THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION
TO A PERSON WHO IS NOT A U.S. PERSON PURSUANT TO REGULATION S UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). NONE OF THE
SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY
U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR
SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO
U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE
1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS
INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933
ACT. "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY REGULATION S UNDER THE
1933 ACT.

CONFIDENTIAL

PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT

This AGREEMENT effective as of November 1, 2006.

TO:

Surge Enterprises, Inc. (the "Company")

205 – 340 Linden Avenue

Victoria, British Columbia Canada V8V 4E9

PURCHASE OF CONVERTIBLE DEBENTURE

1.

Subscription

1.1                         On the basis of the representations and warranties
and subject to the terms and conditions set forth herein, the undersigned (the
"Subscriber") hereby irrevocably subscribes for and agrees to purchase a 10%
convertible debenture due November 1, 2008, in the form attached hereto as
Exhibit A (the "Debenture"), which Debenture is convertible, together with
accrued interest thereon, into shares of common stock in the capital of the
Company (the "Shares") at a price per Share equal to US$3.75 (the "Conversion
Price"), for an aggregate purchase price of US$600,000 (the "Subscription
Proceeds") (such subscription and agreement to purchase being the
"Subscription").

1.2                         Each Share converted from the Debenture will be
issued as fully paid and non-assessable. The Debenture and the Shares are
collectively referred to herein as the "Securities".

1.3                         On the basis of the representations and warranties
and subject to the terms and conditions set forth herein, the Company hereby
agrees to sell the Securities to the Subscriber.

1.4                         Subject to the terms hereof, the Subscription will
be effective upon its acceptance by the Company.

2.

Payment

2.1                         The Subscription Proceeds must accompany this
Subscription and shall be paid by certified cheque or bank draft drawn on a
Canadian chartered bank, and made payable and delivered to the Company.
Alternatively, the Subscription Proceeds may be wired to the Company or its
lawyers pursuant to wiring instructions that will be provided to the Subscriber
upon request. If the funds are wired to the Company's lawyers, those lawyers are
authorized to immediately deliver the funds to the Company.

 

CW905523.1

 

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- 2 -

 

 

2.2                         The Subscriber acknowledges and agrees that this
Subscription Agreement, the Subscription Proceeds and any other documents
delivered in connection herewith will be held on behalf of the Company. In the
event that this Subscription Agreement is not accepted by the Company for
whatever reason, which the Company expressly reserves the right to do, within 30
days of the delivery of an executed Subscription Agreement by the Subscriber,
this Subscription Agreement, the Subscription Proceeds (without interest
thereon) and any other documents delivered in connection herewith will be
returned to the Subscriber at the address of the Subscriber as set forth in this
Subscription Agreement.

2.3                         Where the Subscription Proceeds are paid to the
Company, the Company is entitled to treat such Subscription Proceeds as an
interest free loan to the Company until such time as the Subscription is
accepted and the Debenture has been issued to the Subscriber.

3.

Documents Required from Subscriber

3.1                         The Subscriber must complete, sign and return to the
Company two (2) executed copies of this Subscription Agreement.

3.2                         The Subscriber shall complete, sign and return to
the Company as soon as possible, on request by the Company, any additional
documents, questionnaires, notices and undertakings as may be required by any
regulatory authorities and applicable law.

4.

Closing

4.1                         Closing of the offering of the Securities (the
"Closing") shall occur on or before November 30, 2006, or on such other date as
may be determined by the Company (the "Closing Date").

5.

Acknowledgements of Subscriber

5.1                         The Subscriber acknowledges and agrees that:

 

(a)

none of the Securities have been registered under the 1933 Act, or under any
state securities or "blue sky" laws of any state of the United States, and,
unless so registered, may not be offered or sold in the United States or,
directly or indirectly, to U.S. Persons, as that term is defined in Regulation S
under the 1933 Act ("Regulation S"), except in accordance with the provisions of
Regulation S, pursuant to an effective registration statement under the 1933
Act, or pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the 1933 Act;

 

(b)

the Company has not undertaken, and will have no obligation, to register any of
the Securities under the 1933 Act;

 

(c)

the decision to execute this Agreement and acquire the Securities agreed to be
purchased hereunder has not been based upon any oral or written representation
as to fact or otherwise made by or on behalf of the Company and such decision is
based entirely upon a review of any public information which has been filed by
the Company with the Securities and Exchange Commission ("SEC") in compliance,
or intended compliance, with applicable securities legislation;

 

(d)

the Subscriber and the Subscriber's advisor(s) have had a reasonable opportunity
to ask questions of and receive answers from the Company in connection with the
distribution of the Securities hereunder, and to obtain additional information,
to the extent possessed or obtainable without unreasonable effort or expense,
necessary to verify the accuracy of the information about the Company;

 

(e)

the books and records of the Company were available upon reasonable notice for
inspection, subject to certain confidentiality restrictions, by the Subscriber
during reasonable business hours at its principal place of business, and all
documents, records and books in connection with the

 

CW905523.1

 

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- 3 -

 

distribution of the Securities hereunder have been made available for inspection
by the Subscriber, the Subscriber's lawyer and/or advisor(s);

 

(f)

the Company is entitled to rely on the representations and warranties of the
Subscriber contained in this Agreement and the Subscriber will hold harmless the
Company from any loss or damage it or they may suffer as a result of the
Subscriber's failure to correctly complete this Subscription Agreement;

 

(g)

the Subscriber will indemnify and hold harmless the Company and, where
applicable, its directors, officers, employees, agents, advisors and
shareholders, from and against any and all loss, liability, claim, damage and
expense whatsoever (including, but not limited to, any and all fees, costs and
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any claim, lawsuit, administrative proceeding or investigation whether
commenced or threatened) arising out of or based upon any representation or
warranty of the Subscriber contained in this Subscription Agreement or in any
document furnished by the Subscriber to the Company in connection herewith being
untrue in any material respect or any breach or failure by the Subscriber to
comply with any covenant or agreement made by the Subscriber to the Company in
connection therewith;

 

(h)

none of the Securities are listed on any stock exchange or automated dealer
quotation system and no representation has been made to the Subscriber that any
of the Securities will become listed on any stock exchange or automated dealer
quotation system, except that currently the common shares of the Company are
quoted for trading on the National Association of Securities Dealers Inc.'s OTC
Bulletin Board (the "OTCBB");

 

(i)

the Subscriber has not acquired the Securities as a result of, and will not
itself engage in, any "directed selling efforts" (as defined in Regulation S
under the 1933 Act) in the United States in respect of the Securities which
would include any activities undertaken for the purpose of, or that could
reasonably be expected to have the effect of, conditioning the market in the
United States for the resale of any of the Securities; provided, however, that
the Subscriber may sell or otherwise dispose of the Securities pursuant to
registration thereof under the 1933 Act and any applicable state and provincial
securities laws or under an exemption from such registration requirements;

 

(j)

the Company will refuse to register any transfer of the Securities not made in
accordance with the provisions of Regulation S, pursuant to an effective
registration statement under the 1933 Act or pursuant to an available exemption
from the registration requirements of the 1933 Act and in accordance with
applicable state and provincial securities laws;

 

(k)

the statutory and regulatory basis for the exemption claimed for the offer of
the Securities, although in technical compliance with Regulation S, would not be
available if the offering is part of a plan or scheme to evade the registration
provisions of the 1933 Act or any applicable state and provincial securities
laws;

 

(l)

the Subscriber has been advised to consult the Subscriber's own legal, tax and
other advisors with respect to the merits and risks of an investment in the
Securities and with respect to applicable resale restrictions, and it is solely
responsible (and the Company is not in any way responsible) for compliance with:

 

(i)

any applicable laws of the jurisdiction in which the Subscriber is resident in
connection with the distribution of the Securities hereunder, and

 

(ii)

applicable resale restrictions; and

 

(m)

in addition to resale restrictions imposed under U.S. securities laws, there are
additional restrictions on the Subscriber's ability to resell any of the Shares
under the Securities Act (British

 

CW905523.1

 

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- 4 -

 

Columbia) (the "B.C. Act") and National Instrument 45-102 adopted by the British
Columbia Securities Commission (the "BCSC");

 

(n)

the Company has advised the Subscriber that the Company is relying on an
exemption from the requirements to provide the Subscriber with a prospectus to
issue the Securities and, as a consequence of acquiring the Securities pursuant
to such exemption certain protections, rights and remedies provided by the
applicable securities legislation of British Columbia including statutory rights
of rescission or damages, will not be available to the Subscriber;

 

(o)

neither the SEC nor any other securities commission or similar regulatory
authority has reviewed or passed on the merits of any of the Securities;

 

(p)

no documents in connection with the sale of the Securities hereunder have been
reviewed by the SEC or any state securities administrators;

 

(q)

there is no government or other insurance covering any of the Securities; and

 

(r)

this Subscription Agreement is not enforceable by the Subscriber unless it has
been accepted by the Company.

6.

Representations, Warranties and Covenants of the Subscriber

6.1                         The Subscriber hereby represents and warrants to and
covenants with the Company (which representations, warranties and covenants
shall survive the Closing) that:

 

(a)

it has the legal capacity and competence to enter into and execute this
Subscription Agreement and to take all actions required pursuant hereto and it
is duly incorporated and validly subsisting under the laws of its jurisdiction
of incorporation and all necessary approvals by its directors, shareholders and
others have been obtained to authorize execution and performance of this
Subscription Agreement on behalf of the Subscriber;

 

(b)

the entering into of this Subscription Agreement and the transactions
contemplated hereby do not result in the violation of any of the terms and
provisions of any law applicable to, or the constating documents of, the
Subscriber or of any agreement, written or oral, to which the Subscriber may be
a party or by which the Subscriber is or may be bound;

 

(c)

the Subscriber has duly executed and delivered this Subscription Agreement and
it constitutes a valid and binding agreement of the Subscriber enforceable
against the Subscriber;

 

(d)

the Subscriber is not acquiring the Securities for the account or benefit of,
directly or indirectly, any U.S. Person;

 

(e)

the Subscriber is not a U.S. Person;

 

(f)

the Subscriber is resident in the jurisdiction set out under the heading "Name
and Address of Subscriber" on the signature page of this Subscription Agreement;

 

(g)

the sale of the Securities to the Subscriber as contemplated in this
Subscription Agreement complies with or is exempt from the applicable securities
legislation of the jurisdiction of residence of the Subscriber;

 

(h)

the Subscriber is acquiring the Securities as principal for investment only and
not with a view to resale or distribution and, in particular, it has no
intention to distribute either directly or indirectly any of the Securities in
the United States or to U.S. Persons;

 

CW905523.1

 

--------------------------------------------------------------------------------

- 5 -

 

 

 

(i)

the Subscriber is outside the United States when receiving and executing this
Agreement and is acquiring the Securities as principal for the Subscriber's own
account, for investment purposes only, and not with a view to, or for, resale,
distribution or fractionalisation thereof, in whole or in part, and no other
person has a direct or indirect beneficial interest in such Securities;

 

(j)

the Subscriber is not an underwriter of, or dealer in, the common shares of the
Company, nor is the Subscriber participating, pursuant to a contractual
agreement or otherwise, in the distribution of the Securities;

 

(k)

the Subscriber acknowledges that the Subscriber has not acquired the Securities
as a result of, and will not itself engage in, any "directed selling efforts"
(as defined in Regulation S under the 1933 Act) in the United States in respect
of the Securities which would include any activities undertaken for the purpose
of, or that could reasonably be expected to have the effect of, conditioning the
market in the United States for the resale of the Securities; provided, however,
that the Subscriber may sell or otherwise dispose of the Securities pursuant to
registration of the Securities pursuant to the 1933 Act and any applicable state
and provincial securities laws or under an exemption from such registration
requirements and as otherwise provided herein;

 

(l)

the Subscriber understands and agrees that offers and sales of any of the
Securities prior to the expiration of a period of one year after the date of
original issuance of the Securities (the one year period hereinafter referred to
as the "Distribution Compliance Period") shall only be made in compliance with
the safe harbor provisions set forth in Regulation S, pursuant to the
registration provisions of the 1933 Act or an exemption therefrom, and that all
offers and sales after the Distribution Compliance Period shall be made only in
compliance with the registration provisions of the 1933 Act or an exemption
therefrom and in each case only in accordance with applicable state and
provincial securities laws;

 

(m)

the Subscriber understands and agrees not to engage in any hedging transactions
involving any of the Securities unless such transactions are in compliance with
the provisions of the 1933 Act and in each case only in accordance with
applicable state and provincial securities laws;

 

(n)

the Subscriber understands and agrees that the Company will refuse to register
any transfer of the Securities not made in accordance with the provisions of
Regulation S, pursuant to an effective registration statement under the 1933 Act
or pursuant to an available exemption from the registration requirements of the
1933 Act;

 

(o)

the Subscriber is aware that an investment in the Company is speculative and
involves certain risks, including the possible loss of the entire investment;

 

(p)

the Subscriber has made an independent examination and investigation of an
investment in the Securities and the Company and has depended on the advice of
its legal and financial advisors and agrees that the Company will not be
responsible in any way whatsoever for the Subscriber's decision to invest in the
Securities and the Company;

 

(q)

the Subscriber (i) has adequate net worth and means of providing for its current
financial needs and possible personal contingencies, (ii) has no need for
liquidity in this investment, and (iii) is able to bear the economic risks of an
investment in the Securities for an indefinite period of time;

 

(r)

the Subscriber understands and agrees that the Company and others will rely upon
the truth and accuracy of the acknowledgements, representations and agreements
contained in this Agreement and agrees that if any of such acknowledgements,
representations and agreements are no longer accurate or have been breached, the
Subscriber shall promptly notify the Company;

 

(s)

the Subscriber (i) is able to fend for him/her/itself in the Subscription; (ii)
has such knowledge and experience in business matters as to be capable of
evaluating the merits and risks of its prospective

 

CW905523.1

 

--------------------------------------------------------------------------------

- 6 -

 

investment in the Securities; and (iii) has the ability to bear the economic
risks of its prospective investment and can afford the complete loss of such
investment;

 

(t)

the Subscriber understands and agrees that none of the Securities have been
registered under the 1933 Act, or under any state securities or "blue sky" laws
of any state of the United States, and, unless so registered, may not be offered
or sold in the United States or, directly or indirectly, to U.S. Persons except
in accordance with the provisions of Regulation S, pursuant to an effective
registration statement under the 1933 Act, or pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the 1933 Act
and in each case only in accordance with applicable state and provincial
securities laws;

 

(u)

all information contained in this Agreement is complete and accurate and may be
relied upon by the Company, and the Subscriber will notify the Company
immediately of any material change in any such information occurring prior to
the closing of the purchase of the Securities;

 

(v)

the Subscriber is not an underwriter of, or dealer in, the common shares of the
Company, nor is the Subscriber participating, pursuant to a contractual
agreement or otherwise, in the distribution of the Securities;

 

(w)

the Subscriber understands and agrees that the Company will refuse to register
any transfer of the Shares not made in accordance with the provisions of
Regulation S, pursuant to an effective registration statement under the 1933 Act
or pursuant to an available exemption from the registration requirements of the
1933 Act;

 

(x)

the Subscriber is not aware of any advertisement of any of the Securities and is
not acquiring the Securities as a result of any form of general solicitation or
general advertising including advertisements, articles, notices or other
communications published in any newspaper, magazine or similar media or
broadcast over radio or television, or any seminar or meeting whose attendees
have been invited by general solicitation or general advertising; and

 

(y)

no person has made to the Subscriber any written or oral representations:

 

(i)

that any person will resell or repurchase any of the Securities;

 

(ii)

that any person will refund the purchase price of any of the Securities;

 

(iii)

as to the future price or value of any of the Securities; or

 

(iv)

that any of the Securities will be listed and posted for trading on any stock
exchange or automated dealer quotation system or that application has been made
to list and post any of the Securities of the Company on any stock exchange or
automated dealer quotation system, except that currently certain market makers
make market in the common shares of the Company on the OTCBB.

6.2                         In this Agreement, the term "U.S. Person" shall have
the meaning ascribed thereto in Regulation S.

7.

Representations and Warranties will be Relied Upon by the Company

7.1                         The Subscriber acknowledges that the representations
and warranties contained herein are made by it with the intention that such
representations and warranties may be relied upon by the Company and its legal
counsel in determining the Subscriber's eligibility to purchase the Securities
under applicable securities legislation, or (if applicable) the eligibility of
others on whose behalf it is contracting hereunder to purchase the Securities
under applicable securities legislation. The Subscriber further agrees that by
accepting delivery of the certificates representing the Securities on the
Closing Date, it will be representing and warranting that the representations
and

 

CW905523.1

 

--------------------------------------------------------------------------------

- 7 -

 

warranties contained herein are true and correct as at the Closing Date with the
same force and effect as if they had been made by the Subscriber on the Closing
Date and that they will survive the purchase by the Subscriber of Securities and
will continue in full force and effect notwithstanding any subsequent
disposition by the Subscriber of such Securities.

8.

Resale Restrictions

8.1                         The Subscriber acknowledges that any resale of the
Securities will be subject to resale restrictions contained in the securities
legislation applicable to the Subscriber or proposed transferee. The Subscriber
acknowledges that none of the Securities have been registered under the 1933 Act
of the securities laws of any state of the United States. None of the Securities
may be offered or sold in the United States unless registered in accordance with
United States federal securities laws and all applicable state and provincial
securities laws or exemptions from such registration requirements are available.

9.

Acknowledgement and Waiver

9.1                         The Subscriber has acknowledged that the decision to
acquire the Securities was solely made on the basis of publicly available
information. The Subscriber hereby waives, to the fullest extent permitted by
law, any rights of withdrawal, rescission or compensation for damages to which
the Subscriber might be entitled in connection with the distribution of any of
the Securities.

10.

Legending and Registration of Subject Securities

10.1                       The Subscriber hereby acknowledges that upon the
issuance thereof, and until such time as the same is no longer required under
the applicable securities laws and regulations, the certificates representing
any of the Securities will bear a legend in substantially the following form:

THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION
TO A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED HEREIN) PURSUANT TO REGULATION
S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT").
NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE 1933
ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE
OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED
HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN
EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION,
HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE 1933 ACT. "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED
BY REGULATION S UNDER THE 1933 ACT.

10.2                       The Subscriber hereby acknowledges and agrees to the
Company making a notation on its records or giving instructions to the registrar
and transfer agent of the Company in order to implement the restrictions on
transfer set forth and described in this Agreement.

11.

British Columbia Resale Restriction

11.1                       The Subscriber acknowledges that the Shares are
subject to resale restrictions in British Columbia and may not be traded in
British Columbia except as permitted by the B.C. Act and the rules made
thereunder.

 

CW905523.1

 

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- 8 -

 

 

11.2                       Pursuant to National Instrument 45-102, as adopted by
the BCSC, a subsequent trade in the Shares will be a distribution subject to the
prospectus and registration requirements of applicable Canadian securities
legislation (including the B.C. Act) unless certain conditions are met, which
conditions include a hold period (the "Canadian Hold Period") that shall have
elapsed from the date on which the Securities were issued to the Subscriber and,
during the currency of the Canadian Hold Period, any certificate representing
the Securities is to be imprinted with a restrictive legend (the "Canadian
Legend").

11.3                       By executing and delivering this Agreement, the
Subscriber will have directed the Company not to include the Canadian Legend on
any certificates representing the Securities to be issued to the Subscriber.

11.4                       As a consequence, the Subscriber will not be able to
rely on the resale provisions of National Instrument 45-102, and any subsequent
trade in any of the Shares during or after the Canadian Hold Period will be a
distribution subject to the prospectus and registration requirements of Canadian
securities legislation, to the extent that the trade is at that time subject to
any such Canadian securities legislation.

12.

Costs

12.1                       The Subscriber acknowledges and agrees that all costs
and expenses incurred by the Subscriber (including any fees and disbursements of
any special counsel retained by the Subscriber) relating to the purchase of the
Securities shall be borne by the Subscriber.

13.

Governing Law

13.1                         This Subscription Agreement is governed by the laws
of the Province of British Columbia.

14.

Currency

14.1                         Any reference to currency is to the currency of the
United States unless otherwise indicated.

15.

Survival

15.1                       This Subscription Agreement, including without
limitation the representations, warranties and covenants contained herein, shall
survive and continue in full force and effect and be binding upon the parties
hereto notwithstanding the completion of the purchase of the Securities by the
Subscriber pursuant hereto.

16.

Assignment

16.1                       This Subscription Agreement is not transferable or
assignable.

17.

Severability

17.1                       The invalidity or unenforceability of any particular
provision of this Subscription Agreement shall not affect or limit the validity
or enforceability of the remaining provisions of this Subscription Agreement.

18.

Entire Agreement

18.1                       Except as expressly provided in this Subscription
Agreement and in the agreements, instruments and other documents contemplated or
provided for herein, this Subscription Agreement contains the entire agreement
between the parties with respect to the sale of the Securities and there are no
other terms, conditions, representations or warranties, whether expressed,
implied, oral or written, by statute or common law, by the Company or by anyone
else.

 

CW905523.1

 

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19.

Notices

19.1                       All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Subscriber
shall be directed to the address on the signature page of this Subscription
Agreement and notices to the Company shall be directed to it at 205 – 340 Linden
Avenue, Victoria, British Columbia, Canada V8V 4E9.

20.

Counterparts and Electronic Means

20.1                       This Subscription Agreement may be executed in any
number of counterparts, each of which, when so executed and delivered, shall
constitute an original and all of which together shall constitute one
instrument. Delivery of an executed copy of this Subscription Agreement by
electronic facsimile transmission or other means of electronic communication
capable of producing a printed copy will be deemed to be execution and delivery
of this Subscription Agreement as of the date hereinafter set forth.

IN WITNESS WHEREOF the Subscriber has duly executed this Subscription Agreement
as of November 1, 2006.

Sovereign Services Limited                                  

(Name of Subscriber – Please type or print)

                                          
                                      

(Signature and, if applicable, Office)

3E-Block 1, 25 Tai Hang Drive, Jardine’s
Lookout                                                                   

(Address of Subscriber)

Hong Kong                                                             

(City, State or Province, Postal Code of Subscriber)

                                          
                                      

(Country of Subscriber)

 

 

CW905523.1

 

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A C C E P T A N C E

The above-mentioned Subscription Agreement in respect of the Debenture is hereby
accepted by Surge Enterprises, Inc.

DATED at Vancouver, British Columbia, the 1st day of November, 2006.

SURGE ENTERPRISES, INC.

 

 

Per: /s/ Eric Boehnke

 

Authorized Signatory

 

 

CW905523.1

 

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EXHIBIT A

FORM OF CONVERTIBLE DEBENTURE

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION
TO A PERSON WHO IS NOT A U.S. PERSON PURSUANT TO REGULATION S UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). NEITHER THE
SECURITIES REPRESENTED BY THIS DEBENTURE NOR THE SECURITIES ISSUABLE UPON
CONVERSION OF THIS DEBENTURE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, OR
ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR
SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO
U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE
SECURITIES ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN EACH
CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION,
HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS
DEFINED BY REGULATION S UNDER THE SECURITIES ACT.

 

NO.1

US$600,000

SURGE ENTERPRISES, INC.

10% CONVERTIBLE DEBENTURE

Section 1.

General.

FOR VALUE RECEIVED, Surge Enterprises, Inc., a Nevada corporation
(the “Company”), hereby promises to pay to the order of Sovereign Services
Limited, or its registered assigns (the “Purchaser”), the principal sum of SIX
HUNDRED THOUSAND UNITED STATES DOLLARS (US$600,000), or such lesser amount as
shall then equal the outstanding principal amount hereof, together with interest
thereon at a rate equal to 10% (the “Interest Rate”) per annum, simple interest
computed on the basis of the actual number of days elapsed and a year of 360
days comprised of twelve 30 day months. Unless earlier converted in accordance
with Section 4, all unpaid principal, together with any then unpaid and accrued
interest and other amounts payable hereunder, shall be payable on demand
following the earlier of (i) November 1, 2008 (the “Maturity Date”) or (ii) when
such amounts become due and payable as a result of, and following, an Event of
Default in accordance with Section 2. The Company may repay all but not less
than all of the principle amount, or principle amount remaining, of this
Debenture, together with all accrued interest thereon, with thirty (30) days
written notice received by the Purchaser (the “Repayment Notice”). Upon receipt
of the Repayment Notice, the Purchaser shall have ten (10) days to convert all
but not less than all the principle amount, or principle amount remaining, of
this Debenture, together with all accrued interest thereon, by delivering the
Conversion Notice (as hereinafter defined), to the Company. Upon expiration of
ten (10) days following receipt of the Repayment Notice, the Purchaser shall
lose all right to convert the principle amount, or principle amount remaining,
of this Debenture,

 

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together with all accrued interest thereon. Except as otherwise provided herein,
all payments required to be made hereunder, if any, shall be made in such coin
or currency of the United States as at the time of payment shall be legal tender
therein for the payment of public and private debts. Interest shall accrue on
the unpaid balance of the principal amount of this Debenture (without any
compounding) from and including the date hereof to, but excluding, the date on
which the principal amount of this Debenture is paid in full (or converted in
accordance with Section 4 hereof) and shall be payable on the Maturity Date,
unless (i) the Company repays the principle amount, plus any accrued interest,
prior to the Maturity Date or (ii) the Purchaser converts the principle amount,
plus any accrued interest, prior to the Maturity Date. The payment of interest
on the Maturity Date shall be payable in Shares valued at the Conversion Price
each as defined in, and in accordance with, Section 4(a) hereof. No fractional
Shares shall be issued upon payment of interest under this Debenture. Upon
payment of interest of this Debenture at the Maturity Date or when such interest
becomes due and payable as a result of, and following, an Event of Default in
accordance with Section 2 hereof, the Company shall pay to the Purchaser the
amount of interest that is not paid by the issuance of the Shares in lieu of the
Company issuing any fractional Shares to the Purchaser.

Section 2.

Defaults.

The occurrence of any of the following shall constitute an “Event of Default”
under this Debenture:

(a)          the Company shall fail to pay (i) when due any principal or
interest payment hereof on the due date hereunder or (ii) any other payment
required under the terms of this Debenture on the date due;

(b)          the Company shall fail to observe or perform any other covenant,
obligation, condition or agreement contained in this Debenture and such failure
shall continue for ten (10) days after written notice thereof is delivered to
the Company;

(c)          any representation, warranty, certificate, or other statement
(financial or otherwise) made or furnished by or on behalf of the Company to the
Purchaser in writing in connection with this Debenture shall be false,
incorrect, incomplete or misleading in any material respect when made or
furnished;

(d)          the Company shall (i) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian of itself or of all or a substantial
part of its property, (ii) be unable, or admit in writing its inability, to pay
its debts generally as they mature, (iii) make a general assignment for the
benefit of its or any of its creditors, (iv) be dissolved or liquidated in full
or in part, (v) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it, or (vi) take any action for the purpose of effecting any
of the foregoing; or

(e)          proceedings for the appointment of a receiver, trustee, liquidator
or custodian of the Company or of all or a substantial part of the property
thereof, or an involuntary case or other proceedings seeking liquidation,
reorganization or other relief with respect to the Company or the debts thereof
under any bankruptcy, insolvency or other similar law now or hereafter in effect

 

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shall be commenced and an order for relief entered or such proceeding shall not
be dismissed or discharged within thirty (30) days of commencement.

Section 3.

Rights Of Purchaser Upon Default.

Upon the occurrence or existence of any Event of Default and following the
expiry of any applicable grace periods (other than an Event of Default referred
to in Section 2(e) hereof) and at any time thereafter during the continuance of
such Event of Default, the Purchaser may, by written notice to the Company,
declare all outstanding amounts payable by the Company hereunder to be
immediately due and payable without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything contained
herein to the contrary notwithstanding. Upon the occurrence or existence of any
Event of Default described in Section 2(e) hereof, immediately and without
notice, all outstanding amounts payable by the Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein to the contrary notwithstanding. In addition
to the foregoing remedies, upon the occurrence or existence of any Event of
Default, the Purchaser may exercise any other right, power or remedy permitted
to it by law, either by suit in equity or by action at law, or both.

Section 4.

Conversion.

(a)          Purchaser Conversion. At any time, and from time to time, the
Purchaser may, at its sole and exclusive option by delivering to the Company a
conversion notice in the form attached hereto as Annex A (the “Conversion
Notice”), convert all or any part of the principal (plus accrued but unpaid
interest thereon) outstanding under this Debenture into shares of common stock
in the capital of the Company (the “Shares”) at a conversion price per Share
equal to US$3.75 (the “Conversion Price”). Each Share converted under this
Debenture will be issued as fully paid and non-assessable. The Conversion Price
shall be subject to adjustment as provided in Section 5 hereof. The Purchaser
shall convert a minimum of US$10,000 of principal for any conversio n pursuant
to this Section 4(a).

(b)          Mechanics and Effect of Conversion. No fractional Shares shall be
issued upon conversion of this Debenture. Upon the conversion of the entire
principal outstanding under this Debenture (and any accrued interest thereon),
in lieu of the Company issuing any fractional Shares to the Purchaser, the
Company shall pay to the Purchaser the amount of outstanding principal (and any
accrued interest thereon) that is not so converted. The Purchaser shall not be
required to deliver the original Debenture in order to effect a conversion
thereunder. Execution and delivery of the Conversion Notice shall have the same
effect as cancellation of the original Debenture and issuance of a new Debenture
representing the remaining outstanding principal amount. Upon surrender of this
Debenture following one or more partia l conversions, the Company shall promptly
deliver to the Purchaser a new Debenture representing the remaining outstanding
principal amount. At its expense, the Company shall, as soon as practicable but
in no event more than ten (10) business days after conversion of this Debenture
pursuant to Section 4, issue and deliver to the Purchaser at such principal
office a certificate or certificates for the number of Shares to which the
Purchaser shall be entitled upon such conversion (bearing such legends as are
required by applicable state and federal securities laws in the opinion of
counsel to the Company), together with any other securities and property to
which the Purchaser is entitled upon such conversion under the terms of this
Debenture.

 

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(c)          Payment Of Expenses And Taxes On Conversion. The Company shall pay
all expenses, taxes and other charges payable in connection with the
preparation, execution, issuance and delivery of stock certificates and new
debentures pursuant to this Section 4, except that, in the event such stock
certificates or new debentures shall be registered in a name or names other than
the name of the holder of this Debenture, funds sufficient to pay all stock
transfer fees, which shall be payable upon the execution and delivery of such
stock certificate or certificates or new debentures, shall be paid by the holder
thereof to the Company at the time of delivering this Debenture to the Company
upon conversion.

Section 5.

Conversion Price Adjustments.

(a)          Adjustment For Stock Splits And Combinations. If the Company shall
at any time or from time to time after the date of original issuance of this
Debenture (the “Date of Original Issue”) effect a subdivision or reverse stock
split of the outstanding Common Stock, the Conversion Price in effect
immediately before a subdivision shall be proportionately decreased, and,
conversely, the Conversion Price in effect immediately before a reverse stock
split shall be proportionately increased. Any adjustment under this Section 5(a)
shall become effective at the close of business on the date the subdivision or
reverse stock split becomes effective.

(b)          Adjustment For Common Stock Dividends And Distributions. If the
Company at any time or from time to time after the Date of Original Issue
issues, or fixes a record date for the determination of holders of common stock
entitled to receive, a dividend or other distribution payable solely in
additional shares of common stock, the Conversion Price that is then in effect
shall be decreased as of the time of such issuance or, in the event such record
date is fixed, as of the close of business on such record date, by multiplying
the Conversion Price by a fraction (i) the numerator of which is the total
number of shares of common stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date, and (ii) the
denominator of which is the sum of the tota l number of shares of common stock
issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date plus the number of shares of common stock
issuable in payment of such dividend or distribution; provided, however, that if
such record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Conversion Price
shall be recomputed accordingly as of the close of business on such record date
and thereafter the Conversion Price shall be adjusted pursuant to this
Section 5(b) to reflect the actual payment of such dividend or distribution.

(c)          Adjustments For Other Dividends And Distributions. If the Company
at any time or from time to time after the Date of Original Issue issues, or
fixes a record date for the determination of holders of common stock entitled to
receive, a dividend or other distribution payable in securities of the Company
other than shares of common stock or in other property, in each such event
provision shall be made so that the Purchaser shall receive upon conversion
hereof, in addition to the number of shares of common stock receivable hereupon,
the amount of securities of the Company or other property which such Purchaser
would have received had this Debenture been converted into common stock on the
date of such event and had it thereafter, during the period from the date of
such event to and including the conversion date, retained such securities or
other property receivable by it as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 5 with
respect to the rights of the Purchaser or with respect to such other securities
or other property by their terms. As used herein, the term “other property” does
not include cash.

 

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(d)          Adjustment For Reclassification, Exchange And Substitution. If at
any time or from time to time after the Date of Original Issue, the common stock
issuable upon the conversion of this Debenture is changed into the same or a
different number of shares of any class or series of stock, whether by
recapitalization, reclassification or otherwise (other than a subdivision or
reverse stock split or stock dividend or a reorganization, merger, consolidation
or sale of assets provided for elsewhere in this Section 5), then in any such
event the Purchaser shall have the right thereafter to convert this Debenture
into the kind and amount of stock and other securities and property receivable
upon such recapitalization, reclassification or other change by holders of the
number of shares of common stock into which th is Debenture could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.

(e)          Certificate Of Adjustment. In each case of an adjustment or
readjustment of the Conversion Price for the number of shares of common stock or
other securities issuable upon conversion of this Debenture, the Company, at its
own expense, shall cause its Secretary or Treasurer to compute such adjustment
or readjustment in accordance with the provisions hereof and prepare a
certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to the Purchaser at the
Purchaser’s address as shown in the Company’s books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based. No adjustment in the Conversion Price
shall be required to be made unless it would result in an increase or decrease
of at least one cent, but any adjustments not made because of this sentence
shall be carried forward and taken into account in any subsequent adjustment
otherwise required hereunder.

(f)           Notices Of Record Date. Upon (i) the establishment by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger or consolidation of the Company with or into any other Company, or any
transfer of all or substantially all the assets of the Company to any other
person or any voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to the Purchaser at least 20 days prior to
the record date specified therein a notice specifying (A) the date on which any
such record is to be taken for the purpose of such dividend or distribution and
a description of such dividend or distribution, (B) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective, and (C) the date, if
any, that is to be fixed as to when the holders of record of common stock (or
other securities), shall be entitled to exchange their shares of common stock
(or other securities), for securities or other property deliverable upon such
reorganization, reclassification transfer, consolidation, merger, dissolution,
liquidation or winding up.

Section 6.

Exchange or Replacement of Debentures.

(a)          The Purchaser may, at its option, in person or by duly authorized
attorney, surrender this Debenture for exchange, at the principal business
office of the Company, and receive in exchange therefore, a new Debenture in the
same principal amount as the unpaid principal amount of this Debenture and
bearing interest at the same annual rate as this Debenture,

 

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each such new Debenture to be dated as of the date of this Debenture and to be
in such principal amount as remains unpaid and payable to such person or
persons, or order, as the Purchaser may designate in writing; provided that any
such transfer of this Debenture complies with all applicable securities laws.

(b)          Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction, or mutilation of this Debenture and (in the case of
loss, theft or destruction) of an indemnity reasonably satisfactory to it, and
upon surrender and cancellation of this Debenture, if mutilated, the Company
will deliver a new Debenture of like tenor in lieu of this Debenture. Any
Debenture delivered in accordance with the provisions of this Section 6 shall be
dated as of the date of this Debenture.

Section 7.

Attorneys’ and Collection Fees.

Should the indebtedness evidenced by this Debenture or any part hereof be
collected at law or in equity or in bankruptcy, receivership or other court
proceedings, the Company agrees to pay, in addition to the principal and
interest due and payable hereon, all costs of collection, including reasonable
attorneys’ fees and expenses, incurred by the Purchaser in collecting or
enforcing this Debenture.

Section 8.

Waivers.

The Company hereby waives presentment, demand for payment, notice of dishonor,
notice of protest and all other notices or demands in connection with the
delivery, acceptance, performance or default of this Debenture. No delay by the
Purchaser in exercising any power or right hereunder shall operate as a waiver
of any power or right, nor shall any single or partial exercise of any power or
right preclude other or further exercise thereof, or the exercise thereof, or
the exercise of any other power or right hereunder or otherwise; and no waiver
whatsoever or modification of the terms hereof shall be valid unless set forth
in writing by the Purchaser and then only to the extent set forth therein.

Section 9.

Amendments.

Subject to the provisions of the Subscription Agreement dated November 1, 2006
(the “Subscription Agreement”), between the Company and the Purchaser, this
Debenture may not be amended without the express written consent of both the
Company and the Purchaser.

Section 10.

Governing Law.

This Debenture shall be deemed to be made under and shall be construed in
accordance with the laws of the Province of British Columbia without giving
effect to the principles of conflict of laws thereof.

Section 11.

Successors and Assigns.

The rights and obligations of the Company and the Purchaser under this Debenture
shall be binding upon and benefit the successors, assigns, heirs, administrators
and transferees of the parties. Notwithstanding the foregoing, neither this
Debenture nor any of the rights, interests or obligations hereunder may be
assigned, by operation of law or otherwise, in whole or in part, by the Company,
without the prior written consent of the Purchaser.

 

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Section 12.

Notices.

All notices, requests, demands and other communications to any party hereunder
shall be in writing (including facsimile or similar writing) and shall be given
to such party at its address or facsimile number set forth below or such other
address or facsimile number as such party may hereafter specify by notice to the
other parties listed below:

(a)

If to the Company:

Surge Enterprises, Inc.
307-1178 Hamilton Street
Vancouver, British Columbia
Canada V6B 2S2
Attention: Eric Boehnke
Telephone: 604-484-2405
Facsimile: 604-484-2403

 

 

 

 

with a copy to:

Clark Wilson LLP
Barristers and Solicitors
800-885 West Georgia Street
Vancouver, BC, Canada V6C 3H1
Attention: Cam McTavish
Facsimile: 604-687-6314

 

 

 

(b)

If to the Purchaser:

At the address set out on the signature page

 

 

Each such notice, request or other communication shall be effective (i) upon
receipt (provided, however, that notices received on a Saturday, Sunday or legal
holiday recognized in the Province of British Columbia, Canada, or after 5:00
p.m. on any other day will be deemed to have been received on the next business
day), if given by legible facsimile transmission with proof from sender of
confirmation of receipt, or (ii) if given by any other means, when delivered at
the address specified in this Section 12.

Section 13.

No Rights of Stockholders.

Except as otherwise provided herein, this Debenture shall not entitle the
Purchaser to any of the rights of a stockholder of the Company, including
without limitation, the right to vote, to receive dividends and other
distributions, or to receive any notice of, or to attend, meetings of
stockholders or any other proceedings of the Company, unless and to the extent
converted into shares of common stock in accordance with the terms hereof.

Section 14.

Entire Agreement.

This Debenture represents the entire agreement between the parties hereto with
respect to the subject matter hereof and there are no representations,
warranties or commitments, except as set forth herein. This Debenture may be
amended only by an instrument in writing executed by the parties hereto.

 

 

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Section 15.

Headings.

 

The headings used in this Debenture are used for convenience only and are not to
be considered in construing or interpreting this Debenture.

Section 16.

Electronic Means

Delivery of an executed copy of this Debenture by electronic facsimile
transmission or other means of electronic communication capable of producing a
printed copy will be deemed to be execution and delivery of this Debenture as of
the date hereinafter set forth.

Section 17.

Assignability

This Debenture shall be binding upon the Company and its successors and shall
enure to the benefit of the Purchaser and its successors. This Debenture is not
assignable by the Purchaser without the express written consent of the Company.

Section 18.

Currency

Unless expressly stated otherwise, all funds expressed in this Debenture are
stated in United States dollars.

Section 19.

Restrictions on Shares

The Shares issuable upon conversion of this Debenture may not be sold or
transferred unless (a) the Shares, first shall have been registered under the
Securities Act and applicable state securities laws, or (b) the Company shall
have been furnished with an opinion of legal counsel (in form, substance and
scope customary for opinions in such circumstances) to the effect that such sale
or transfer is exempt from registration requirements of the Securities Act, or
(c) the Shares, are sold under Rule 144 under the Securities Act. Except as
otherwise provided in the Subscription Agreement, each certificate for the
Shares issuable upon conversion of this Debenture that has not been so
registered and that has not been sold under an exemption that permits removal of
the legend, shall bear a legend substantially in the following form, as
appropriate:

“THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION
TO A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED HEREIN) PURSUANT TO REGULATION
S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”). NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED,
MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS
DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY
NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. “UNITED STATES”
AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE SECURITIES ACT.”

 

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Upon the request of the Purchaser of a certificate representing any Shares
issuable upon conversion of this Debenture, the Company shall remove the
foregoing legend from the certificate and issue to the Purchaser a new
certificate free of any transfer legend, (a) if without an effective
registration statement with such request, the Company shall have received either
(i) an opinion of counsel, in form, substance and scope customary for opinions
in such circumstances, to the effect that any such legend may be removed from
such certificate, or (ii) satisfactory representations from the Purchaser that
the Purchaser is eligible to sell such security under Rule 144 or (b) a
registration statement under the Securities Act covering the resale of such
securities is in effect.

IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by
its duly authorized officer as of the date indicated below.

Date: November 1, 2006

SURGE ENTERPRISES, INC.

 

By:

/s/ Eric Boehnke

Name: Eric Boehnke

Title: President, Secretary and Treasurer

 

Debenture No. 1

Amount:

US$600,000

Purchaser Name: Sovereign Services Limited

Address:

3E – Block 1, 25 Tai Hang Drive

 

Jardine’s Lookout

 

Hong Kong

Telephone:

(852) 2895-1736

Facsimile:

(852) 2895-1871

 

 

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ANNEX A

NOTICE OF CONVERSION

(To be executed by the Purchaser in order to Convert the Debenture)

 

TO:

SURGE ENTERPRISES, INC.

 

The undersigned hereby irrevocably elects to convert US$_______________________
of the principal amount of the Debenture effective as of November 1, 2006
between the Company and Sovereign Services Limited, into shares of common stock
in the capital of the Company according to the conditions stated therein, as of
the conversion date written below. All capitalized terms used herein shall have
the meanings assigned thereto in the Debenture.

 

Conversion Date:

____________________________________________________

Applicable Conversion Price:

US$_________________________________________________

Amount to be converted:

US$_______________________________________________

Number of Shares of common stock to be issued:

____________________________________________________

Amount of Debenture unconverted:

Principal: US$

Please issue the Shares of common stock in the following name and to the
following address:

____________________________________________________

____________________________________________________

 

____________________________________________________

 

 

Signature of the Holder:

____________________________________________________

Name:

____________________________________________________

Address:

____________________________________________________

 

____________________________________________________

 

 

Phone Number:

____________________________________________________

 

 

 

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CW905523.1