EXHIBIT
10.26
RELEASE AND INDEMNIFICATION
AGREEMENT
THIS AGREEMENT is made the 15th day of November,
2005
SURGE
GLOBAL ENERGY (CANADA), LTD. , a corporation existing under the laws of the
Province of Alberta (" Surge Canada ")
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 Fred
Kelly 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 Gary Vandergrift
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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"
Affiliate " has the same meaning as "affiliate"
under the Securities Act (Alberta);
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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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"
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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"
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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"
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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"
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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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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"
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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"
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 Fred Kelly 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.
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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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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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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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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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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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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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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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:
Suite 1818, 144 - 4th Avenue S.W.
Attention: Chief Executive Officer
Facsimile No.: (403) 440-1114
Suite 410,
12220 El Camino Real
Facsimile No.: (858) 704-5011
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.
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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SURGE
GLOBAL ENERGY, INC.
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SCHEDULE
A
ESCROW
AGREEMENT
THIS AGREEMENT is made the 15th day of November,
2005
VALIANT
TRUST COMPANY , a
trust company existing under the laws of the Province of Alberta
(the " Escrow Agent ")
SURGE
GLOBAL ENERGY (CANADA), LTD. , a corporation existing under the laws of the
Province of Alberta (" Surge Canada ")
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 othe
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