RELEASE AND INDEMNIFICATION AGREEMENT
EXHIBIT
10.26
THIS
AGREEMENT is made the 15th day of November, 2005
BETWEEN:
SURGE
GLOBAL ENERGY (CANADA), LTD.,
a
corporation existing under the laws of the Province of Alberta ("Surge
Canada")
AND
SURGE
GLOBAL ENERGY, INC.,
a
corporation existing under the laws of the state of Delaware ("Surge
U.S.")
WHEREAS
Surge U.S. intends to further capitalize Surge Canada on the date
hereof;
AND
WHEREAS Surge U.S., Surge Canada and the new management team of Surge Canada
are
desirous of fixing the real and contingent liability position of Surge Canada
at
the time of completing (the "Closing")
the
private placement of $
aggregate principal amount of 7.0% convertible secured debentures due November
15, 2007 of Surge Canada on the date hereof (the "Closing
Date");
AND
WHEREAS Surge U.S. has represented to Surge Canada that, as at the date hereof,
the aggregate liabilities of Surge Canada (including monies owed to Surge U.S.)
do not exceed Cdn. $630,000 excluding: (i) the outstanding compensation of
▇▇▇▇
▇▇▇▇▇ in the aggregate amount of Cdn. $120,000; (ii) the direct costs of
drilling the Test Well (as defined in the Farmout Agreement) pursuant to the
Farmout Agreement (as defined below); and (iii) any other bona fide liabilities
of Surge Canada not to exceed Cdn. $250,000 in the aggregate (the "Surge
Canada Liabilities");
AND
WHEREAS Surge Canada has on the date hereof paid Surge U.S. Cdn. $630,000 in
full and final satisfaction of all of the Surge Canada Liabilities;
AND
WHEREAS Surge U.S. has represented to Surge Canada that prior to the date hereof
neither it nor Surge Canada has granted any Interest to any Person in connection
with, nor are there any Interests in, the Farmout Lands, and for greater
certainty, neither Dynamo Energy Corporation nor ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ have an
Interest in the Farmout Lands;
AND
WHEREAS Surge Canada, Surge U.S. and Valiant Trust Company have entered into
or
become a party to the escrow agreement substantially in the form attached hereto
as Schedule "A";
AND
WHEREAS the foregoing recitals are made as representations and statements of
fact by Surge U.S. and Surge Canada to the other;
NOW,
THEREFORE, in consideration of the covenants and agreements herein contained,
and for other good and valuable consideration (the receipt and sufficiency
of
which are hereby acknowledged) the parties agree as follows:
1. Definitions.
As
used
in this Agreement, the following terms have the following meanings:
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(a)
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"Affiliate"
has the same meaning as "affiliate" under the Securities
Act
(Alberta);
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(b)
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"Farmout
Agreement"
means the farmout agreement dated February 25, 2005 (as amended)
between
Surge U.S., Surge Canada, Deep Well Oil & Gas, Inc. and Northern
Alberta Oil Ltd., whereby Surge Canada has a right to earn a 40%
working
interest in the Farmout Lands;
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(c)
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"Farmout
Lands"
means all right, title, interest and estate of Surge Canada, Surge
U.S.,
Deep Well Oil & Gas, Inc. and Northern Alberta Oil Ltd. in the
Petroleum and Natural Gas Rights in lands set out in Schedule "A"
to the
Farmout Agreement;
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(d)
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"Interest"
means a lien, mortgage, pledge, claim, option, encumbrance, charge,
Security Interest, penalty, royalty, finders' fee, burden, net profits
interest, carried working interest or other adverse claim of any
Person in
the Farmout Lands, but shall specifically exclude claims in the Farmout
Lands by the Lubicon Lake Indian Nation or any other aboriginal or
first
nation group under the laws of
Canada;
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(e)
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"Leases"
means collectively the fee simple certificates of title, leases,
licenses,
permits, royalty agreements and other instruments, by virtue of which
the
holder is entitled to drill for, win, take, own or remove the Petroleum
Substances within, upon or under all or any part of the Farmout Lands
(or
any replacement thereof, renewals thereof or leases derived therefrom),
but only insofar as the same relate to the Farmout
Lands;
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(f)
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"Person"
means any individual, body corporate, partnership (limited or general),
trust, trustee, executor or similar official, governmental agency
or
authority or other entity;
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(g)
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Petroleum
and Natural Gas Rights"
means all right, title, interest and estate of Surge Canada, Surge
U.S.,
Deep Well Oil & Gas, Inc. or Northern Alberta Oil Ltd. in and to the
Farmout Lands including, the interests set forth in the Farmout Agreement
and to the Leases to the extent they apply to the Farmout
Lands;
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(h)
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"Petroleum
Substances"
means petroleum, natural gas and all related hydrocarbons including,
without limitation, all liquid hydrocarbons and all other mineral
substances, whether liquid, solid or gaseous and whether hydrocarbons
or
not (except coal but including sulphur, coalbed methane and hydrogen
sulphide), produced in association with such petroleum, natural gas
or
related hydrocarbons or found in any water produced from the Farmout
Lands, insofar only as the rights to the same are granted by the
Leases;
and
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(i)
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"Security
Interest"
means any mortgage, charge, pledge, lien, hypothec, assignment by
way of
or in effect as security, or security interest whatsoever, but does
not
include a right of set off or a set
off.
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2. Release
in Favour of Surge Canada.
In
consideration of the sum of Cdn. $630,000 and other good and valuable
consideration given by Surge Canada, the receipt and sufficiency of which is
hereby acknowledged, Surge U.S. hereby remises, releases and forever discharges
for itself and its successors and assigns, Surge Canada and each of its
shareholders, current and former directors, officers, employees, agents and
representatives and its successors and assigns from any and all actions, causes
of action, claims and demands whatsoever, whether known or unknown and whether
or not well founded in fact or in law and of and from any and all suits, debts
and dues, sums of money, accounts, reckonings, bonds, bills, specialities,
covenants, controversies, agreements, promises, trespasses, damages, judgments,
executions, claims and demands whatsoever in law or in equity which Surge U.S.
or its successors or assigns has had or now has or to which any of them
hereafter can, shall or may have for, or by reason of any matter, cause or
thing
whatsoever, occurring or existing up to and inclusive of the date hereof, except
for: (i) the outstanding compensation of ▇▇▇▇ ▇▇▇▇▇ in the aggregate amount
of
Cdn. $120,000; (ii) the direct costs of drilling the Test Well (as defined
in
the Farmout Agreement) pursuant to the Farmout Agreement; and (iii) any other
bona fide liabilities of Surge Canada not to exceed Cdn. $250,000 in the
aggregate.
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3. Indemnification
in Favour of Surge Canada.
Subject
to Section 4, Surge U.S. will indemnify and save Surge Canada and each of its
shareholders and partners, and each of their respective current and former
directors, officers, employees, agents and representatives (collectively, the
"Indemnified
Persons")
harmless of and from any loss, liability, claim, damage (including incidental
and consequential damage) or expense (whether or not involving a third-party
claim) including legal expenses (collectively, "Damages")
suffered by, imposed upon or asserted against any of the Indemnified Persons
as
a result of, in respect of, connected with, or arising out of, under, or
pursuant to any breach or inaccuracy of any representation or warranty given
by
Surge U.S. in the recitals to this Agreement (such Damages are herein called
"Indemnified
Loss").
4. Time
Limitations. The
representations and warranties of Surge U.S. contained in the recitals to this
Agreement and the indemnification in favour of Surge Canada provided in Section
3 of this Agreement will survive the Closing and, notwithstanding the Closing
and any investigation made by or on behalf of Surge Canada, will continue for
a
period of twenty-four (24) months after the Closing Date and any claim in
respect thereof will be made in writing and will be subject to Section 5 and
Section 6 except that:
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(a)
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the
release in favour of Surge Canada set forth in Section 2 of this
Agreement
will survive and continue in full force and effect without limitation
of
time;
and
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(b)
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a
claim for any breach by Surge U.S. of any of the representations
and
warranties contained in the recitals to this Agreement involving
fraud or
fraudulent misrepresentation may be made at any time subject only
to
applicable limitation periods imposed by applicable
law.
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5. Procedure
for Indemnification - Other Claims.
A claim
for indemnification for any matter not involving a third-party claim may be
asserted by notice to Surge U.S. from whom indemnification is
sought.
6. Indemnification
Proceedings - Third Party Claims.
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(a)
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Promptly
after receipt by an Indemnified Person under Section 3 of a notice
of
commencement of any proceeding against it by a third party, the
Indemnified Person will, if a claim is to be made against Surge U.S.
under
such Section, give notice to Surge U.S. of the commencement of such
claim.
The failure to notify Surge U.S. will not relieve Surge U.S. of any
liability that it may have to any Indemnified Person, except to the
extent
that Surge U.S. demonstrates that the defense of such action is prejudiced
by the Indemnified Person's failure to give such
notice.
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(b)
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If
any proceeding referred to in Section 6(a)
(a
"Proceeding")
is brought against an Indemnified Person and it gives notice to Surge
U.S.
of the commencement of the Proceeding, Surge U.S. will be entitled
to
participate in the Proceeding as hereinafter provided. Subject to
the next
following sentence, to the extent that Surge U.S. wishes to assume
the
defense of the Proceeding with counsel satisfactory to the Indemnified
Person, it may do so provided it reimburses the Indemnified Person
for all
of its out-of-pocket expenses (including solicitor's fees and
disbursements) arising prior to or in connection with such assumption.
Surge U.S. may not assume defence of the Proceeding if (i) Surge
U.S. is
also a party to the Proceeding and the Indemnified Person determines
in
good faith that joint representation would be inappropriate, or (ii)
Surge
U.S. fails to provide reasonable assurance to the Indemnified Person
of
its financial capacity to defend the Proceeding and provide
indemnification with respect to the Proceeding. After notice from
Surge
U.S. to the Indemnified Person of its election to assume the defense
of
the Proceeding as against the Indemnified Person, Surge U.S. will
not, as
long as it diligently conducts such defense, be liable to the Indemnified
Person under this Section 6
in
connection with the defense of the Proceeding, other than reasonable
costs
of investigation. If Surge U.S. assumes the defense of a Proceeding
as
against the Indemnified Person (i) no compromise or settlement of
such
claims may be made by Surge U.S. without the Indemnified Person's
consent
(which may not be unreasonably withheld) unless (A) there is no finding
or
admission of any violation of applicable laws or any violation of
the
rights of any person and no adverse effect on any other claims that
may be
made against the Indemnified Person, and (B) the sole relief provided
is
monetary damages that are paid in full by Surge U.S., and (ii) the
Indemnified Person will have no liability with respect to any compromise
or settlement of such claims effected without its consent not to
be
unreasonably withheld. If notice is given to Surge U.S. of the
commencement of any Proceeding and Surge U.S. does not, within thirty
(30)
days after receipt of such notice, give notice to the Indemnified
Person
of its election to assume the defence of the Proceeding, Surge U.S.
will
not be entitled to assume the defence and will be bound by any
determination made in the Proceeding or any compromise or settlement
effected by the Indemnified Person acting in good
faith.
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(c)
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Notwithstanding
the foregoing, if an Indemnified Person determines in good faith
that
there is a reasonable probability that a Proceeding may adversely
affect
it or its Affiliates other than as a result of monetary damages for
which
it would be entitled to indemnification under this Agreement, the
Indemnified Person may, by notice to Surge U.S., assume the exclusive
right to defend, compromise, or settle the Proceeding. In such case,
Surge
U.S. will not be bound by any compromise or settlement effected without
its consent (which may not be unreasonably withheld) but will be
bound by
a final and conclusive judgment of a court of competent
jurisdiction.
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(d)
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Where
the defence of a Proceeding is being undertaken and controlled by
Surge
U.S., the Indemnified Person will use its reasonable best efforts
to make
available to Surge U.S. those employees, officers and directors whose
assistance, testimony or presence is necessary to assist Surge U.S.
in
evaluating and defending any such claims. However, Surge U.S. will
be
responsible for the reasonable out-of-pocket expenses associated
with any
employees, officers and directors made available by the Indemnified
Person
to Surge U.S. pursuant to this Section 6(d).
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(e)
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With
respect to any Proceeding at the request of Surge U.S., the Indemnified
Person will make available to Surge U.S. or its representatives on
a
timely basis all documents, records and other materials in the possession
of the Indemnified Person, at the expense of the Indemnifying Party,
reasonably required by Surge U.S. for its use in defending any such
claim
and will otherwise cooperate on a timely basis with Surge U.S. in
the
defence of such claim.
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7. Notices.
All
notices, demands and other communications to be given or delivered under or
by
reason of the provision of this Agreement will be in writing and be sent to
the
parties hereto at the addresses, as set forth below, or at such other address
of
such party as such party will have furnished to the other parties in writing
and
in accordance with this Section 7:
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(a)
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If
to Surge Canada to:
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▇▇▇▇▇
▇▇▇▇, ▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇
▇▇▇
▇▇▇
Attention: Chief
Executive Officer
Facsimile
No.: (▇▇▇)
▇▇▇-▇▇▇▇
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(b)
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If
to Surge U.S. to:
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Suite
410, ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
Attention: Chairman
Facsimile
No.: (▇▇▇)
▇▇▇-▇▇▇▇
All
notices and other communications will be deemed effectively given as to the
party to whom it is addressed as of the earliest of the following times: (i)
when received, (ii) when delivered personally, (iii) one (1) Business Day after
being delivered by facsimile (with appropriate confirmation of receipt), (iv)
one (1) Business Day after being timely deposited with an overnight courier
service with instructions (and the capability) to make delivery on the next
day,
(v) if sent internationally, five (5) Business Days after being deposited in
international mail, first class with postage prepaid, or (vi) if sent
domestically, five (5) Business Days after being deposited in U.S. or Canadian
mail, first class with postage prepaid.
8. Business
Day.
Business Day means any day, other than a Saturday, Sunday or any other day
on
which banks are generally not open for business in either Calgary, Alberta
or
San Diego, California. Any day on which any action is required to be taken
hereunder is not a Business Day, then such action shall be required to be taken
at or before the requisite time on the next succeeding day that is a Business
Day.
9. Governing
Law.
This
Agreement will be construed in accordance with the laws of the Province of
Alberta and the federal laws of Canada applicable therein. Each of the parties
hereto attorns to the jurisdiction of the courts of the Province of
Alberta.
10. Amendment,
Modification or Waiver.
This
Agreement may be amended or modified and any term of this Agreement may be
waived if such amendment, modification or waiver is in writing and signed by
all
parties.
11. Time
of the Essence.
Time is
of the essence of this Agreement.
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12. Counterparts.
This
Agreement may be executed in several counterparts, each one of which will
constitute an original and all collectively will constitute but one instrument.
Counterparts may be executed either in original or faxed form and the parties
adopt any signatures received by a receiving fax machine as original signatures
of the parties; provided, however, than any party providing its signature in
such manner will promptly forward to the other parties an original of the signed
copy of this Agreement which was so faxed.
IN
WITNESS WHEREOF, the parties have been duly executed this Agreement as of the
date first above written.
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SURGE
GLOBAL ENERGY (CANADA), LTD.
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By:
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/s/
▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Executive
Chairman and
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Chief
Executive Officer
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By:
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/s/
▇▇▇▇ ▇. ▇▇▇▇▇
Chief
Operating Officer
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By:
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/s/
▇▇▇▇▇ ▇▇▇▇▇
Chairman
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By:
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/s/
▇▇▇▇ ▇. ▇▇▇▇▇
Chief
Executive Officer
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5
SCHEDULE
A
ESCROW
AGREEMENT
THIS
AGREEMENT is made the 15th day of November, 2005
AMONG:
VALIANT
TRUST COMPANY,
a trust
company existing under the laws of the Province of Alberta (the "Escrow
Agent")
AND
SURGE
GLOBAL ENERGY (CANADA), LTD.,
a
corporation existing under the laws of the Province of Alberta ("Surge
Canada")
AND
SURGE
GLOBAL ENERGY, INC.,
a
corporation existing under the laws of the state of Delaware ("Surge
U.S.")
WHEREAS
Surge Canada and Surge U.S. are parties to a release and indemnification
agreement (the "Indemnification
Agreement")
dated
on even date hereof;
AND
WHEREAS as security for the indemnification obligations of Surge U.S. pursuant
to the Indemnification Agreement, Surge U.S. has agreed to deposit 6,300,000
common shares of Surge Canada (together with all securities and other property
that may at any time be received or receivable or otherwise distributed or
distributable in substitution or exchange for any such common shares, including
without limitation, upon the subdivision, consolidation or reclassification
thereof, the "Escrowed
Shares"),
in
escrow with the Escrow Agent;
AND
WHEREAS the parties desire to more specifically set forth their rights and
obligations with respect to the Escrowed Shares and the distribution and release
thereof;
AND
WHEREAS the execution and delivery of this Agreement is a condition to the
obligations to consummate the transactions contemplated under the
Indemnification Agreement;
AND
WHEREAS the foregoing recitals are made as representations and statements of
fact by Surge U.S. and Surge Canada to the other (collectively, the
"Escrow
Participants")
and
not by the Escrow Agent;
NOW,
THEREFORE, in consideration of the covenants and agreements herein contained,
and for other good and valuable consideration (the receipt and sufficiency
of
which are hereby acknowledged) the parties agree as follows:
1. Escrow
Agent Not a Trustee.
The
Escrow Agent accepts duties and responsibilities under this Agreement, and
the
Escrowed Shares and any share certificates or other evidence of these
securities, solely as a custodian, bailee and agent. No trust is intended to
be,
or is or will be, created hereby and the Escrow Agent shall owe no duties
hereunder as trustee.
A-1
2. Establishment
of Escrow Account.
Surge
U.S. hereby deposits with the Escrow Agent the Escrowed Shares, together with
a
power of attorney in respect thereof, to be held in escrow by the Escrow Agent
in accordance with the terms of this Agreement and agrees to deliver forthwith
to the Escrow Agent any certificates evidencing such securities. The Escrow
Agent accepts the Escrowed Shares and agrees to establish and maintain an
account (an "Escrow
Account")
for
the Escrowed Shares in its capacity as Escrow Agent pursuant to the terms of
this Agreement. The Escrowed Shares will, following their deposit with the
Escrow Agent, remain registered in the name of Surge U.S. and/or a permitted
transferee of Surge U.S. pursuant to Section 3(d). Surge U.S. agrees to
provide the Escrow Agent with such additional powers of attorney in respect
of
the Escrowed Shares as the Escrow Agent may reasonably request in connection
with carrying out its duties hereunder.
3. Release
of Escrow Account.
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(a)
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Release.
The Escrowed Shares will only be distributed and released on joint
written
instructions signed by Surge U.S. and Surge Canada, including a Release
Notice as defined in paragraph 3(b). Subject to paragraph 3(g),
as soon as reasonably practicable (and in any event, not later than
three
(3) Business Days), following receipt of the Release Notice or other
joint
written instructions signed by Surge U.S. and Surge Canada, the Escrow
Agent will release all or a portion of the Escrowed Shares from the
Escrow
Account in accordance with the Release Notice or the joint written
instructions.
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(b)
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Surge
Canada and Surge U.S. Obligations.
If
Surge Canada and Surge U.S. have agreed to the amount of a claim
(a
"Claim")
that Surge Canada is entitled to recover from Surge U.S. pursuant
to
Section 3 of the Indemnification Agreement or if Surge Canada is
entitled
to recover a Claim from Surge U.S. pursuant to a judgment of a court
of
competent jurisdiction (from which there lies no appeal), Surge Canada
and
Surge U.S. agree to deliver a joint notice (a "Release
Notice")
to the Escrow Agent in accordance with paragraph 3(a) directing the
Escrow Agent to release to Surge Canada or its nominee that number
of
Escrowed Shares (the "Released
Shares")
from the Escrow Account having a Fair Market Value equal to the amount
of
such Claim, as set forth in the Release Notice. If the amount of
the Claim
exceeds the Fair Market Value of the Escrowed Shares then held in
the
Escrow Account, the Release Notice will direct the Escrow Agent to
release
all of the Escrowed Shares of Surge U.S. then constituting the Escrow
Account. On November 15, 2007, Surge Canada and Surge U.S. each agree
that
they will deliver a Release Notice to the Escrow Agent directing
the
Escrow Agent to release to Surge U.S. the Escrowed Shares remaining
in the
Escrow Account having an aggregate Fair Market Value in excess of
any
amounts with respect to which Surge Canada (A) is entitled to (as a
result of a resolved Claim), but has not yet received, disbursement
from
the Escrow Account pursuant to this Agreement, and (B) has delivered
a notice of Claim pursuant to the Indemnification Agreement, as set
forth
in the Release Notice. Promptly upon resolution of all Claims pending
after receipt of the Release Notice on November 15, 2007, Surge Canada
and
Surge U.S. will deliver to the Escrow Agent a further Release Notice
directing the Escrow Agent to release all of the Escrowed Shares
then
remaining in the Escrow Account that are not payable to Surge Canada
in
accordance with such resolution of such Claims, as set forth in the
Release Notice. For these purposes, "Fair
Market Value"
of an Escrowed Share shall be determined as of the Business Day
immediately preceding the date the Release Notice is delivered and
(i) at
any date prior to a Going Public Transaction shall be the greater
of $1.00
per common share of Surge Canada and the price per common share determined
by the board of directors of Surge Canada, acting reasonably, and
(ii) at
any date following a Going Public Transaction will mean the value
of a
common share of Surge Canada calculated with reference to the fifteen
(15)
day weighted average trading price on the stock exchange on which
the
common shares of Surge Canada are then traded; provided if the common
shares are then traded on more than one stock exchange, then on the
stock
exchange on which the largest volume of common shares were traded
during
such fifteen (15) consecutive trading day period. The weighted average
price per common share shall be determined by dividing the aggregate
sale
price of all common shares sold on such exchange or market, as the
case
may be, during the said fifteen (15) consecutive trading days by
the total
number of shares so sold. For purposes of this paragraph 3(b), trading
day
means, with respect to a stock exchange, a day on which such exchange
is
open for the transaction of business. For these purposes "Going
Public Transaction"
means the occurrence of either of: (i) a final receipt for a prospectus
of
Surge Canada filed in at least one "jurisdiction" (as listed in Appendix
B
to Multi-Lateral Instrument 45-102) has been obtained and the common
shares of Surge Canada are listed and posted for trading on the Toronto
Stock Exchange or the TSX Venture Exchange; or (ii) the sale, exchange,
reorganization or arrangement of all the common shares of Surge Canada
for, or the sale of all or substantially all of the assets of Surge
Canada
in a transaction that results in the holders of common shares of
Surge
Canada 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 Toronto Stock Exchange
or the
TSX Venture Exchange.
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A-2
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(c)
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Entitlements.
Prior to the release of the Escrowed Shares from escrow, Surge U.S.
and
any transferee of Escrowed Shares (and, for greater clarity, not
the
Escrow Agent) will be:
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(i)
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entitled
to exercise all rights as a holder of such Escrowed Shares, including,
without limitation, the right to vote the Escrowed Shares in accordance
with their terms;
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(ii)
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paid
all dividends (other than stock dividends) and like distributions
declared
in respect of the Escrowed Shares;
and
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(iii)
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entitled
to any and all benefits and/or rights pertaining to the Escrowed
Shares,
which shall be conveyed, transferred or dealt with in such manner
as Surge
U.S. and/or the transferee, as the case may be, may from time to
time
direct.
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(d)
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Transfer
of Escrowed Shares.
During the period that any Escrowed Share is held by the Escrow Agent
pursuant to this Agreement, neither Surge U.S. nor any permitted
transferee of Surge U.S. (as set forth below) will be entitled to,
and
Surge U.S. and each transferee described in clause (i) of this
Section 3(d) hereby covenants and agrees that it will not, sell or
dispose of, transfer, relinquish or otherwise deal with any of its
right,
title or interest in any of the Escrowed Shares unless (i) such
transferee is a successor to Surge U.S. by merger, amalgamation,
combination or otherwise, (ii) prior
to such transfer Surge U.S. or such transferee, as applicable, delivers
to
Surge Canada and the Escrow Agent a certificate of an officer of
Surge
U.S. or of such transferee or an officer thereof, as applicable,
certifying that such transferee is a person or entity referred to
in
clause (i) of this Section 3(d), and (iii) such transferee
agrees in writing with the parties hereto that the transferred Escrowed
Shares will continue to be held by the Escrow Agent and remain subject
to
terms of this Agreement. In the event that a take-over bid as defined
in
the Securities
Act
(Alberta) is made to all or substantially all the holders of common
shares
of Surge Canada by a person, firm or corporation, to acquire common
shares
of Surge Canada such that upon completion of such take-over bid that
person, firm or corporation will control directly or indirectly greater
than 66⅔% of the votes attaching to all of the outstanding common shares
of Surge Canada, Surge Canada and Surge U.S. each agree that in the
event
they want to accept the take-over bid, they will deliver a Release
Notice
to the Escrow Agent to tender any or all of the Escrowed Shares to
the
offeror under the take-over bid and Surge U.S. will deliver to the
Escrow
Agent a signed acceptance to the take-over bid and the appropriate
documentation required by the Escrow Agent, acting reasonably, to
effect
the tender in respect of any or all of Surge U.S.'s Escrowed Shares.
The
Escrow Agent shall thereupon tender certificates for the specified
number
of Escrowed Shares to the offeror under the bid together with such
signed
acceptances to such take-over bid. If the Escrowed Shares are not
taken up
and paid for pursuant to such take-over bid, they shall be forthwith
redeposited and held hereunder in accordance with the terms hereof.
If the
Escrowed Shares are taken up and paid for pursuant to such take-over
bid
the cash and securities received in exchange for such Escrowed Shares
shall be forthwith redeposited and held hereunder in accordance with
the
terms hereof.
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A-3
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(e)
|
No
Limitation of Remedies.
Surge U.S. hereby acknowledges and agrees that (i) any claims made
by
Surge Canada pursuant to the Indemnification Agreement shall be satisfied,
first, from the Escrow Account and, to the extent that any such claim
exceeds the Fair Market Value of the Escrowed Shares remaining in
the
Escrow Account, (ii) the payment of the Escrow Account to Surge
Canada pursuant to this Agreement with respect to Damages (as defined
in
the Indemnification Agreement) will not limit or otherwise affect
any
right of indemnification which Surge Canada or the Indemnified Persons
(as
defined in Indemnification Agreement) may otherwise have pursuant
to
Section 3 of the Indemnification Agreement, and (iii) to the extent
that any such claim exceeds the Fair Market Value of the Escrowed
Shares
remaining in the Escrow Account, the Escrow Account does not constitute
an
exclusive remedy for Damages incurred by Surge Canada or the Indemnified
Persons pursuant to the Indemnification
Agreement.
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(f)
|
Termination.
This Agreement will terminate when all of the Escrow Account has
been
released and distributed in accordance with this Section 3. Upon such
termination, this Agreement will have no further force and effect,
except
that the provisions of Section 3 and Section 4 will survive such
termination.
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(g)
|
Surge
Canada.
Surge Canada agrees that it will cause to be delivered to the Escrow
Agent
such replacement certificates for Escrowed Shares as may be required
to
facilitate the release and delivery of Escrowed Shares from time
to time
in accordance with the provisions of this Section 3. For greater
certainty, the Escrow Agent shall have no obligation to release or
deliver
any Escrowed Shares in accordance with the provisions of this Section
3
until it has received from Surge Canada the necessary replacement
certificates, if any, required for such release and
delivery.
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4. Concerning
the Escrow Agent.
Notwithstanding any provision contained herein to the contrary, the Escrow
Agent, including its officers, directors, employees, agents and shareholders
will:
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(a)
|
not
be liable for any action taken or omitted under this Agreement so
long as
it will have acted in good faith and without gross
negligence;
|
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(b)
|
be
protected in acting and relying upon any notice, direction, instruction,
order, certificate, confirmation, request, waiver, consent, receipt,
statutory declaration or other paper or document (collectively referred
to
as "Documents")
furnished to it and purportedly signed by an officer or person required
to
or entitled to execute and deliver to the Escrow Agent any such Document
in connection with this Agreement, not only as to its due execution
and
the validity and effectiveness of its provisions, but also as to
the truth
or accuracy of any information therein contained, which it in good
faith
believes to be genuine;
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(c)
|
have
no responsibility to inquire into or determine the genuineness,
authenticity, or sufficiency of any securities, cheques, or other
documents or instruments submitted to it in connection with its duties
hereunder;
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A-4
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(d)
|
have
no responsibility for seeking, obtaining, compiling, preparing or
determining the accuracy of any information or document, including
the
representative capacity in which a party purports to act, that the
Escrow
Agent receives as a condition to a release from escrow or a transfer
of
escrow securities within escrow under this
Agreement;
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(e)
|
have
no responsibility for Escrowed Shares that it has released or tendered
according to this Agreement;
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(f)
|
be
entitled to deem the signatories of any documents or instruments
submitted
to it hereunder as being those purported to be authorized to sign
such
documents or instruments on behalf of the Escrow Participants, and
will be
entitled to rely upon the genuineness of the signatures of such
signatories without inquiry and without requiring substantiating
evidence
of any kind;
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(g)
|
be
entitled to refrain from taking any action contemplated by this Agreement
in the event that it becomes aware of any disagreement among the
Escrow
Participants as to any facts or as to the happening of any contemplated
event precedent to such action;
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(h)
|
have
the right not to act and will not be liable for refusing to act unless
it
has received clear and reasonable documentation that complies with
the
terms of this Agreement. Such documentation must not require the
exercise
of any discretion or independent
judgment;
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(i)
|
have
no duties except those which are expressly set forth herein, and
it shall
not be bound by any notice of claim or demand with respect to, or
any
waiver, modification, amendment, termination or rescission of this
Agreement, unless received by it in writing and executed by Surge
Canada
and Surge U.S. and, if its duties are herein affected, unless it
shall
have given its prior written
consent;
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(j)
|
have
no responsibility or liability for any diminution in value of any
assets
held hereunder which may result from any investments or reinvestment
made
in accordance with any provision which may be contained
herein;
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(k)
|
be
entitled to compensation from Surge Canada for its services hereunder
as
per Schedule A
attached hereto, which is made a part hereof, and for reimbursement
of its
out-of-pocket expenses including, but not by way of limitation, the
fees
and costs of attorneys or agents which it may find necessary to engage
in
performance of its duties hereunder. Any amount due under this section
and
unpaid after request for such payment will bear interest from the
expiration of such period at a rate per annum equal to the then current
rate charged by the Escrow Agent, payable on
demand;
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(l)
|
be,
and hereby is, jointly and severally indemnified and saved harmless
by the
Escrow Participants from all losses, liabilities, costs and expenses,
including, without limitation, attorney and legal counsel fees and
expenses, which may be incurred by it as a result of its acceptance
of the
escrow account or arising from the performance of its duties hereunder,
unless such losses, liabilities, costs and expenses shall have been
finally adjudicated to have resulted from the bad faith or gross
negligence of the Escrow Agent, and such indemnification shall survive
its
resignation or removal, or the termination of this
Agreement;
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(m)
|
in
the event that (i) any dispute will arise between the Escrow Participants
with respect to the disposition or disbursement of any of the assets
held
hereunder, or (ii) the Escrow Agent is uncertain as to how to proceed
in a
situation not explicitly addressed by the terms of this Agreement
whether
because of conflicting demands by the Escrow Participants or otherwise,
be
permitted to interplead all of the assets held hereunder into a court
of
competent jurisdiction, and thereafter be fully relieved from any
and all
liability or obligation with respect to such interpleaded assets
and the
cost thereof shall be for the account of the Escrow Participants.
The
Escrow Participants further agree to pursue any redress or recourse
in
connection with such a dispute, without making the Escrow Agent a
party to
same;
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A-5
|
(n)
|
have
only those duties as are specifically provided herein, which will
be
deemed purely ministerial in nature, and will under no circumstance
be
deemed a fiduciary for any of the Escrow Participants. The Escrow
Agent
will neither be responsible for, nor chargeable with, knowledge of
the
terms and conditions of any other agreement, instrument or document
among
the Escrow Participants, in connection herewith, including without
limitation the Indemnification Agreement. This Agreement sets forth
all
matters pertinent to the escrow contemplated hereunder, and no additional
obligations of the Escrow Agent will be inferred from the terms of
this
Agreement or any other agreement. In no event shall the Escrow Agent
be
liable, directly or indirectly, for any damages or expenses arising
out of
the services provided hereunder, including its own negligence, but
excluding its own gross negligence and wilful misconduct. In no event
shall the Escrow Agent be liable to any Escrow Participant for special,
indirect or consequential damages, or lost profits or loss of business,
arising under or in connection with this
Agreement;
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(o)
|
have
the right, but not the obligation, to, at the joint and several expense
of
the Escrow Participants, consult with legal counsel and other expert
advisors as may be reasonably required for the purpose of discharging
its
duties or determining its rights under this Agreement and may rely
and act
upon the advice of such counsel or advisor and will not be liable
for
action taken or omitted to be taken in accordance with the advice
of such
counsel or advisor or in accordance with any opinion of counsel to
Surge
U.S. or Surge Canada addressed and delivered to the Escrow Agent;
and
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|
(p)
|
have
the right to perform any of its duties hereunder through agents,
attorneys, custodians or nominees. Surge Canada will pay or reimburse
the
Escrow Agent for any reasonable fees, expenses and disbursements
of such
counsel or advisors.
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5. Attachment
of Escrow Fund; Compliance with Legal Orders.
In the
event that the Escrow Account will be attached, garnished or levied upon by
any
court order, or the delivery thereof will be stayed or enjoined by an order
of a
court, or any order, judgment or decree will be made or entered by any court
order affecting any of the Escrowed Shares deposited under this Agreement,
the
Escrow Agent is hereby expressly authorized, in its sole discretion, to obey
and
comply with all writs, orders or decrees so entered or issued, which it is
advised by legal counsel of its own choosing is binding upon it, whether with
or
without jurisdiction, and in the event that the Escrow Agent obeys or complies
with any such writ, order or decree it will not be liable to any of the Escrow
Participants or to any other person, firm or corporation, by reason of such
compliance notwithstanding such writ, order or decree be subsequently reversed,
modified, annulled, set aside or vacated.
6. Resignation
or Removal of Escrow Agent.
The
Escrow Agent may resign as such following the giving of thirty (30) days prior
written notice to Surge U.S. and Surge Canada. Similarly, the Escrow Agent
may
be removed and replaced following the giving of thirty (30) days prior written
notice to the Escrow Agent by Surge U.S. and Surge Canada. In either event,
the
duties of the Escrow Agent will terminate thirty (30) days after receipt of
such
notice (or as of such earlier date as may be mutually agreeable); and, upon
receipt of all amounts owing to it hereunder, the Escrow Agent will then deliver
the balance of the Escrow Account then in its possession to a successor escrow
agent as will be appointed by Surge U.S. and Surge Canada as evidenced by a
written notice filed with the Escrow Agent. If Surge U.S. and Surge Canada
have
failed to appoint a successor prior to the expiration of thirty (30) days
following receipt of the notice of resignation or removal, the Escrow Agent
may
appoint a successor or, at the expense of the Escrow Participants, petition
any
court of competent jurisdiction for the appointment of a successor escrow agent
or for other appropriate relief, and any such resulting appointment will be
binding upon all of the parties hereto. Any new escrow agent appointed under
these provisions must be a corporation authorized to carry on the business
of a
trust company in the Province of Alberta. Any corporation into which the Escrow
Agent 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 Escrow Agent shall be a party, shall be the new escrow agent under this
Agreement without the execution of any instrument or any further act. All
provisions hereunder limiting the Escrow Agent's liability and all
indemnifications in its favour shall survive the resignation or removal of
the
Escrow Argent.
A-6
7. Notices.
All
notices, demands and other communications to be given or delivered under or
by
reason of the provision of this Agreement will be in writing and be sent to
the
parties hereto at the addresses, as set forth below, or at such other address
of
such party as such party will have furnished to the other parties in writing
and
in accordance with this Section 7:
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(a)
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If
to Surge Canada to:
|
▇▇▇▇▇
▇▇▇▇, ▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇
▇▇▇
▇▇▇
Attention: Chief
Executive Officer
Facsimile
No.: (▇▇▇)
▇▇▇-▇▇▇▇
|
(b)
|
If
to Surge U.S. to:
|
Suite
410, ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
Attention: Chairman
Facsimile
No.: (▇▇▇)
▇▇▇-▇▇▇▇
|
(c)
|
in
the case of the Escrow Agent:
|
Valiant
Trust Company
▇▇▇▇▇
▇▇▇, ▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇
▇▇▇
Attention: Manager
Client Relations
Facsimile
No.: (▇▇▇)
▇▇▇-▇▇▇▇
All
notices and other communications will be deemed effectively given as to the
party to whom it is addressed as of the earliest of the following times: (i)
when received, (ii) when delivered personally, (iii) one (1) Business Day after
being delivered by facsimile (with appropriate confirmation of receipt), (iv)
one (1) Business Day after being timely deposited with an overnight courier
service with instructions (and the capability) to make delivery on the next
day,
(v) if sent internationally, five (5) Business Days after being deposited in
international mail, first class with postage prepaid, or (vi) if sent
domestically, five (5) Business Days after being deposited in U.S. or Canadian
mail, first class with postage prepaid.
A-7
8. Business
Day.
Business Day means any day, other than a Saturday, Sunday or any other day
on
which the Escrow Agent is generally not open for business in Calgary, Alberta.
Any day on which any action is required to be taken hereunder is not a Business
Day, then such action shall be required to be taken at or before the requisite
time on the next succeeding day that is a Business Day.
9. Defined
Terms.
Capitalized terms used, but not defined, herein will have the meanings set
forth
in the Indemnification Agreement.
10. Governing
Law.
This
Agreement will be construed in accordance with the laws of the Province of
Alberta and the federal laws of Canada applicable therein. Each of the parties
hereto attorns to the jurisdiction of the courts of the Province of
Alberta.
11. Amendment,
Modification or Waiver.
This
Agreement may be amended or modified and any term of this Agreement may be
waived if such amendment, modification or waiver is in writing and signed by
all
parties.
12. Time
of the Essence.
Time is
of the essence of this Agreement.
13. Assignments
of Interests.
No
assignment of the interest of any of the Escrow Participants hereto will be
binding upon the Escrow Agent unless and until written evidence of such
assignment in form satisfactory to the Escrow Agent will be filed with and
accepted by the Escrow Agent.
A-8
14.
Counterparts.
This
Agreement may be executed in several counterparts, each one of which will
constitute an original and all collectively will constitute but one instrument.
Counterparts may be executed either in original or faxed form and the parties
adopt any signatures received by a receiving fax machine as original signatures
of the parties; provided, however, than any party providing its signature in
such manner will promptly forward to the other parties an original of the signed
copy of this Agreement which was so faxed.
IN
WITNESS WHEREOF, the parties have been duly executed this Agreement as of the
date first above written.
|
VALIANT
TRUST COMPANY
|
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|
By:
|
|
|
|
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||
|
By:
|
|
|
|
SURGE
GLOBAL ENERGY (CANADA), LTD.
|
||
|
By:
|
Executive
Chairman and Chief
Executive Officer
|
|
|
|
||
|
By:
|
|
|
|
By:
|
Chairman
|
|
|
By:
|
Chief
Executive Officer
|
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A-9