $1.00 (the “Exchange
Price”) per Surge U.S. Common Share (and a fixed 

 

2

 

exchange
rate of Cdn. $1.25 equal to U.S. $1.00), all subject to the terms and
conditions and in the manner set forth in the Trust Indenture.  The Trust Indenture makes provision for the adjustment
of the Exchange Price as a result of certain events therein specified and
described in Article 8 of the Trust Indenture.  No fractional Surge U.S. Common Shares will
be issued on any exchange.  No adjustment
in the number of Surge U.S. Common Shares to be issued upon exchange will be
made for distributions or dividends on Surge U.S. Common Shares issuable upon
exchange or for interest accrued on any Debentures surrendered for
exchange.  Upon exchange, the Debentureholder
shall also receive from the Corporation all accrued and unpaid interest in
respect of the principal amount exchanged up to the date of exchange.  Upon completion of the exchange, Surge U.S.
will be deemed to have exercised its conversion right as the resultant
Debentureholder to acquire Common Shares as outlined above.

 

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

 

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

 

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

 

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

 

The Trust
Indenture contains provisions making binding upon all holders of Debentures
outstanding thereunder resolutions passed at meetings of such holders held in
accordance with such provisions and instruments signed by the holders of a
specified majority of Debentures outstanding, which resolutions or instruments
may have the effect of amending the terms of this Debenture or the Trust
Indenture.

 

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

 

3

 

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

 

IN
WITNESS WHEREOF SURGE GLOBAL ENERGY (CANADA), LTD. has caused this Debenture to be signed by its authorized
representatives as of the 15th day of November, 2005.

 

 

	
   

  	
  SURGE GLOBAL ENERGY (CANADA), LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

4

 

TRUSTEE’S CERTIFICATE

 

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

 

 

	
  VALIANT TRUST COMPANY

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  (Authorized
  Officer)

  	
   

  	
   

  

 

 

REGISTRATION PANEL

 

(No
writing hereon except by Trustee or other registrar)

 

 

	
  Date of Registration

  	
   

  	
  In Whose
  Name Registered

  	
   

  	
  Signature of
  Trustee or Registrar

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

5

 

FORM OF ASSIGNMENT

 

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

 

	
  Dated:

  	
   

  
	
   

  
	
  Address of
  Transferee:

  	
   

  
	
   

  	
  (Street Address, City, Province and Postal Code)

  
	
   

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

  	
   

  
				

 

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

 

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

 

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

 

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

 

	
  Signature of
  Guarantor:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Authorized
  Officer

  	
   

  	
  Signature of
  transferring registered holder

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name of
  Institution

  	
   

  	
  Name of
  Holder (Please print)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Capacity of
  Authorized Representative

  	
   

  

 

6

 

CONVERSION NOTICE TO
CONVERT DEBENTURES

INTO COMMON SHARES OF
THE CORPORATION

 

TO:                            SURGE
GLOBAL ENERGY (CANADA), LTD.

TO:                            VALIANT
TRUST COMPANY

 

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

 

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

 

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature
  of Registered Holder)

  

 

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

 

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

 

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

 

 

	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Address)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (City,
  Province and Postal Code)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name of
  guarantor:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Authorized
  signature:

  	
   

  	
   

  	
   

  
							

 

7

 

EXCHANGE NOTICE TO
EXCHANGE DEBENTURES

FOR SURGE U.S. COMMON
SHARES

 

TO:                            SURGE
GLOBAL ENERGY, INC.

TO:                            SURGE
GLOBAL ENERGY (CANADA), LTD.

TO:                            VALIANT
TRUST COMPANY

 

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

 

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

 

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature
  of Registered Holder)

  

 

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

 

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

 

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

 

 

	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Address)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (City,
  Province and Postal Code)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name of
  guarantor:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Authorized
  signature:

  	
   

  	
   

  	
   

  
							

 

8Exhibit
10.22

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”)
is made and entered into as of November 15, 2005, by and among Surge Global
Energy, Inc., a Delaware corporation (the “Company”), and MGI
Securities, Inc., as agent to the purchasers of the Debentures set forth on
Schedule “A” hereto (each such purchaser, a “Purchaser” and
collectively, the “Purchaser”).

 

This Agreement is made pursuant to the
Agency Agreement, dated as of the date hereof among the Company and MGI
Securities Inc.  (the “Purchase
Agreement”).

 

The Company and the Purchasers hereby agree
as follows:

 

1.  Definitions

 

Capitalized
terms used and not otherwise defined herein that are defined in the Purchase
Agreement shall have the meanings given such terms in the Purchase Agreement.

As
used in this Agreement, the following terms shall have the following meanings:

 

“Effectiveness Date”
means, with respect to the initial Registration Statement required to be filed
hereunder, the 90th calendar day following the Closing Date and,
with respect to any additional Registration Statements which may be required
pursuant to Section 3(b), the 90th calendar day following the date
on which the Company first knows, or reasonably should have known, that such
additional Registration Statement is required hereunder; provided,  however,
in the event the Company is notified by the Commission that one of the above
Registration Statements will not be reviewed or is no longer subject to further
review and comments, the Effectiveness Date as to such Registration Statement
shall be the fifth Trading Day following the date on which the Company is so
notified if such date precedes the dates required above.

 

“Effectiveness Period”
shall have the meaning set forth in Section 2.

 

“Filing Date”
means, with respect to the initial Registration Statement required hereunder,
the 45lh calendar day following the Closing Date and, with respect
to any additional Registration Statements which may be required pursuant to
Section 3(b), the 15th day following the date on which the Company
first knows, or reasonably should have known that such additional Registration
Statement is required hereunder.

 

“Holder” or “Holders”
means the holder or holders, as the case may be, from time to time of Registrable
Securities.

 

“Indemnified Party”
shall have the meaning set forth in Section 5(c) hereof.

 

“Indemnifying Party”
shall have the meaning set forth in Section 5(c) hereof.

 

1

 

“Losses” shall have
the meaning set forth in Section 5(a).

 

“Proceeding” means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.

 

“Prospectus” means
the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by a Registration
Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.

 

“Registrable Securities”
means (i) all of the shares of Common Stock issuable upon conversion in full of
the Debentures, (ii) all shares issuable as interest on the Debentures assuming
all interest payments are made in shares of Common Stock and the Debentures are
held until maturity, and (iii) any securities issued or issuable upon any stock
split, dividend or other distribution recapitalization or similar event with
respect to the foregoing,

 

“Registration Statement”
means the registration statements required to be filed hereunder and any
additional registration statements contemplated by Section 3(b), including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.

 

“Rule 415” means
Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule,

 

“Rule 424” means
Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule.

 

‘Trading Day” means
any day during which the Trading Market shall be open for business.

 

“Trading Market”
means the following markets or exchanges on which the Common Stock is listed or
quoted for trading on the date in question: OTC Bulletin Board, the American
Stock Exchange, the New York Stock Exchange, the Nasdaq

 

2

 

National Market or the Nasdaq SmallCap Market.

 

2.  Shelf
Registration

 

On
or prior to each Filing Date, the Company shall prepare and file with the
Commission a “Shelf” Registration Statement covering the resale of the
Registrable Securities on such Filing Date for an offering to be made on a
continuous basis pursuant to Rule 415.  The
Registration Statement shall be on Form SB-2 (unless the Company is not then
eligible to register the Registrable Securities for resale on Form SB-2, in
which case such registration shall be on another appropriate form in accordance
herewith) and shall contain (unless otherwise directed by the Holders)
substantially the “Plan of Distribution” attached hereto as Annex A.  Subject to the terms of this Agreement, the
Company shall use cause the Registration Statement to be declared effective
under the Securities Act as promptly as possible after the filing thereof, but
in any event prior to the applicable Effectiveness Date, and shall keep such
Registration Statement continuously effective under the Securities Act until
all Registrable Securities covered by such Registration Statement have been
sold or may be sold without volume restrictions pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion letter
to such effect, addressed and acceptable to the Company’s transfer agent and
the affected Holders (the “Effectiveness Period”). The Company shall
immediately notify the Holders via facsimile of the effectiveness of the
Registration Statement on the same day that the Company receives notification
of the effectiveness from the Commission.

 

3.  Registration
Procedures

 

In
connection with the Company’s registration obligations hereunder, the Company
shall:

 

(a) Not less than two Trading Days prior to the filing of each
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall, (i) furnish to each
Holder copies of all such documents proposed to be filed, which documents (other
than those incorporated or deemed to be incorporated by reference) will be
subject to the review of such Holders, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to conduct a reasonable investigation within the meaning of the Securities
Act.

 

(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to a Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep a Registration Statement
continuously effective as to the applicable Registrable Securities for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities
Act all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement (subject to the
terms of this Agreement), and as so supplemented or amended to be filed
pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any
comments received from the Commission with respect to a

 

3

 

Registration Statement or
any amendment thereto and as promptly as reasonably possible provide the
Holders true and complete copies of all correspondence from and to the
Commission relating to a Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by a
Registration Statement daring the applicable period in accordance (subject to
the terms of this Agreement) with the intended methods of disposition by the
Holders thereof set forth in such Registration Statement as so amended or in
such Prospectus as so supplemented.

 

(c) Notify the Holders of Registrable Securities to be sold (which
notice shall, pursuant to clauses (ii) through (vi) hereof, be accompanied by
an instruction to suspend the use of the Prospectus until the requisite changes
have been made) as promptly as reasonably possible (and, in the case of (i)(A)
below, not less than five Trading Days prior to such filing) and (if requested by
any such Person) confirm such notice in writing no later than one Trading Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to a Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a “review”
of such Registration Statement and whenever the Commission comments in writing
on such Registration Statement (the Company shall provide true and complete
copies thereof and all written responses thereto to each of the Holders); and
(C) with respect to a Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or
any other Federal or state governmental authority for amendments or supplements
to a Registration Statement or Prospectus or for additional information; (iii)
of the issuance by the Commission of any stop order suspending the effectiveness
of a Registration Statement covering any or all of the Registrable Securities
or the initiation of any Proceedings for that purpose; (iv) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; (v) of the occurrence of any event or passage of
time that makes the financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in a Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to a Registration Statement, Prospectus or other
documents so that, in the case of a Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; and (vi) the occurrence or existence of any pending corporate
development with respect to the Company that the Company believes may be
material and that, in the determination of the Company, makes it not in the
best interest of the Company to allow continued availability of the
Registration Statement or Prospectus; provided that any and all of such
information shall remain confidential to each Holder until such information
otherwise becomes public, unless disclosure by a Holder is required by law; provided,
further, notwithstanding each Holder’s agreement to keep such
information confidential, the Holders make no acknowledgement that any such
information is material, non-public information.

 

(d) Promptly deliver to each Holder, without charge, as many copies of
the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto

 

4

 

as such Persons may reasonably
request.  Subject to the terms of this
Agreement, the Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders in connection
with the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto.

 

(e) Comply with all applicable
rules and regulations of the Commission.

 

(f) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.

 

(g) The Company may require, at any time prior to the third Trading Day
prior to the Filing Date, each Holder to furnish to the Company a statement as
to the number of shares of Common Stock beneficially owned by such Holder and,
if requested by the Commission, the controlling person thereof, within three
Trading days of the Company’s request.  During
any periods that the Company is unable to meet its obligations hereunder with
respect to the registration of the Registrable Securities solely because any
Holder fails to furnish such information within three Trading Days of the
Company’s request.

 

4.  Registration
Expenses.  All fees and expenses
incident to the performance of or compliance with this Agreement by the Company
shall be borne by the Company whether or not any Registrable Securities are
sold pursuant to the Registration Statement. 
The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to
be made with the Trading Market on which the Common Stock is then listed for
trading, and (B) in compliance with applicable state securities or Blue Sky
laws reasonably agreed to by the Company in writing (including, without limitation,
fees and disbursements of counsel for the Company in connection with Blue Sky
qualifications or exemptions of the Registrable Securities and determination of
the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as requested by the Holders), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the Holders),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements
of counsel for the Company, and (v) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation
of the transactions contemplated by this Agreement (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit and the fees and
expenses incurred in connection with the listing of the Registrable Securities
on any securities exchange as required hereunder.

 

5

 

5.  Indemnification

 

(a) Indemnification by the Company.  The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls any such Holder (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and reasonable attorneys’ fees) and expenses (collectively,
“Losses”), as incurred, arising out of or relating to any untrue or
alleged untrue statement of a material fact contained in a Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (1) such untrue statements or omissions or alleged
untrue statements or omissions are based upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein,
or to the extent that such information relates to such Holder or such Holder’s
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in a
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (2) in the case of an occurrence of an event
of the type specified in Section 3(c)(ii)-(vi), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the receipt
by such Holder of the Advice contemplated in Section 6(d).  The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding arising from or in
connection with the transactions contemplated by this Agreement of which the
Company is aware.

 

(b) Indemnification by Holders.  Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and
the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising out of or based upon any untrue statement of a
material fact contained in any Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising
solely out of or based solely upon: (i) such Holder’s failure to comply with
the prospectus delivery requirements of the Securities Act or (ii) any omission
of a material fact required to be staled therein or necessary to make the
statements therein not misleading to the extent, but only to the extent, such
untrue statement or omission is contained in any information so furnished in writing
by such Holder to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (1) such untrue statements
or omissions are based upon information regarding such Holder furnished in
writing to the Company by such Holder

 

6

 

expressly
for use therein, or to the extent such information relates to such Holder or
such Holder’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in
any amendment or supplement thereto or (2) in the case of an occurrence of an
event of the type specified in Section 3(d)(ii)-(vi), the use by such Holder of
an outdated or defective Prospectus after the Company has notified such Holder
in writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 6(d).  In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.

 

(c) Conduct of Indemnification
Proceedings.  If any
Proceeding shall be brought or asserted against any Person entitled to
indemnity hereunder (an “Indemnified Party”), such Indemnified Party
shall promptly notify the Person from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to the
extent that such failure shall have prejudiced the Indemnifying Party.

 

An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless; (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a material conflict of interest is
likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have
the right to assume the defense thereof and the expense of one such counsel for
each Holder shall be at the expense of the Indemnifying Party).  The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld.  No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party
from all liability on claims that are the subject matter of such Proceeding.

 

Subject to the terms of this Agreement, all fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent
incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten Trading Days of written notice thereof
to the Indemnifying Party (regardless of whether it is ultimately determined
that an Indemnified

 

7

 

Party
is not entitled to indemnification hereunder; provided, that the Indemnifying
Party may require such Indemnified Party to undertake to reimburse all such
fees and expenses to the extent it is finally judicially determined that such
Indemnified Party is not entitled to indemnification hereunder).

 

(d) Contribution.  If a claim for indemnification
under Section 5(a) or 5(b) is unavailable to an Indemnified Party (by reason of
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations.  The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission.  The
amount paid or payable by a party as a result of any Losses shall be deemed to
include, subject to the limitations set forth in Section 5(c), any reasonable
attorneys’ or other reasonable fees or expenses incurred by such party in
connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.

 

The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this
Section 5(d), no Holder shall be required to contribute, in the aggregate, any
amount in excess of the amount by which the proceeds actually received by such
Holder from the sale of the Registrable Securities subject to the Proceeding
exceeds the amount of any damages that such Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission.

 

The indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

 

6.  Miscellaneous

 

(a) Amendments and Waivers.  The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and all of the Holders of the then outstanding Registrable Securities,
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of all of the Registrable Securities to
which such waiver or consent relates; provided,  however, that the

 

8

 

provisions
of this sentence may not be amended, modified, or supplemented except in
accordance with the provisions of the immediately preceding sentence.

 

(b) No Inconsistent Agreements.  Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or any
of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof.  Except
as set forth on Schedule 6(b), neither the Company nor any of its subsidiaries
has previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person that have not been satisfied in
full.

 

(c) Compliance. Each
Holder covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement.

 

(d) Discontinued Disposition.  Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Sections
3(c)(ii) through (vi), such Holder will forthwith discontinue disposition of
such Registrable Securities under a Registration Statement until such Holder’s receipt
of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3, or until it is advised in writing (the “Advice”)
by the Company that the use of the applicable Prospectus may be resumed, and,
in either case, has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement.  The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.

 

(e) Piggy-Back Registrations.  If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare
and file with the Commission a registration statement relating to an offering
for its own account or the account of others under the Securities Act of any of
its equity securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or other
employee benefit plans, then the Company shall send to each Holder written
notice of such determination and, if within fifteen days after receipt of such
notice, any such Holder shall so request in writing, the Company shall include
in such registration statement all or any part of such Registrable Securities
such holder requests to be registered; provided, that, the Company shall not be
required to register any Registrable Securities pursuant to this Section 6(e)
that are eligible for resale pursuant to Rule

144(k) promulgated under the Securities Act or that are the subject of a then
effective Registration Statement.

 

(f) Successors and Assigns.  This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder.  The Company may not assign its rights or
obligations hereunder without the prior written consent of all of the Holders
of the then-outstanding Registrable Securities. 
Each Holder

 

9

 

may assign their
respective rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.

 

(g) Counterparts.  This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed to
be an original and, all of which taken together shall constitute one and the
same Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

 

(h) Governing Law.  All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of law
thereof.  Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting
in the City of New York, Borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is improper.  Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.  Each
party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby.  If either party shall commence a
Proceeding to enforce any provisions of this Agreement, then the prevailing
party in such Proceeding shall be reimbursed by the other party for its
attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.

 

(i) Severability.  If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.  It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.

 

(j) Headings.  The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

 

(k) Independent Nature of Purchasers’
Obligations and Rights.  The
obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser

 

10

 

hereunder, and no
Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser hereunder. 
Nothing contained herein or in any other agreement or document delivered
at any closing, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute the Purchasers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or the transactions
contemplated by this Agreement.  Each
Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not
be necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.

 

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

 

11

 

IN WITNESS WHEREOF, the parties have
executed this Registration Rights Agreement as of the date first written above.

 

	
   

  	
  SURGE GLOBAL ENERGY, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Perez

  	
   

  
	
   

  	
   

  	
  Name:

  	
  David Perez

  
	
   

  	
   

  	
  Title:

  	
  Chief Operating Officer and

  Chairman of the Board

  
					

 

 

	
   

  	
  MGI SECURITIES INC. 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tony P. Loria

  	
   

  
	
   

  	
   

  	
  Name: Tony P. Loria

  
	
   

  	
   

  	
  Title: Managing Director, Corporate Finance

  

 

12

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00095-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00095-of-00352.parquet"}]]