SECURED CONVERTIBLE PROMISSORY NOTE
 
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD
CAREFULLY REVIEW THE TERMS OF THIS NOTE.
 
NEXUS NANO ELECTRONICS, INC.
 
SECURED CONVERTIBLE PROMISSORY NOTE
 
Issuance Date: December 7, 2007
Original Principal Amount: $37,034.39

 
NEXUS NANO ELECTRONICS, INC., a Nevada corporation (the “Company”), hereby
promises to pay to the order of CSI BUSINESS FINANCE, INC., a Texas
corporation (the “Holder”) the amount set out above as the Original Principal
Amount (as reduced pursuant to the terms hereof pursuant to redemption,
conversion or otherwise, the “Principal”) when due, whether upon the Maturity
Date (as defined below), acceleration, redemption or otherwise (in each case in
accordance with the terms hereof) and to pay interest (“Interest”) on the
outstanding Principal at the applicable Interest Rate from the date set out
above as the Issuance Date (the “Issuance Date”) until the same becomes due and
payable, whether upon an Interest Date (as defined below) or the Maturity Date
or acceleration, conversion, redemption or otherwise (in each case in accordance
with the terms hereof). Certain capitalized terms used herein are defined on
Exhibit A hereto.

FOR VALUE RECEIVED, the Company hereby promises to pay to the Holder or its
successors and assigns the Principal together with accrued but unpaid Interest
in accordance with the terms set forth herein below.
 
The obligations of the Company to the Holder as evidenced by this Note are
secured by (w) the collateral identified and described as security therefor in
the Security Agreement.
 

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(1) PAYMENTS OF PRINCIPAL.
 
(a) On the Maturity Date, the Company shall pay to the Holder an amount in cash
representing all outstanding Principal, accrued and unpaid Interest and accrued
and unpaid Late Charges on such Principal and Interest. The “Maturity Date”
means, unless extended by the Holder, the earlier of (i) July 1, 2010, (ii) the
consummation of a Change of Control and (iii) the occurrence of an Event of
Default or any event that with the passage of time and the failure to cure would
result in an Event of Default
 
(b) The Company may prepay this Note at any time upon not less than thirty (30)
days prior written notice to the Holder; provided, that any such prepayments
shall applied first to unpaid Late Charges on Principal and Interest, if any,
then to unpaid Interest and then unpaid Principal.
 
(c) The Company, in its sole discretion, may redeem in cash any and all amounts
owed hereunder prior to the Maturity Date upon not less than thirty (30) days
prior written notice to the Holder; provided, that (i) the Common Stock is
trading below the Fixed Conversion Price at the time of the redemption notice
and (ii) no Event of Default has occurred and is continuing.
 
(2) PAYMENT OF INTEREST; INTEREST RATE. Interest on this Note shall commence
accruing on the Issuance Date and shall be computed on the basis of a 360-day
year comprised of twelve (12) thirty  (30) day months and shall be compounded
monthly and added to the unpaid Principal hereunder at the rate of eighteen
percent (18%). Unless required to be paid sooner hereunder, accrued and unpaid
Interest shall be payable at Maturity. From and after the occurrence and during
the continuance of an Event of Default, the Interest Rate shall be increased
from eighteen percent (18%) to twenty percent (20%). In the event that such
Event of Default is subsequently cured, the adjustment referred to in the
preceding sentence shall cease to be effective as of the date of such cure;
provided that the Interest as calculated and unpaid at such increased rate
during the continuance of such Event of Default shall continue to apply to the
extent relating to the days after the occurrence of such Event of Default
through and including the date of cure of such Event of Default.
 
(3) CONVERSION OF NOTES. This Note shall be convertible into shares of the
Company’s common stock, par value $0.001 per share (the “Common Stock”), on the
terms and conditions set forth in this Section 3.
 
(a) Conversion Right. Subject to the provisions of Section 3(d), at any time or
times on or after the Issuance Date, the Holder shall be entitled to convert any
portion of the outstanding and unpaid Conversion Amount (as defined below) into
fully paid and nonassessable shares of Common Stock in accordance with
Section 3(c), at the Conversion Rate (as defined below). The Company shall not
issue any fraction of a share of Common Stock upon any conversion. If the
issuance would result in the issuance of a fraction of a share of Common Stock,
the Company shall round such fraction of a share of Common Stock up to the
nearest whole share. The Company shall pay any and all transfer, stamp and
similar taxes that may be payable with respect to the issuance and delivery of
Common Stock upon conversion of any Conversion Amount.
 
(b) Conversion Rate. The number of shares of Common Stock issuable upon
conversion of any Conversion Amount pursuant to Section 3(a) shall be determined
by dividing (x) such Conversion Amount by (y) the Conversion Price (the
“Conversion Rate”).
 
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i) “Conversion Amount” means the portion of the Principal and Interest to be
converted, redeemed or otherwise with respect to which this determination is
being made.
 
ii) “Conversion Price” means, as of any Conversion Date (as defined below) or
other date of determination, the lesser or (x) $0.01, subject to adjustment as
provided herein (the “Fixed Conversion Price”) and (y) eighty percent (80%) of
the lowest daily Weighted Average Price of the Common Stock during the ten (10)
Trading Days immediately preceding the conversion date.
 
(c) Mechanics of Conversion.
 
(i) Optional Conversion. To convert any Conversion Amount into shares of Common
Stock on any date (a “Conversion Date”), the Holder shall (A) transmit by
facsimile (or otherwise deliver) a copy of an executed notice of conversion in
the form attached hereto as Exhibit B (the “Conversion Notice”) to the Company
and (B) if required by this Section 3(c), surrender this Note to the Company (or
an indemnification undertaking with respect to this Note in the case of its
loss, theft or destruction). Promptly following (but in any event not more than
one Business Day following the date of receipt of a Conversion Notice), the
Company shall transmit by facsimile a confirmation of receipt of such Conversion
Notice to the Holder and the Company’s transfer agent (the “Transfer Agent”). On
or before the second Business Day following the date of receipt of a Conversion
Notice (the “Share Delivery Date”), the Company shall (1) (X) if legends are not
required to be placed on certificates of Common Stock hereof and provided that
the Transfer Agent is participating in the Depository Trust Company’s (“DTC”)
Fast Automated Securities Transfer Program, credit such aggregate number of
shares of Common Stock to which the Holder shall be entitled to the Holder’s or
its designee’s balance account with DTC through its Deposit Withdrawal Agent
Commission system or (Y) if the Transfer Agent is not participating in the DTC
Fast Automated Securities Transfer Program, issue and deliver to the address as
specified in the Conversion Notice, a certificate, registered in the name of the
Holder or its designee, for the number of shares of Common Stock to which the
Holder shall be entitled which certificates shall not bear any restrictive
legends; and (2) pay to the Holder in cash an amount equal to the accrued and
unpaid Interest on the Conversion Amount up to and including the Conversion
Date. If this Note is physically surrendered for conversion as required by this
Section 3(c) and the outstanding Principal of this Note is greater than the
Principal portion of the Conversion Amount being converted, then the Company
shall as soon as practicable and in no event later than five (5) Business Days
after receipt of this Note and at its own expense, issue and deliver to the
holder a new Note representing the outstanding Principal not converted. The
Person or Persons entitled to receive the shares of Common Stock issuable upon a
conversion of this Note shall be treated for all purposes as the record holder
or holders of such shares of Common Stock on the Conversion Date.
 
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(ii) Company’s Failure to Timely Convert. If within five (5) Trading Days after
the Company’s receipt of the facsimile copy of a Conversion Notice the Company
shall fail to issue and deliver a certificate to the Holder or credit the
Holder’s balance account with DTC for the number of shares of Common Stock to
which the Holder is entitled upon such holder’s conversion of any Conversion
Amount (a “Conversion Failure”), and if on or after such Trading Day the Holder
purchases (in an open market transaction or otherwise) Common Stock to deliver
in satisfaction of a sale by the Holder of Common Stock issuable upon such
conversion that the Holder anticipated receiving from the Company (a “Buy-In”),
then the Company shall, within five (5) Business Days after the Holder’s request
and in the Holder’s discretion, either (i) pay cash to the Holder in an amount
equal to the Holder’s total purchase price (including brokerage commissions and
other out of pocket expenses, if any) for the shares of Common Stock so
purchased (the “Buy-In Price”), at which point the Company’s obligation to
deliver such certificate (and to issue such Common Stock) shall terminate, or
(ii) promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such Common Stock and pay cash to the Holder in an
amount equal to the excess (if any) of the Buy-In Price over the product of
(A) such number of shares of Common Stock, times (B) the Closing Bid Price on
the Conversion Date.
 
(iii) Book-Entry. Notwithstanding anything to the contrary set forth herein,
upon conversion of any portion of this Note in accordance with the terms hereof,
the Holder shall not be required to physically surrender this Note to the
Company unless (A) the full Conversion Amount represented by this Note is being
converted or (B) the Holder has provided the Company with prior written notice
(which notice may be included in a Conversion Notice) requesting reissuance of
this Note upon physical surrender of this Note. The Holder and the Company shall
maintain records showing the Principal, Interest and Late Charges converted and
the dates of such conversions or shall use such other method, reasonably
satisfactory to the Holder and the Company, so as not to require physical
surrender of this Note upon conversion.
 
(d) Limitations on Conversions - Beneficial Ownership. The Company shall not
effect any conversion of this Note, and the Holder of this Note shall not have
the right to convert any portion of this Note pursuant to Section 3(a), to the
extent that after giving effect to such conversion, the Holder (together with
the Holder’s affiliates) would beneficially own in excess of 4.99% (the “Maximum
Percentage”) of the number of shares of Common Stock outstanding immediately
after giving effect to such conversion. For purposes of the foregoing sentence,
the number of shares of Common Stock beneficially owned by the Holder and its
affiliates shall include the number of shares of Common Stock issuable upon
conversion of this Note with respect to which the determination of such sentence
is being made, but shall exclude the number of shares of Common Stock which
would be issuable upon (A) conversion of the remaining, nonconverted portion of
this Note beneficially owned by the Holder or any of its affiliates and
(B) exercise or conversion of the unexercised or nonconverted portion of any
other securities of the Company (including, without limitation, any warrants)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its affiliates.
Except as set forth in the preceding sentence, for purposes of this
Section 3(d)(i), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934
Act”). For purposes of this Section 3(d)(i), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in any notice by the Company or
the Transfer Agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written request of the Holder,
the Company shall within one (1) Business Day confirm in writing to the Holder
the number of shares of Common Stock then outstanding. In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Note, by
the Holder or its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.
 
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(4) RIGHTS UPON EVENT OF DEFAULT.
 
(a) Event of Default. Each of the following events shall constitute an “Event of
Default”:
 
(i) the suspension from trading or failure of the Common Stock to be listed on
an Eligible Market for a period of five (5) consecutive Trading Days or for more
than an aggregate of ten (10) Trading Days in any 365-day period;
 
(ii) the Company’s (A) failure to cure a Conversion Failure by delivery of the
required number of shares of Common Stock within ten (10) Business Days after
the applicable Conversion Date or (B) notice, written or oral, to any holder of
the Notes, including by way of public announcement, at any time, of its
intention not to comply with a request for conversion of any Notes into shares
of Common Stock that is tendered in accordance with the provisions of the Notes,
other than pursuant to Section 3(d);
 
(iii) at any time following the tenth (10th) consecutive Business Day following
the Company’s failure to have a sufficient number of shares of Common Stock
authorized and available for delivery to the Holder upon a conversion of the
full Conversion Amount of this Note (without regard to any limitations on
conversion set forth in Section 3(d) or otherwise);
 
(iv) the Company’s failure to pay to the Holder any amount of Principal,
Interest, Late Charges or other amounts when and as due under this Note, any
other indebtedness of the Company or any of its Subsidiaries to the Holder, or
any other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated hereby to which the Holder is a
party, except, in the case of a failure to pay Interest and Late Charges when
and as due, in which case only if such failure continues for a period of at
least ten (10) Business Days;
 
(v) the occurrence of any default under, redemption of or acceleration prior to
maturity of any Indebtedness of the Company or any of its Subsidiaries which,
individually or in the aggregate, exceeds Two Hundred Fifty Thousand Dollars
($250,000);
 
(vi) the Company or any of its Subsidiaries, pursuant to or within the meaning
of Title 11, U.S. Code, or any similar Federal, foreign or state law for the
relief of debtors (collectively, “Bankruptcy Law”), (A) commences a voluntary
case, (B) consents to the entry of an order for relief against it in an
involuntary case, (C) consents to the appointment of a receiver, trustee,
assignee, liquidator or similar official (a “Custodian”), (D) makes a general
assignment for the benefit of its creditors or (E) admits in writing that it is
generally unable to pay its debts as they become due;
 
(vii) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (A) is for relief against the Company or any of its
Subsidiaries in an involuntary case, (B) appoints a Custodian of the Company or
any of its Subsidiaries or (C) orders the liquidation of the Company or any of
its Subsidiaries;
 
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(viii) a final judgment or judgments for the payment of money aggregating in
excess of Two Hundred Fifty Thousand Dollars ($250,000) for any one creditor are
rendered against the Company or any of its Subsidiaries and which judgments are
not, within sixty (60) calendar days after the entry thereof, bonded, discharged
or stayed pending appeal, or are not discharged within sixty (60) calendar days
after the expiration of such stay;
 
(ix) the Company or any Subsidiary breaches any representation, warranty,
covenant or other term or condition of this Note, any other indebtedness or
agreement of the Company or any of its Subsidiaries with the Holder, or any
Transaction Document, except, in the case of a breach of a covenant or other
term or condition which is curable, only if such breach continues for a period
of at least five (5) consecutive Business Days; or
 
(x) the Company’s breach or failure in any material respect to comply with any
covenant in this Note.
 
(b) Rights Upon Default. During the time that any portion of this Note is
outstanding, if any Event of Default has occurred, or the Company shall be party
to a Fundamental Transaction, the full unpaid Principal amount of this Note,
together with interest and other amounts owing in respect thereof, to the date
of acceleration shall become at the Holder's election, immediately due and
payable in cash; provided however, the Holder may request (but shall have no
obligation to request) payment of such amounts in Common Stock of the Company.
Furthermore, in addition to any other remedies, the Holder shall have the right
(but not the obligation) to convert this Note at any time after (x) an Event of
Default or (y) the Maturity Date at the applicable Conversion Price. The Holder
need not provide and the Company hereby waives any presentment, demand, protest
or other notice of any kind, (other than required notice of conversion) and the
Holder may immediately and without expiration of any grace period enforce any
and all of its rights and remedies hereunder and all other remedies available to
it under applicable law. Such declaration may be rescinded and annulled by
Holder at any time prior to payment hereunder. No such rescission or annulment
shall affect any subsequent Event of Default or impair any right consequent
thereon.
 
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(5) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.
 
(a) Purchase Rights. If at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the “Purchase Rights”), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.
 
(b) Other Corporate Events. In addition to and not in substitution for any other
rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a “Corporate Event”), the Company shall make appropriate provision to
insure that the Holder will thereafter have the right to receive upon a
conversion of this Note, at the Holder’s option, (i) in addition to the shares
of Common Stock receivable upon such conversion, such securities or other assets
to which the Holder would have been entitled with respect to such shares of
Common Stock had such shares of Common Stock been held by the Holder upon the
consummation of such Corporate Event (without taking into account any
limitations or restrictions on the convertibility of this Note) or (ii) in lieu
of the shares of Common Stock otherwise receivable upon such conversion, such
securities or other assets received by the holders of shares of Common Stock in
connection with the consummation of such Corporate Event in such amounts as the
Holder would have been entitled to receive had this Note initially been issued
with conversion rights for the form of such consideration (as opposed to shares
of Common Stock) at a conversion rate for such consideration commensurate with
the Conversion Rate. The provisions of this Section shall apply similarly and
equally to successive Corporate Events and shall be applied without regard to
any limitations on the conversion or redemption of this Note.
 
(6) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.
 
(a) Adjustment of Conversion Price upon Issuance of Common Stock. If and
whenever on or after the Subscription Date, the Company issues or sells, or in
accordance with this Section 7(a) is deemed to have issued or sold, any shares
of Common Stock (including the issuance or sale of shares of Common Stock owned
or held by or for the account of the Company, but excluding shares of Common
Stock deemed to have been issued or sold by the Company in connection with any
Excluded Security) for a consideration per share less than a price equal to the
Fixed Conversion Price in effect immediately prior to such issue or sale (such
price the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then
immediately after such Dilutive Issuance the Fixed Conversion Price for purposes
of Section 3(b)(ii)(x) then in effect shall be reduced to an amount equal to the
issuance price of such Dilutive Issuance. For purposes of determining the
adjusted Conversion Price under this Section 7(a), the following shall be
applicable:
 
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(i) Issuance of Options. If the Company in any manner grants or sells any
Options and the lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion or exchange or
exercise of any Convertible Securities issuable upon exercise of such Option is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
the granting or sale of such Option for such price per share. For purposes of
this Section 7(a)(i), the “lowest price per share for which one share of Common
Stock is issuable upon the exercise of any such Option or upon conversion or
exchange or exercise of any Convertible Securities issuable upon exercise of
such Option” shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by the Company with respect to any one share of
Common Stock upon granting or sale of the Option, upon exercise of the Option
and upon conversion or exchange or exercise of any Convertible Security issuable
upon exercise of such Option. No further adjustment of the Conversion Price
shall be made upon the actual issuance of such share of Common Stock or of such
Convertible Securities upon the exercise of such Options or upon the actual
issuance of such Common Stock upon conversion or exchange or exercise of such
Convertible Securities.
 
(ii) Issuance of Convertible Securities. If the Company in any manner issues or
sells any Convertible Securities and the lowest price per share for which one
share of Common Stock is issuable upon such conversion or exchange or exercise
thereof is less than the Applicable Price, then such share of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this Section 7(a)(ii), the “lowest price per
share for which one share of Common Stock is issuable upon such conversion or
exchange or exercise” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any
one share of Common Stock upon the issuance or sale of the Convertible Security
and upon the conversion or exchange or exercise of such Convertible Security. No
further adjustment of the Conversion Price shall be made upon the actual
issuance of such share of Common Stock upon conversion or exchange or exercise
of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which adjustment
of the Conversion Price had been or are to be made pursuant to other provisions
of this Section 7(a), no further adjustment of the Conversion Price shall be
made by reason of such issue or sale.
 
(iii) Change in Option Price or Rate of Conversion. If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion, exchange or exercise of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable or exercisable for Common Stock changes at any time, the Conversion
Price in effect at the time of such change shall be adjusted to the Conversion
Price which would have been in effect at such time had such Options or
Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold. For purposes of this Section 7(a)(iii), if
the terms of any Option or Convertible Security that was outstanding as of the
Subscription Date are changed in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such change. No adjustment shall be
made if such adjustment would result in an increase of the Conversion Price then
in effect.
 
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(iv) Calculation of Consideration Received. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options will be deemed to
have been issued for the difference of (x) the aggregate fair market value of
such Options and other securities issued or sold in such integrated transaction,
less (y) the fair market value of the securities other than such Option, issued
or sold in such transaction and the other securities issued or sold in such
integrated transaction will be deemed to have been issued or sold for the
balance of the consideration received by the Company. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the gross amount raised by the Company; provided, however, that such gross
amount is not greater than 110% of the net amount received by the Company
therefor. If any Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of the consideration other
than cash received by the Company will be the fair value of such consideration,
except where such consideration consists of securities, in which case the amount
of consideration received by the Company will be the Closing Sale Price of such
securities on the date of receipt. If any Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Options or Convertible Securities, as the case may be. The
fair value of any consideration other than cash or securities will be determined
jointly by the Company and the Holder. If such parties are unable to reach
agreement within ten (10) calendar days after the occurrence of an event
requiring valuation (the “Valuation Event”), the fair value of such
consideration will be determined within five (5) Business Days after the tenth
(10th) calendar day following the Valuation Event by an independent, reputable
appraiser jointly selected by the Company and the Holder. The determination of
such appraiser shall be deemed binding upon all parties absent manifest error
and the fees and expenses of such appraiser shall be borne by the Company.
 
(v) Record Date. If the Company takes a record of the holders of Common Stock
for the purpose of entitling them (A) to receive a dividend or other
distribution payable in Common Stock, Options or in Convertible Securities or
(B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the Common Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
 
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(b) Adjustment of Conversion Price upon Subdivision or Combination of Common
Stock. If the Company at any time on or after the Subscription Date subdivides
(by any stock split, stock dividend, recapitalization or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
will be proportionately reduced. If the Company at any time on or after the
Subscription Date combines (by combination, reverse stock split or otherwise)
one or more classes of its outstanding shares of Common Stock into a smaller
number of shares, the Conversion Price in effect immediately prior to such
combination will be proportionately increased.
 
(c) Other Events. If any event occurs of the type contemplated by the provisions
of this Section 7 but not expressly provided for by such provisions (including,
without limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with equity features), then the Company’s Board of
Directors (the “Board”) will make an appropriate adjustment in the Conversion
Price so as to protect the rights of the Holder under this Note; provided that
no such adjustment will increase the Conversion Price as otherwise determined
pursuant to this Section 7.
 
(7) NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company
will not, by amendment of its Articles of Incorporation, Bylaws or through any
reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Note, and will at all times in good faith carry out all of the
provisions of this Note and take all action as may be required to protect the
rights of the Holder of this Note.
 
(8) RESERVATION OF AUTHORIZED SHARES.
 
(a) Reservation. The Company shall initially reserve out of its authorized and
unissued Common Stock a number of shares of Common Stock equal to one hundred
thirty percent (130%) of the Conversion Rate with respect to the Conversion
Amount of the Note as of the Issuance Date. So long as the Note is outstanding,
the Company shall take all action necessary to reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Note, one hundred thirty percent (130%) of the number of
shares of Common Stock as shall from time to time be necessary to effect the
conversion of the Note; provided that at no time shall the number of shares of
Common Stock so reserved be less than the number of shares required to be
reserved by the previous sentence (without regard to any limitations on
conversions) (the “Required Reserve Amount”).
 
(b) Insufficient Authorized Shares. If at any time while the Note remains
outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve for
issuance upon conversion of the Note at least a number of shares of Common Stock
equal to the Required Reserve Amount (an “Authorized Share Failure”), then the
Company shall immediately take all action necessary to increase the Company’s
authorized shares of Common Stock to an amount sufficient to allow the Company
to reserve the Required Reserve Amount. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than ninety (90) calendar
days after the occurrence of such Authorized Share Failure, the Company shall
hold a meeting of its stockholders for the approval of an increase in (the
“Authorized Share Failure Deadline”), the number of authorized shares of Common
Stock. In connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its best efforts to solicit its
stockholders’ approval of such increase in authorized shares of Common Stock and
to cause the Board to recommend to the stockholders that they approve such
proposal.
 
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(9) COVENANTS.
 
(a) Rank. All payments due under this Note shall rank senior to all Indebtedness
of the Company and its Subsidiaries other than Permitted Indebtedness.
 
(b) Incurrence of Indebtedness. So long as this Note is outstanding and without
the prior written consent of the Holder, the Company shall not, and the Company
shall not permit any of its Subsidiaries to, directly or indirectly, incur or
guarantee, assume or suffer to exist any Indebtedness, other than Permitted
Indebtedness.
 
(c) Existence of Liens. So long as this Note is outstanding and without the
prior written consent of the Holder, the Company shall not, and the Company
shall not permit any of its Subsidiaries to, directly or indirectly, allow or
suffer to exist any mortgage, lien, pledge, charge, security interest or other
encumbrance upon or in any property or assets (including accounts and contract
rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”)
other than Permitted Liens.
 
(d) Restricted Payments. The Company shall not, and the Company shall not permit
any of its Subsidiaries to without the prior written consent of the Holder,
directly or indirectly, redeem, defease, repurchase, repay or make any payments
in respect of, by the payment of cash or cash equivalents (in whole or in part,
whether by way of open market purchases, tender offers, private transactions or
otherwise), all or any portion of any Indebtedness, whether by way of payment in
respect of principal of (or premium, if any) or interest on, such Indebtedness
if at the time such payment is due or is otherwise made or, after giving effect
to such payment, (A) an event constituting an Event of Default has occurred and
is continuing or (B) an event that with the passage of time and without being
cured would constitute an Event of Default has occurred and is continuing.
 
(e) Restriction on Redemption and Cash Dividends. Until the Note has been
converted, redeemed or otherwise satisfied in full in accordance with its terms,
the Company shall not, directly or indirectly, redeem, repurchase, or declare or
pay any cash dividend or distribution on, its capital stock without the prior
express written consent of the Holder.
 
(f) Restriction on Mergers, Etc.. Until the Note has been converted, redeemed or
otherwise satisfied in full in accordance with its terms, the Company shall not,
directly or indirectly, (i) subject to Section 5 of this Note, merge, dissolve,
liquidate, consolidate with or into another person, or dispose of or otherwise
transfer (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to or
in favor of any person, or (ii) acquire any assets or business or any interest
in any person or entity in excess of One Hundred Thousand Dollars ($100,000),
except for purchases of trade payables, inventory, raw materials and equipment
in the ordinary course of business.
 
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(10) PARTICIPATION. The Holder, as the holder of this Note, shall be entitled to
receive such dividends paid and distributions made to the holders of Common
Stock to the same extent as if the Holder had converted this Note into Common
Stock (without regard to any limitations on conversion herein or elsewhere) and
had held such shares of Common Stock on the record date for such dividends and
distributions. Payments under the preceding sentence shall be made concurrently
with the dividend or distribution to the holders of Common Stock.
 
(11) AMENDMENT. No provision of this Note shall be altered, amended or waived
without the prior written consent of the Holder.
 
(12) TRANSFER. This Note and any shares of Common Stock issued upon conversion
of this Note may be offered, sold, assigned or transferred by the Holder without
the consent of the Company, subject only to the provisions of applicable
securities laws.
 
(13) REISSUANCE OF THIS NOTE.
 
(a) Transfer. If this Note is to be transferred, the Holder shall surrender this
Note to the Company, whereupon the Company will, subject to the satisfaction of
the transfer provisions of applicable securities laws, forthwith issue and
deliver upon the order of the Holder a new Note (in accordance with subsection
(d) of this Section), registered in the name of the registered transferee or
assignee, representing the outstanding Principal being transferred by the Holder
and, if less then the entire outstanding Principal is being transferred, a new
Note (in accordance with subsection (d) of this Section) to the Holder
representing the outstanding Principal not being transferred.
 
(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new note (in accordance with
subsection (d) of this Section) representing the outstanding Principal.
 
(c) Note Exchangeable for Different Denominations. This Note is exchangeable,
upon the surrender hereof by the Holder at the principal office of the Company,
for a new note or notes (in accordance with subsection (d) of this Section)
representing in the aggregate the outstanding Principal of this Note, and each
such new Note will represent such portion of such outstanding Principal as is
designated by the Holder at the time of such surrender.
 
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(d) Issuance of New Notes. Whenever the Company is required to issue a new note
pursuant to the terms of this Note, such new note (i) shall be of like tenor
with this Note, (ii) shall represent, as indicated on the face of such new Note,
the Principal remaining outstanding (or in the case of a new Note being issued
pursuant to subsection (a) or (c) of this Section), the Principal designated by
the Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining
outstanding under this Note immediately prior to such issuance of new Notes),
(iii) shall have an issuance date, as indicated on the face of such new Note,
which is the same as the Issuance Date of this Note, (iv) shall have the same
rights and conditions as this Note, and (v) shall represent accrued and unpaid
Interest and Late Charges on the Principal and Interest of this Note, from the
Issuance Date.
 
(14) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF. The remedies provided in this Note shall be cumulative and in addition
to all other remedies available under this Note and any of the other Transaction
Documents at law or in equity (including a decree of specific performance and/or
other injunctive relief), and nothing herein shall limit the Holder’s right to
pursue actual and consequential damages for any failure by the Company to comply
with the terms of this Note. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the Holder and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
 
(15) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is
placed in the hands of an attorney for collection or enforcement or is collected
or enforced through any legal proceeding or the Holder otherwise takes action to
collect amounts due under this Note or to enforce the provisions of this Note or
(b) there occurs any bankruptcy, reorganization, receivership of the Company or
other proceedings affecting Company creditors’ rights and involving a claim
under this Note, then the Company shall pay the costs incurred by the Holder for
such collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including, but not limited to,
attorneys’ fees and disbursements.
 
(16) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by
the Company and the Holder and shall not be construed against any person as the
drafter hereof. The headings of this Note are for convenience of reference and
shall not form part of, or affect the interpretation of, this Note.
 
(17) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the
Holder in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.
 
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(18) DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Closing Bid Price, the Closing Sale Price or the Weighted Average Price or the
arithmetic calculation of the Conversion Rate or any redemption price, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within five (5) Business Days of receipt, or deemed receipt, of the
Conversion Notice or redemption notice or other event giving rise to such
dispute, as the case may be, to the Holder. If the Holder and the Company are
unable to agree upon such determination or calculation within five (5) Business
Days of such disputed determination or arithmetic calculation being submitted to
the Holder, then the Company shall, within two (2) Business Days submit via
facsimile (a) the disputed determination of the Closing Bid Price, the Closing
Sale Price or the Weighted Average Price to an independent, reputable investment
bank selected by the Company and approved by the Holder or (b) the disputed
arithmetic calculation of the Conversion Rate or any redemption price to the
Company’s independent, outside accountant. The Company, at the Company’s
expense, shall cause the investment bank or the accountant, as the case may be,
to perform the determinations or calculations and notify the Company and the
Holder of the results no later than five (5) Business Days from the time it
receives the disputed determinations or calculations. Such investment bank’s or
accountant’s determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.
 
(19) NOTICES; PAYMENTS.
 
(a) Notices. The Company shall provide the Holder with prompt written notice of
all actions taken pursuant to this Note, including in reasonable detail a
description of such action and the reason therefore. Without limiting the
generality of the foregoing, the Company will give written notice to the Holder
(i) immediately upon any adjustment of the Conversion Price, setting forth in
reasonable detail, and certifying, the calculation of such adjustment and
(ii) at least twenty (20) days prior to the date on which the Company closes its
books or takes a record (A) with respect to any dividend or distribution upon
the Common Stock, (B) with respect to any pro rata subscription offer to holders
of Common Stock or (C) for determining rights to vote with respect to any
Fundamental Transaction, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to the Holder.
 
(b) Payments. Whenever any payment of cash is to be made by the Company to any
Person pursuant to this Note, such payment shall be made in lawful money of the
United States of America by a check drawn on the account of the Company and sent
via overnight courier service to such Person at such address as previously
provided to the Company in writing; provided that the Holder may elect to
receive a payment of cash via wire transfer of immediately available funds by
providing the Company with prior written notice setting out such request and the
Holder’s wire transfer instructions. Unless otherwise set forth herein, the
Holder shall have the absolute right to allocate any payments to Principal,
Interest, Late Charges, or otherwise, as it sees fit and will provide the
Company with notification of its allocation. Whenever any amount expressed to be
due by the terms of this Note is due on any day which is not a Business Day, the
same shall instead be due on the next succeeding day which is a Business Day
and, in the case of any Interest Date which is not the date on which this Note
is paid in full, the extension of the due date thereof shall not be taken into
account for purposes of determining the amount of Interest due on such date. Any
amount of Principal or other amounts due under the Transaction Documents, other
than Interest, which is not paid when due shall result in a late charge being
incurred and payable by the Company in an amount equal to interest on such
amount at the rate of twenty percent (20%) per annum from the date such amount
was due until the same is paid in full (“Late Charge”).
 
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(20) CANCELLATION. After all Principal, accrued Interest and other amounts at
any time owed on this Note have been paid in full, this Note shall automatically
be deemed canceled, shall be surrendered to the Company for cancellation and
shall not be reissued.
 
(21) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives
demand, notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note.
 
(22) GOVERNING LAW. This Note shall be construed and enforced in accordance
with, and all questions concerning the construction, validity, interpretation
and performance of this Note shall be governed by, the internal laws of the
State of Texas, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Texas or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State Texas. The Company hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in Houston, Texas for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Note.
Nothing contained herein shall be deemed or operate to preclude the Holder from
bringing suit or taking other legal action against the Company in any other
jurisdiction to collect on the Company’s obligations to the Holder, to realize
on any collateral or any other security for such obligations, or to enforce a
judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
 
(23) DISCLOSURE. Upon receipt or delivery by the Company of any notice in
accordance with the terms of this Note, unless the Company has in good faith
determined that the matters relating to such notice do not constitute material,
nonpublic information relating to the Company or its Subsidiaries, the Company
shall within four (4) Business Days after any such receipt or delivery publicly
disclose such material, nonpublic information on a Current Report on Form 8-K or
otherwise. In the event that the Company believes that a notice contains
material, nonpublic information relating to the Company or its Subsidiaries, the
Company so shall indicate to the Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not constitute material,
nonpublic information relating to the Company or its Subsidiaries. In the event
of a breach of the foregoing covenant by the Company, any of its Subsidiaries,
or any of its or their respective officers, directors, employees and agents, in
addition to any other remedy provided herein or in the Transaction Documents,
the Holder shall have the right to make a public disclosure, in the form of a
press release, public advertisement or otherwise, of such material, nonpublic
information without the prior approval by the Company, its Subsidiaries, or any
of its or their respective officers, directors, employees or agents. The Holder
shall have no liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, stockholders or agents for any such
disclosure.
 
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IN WITNESS WHEREOF, the Company has caused this Secured Convertible Promissory
Note to be duly executed as of the Issuance Date set out above.
 

 
NEXUS NANO ELECTRONICS, INC.
                 
By:
 
/s/ W. Chris Mathers
       
Name:
W. Chris Mathers
     
Title:
Chief Financial Officer
 

 
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Exhibit A - Certain Definitions
 
For purposes of the Secured Convertible Promissory Note dated December __, 2007
issued by Nexus Nano Electronics, Inc., the Nevada corporation to CSI Business
Finance, Inc., the Texas corporation, the following terms have the following
meanings:
 
(a) “Approved Stock Plan” means any employee benefit plan which has been
approved by the Board, pursuant to which the Company’s securities may be issued
to any employee, consultant, officer or director for services provided to the
Company.
 
(b) “Bloomberg” means Bloomberg Financial Markets.
 
(c) “Business Day” means any day other than Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to remain closed.
 
(d) “Change of Control” means any Fundamental Transaction other than (i) any
reorganization, recapitalization or reclassification of the Common Stock or
business combination in which the Company is the publicly traded surviving
entity in which holders of the Company’s voting power immediately prior to such
reorganization, recapitalization or reclassification or business combination
continue after such reorganization, recapitalization or reclassification or
business combination to hold publicly traded securities and, directly or
indirectly, the voting power of the surviving entity or entities necessary to
elect a majority of the members of the board of directors (or their equivalent
if other than a corporation) of such entity or entities, or (ii) pursuant to a
migratory merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company.
 
(e) “Closing Bid Price” and “Closing Sale Price” means, for any security as of
any date, the last closing bid price and last closing trade price, respectively,
for such security on the Principal Market, as reported by Bloomberg, or, if the
Principal Market begins to operate on an extended hours basis and does not
designate the closing bid price or the closing trade price, as the case may be,
then the last bid price or last trade price, respectively, of such security
prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the
Principal Market is not the principal securities exchange or trading market for
such security, the last closing bid price or last trade price, respectively, of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price or last trade price, respectively, of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price or last
trade price, respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly
the National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing
Sale Price cannot be calculated for a security on a particular date on any of
the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the
case may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 19. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during the applicable calculation period.
 
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(f) “Common Stock Deemed Outstanding” means, at any given time, the number of
shares of Common Stock outstanding at such time, plus the number of shares of
Common Stock deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii)
hereof regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any Common Stock owned or held by or for
the account of the Company or issuable upon conversion of the Note.
 
(g) “Contingent Obligation” means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
Indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.
 
(h) “Convertible Securities” means any stock or securities (other than Options)
directly or indirectly convertible into or exercisable or exchangeable for
Common Stock.
 
(i) “Eligible Market” means the OTC Bulletin Board, the Nasdaq National Market
or the Principal Market.
 
(j) “Excluded Securities” means any Common Stock issued or issuable: (i) in
connection with any Approved Stock Plan; (ii) upon conversion, adjustment or
redemption of the Note; (iii) pursuant to a bona fide firm commitment
underwritten public offering with a nationally recognized underwriter which
generates gross proceeds to the Company in excess of Fifty Million Dollars
($50,000,000) (other than an “at-the-market offering” as defined in
Rule 415(a)(4) under the 1933 Act and “equity lines”); (iv) in connection with
any acquisition by the Company, whether through an acquisition of stock or a
merger of any business, assets or technologies the primary purpose of which is
not to raise equity capital; (v) in connection with any other strategic
transaction or alliance the primary purpose of which is not to raise equity
capital, and (vi) upon conversion or exercise of any Options or Convertible
Securities which are outstanding on the day immediately preceding the
Subscription Date, provided that the conversion or exercise price of such
Options or Convertible Securities is not amended, modified or changed on or
after the Subscription Date.
 
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(k) “Fundamental Transaction” means that the Company shall, directly or
indirectly, in one or more related transactions, (i) consolidate or merge with
or into (whether or not the Company is the surviving corporation) another Person
or Persons, or (ii) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of the Company to another
Person, or (iii) allow another Person to make a purchase, tender or exchange
offer that is accepted by the holders of more than fifty percent (50%) of the
outstanding shares of Voting Stock (not including any shares of Voting Stock
held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer),
or (iv) consummate a stock purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other Person acquires
more than the fifty percent (50%) of the outstanding shares of Voting Stock (not
including any shares of Voting Stock held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making or
party to, such stock purchase agreement or other business combination), or
(v) reorganize, recapitalize or reclassify its Common Stock, or (vi) any
“person” or “group” (as these terms are used for purposes of Sections 13(d) and
14(d) of the 1934 Act) is or shall become the “beneficial owner” (as defined in
Rule 13d-3 under the 1934 Act), directly or indirectly, of fifty percent (50%)
of the aggregate Voting Stock of the Company.
 
(l) “GAAP” means United States generally accepted accounting principles,
consistently applied.
 
(m) “Indebtedness” of any Person means, without duplication (i) all indebtedness
for borrowed money, (ii) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services, including (without limitation)
“capital leases” in accordance with GAAP (other than trade payables entered into
in the ordinary course of business), (iii) all reimbursement or payment
obligations with respect to letters of credit, surety bonds and other similar
instruments, (iv) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses, (v) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to any property
or assets acquired with the proceeds of such indebtedness (even though the
rights and remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property), (vi) all monetary
obligations under any leasing or similar arrangement which, in connection with
GAAP, consistently applied for the periods covered thereby, is classified as a
capital lease, (vii) all indebtedness referred to in clauses (i) through (vi)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any mortgage, lien, pledge,
charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (viii) all Contingent Obligations in
respect of indebtedness or obligations of others of the kinds referred to in
clauses (i) through (vii) above.
 
(n) “Interest Rate” means, initially eighteen percent (18%) per annum, subject
to adjustment as provided herein.
 
(o) “Options” means any rights, warrants or options to subscribe for or purchase
shares of Common Stock or Convertible Securities.
 
(p) “Parent Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person and whose common stock or equivalent equity
security is quoted or listed on an Eligible Market, or, if there is more than
one such Person or Parent Entity, the Person or Parent Entity with the largest
public market capitalization as of the date of consummation of the Fundamental
Transaction.
 
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(q) “Permitted Indebtedness” means the Indebtedness evidenced by this Note
 
(r) “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or
being contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP, (ii) any statutory Lien
arising in the ordinary course of business by operation of law with respect to a
liability that is not yet due or delinquent, (iii) any Lien created by operation
of law, such as materialmen’s liens, mechanics’ liens and other similar liens,
arising in the ordinary course of business with respect to a liability that is
not yet due or delinquent or that are being contested in good faith by
appropriate proceedings, (iv) Liens (A) upon or in any equipment acquired or
held by the Company or any of its Subsidiaries to secure the purchase price of
such equipment or indebtedness incurred solely for the purpose of financing the
acquisition or lease of such equipment, or (B) existing on such equipment at the
time of its acquisition, provided that the Lien is confined solely to the
property so acquired and improvements thereon, and the proceeds of such
equipment, (v) leases or subleases and licenses and sublicenses granted to
others in the ordinary course of the Company’s business, not interfering in any
material respect with the business of the Company and its Subsidiaries taken as
a whole and (vi) any Lien created under the Security Agreement.
 
(s) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.
 
(t) “Principal Market” means the pink sheets (as reported by Pink Sheets LLC).
 
(u) “SEC” means the United States Securities and Exchange Commission.
 
(v) “Security Agreement” means that certain Security Agreement, dated December
__, 2007, by and between the Company and the Holder.
 
(w) “Subscription Date” means the original issue date of this Note.
 
(x) “Subsidiaries” means subsidiaries of the Company which includes any joint
venture or any other entity (i) in which the Company, directly or indirectly,
owns fifty percent (50%) or more of the outstanding capital stock or holds an
equity or similar interest representing fifty percent (50%) or more of the
outstanding equity or similar interest of such entity, (ii) that is a
“significant subsidiary” of the Company as defined under Regulation S-X of the
1934 Act or (iii) in which the Company controls or operates all or part of the
business, operations or administration of such entity.
 
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(y) “Successor Entity” means the Person, which may be the Company, formed by,
resulting from or surviving any Fundamental Transaction or the Person with which
such Fundamental Transaction shall have been made, provided that if such Person
is not a publicly traded entity whose common stock or equivalent equity security
is quoted or listed for trading on an Eligible Market, Successor Entity shall
mean such Person’s Parent Entity.
 
(z) “Trading Day” means any day on which the Common Stock is traded on the
Principal Market, or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded; provided that
“Trading Day” shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York Time).
 
(aa) “Voting Stock” of a Person means capital stock of such Person of the class
or classes pursuant to which the holders thereof have the general voting power
to elect, or the general power to appoint, at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not
at the time capital stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
 
(bb) “Weighted Average Price” means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market during
the period beginning at 9:30:01 a.m., New York Time (or such other time as the
Principal Market publicly announces is the official open of trading), and ending
at 4:00:00 p.m., New York Time (or such other time as the Principal Market
publicly announces is the official close of trading) as reported by Bloomberg
through its “Volume at Price” functions, or, if the foregoing does not apply,
the dollar volume-weighted average price of such security in the
over-the-counter market on the electronic bulletin board for such security
during the period beginning at 9:30:01 a.m., New York Time (or such other time
as such market publicly announces is the official open of trading), and ending
at 4:00:00 p.m., New York Time (or such other time as such market publicly
announces is the official close of trading) as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.). If the Weighted Average Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Weighted Average Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the Holder. If the Company and the Holder are unable to agree
upon the fair market value of such security, then such dispute shall be resolved
pursuant to Section 19. All such determinations to be appropriately adjusted for
any stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.
 
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EXHIBIT B
 
NEXUS NANO ELECTRONICS, INC.
 
(To be executed by the Holder in order to Convert the Note)
 
TO:

 
The undersigned hereby irrevocably elects to convert $      of the principal
amount of Debenture No.NEXO __-__ into Shares of Common Stock of NEXO NANO
ELECTRONICS, INC., according to the conditions stated therein, as of the
Conversion Date written below.
 
Conversion Date:
     
Conversion Amount to be converted:
$        
   
Conversion Price:
$  
   
Number of shares of Common Stock to be issued:
                     
Amount of Debenture Unconverted:
$   
 
 
Please issue the shares of Common Stock in the following name and to the
following address:
 
Issue to:
 

 
Authorized Signature:
     
Name:
     
Title:
     
Broker DTC Participant Code:
     
Account Number:
 

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ACKNOWLEDGMENT
 
The Company hereby acknowledges this Conversion Notice and hereby directs
______________________ (the “Transfer Agent”) to issue the above indicated
number of shares of Common Stock in accordance with the Transfer Agent
Instructions dated _______ __, 200_ from the Company and acknowledged and agreed
to by the Transfer Agent.
 
 

 
NEXUS NANO ELECTRONICS, INC.
         
By:
       
Name:
   
Title:

 

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