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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE
REASONABLY SATISFACTORY TO THE COMPANY THAT THIS NOTE MAY BE SOLD, TRANSFERRED,
OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
SUCH STATE SECURITIES LAWS.

LITHIUM EXPLORATION GROUP, INC.
10% OID Convertible Promissory Note
Due August 12, 2017

August 12, 2016     Purchase Price: USD $42,500   Principal Price: $46,750

              For value received, Lithium Exploration Group, Inc., a Nevada
corporation (the "Company"), hereby promises to pay to the order of JDF Capital
Inc. (together with its successors, representatives, and permitted assigns, the
"Holder"), in accordance with the terms hereinafter provided, up to an aggregate
of $46,750 (forty-six thousand seven hundred fifty dollars) (the "Principal
Amount"), which includes the aggregate principal sum of $42,500 (forty-two
thousand fifty dollars) advanced by the Holder, $4250 Original Issue Discount
incurred by the Holder, and $2500 legal fees. The Principal Amount outstanding
shall be due and payable on August 12, 2017.

              The due dates of any outstanding principal balance are referred to
herein as the "Maturity Date", respectively.

              All payments under or pursuant to this Note refer to and shall be
made in United States Dollars in immediately available funds to the Holder at
the address of the Holder first set forth above or at such other place as the
Holder may designate from time to time in writing to the Company or by wire
transfer of funds to the Holder's account, instructions for which are attached
hereto as Exhibit A.

ARTICLE I

                     Section 1.1        Purchase Agreement. This Note has been
executed and delivered pursuant to the Security Purchase Agreement dated as of
August 12, 2016 (the "Purchase Agreement'') by and among the Company and the
purchasers listed therein. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth for such terms in the Purchase
Agreement.

                     Section 1.2        Interest.

                     (a)        Beginning on the issuance date of this Note (the
"Issuance Date"), the outstanding principal balance of this Note shall bear
interest at a rate per annum equal to 10 percent (10%) accruing on an 12 month
basis, which shall consist of the pre-paid interest referred to above, which may
be converted to shares of the Company's common stock, par value $0.001 per share
(the "Common Stock") at the option of the Holder on the same terms as the Note.

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                     Section 1.3        Payment on Non-Business Days. Whenever
any payment to be made shall be due on a Saturday, Sunday or a public holiday
under the laws of the State of Nevada, such payment may be due on the next
succeeding business day and such next succeeding day shall be included in the
calculation of the amount of accrued interest payable on such date.

                     Section 1.4        Transfer. This Note may be transferred
or sold, subject to the provisions of Section 4.8 of this Note, or pledged,
hypothecated or otherwise granted as security by the Holder.

                     Section 1.5        Replacement. Upon receipt of a duly
executed, notarized and unsecured written statement from the Holder with respect
to the loss, theft or destruction of this Note (or any replacement hereof), and
without requiring an indemnity bond or other security, or, in the case of a
mutilation of this Note, upon surrender and cancellation of such Note, the
Company shall issue a new Note, of like tenor and amount, in lieu of such lost,
stolen, destroyed or mutilated Note.

ARTICLE II

EVENTS OF DEFAULT; REMEDIES

                     Section 2.1        Events of Default. The occurrence of any
of the following events shall be an "Event of Default" under this Note:

              (a)        the Company shall fail to make the payment of any
amount of principal outstanding on the date such payment is due hereunder;

              (b)        the Company shall fail to make any payment of interest
in shares of Common Stock for a period of three (3) days after the date such
interest is due;

              (c)        the suspension from listing, without subsequent listing
on any one of, or the failure of the Common Stock to be listed on at least one
of the OTC Bulletin Board, Nasdaq Small Cap Market, Nasdaq National Market,
American Stock Exchange or The New York Stock Exchange, Inc. for a period of
five (5) consecutive Trading Days;

              (d)        the Company's notice to the Holder, including by way of
public announcement, at any time, of its inability to comply or its intention
not to comply with proper requests for conversion of this Note into shares of
Common Stock;

              (e)        the Company shall fail to (i) timely deliver the shares
of Common Stock upon conversion of the Note or any accrued and unpaid interest,
or (ii) make the payment of any fees and/or liquidated damages under this Note
or the Purchase Agreement, which failure in the case of items (i) and (ii) of
this Section 2.1(e) is not remedied within three (3) business days after the
incurrence thereof;

              (f)        default shall be made in the performance or observance
of (i) any material covenant, condition or agreement contained in this Note
(other than as set forth in clause (e) of this Section 2.1) and such default is
not fully cured within five (5) business days after the occurrence thereof or
(ii) any material covenant, condition or agreement contained in the Purchase
Agreement or any other Transaction Document which is not covered by any other
provisions of this Section 2.1 and such default is not fully cured within five
(5) business days after the occurrence thereof;

              (g)        any material representation or warranty made by the
Company herein or in the Purchase Agreement or any other Transaction Document
shall prove to have been false or incorrect or breached in a material respect on
the date as of which made;

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              (h)        the Company shall (A) default in any payment of any
amount or amounts of principal of or interest on any Indebtedness (other than
the Indebtedness hereunder) the aggregate principal amount of which Indebtedness
is in excess of $50,000 or (B) default in the observance or performance of any
other agreement or condition relating to any Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to perm it the holder or holders or beneficiary or
beneficiaries of such Indebtedness to cause with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity;

              (i)        the Company shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property or
assets, (ii) make a general assignment for the benefit of its creditors, (iii)
commence a voluntary case under the United States Bankruptcy Code (as now or
hereafter in effect) or under the comparable laws of any jurisdiction (foreign
or domestic), (iv) file a petition seeking to take advantage of any bankruptcy,
insolvency, moratorium, reorganization or other similar law affecting the
enforcement of creditors' rights generally, (v) acquiesce in writing to any
petition filed against it in an involuntary case under United States Bankruptcy
Code (as now or hereafter in effect) or under the comparable laws of any
jurisdiction (foreign or domestic), (vi) issue a notice of bankruptcy or winding
down of its operations or issue a press release regarding same, or (vii) take
any action under the laws of any jurisdiction (foreign or domestic) analogous to
any of the foregoing;

              (j)        a proceeding or case shall be commenced in respect of
the Company, without its application or consent, in any court of competent
jurisdiction, seeking (i) the l iquidation, reorganization, moratorium,
dissolution, winding up, or composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of it or
of all or any substantial part of its assets in connection with the liquidation
or dissolution of the Company or (iii) similar relief in respect of it under any
law providing for the relief of debtors, and such proceeding or case described
in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in
effect, for a period of sixty (60) days or any order for relief shall be entered
in an involuntary case under United States Bankruptcy Code (as now or hereafter
in effect) or under the comparable laws of any jurisdiction (foreign or
domestic) against the Company or action under the laws of any jurisdiction
(foreign or domestic) analogous to any of the foregoing shall be taken with
respect to the Company and shall continue undismissed, or unstayed and in effect
for a period of sixty (60) days; or

             (k)        the failure of the Company to instruct its transfer
agent to remove any legends from shares of Common Stock eligible to be sold
under Rule 144 of the Securities Act and issue such unlegended certificates to
the Holder within five (5) business days of the Holder's request so long as the
Holder has provided reasonable assurances and opinions of counsel to the Company
that such shares of Common Stock can be resold pursuant to Rule 144; or

              (I)        the failure of the Company to pay any amounts due to
the Holder herein within three (3) business days of receipt of notice to the
Company.

                     Section 2.2        Remedies Upon An Event of Default. If an
Event of Default shall have occurred and shall be continuing, the Holder of this
Note may at any time at its option, (a) declare the entire unpaid principal
balance of this Note, together with all interest accrued hereon, due and
payable, and thereupon, the same shall be accelerated and so due and payable,
without presentment, demand, protest, or notice, all of which are hereby
expressly unconditionally and irrevocably waived by the Company; provided,
however, that upon the occurrence of an Event of Default described in (i)
Sections 2.1 (k) or (I), the outstanding principal balance and interest
hereunder shall be automatically due and payable and (ii) Sections 2.1 (a)-(j)
and 2.l (m)-(n), demand the prepayment of this Note pursuant to Section 3.6
hereof, (b) subject to Section 3.4 hereof, demand that the principal amount of
this Note then outstanding shall be converted into shares of Common Stock at a
Conversion Price (as defined in Section 3.2(a) hereof) per share calculated
pursuant to Section 3.1 hereof assuming that the date that the Event of Default
occurs is the Conversion Date and demand that all accrued and unpaid interest
under this Note shall be converted into shares of Common Stock in accordance
with Section 1 .2 hereof, or (c) exercise or otherwise enforce any one or more
of the Holder's rights, powers, privileges, remedies and interests under this
Note, the Purchase Agreement, other Transaction Document or applicable law. No
course of delay on the part of the Holder shall operate as a waiver thereof or
otherwise prejudice the right of the Holder. No remedy conferred hereby shall be
exclusive of any other remedy referred to herein or now or hereafter available
at law, in equity, by statute or otherwise.

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ARTICLE III

CONVERSION; ANTIDILUTION; PREPAYMENT

                     Section 3.1        Conversion Option.

              (a)        At any time on or after the Issuance Date, this Note
shall be convertible (in whole or in part), at the option of the Holder (the
"Conversion Option"), into such number of fully paid and non- assessable shares
of Common Stock (the "Conversion Rate") as is determined by dividing that
portion of the outstanding principal balance under this Note as of such date
that the Holder elects to convert by the Conversion Price (as defined in Section
3.2(a) hereof) then in effect on the date on which the Holder faxes a notice of
conversion (the "Conversion Notice"), duly executed, to the Company (the
"Voluntary Conversion Date"), provided, however, that the Conversion Price shall
be subject to adjustment as described in Section 3.5 below. The Holder shall
deliver this Note to the Company at the address designated in the Purchase
Agreement at such time that this Note is fully converted. With respect to
partial conversions of this Note, the Company shall keep written records of the
amount of this Note converted as of each Conversion Date.

              (b)        On any Voluntary Conversion Date, the Holder may cause
the any outstanding Principal Amount of this Note plus all accrued and unpaid
interest to convert into a number of fully paid and non-assessable shares of
Common Stock equal to the quotient of the elected outstanding principal amount
of this Note plus all accrued interest on the elected outstanding on the
Voluntary Conversion Date (as described in this Section below) divided by the
Conversion Price as described in Section 3.2(a) below. Furthermore, upon the
occurrence of an Event of Default (as defined in Section 2.1 hereof), then to
the extent permitted by law, the Company will pay interest to the Holder,
payable on demand, on the outstanding principal balance of the Note from the
date of the Event of Default until such Event of Default is cured at the rate of
the lesser of fifteen percent (15%) and the maximum applicable legal rate per
annum.

(B)               Conversion Limitations; Holder's Restriction on Conversion.
The Company shall not effect any conversion of this Note, and the Holder shall
not have the right to convert any portion of this Note, to the extent that after
giving effect to such conversion, the Holder (together with the Holder's
affiliates), as set forth on the applicable Conversion Notice, would
beneficially own in excess of 4.99% of the number of shares of the 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 other Notes or the 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, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act. To the extent
that the limitation contained in this section applies, the determination of
whether this Note is convertible (in relation to other securities owned by the
Holder) and of which a portion of this Note is convertible shall be in the sole
discretion of such Holder. To ensure compliance with this restriction, the
Holder will be deemed to represent to the Company each time it delivers a
Conversion Notice that such Conversion Notice has not violated the restrictions
set forth in this paragraph and the Company shall have no obligation to verify
or confirm the accuracy of such determination. For purposes of this Section, 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 (x) the
Company's most recent Form 10-Q or Form 10-K (or such related form), as the case
may be, (y) a more recent public announcement by the Company or (z) any other
notice by the Company or the Company's Transfer Agent setting forth the number
of shares of Common Stock outstanding. Upon the written or oral request of the
Holder, the Company shall within two Trading Days confirm orally and 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. The provisions
of this Section may be waived by the Holder upon, at the election of the Holder,
not less than 61 days' prior notice to the Company, and the provisions of this
Section shall continue to apply until such 61st day (or such later date, as
determined by the Holder, as may be specified in such notice of waiver).

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                     Section 3.2        Conversion Price.

              The Holder of this Note is entitled, at its option, at any time,
to convert all or any amount of the principal face amount of this Note then
outstanding into shares of the Company's common stock (the "Common Stock") at a
price ("Conversion Price") for each share of Common Stock equal to 65% of the
lowest trading price of the Common Stock as reported on the OTC Markets
electronic quotation service or such marketplace upon which the Company’s shares
are traded or any exchange upon which the Common Stock may be traded in the
future ("Exchange"), for the twenty prior trading days including the day upon
which a Notice of Conversion is received by the Company or its transfer agent
(provided such Notice of Conversion is delivered by fax or other electronic
method of communication to the Company or its transfer agent after 4 P.M.
Eastern Standard or Daylight Savings Time if the Holder wishes to include the
same day closing price). No fractional shares or scrip representing fractions of
shares will be issued on conversion, but the number of shares issuable shall be
rounded to the nearest whole share. To the extent the Conversion Price of the
Company’s Common Stock closes below the par value per share, the Company will
take all steps necessary to solicit the consent of the stockholders to reduce
the par value to the lowest value possible under law. The Company agrees to
honor all conversions submitted pending this increase. In the event the Company
experiences a DTC “Chill” on its shares, the conversion price shall be decreased
to 55% instead of 65% while that “Chill” is in effect.

                     Section 3.3        Mechanics of Conversion.

                     (a)        Not later than three (3) Trading Days after any
Conversion Date, the Company or its designated transfer agent, as applicable,
shall issue and deliver to the Depository Trust Company ("DTC") account on the
Holder's behalf via the Deposit Withdrawal Agent Commission System ("DWAC") as
specified in the Conversion Notice, 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. I n the alternative, not later than three (3) Trading Days after any
Conversion Date, the Company shall deliver to the applicable Holder by express
courier a certificate or certificates which shall be free of restrictive legends
and trading restrictions (other than those required by Section 5. l of the
Purchase Agreement) representing the number of shares of Common Stock being
acquired upon the conversion of this Note (the "Delivery Date").

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Notwithstanding the foregoing to the contrary, the Company or its transfer agent
shall only be obligated to issue and deliver the shares to the OTC on the
Holder's behalf via DWAC (or certificates free of restrictive legends) if such
conversion is in connection with a sale and the Holder has complied with the
applicable prospectus delivery requirements. lf in the case of any Conversion
Notice such certificate or certificates are not delivered to or as directed by
the applicable Holder by the Delivery Date, the Holder shall be entitled by
written notice to the Company at any time on or before its receipt of such
certificate or certificates thereafter, to rescind such conversion, in which
event the Company shall immediately return this Note if tendered for conversion,
whereupon the Company and the Holder shall each be restored to their respective
positions immediately prior to the delivery of such notice of revocation, except
that any amounts described in Sections 3.3(b) and (c) shall be payable through
the date notice of rescission is given to the Company.

                     (b)        The Company understands that a delay in the
delivery of the shares of Common Stock upon conversion of this Note beyond the
Delivery Date could result in economic loss to the Holder. If the Company fails
to deliver to the Holder such shares via DWAC or a certificate or certificates
pursuant to this Section hereunder by the Delivery Date, the Company shall pay
to such Holder, in cash, an amount per Trading Day for each Trading Day until
such shares are delivered via DWAC or certificates are delivered, together with
interest on such amount at a rate of l 0% per annum, accruing until such amount
and any accrued interest thereon is paid in full, equal to the greater of (A)
(i) 1% of the aggregate principal amount of the Note requested to be converted
for the first five (5) Trading Days after the Delivery Date and (ii) 2% of the
aggregate principal amount of the Note requested to be converted for each
Trading Day thereafter and (B) $2,000 per day (which amount shall be paid as
liquidated damages and not as a penalty). Nothing herein shall limit a Holder's
right to pursue actual damages for the Company's failure to deliver certificates
representing shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies available to
it at law or in equity (including, without limitation, a decree of specific
performance and/or injunctive relief). Notwithstanding anything to the contrary
contained herein, the Holder shall be entitled to withdraw a Conversion Notice,
and upon such withdrawal the Company shall only be obligated to pay the
liquidated damages accrued in accordance with this Section 3.3(b) through the
date the Conversion Notice is withdrawn.

                     (c)        ln addition to any other rights available to the
Holder, if the Company fails to cause its transfer agent to transmit to the
Holder a certificate or certificates representing the shares of Common Stock
issuable upon conversion of this Note on or before the Delivery Date, and if
after such date the Holder is required by its broker to purchase (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the shares of Common Stock issuable upon
conversion of this Note which the Holder anticipated receiving upon such
exercise (a "Buy- In"), then the Company shall ( 1) pay in cash to the Holder
the amount by which (x) the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multi plying (A) the number of shares of Common Stock
issuable upon conversion of this Note that the Company was required to deliver
to the Holder in connection with the conversion at issue times (B) the price at
which the sell order giving rise to such purchase obligation was executed, and
(2) at the option of the Holder, either reinstate the portion of the Note and
equivalent number of shares of Common Stock for which such conversion was not
honored or deliver to the Holder the number of shares of Common Stock that would
have been issued had the Company timely complied with its conversion and
delivery obligations hereunder. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of shares of Common Stock with an aggregate sale price
giving rise to such purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by the Company. Nothing
herein shall limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of Common Stock upon
conversion of this Note as required pursuant to the terms hereof.

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                     Section 3.4        Ownershi p Cap and Certain Conversion
Restrictions.

                     Notwithstanding anything to the contrary set forth in
Section 3 of this Note, at no time may the Holder convert all or a portion of
this Note if the number of shares of Common Stock to be issued pursuant to such
conversion would exceed, when aggregated with all other shares of Common Stock
owned by the Holder at such time, the number of shares of Common Stock which
would result in the Holder beneficially owning (as determined in accordance with
Section l3(d) of the Exchange Act and the rules thereunder) more than 9.9% of
all of the Common Stock outstanding at such time; provided, however, that upon
the Holder providing the Company with sixty-one (61) days notice (pursuant to
Section 4.1 hereof) (the "Waiver Notice") that the Holder would like to waive
this Section 3.4 with regard to any or all shares of Common Stock issuable upon
conversion of this Note, this Section 3.4 will be of no force or effect with
regard to all or a portion of the Note referenced in the Waiver Notice;
provided, further, that this provision shall be of no further force or effect
during the sixty-one (61) days immediately preceding the Maturity Date.

                     Section 3.5        Adjustment of Conversion Price.

                     (a)        The Conversion Price shall be subject to
adjustment from time to time as follows:

                                 (i)        Adjustments for Stock Splits and
Combinations. If the Company shall at any time or from time to time after the
Issuance Date, effect a stock split of the outstanding Common Stock, the
applicable Conversion Price in effect immediately prior to the stock split shall
be proportionately decreased. If the Company shall at any time or from time to
time after the Issuance Date, combine the outstanding shares of Common Stock,
the applicable Conversion Price in effect immediately prior to the combination
shall be proportionately increased. Any adjustments u nder this Section
3.5(a)(i) shall be effective at the close of business on the date the stock
split or combination occurs.

                                 (ii)        Adjustments for Certain Dividends
and Distributions. If the Company shall at any time or from time to time after
the Issuance Date, make or issue or set a record date for the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in shares of Common Stock, then, and in each event, the applicable
Conversion Price in effect immediately prior to such event shall be decreased as
of the time of such issuance or, in the event such record date shall have been
fixed, as of the close of business on such record date, by multiplying, the
applicable Conversion Price then in effect by a fraction:

                                               (1)        the numerator of which
shall be the total n umber 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

                                               (2)        the denominator of
which shall be 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; plus the number of shares of Common Stock issuable in payment of
such dividend or distribution.

                                 (iii)        Adjustment for Other Dividends and
Distributions. If the Company shall at any time or from time to time after the
Issuance Date, make or issue or set a record date for the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in other than shares of Common Stock, then, and in each event, an
appropriate revision to the applicable Conversion Price shall be made and
provision shall be made (by adjustments of the Conversion Price or otherwise) so
that the holders of this Note shall receive upon conversions thereof, in
addition to the number of shares of Common Stock receivable thereon, the number
of securities of the Company which they would have received had this Note been
converted into Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the Conversion Date,
retained such securities (together with any distributions payable thereon during
such period), giving application to all adjustments called for during such
period under this Section 3.5(a)(iii ) with respect to the rights of the holders
of this Note; provided, however, that if such record date shall have been 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 adjusted pursuant to this
paragraph as of the time of actual payment of such dividends or distributions.

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                                 (iv)        Adjustments for Reclassification,
Exchange or Substitution. If the Common Stock issuable upon conversion of this
Note at any time or from time to time after the Issuance Date shall be changed
to the same or different n umber of shares of any class or classes of stock,
whether by reclassification, exchange, substitution or otherwise (other than by
way of a stock split or combination of shares or stock dividends provided for in
Sections 3.5(a)(i), (ii) and (iii), or a reorganization, merger, consolidation,
or sale of assets provided for in Section 3.5(a)(v)), then, and in each event,
an appropriate revision to the Conversion Price shall be made and provisions
shall be made (by adjustments of the Conversion Price or otherwise) so that the
Holder shall have the right thereafter to convert this Note into the kind and
amount of shares of stock and other securities receivable upon reclassification,
exchange, substitution or other change, by holders of the number of shares of
Common Stock into which such Note might have been converted immediately prior to
such reclassification, exchange, substitution or other change, all subject to
further adjustment as provided herein.

                                 (v)        Adjustments for Reorganization,
Merger, Consolidation or Sales of Assets. If at any time or from time to time
after the Issuance Date there shall be a capital reorganization of the Company
(other than by way of a stock split or combination of shares or stock dividends
or distributions provided for in Section 3.5(a)(i), (ii) and (iii), or a
reclassification, exchange or substitution of shares provided for in Section
3.5(a)(iv)), or a merger or consolidation of the Company with or into another
corporation where the holders of outstanding voting securities prior to such
merger or consolidation do not own over fifty percent (50%) of the outstanding
voting securities of the merged or consolidated entity, immediately after such
merger or consolidation, or the sale of all or substantially all of the
Company's properties or assets to any other person (an "Organic Change"), then
as a part of such Organic Change an appropriate revision to the Conversion Price
shall be made and provision shall be made (by adjustments of the Conversion
Price or otherwise) so that the Holder shall have the right thereafter to
convert such Note into the kind and amount of shares of stock and other
securities or property of the Company or any successor corporation resulting
from Organic Change. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 3.5(a)(v) with respect to the
rights of the Holder after the Organic Change to the end that the provisions of
this Section 3.5(a)(v) (including any adjustment in the applicable Conversion
Price then in effect and the number of shares of stock or other securities
deliverable upon conversion of this Note) shall be applied after that event in
as nearly an equivalent manner as may be practicable.

                                 (vi)        Issuance of Common Stock
Equivalents. If the Company, at any time after the Issuance Date, shall issue
any securities convertible into or exchangeable for, directly or indirectly,
Common Stock ("Convertible Securities"), other than the Note, or any rights or
warrants or options to purchase any such Common Stock or Convertible Securities,
shall be issued or sold (collectively, the "Common Stock Equivalents") and the
aggregate of the price per share for which Additional Shares of Common Stock may
be issuable thereafter pursuant to such Common Stock Equivalent, plus the
consideration received by the Company for issuance of such Common Stock
Equivalent divided by the number of shares of Common Stock issuable pursuant to
such Common Stock Equivalent (the "Aggregate Per Common Share Price") shall be
less than the applicable Conversion Price then in effect, or if, after any such
issuance of Common Stock Equivalents, the price per share for which Additional
Shares of Common Stock may be issuable thereafter is amended or adjusted, and
such price as so amended shall make the Aggregate Per Share Common Price be less
than the applicable Conversion Price in effect at the time of such amendment or
adjustment, then the applicable Conversion Price upon each such issuance or
amendment shall be adjusted as provided in the first sentence of subsection (vi)
of this Section 3.5(a) on the basis that (1) the maximum number of Additional
Shares of Common Stock issuable pursuant to all such Common Stock Equivalents
shall be deemed to have been issued (whether or not such Common Stock
Equivalents are actually then exercisable, convertible or exchangeable in whole
or in part) as of the earlier of (A) the date on which the Company shall enter
into a firm contract for the issuance of such Common Stock Equivalent, or (B)
the date of actual issuance of such Common Stock Equivalent. No adjustment of
the applicable Conversion Price shall be made under this subsection (vii) upon
the issuance of any Convertible Security which is issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any adjustment shall previously have been made to the exercise price of such
warrants then in effect upon the issuance of such warrants or other rights
pursuant to this subsection (vii). No adjustment shall be made to the Conversion
Price upon the issuance of Common Stock pursuant to the exercise, conversion or
exchange of any Convertible Security or Common Stock Equivalent where an
adjustment to the Conversion Price was made as a result of the issuance or
purchase of any Convertible Security or Common Stock Equivalent.

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                                 (vii)        Consideration for Stock. In case
any shares of Common Stock or any Common Stock Equivalents shall be issued or
sold:

                                               (1)        in connection with any
merger or consolidation in which the Company is the surviving corporation (other
than any consolidation or merger in which the previously outstanding shares of
Common Stock of the Company shall be changed to or exchanged for the stock or
other securities of another corporation), the amount of consideration therefor
shall be, deemed to be the fair value, as determined reasonably and in good
faith by the Board of Directors of the Company, of such portion of the assets
and business of the non-surviving corporation as such Board may determine to be
attributable to such shares of Common Stock, Convertible Securities, rights or
warrants or options, as the case may be; or

                                               (2)        in the event of any
consolidation or merger of the Company in which the Company is not the surviving
corporation or in which the previously outstanding shares of Common Stock of the
Company shall be changed into or exchanged for the stock or other securities of
another corporation, or in the event of any sale of all or substantially all of
the assets of the Company for stock or other securities of any corporation, the
Company shall be deemed to have issued a number of shares of its Common Stock
for stock or securities or other property of the other corporation computed on
The basis of the actual exchange ratio on which the transaction was predicated,
and for a consideration equal to the fair market value on the date of such
transaction of all such stock or securities or other property of the other
corporation. If any such calculation results in adjustment of the applicable
Conversion Price, or the number of shares of Common Stock issuable upon
conversion of the Note, the determination of the applicable Conversion Price or
the number of shares of Common Stock issuable upon conversion of the Note
immediately prior to such merger, consolidation or sale, shall be made after
giving effect to such adjustment of the number of shares of Common Stock
issuable upon conversion of the Note. In the event Common Stock is issued with
other shares or securities or other assets of the Company for consideration
which covers both, the consideration computed as provided in this Section
3.5(viii) shall be allocated among such securities and assets as determined in
good faith by the Board of Directors of the Company.

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                     (b)        Record Date. In case the Company shall take
record of the holders of its Common Stock for the purpose of entitling them to
subscribe for or purchase Common Stock or Convertible Securities, then the date
of the issue or sale of the shares of Common Stock shall be deemed to be such
record date.

                     (c)        Certain Issues Excepted Anything herein to the
contrary notwithstanding, the Company shall not be required to make any
adjustment to the Conversion Price in connection with (i) securities issued
(other than for cash) in connection with a merger, acquisition, or
consolidation, (ii) securities issued pursuant to a bona fide firm underwritten
public offering of the Company's securities, (iii) securities issued pursuant to
the conversion or exercise of convertible or exercisable securities issued or
outstanding on or prior to the date hereof or issued pursuant to the Purchase
Agreement, (iv) the shares of Common Stock issuable upon the exercise of
Warrants, (v) securities issued i n connection with strategic license agreements
or other partnering arrangements so long as such issuances are not for the
purpose of raising capital, (vi) Common Stock issued or options to purchase
Common Stock granted or issued pursuant to the Company's stock option plans and
employee stock purchase plans as they now exist, (vii) the payment of any
accrued interest in shares of Common Stock pursuant to this Note.

                     (d)        No Impairment. The Company shall not, by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, 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 to be observed or performed hereunder by the
Company, but will at all times in good faith, assist in the carrying out of all
the provisions of this Section 3.5 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
Holder against impairment. In the event a Holder shall elect to convert any Note
as provided herein, the Company cannot refuse conversion based on any claim that
such Holder or anyo ne associated or affiliated with such Holder has been
engaged in any violation of law, violation of an agreement to which such Holder
is a party or for any reason whatsoever, unless, an injunction from a court, or
notice, restraining and or adjoining conversion of all or of said Note shall
have issued and the Company posts a surety bond for the benefit of such Holder
in an amount equal to one hundred thirty percent ( 130%) of the amount of the
Note the Holder has elected to convert, which bond shall remain in effect until
the completion of arbitration/litigation of the dispute and the proceeds of
which shall be payable to such Holder in the event it obtains judgment.

                     (e)        Certificates as to Adjustments. Upon occurrence
of each adjustment or readjustment of the Conversion Price or n umber of shares
of Common Stock issuable upon conversion of this Note pursuant to this Section
3.5, the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the Holder a
certificate setting forth such adjustment and readjustment, showing i n detail
the facts upon which such adjustment or readjustment is based. The Company
shall, upon written request of the Holder, at any time, furnish or cause to be
furnished to the Holder a like certificate setting forth such adjustments and
readjustments, the applicable Conversion Price in effect at the time, and the
number of shares of Common Stock and the amount, if any, of other securities or
property which at the time would be received upon the conversion of this Note.
Notwithstanding the foregoing, the Company shall not be obligated to deliver a
certificate unless such certificate would reflect an increase or decrease of at
least one percent (1%) of such adjusted amount.

                     (f)        Issue Taxes. The Company shall pay any and all
issue and other taxes, excluding federal, state or local income taxes, that may
be payable in respect of any issue or delivery of shares of Common Stock on
conversion of this Note pursuant thereto; provided, however, that the Company
shall not be obligated to pay any transfer taxes resulting from any transfer
requested by the Holder in connection with any such conversion.

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                    (g)        Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of this Note. In lieu of any fractional
shares to which the Holder would otherwise be entitled, the Company shall pay
cash equal to the product of such fraction multiplied by the average of the
Closing Bid Prices of the Common Stock for the five (5) consecutive Trading Days
immediately preceding the Conversion Date.

                     (h)        Reservation of Common Stock. The Company shall
at all times when this Note shall be outstanding, reserve and keep available out
of its authorized but unissued Common Stock, such number of shares of Common
Stock as shall from time to time be sufficient to effect the conversion of this
Note and all interest accrued thereon; provided that the number of shares of
Common Stock so reserved shall at no time be less than one hundred twenty
percent ( 120%) of the number of shares of Common Stock for which this Note and
all interest accrued thereon are at any time convertible. The Company shall,
from time to time in accordance with Nevada corporate law, increase the
authorized number of shares of Common Stock if at any time the unissued number
of authorized shares shall not be sufficient to satisfy the Company's
obligations under this Section 3.5(h) .

                     (i)        Regulatory Compliance. If any shares of Common
Stock to be reserved for the purpose of conversion of this Note or any interest
accrued thereon require registration or listing with or approval of any
governmental authority, stock exchange or other regulatory body under any
federal or state law or regulation or otherwise before such shares may be
validly issued or delivered upon conversion, the Company shall, at its sole cost
and expense, i n good faith and as expeditiously as possible, endeavor to secure
such registration, listing or approval, as the case may be.

                     Section 3.6        Prepayment.

                     (a)        Prepayment Upon an Event of Default.
Notwithstanding anything to the contrary contained herein, upon the occurrence
of an Event of Default described i n Sections 2.1 (a)-(j)) and 2.1 (m)- (o)
hereof, the Holder shall have the right, at such Holder's option, to require the
Company to prepay in cash all or a portion of this Note at a price equal to one
hundred twenty percent (120%) of the aggregate principal amount of this Note
plus all accrued and unpaid interest applicable at the time of such request (the
"Event of Default Prepayment Price"). Nothing i n this Section 3.6(a) shall
limit the Holder's rights under Section 2.2 hereof.

                     (b)        Prepayment Option Upon Major Transaction. In
addition to all other rights of the Holder contained herein, simultaneous with
the occurrence of a Major Transaction (as defined in Section 3.6(e) hereof), the
Holder shall have the right, at the Holder's option, to require the Company to
prepay all or a portion of the Holder's Note at a price equal to one hundred ten
percent (110%) of the aggregate principal amount of this Note plus all accrued
and unpaid interest (the "Major Transaction Prepayment Price").

                     (c)        Prepayment Option Upon Triggering Event. In
addition to all other rights of the Holder contained herein, after a Triggering
Event (as defined below), the Holder shall have the right, at the Holder's
option, to require the Company to prepay all or a portion of this Note in cash
at a price equal to the sum of (i) the greater of (A) one hundred twenty percent
(120%) of the aggregate principal amount of this Note plus all accrued and un
paid interest and (B) in the event at such time the Holder is unable to obtain
the benefit of its conversion rights through the conversion of this Note and
resale of the shares of Common Stock issuable upon conversion hereof in
accordance with the terms of this Note and the other Transaction Documents, the
aggregate principal amount of this Note plus all accrued but unpaid interest
hereon, divided by the Conversion Price on (x) the date the Prepayment Price (as
defined below) is demanded or otherwise due or (y) the date the Prepayment Price
is paid in full, whichever is less, multiplied by the VWAP on (x) the date the
Prepayment Price is demanded or otherwise due, and (y) the date the Prepayment
Price is paid in full, whichever is greater, and (ii) all other amounts, costs,
expenses and liquidated damages due in respect of this Note and the other
Transaction Documents (the "Triggering Event Prepayment Price," and,
collectively with the "Major Transaction Prepayment Price," the "Prepayment
Price").

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                     (d)        Major Transaction. A "Major Transaction" shall
be deemed to have occurred at such time as any of the following events:

                                 (i)        the consolidation, merger or other
business combination of the Company with or into another Person (other than (A)
pursuant to a migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Company or (B) a consolidation, merger or
other business combination in which holders of the Company's voting power
immediately prior to the transaction continue after the transaction to hold,
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)        the sale or transfer of more than
fifty percent (50%) of the Company's assets (based on the fair market value as
determined in good faith by the Company's Board of Directors) other than
inventory in the ordinary course of business in one or a related series of
transactions; or

                                 (iii)        closing of a purchase, tender or
exchange offer made to the holders of more than fifty percent (50%) of the
outstanding shares of Common Stock in which more than fifty percent (50%) of the
outstanding shares of Common Stock were tendered and accepted.

                     (e)        Triggering Event. A "Triggering Event" shall be
deemed to have occurred at such time as any of the following events:

                                 (i)        the suspension from listing, without
subsequent listing on any one of, or the failure of the Common Stock to be
listed on at least one of the OTC Bulletin Board, Nasdaq SmallCap Market, Nasdaq
National Market, American Stock Exchange or The New York Stock Exchange, Inc.
for a period of five (5) consecutive Trading Days;

                                 (ii)        the Company's notice to any holder
of the Note, including by way of public announcement, at any time, of its
inability to comply (including for any of the reasons described in Section 3.8)
or its intention not to comply with proper requests for conversion of any Note
into shares of Common Stock; or

                                 (iii)        the Company's failure to comply
with a Conversion Notice tendered in accordance with the provisions of this Note
within ten (10) business days after the receipt by the Company of the Conversion
Notice; or

                                 (iv)        the Company deregisters its shares
of Common Stock and as a result such shares of Common Stock are no longer
publicly traded; or

                                 (v)        the Company consummates a ''going
private" transaction and as a result the Common Stock is no longer registered
under Sections l 2(b) or 12(g) of the Exchange Act.

                     (f)        Mechanics of Prepayment at Option of Holder Upon
Major Transaction. No sooner than fifteen (15) days nor later than ten (10) days
prior to the consummation of a Major Transaction, but not prior to the public
announcement of such Major Transaction, the Company shall deliver written notice
thereof via facsimile and overnight courier ("Notice of Major Transaction") to
the Holder of this Note. At any time after receipt of a Notice of Major
Transaction (or, in the event a Notice of Major Transaction is not delivered at
least ten (10) days prior to a Major Transaction, at any time within ten (10)
days prior to a Major Transaction), any holder of the Notes then outstanding may
require the Company to prepay, effective immediately prior to the consummation
of such Major Transaction, all of the holder's Notes then outstanding by
delivering written notice thereof via facsimile and overnight courier ("Notice
of Prepayment at Option of Holder Upon Major Transaction") to the Company, which
Notice of Prepayment at Option of Holder Upon Major Transaction shall indicate
(i) the number of Notes that such holder is electing to prepay and (ii) the
applicable Major Transaction Prepayment Price, as calculated pursuant to Section
3.6(b) above.

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                     (g)        Mechanics of Prepayment at Option of Holder Upon
Triggering Event. Within one (1) business day after the occurrence of a
Triggering Event, the Company shall deliver written notice thereof via facsimile
and overnight courier ("Notice of Triggering Event") to each holder of the
Notes. At any time after the earlier of a holder's receipt of a Notice of
Triggering Event and such holder becoming aware of a Triggering Event, any
holder of this Note may require the Company to prepay all of the Notes on a pro
rata basis by delivering written notice thereof via facsimile and overnight
courier ("Notice of Prepayment at Option of Holder Upon Triggering Event") to
the Company, which Notice of Prepayment at Option of Holder Upon Triggering
Event shall indicate (i) the amount of the Note that such holder is electing to
have prepaid and (ii) the applicable Triggering Event Prepayment Price, as
calculated pursuant to Section 3.6(c) above. A holder shall only be permitted to
require the Company to prepay the Note pursuant to Section 3.6 hereof for the
greater of a period of ten (10) days after receipt by such holder of a Notice of
Triggering Event or for so long as such Triggering Event is continuing.

                     (h)        Payment of Prepayment Price. Upon the Company's
receipt of a Notice(s) of Prepayment at Option of Holder Upon Triggering Event
or a Notice(s) of Prepayment at Option of Holder Upon Major Transaction from any
holder of the Notes, the Company shall immediately notify each holder of the
Notes by facsimile of the Company's receipt of such Notice(s) of Prepayment at
Option of Holder Upon Triggering Event or Notice(s) of Prepayment at Option of
Holder Upon Major Transaction and each holder which has sent such a notice shall
promptly submit to the Company such holder's certificates representing the Notes
which such holder has elected to have prepaid. The Company shall deliver the
applicable Triggering Event Prepayment Price, in the case of a prepayment
pursuant to Section 3.6(i), to such holder within five (5) business days after
the Company's receipt of a Notice of Prepayment at Option of Holder Upon
Triggering Event and, in the case of a prepayment pursuant to Section 3.6(f),
the Company shall deliver the applicable Major Transaction Prepayment Price
immediately prior to the consummation of the Major Transaction; provided that a
holder's original Note shall have been so delivered to the Company; provided
further that if the Company is u nable to prepay all of the Notes to be prepaid,
the Company shall prepay an amount from each holder of the Notes being prepaid
equal to such holder's pro-rata amount (based on the number of Notes held by
such holder relative to the number of Notes outstanding) of all Notes being
prepaid. If the Company shall fail to prepay all of the Notes submitted for
prepayment (other than pursuant to a dispute as to the arithmetic calculation of
the Prepayment Price), in addition to any remedy such holder of the Notes may
have under this Note and the Purchase Agreement, the applicable Prepayment Price
payable in respect of such Notes not prepaid shall bear interest at the rate of
two percent (2%) per month (prorated for partial months) until paid in full.
Until the Company pays such unpaid applicable Prepayment Price in full to a
holder of the Notes submitted for prepayment, such holder shall have the option
(the "Void Optional Prepayment Option") to, in lieu of prepayment, require the
Company to promptly return to such holder(s) all of the Notes that were
submitted for prepayment by such holder(s) under this Section 3.6 and for which
the applicable Prepayment Price has not been paid, by sending written notice
thereof to the Company via facsimile (the "Void Optional Prepayment Notice").
Upon the Company's receipt of such Void Optional Prepayment Notice(s) and prior
to payment of the full applicable Prepayment Price to such holder, (i) the
Notice(s) of Prepayment at Option of Holder Upon Triggering Event or the
Notice(s) of Prepayment at Option of Holder Upon Major Transaction, as the case
may be, shall be null and void with respect to those Notes submitted for
prepayment and for which the applicable Prepayment Price has not been paid, (ii)
the Company shall immediately return any Notes submitted to the Company by each
holder for prepayment under this Section 3.6(h) and for which the applicable
Prepayment Price has not been paid and (iii) the Conversion Price of such
returned Notes shall be adjusted to the lesser of (A) the Conversion Price as in
effect on the date on which the Void Optional Prepayment Notice(s) is delivered
to the Company and (B) the lowest Closing Bid Price during the period beginning
on the date on which the Notice(s) of Prepayment of Option of Holder Upon Major
Transaction or the Notice(s) of Prepayment at Option of Holder Upon Triggering
Event, as the case may be, is delivered to the Company and ending on the date on
which the Void Optional Prepayment Notice(s) is delivered to the Company;
provided that no adjustment shall be made if such adjustment would result in an
increase of the Conversion Price then in effect. A holder's delivery of a Void
Optional Prepayment Notice and exercise of its rights following such notice
shall not effect the Company's obligations to make any payments which have
accrued prior to the date of such notice. Payments provided for in this Section
3.6 shall have priority to payments to other stockholders in connection with a
Major Transaction.

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                     (i)        Company Prepayment Option upon Major
Transaction. Upon the consummation of a Major Transaction, the Company may
prepay in cash all or any portion of the outstanding principal amount of this
Note together with all accrued and unpaid interest thereon upon at least thirty
(30) days prior written notice to the Holder (the "Company's Prepayment Notice")
at a price equal to one hundred twenty percent (120%) of the aggregate principal
amount of this Note plus any accrued but unpaid interest (the "Company's
Prepayment Price"); provided, however, that if a holder has delivered a
Conversion Notice to the Company or delivers a Conversion Notice within such
thirty (30) day period following delivery of the Company's Prepayment Notice,
the principal amount of the Notes plus any accrued but unpaid interest
designated to be converted may not be prepaid by the Company and shall be
converted in accordance with Section 3.3 hereof; provided further that if during
the period between delivery of the Company's Prepayment Notice and the Company's
Prepayment Date (as defined below), a holder shall become entitled and elects to
deliver a Notice of Prepayment at Option of Holder Upon Major Transaction or
Notice of Prepayment at Option of Holder upon Triggering Event, then such rights
of the holders shall take precedence over the previously delivered Company
Prepayment Notice if the holder so elects. The Company's Prepayment Notice shall
state the date of prepayment which date shall be the date of the consummation of
the Major Transaction (the "Company's Prepayment Date"), the Company's
Prepayment Price and the principal amount of Notes plus any accrued but unpaid
interest to be prepaid by the Company. The Company shall deliver the Company's
Prepayment Price on the Company's Prepayment Date, provided, that if the
holder(s) delivers a Conversion Notice before the Company's Prepayment Date,
then the portion of the Company's Prepayment Price which would be paid to prepay
the Notes covered by such Conversion Notice shall be returned to the Company
upon delivery of the Common Stock issuable i n connection with such Conversion
Notice to the holder(s). On the Company's Prepayment Date, the Company shall pay
the Company's Prepayment Price, subject to any adjustment pursuant to the
immediately preceding sentence, to the holder(s) on a pro rata basis. If the
Company fails to pay the Company's Prepayment Price by the third (3rd) business
day after the Company's Prepayment Date, the prepayment will be declared null
and void and the Company shall lose its right to serve a Company's Prepayment
Notice pursuant to this Section 3.6(i) in the future. Notwithstanding the
foregoing to the contrary, the Company may effect a prepayment pursuant to this
Section 3.6(i) only if trading in the Common Stock shall not have been suspended
by the Securities and Exchange Commission or the Nasdaq SmallCap Market (or
other exchange or market on which the Common Stock is trading), and and the
Company is in material compliance with the terms and conditions of this Note and
the other Transaction Documents.

                     Section 3.7        Inability to Fully Convert.

                     (a)        Holder's Option if Company Cannot Fully Convert.
If, upon the Company's receipt of a Conversion Notice, the Company cannot issue
shares of Common Stock for any reason, including, without limitation, because
the Company (w) does not have a sufficient number of shares of Common Stock
authorized and available, or (x) is otherwise prohibited by applicable law or by
the rules or regulations of any stock exchange, interdealer quotation system or
other self-regulatory organization with jurisdiction over the Company or any of
its securities from issuing all of the Common Stock which is to be issued to the
Holder pursuant to a Conversion Notice, then the Company shall issue as many
shares of Common Stock as it is able to issue in accordance with the Holder's
Conversion Notice and, with respect to the unconverted portion of this Note, the
Holder, solely at Holder's option, can elect to:

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                                 (i)        require the Company to prepay that
portion of this Note for which the Company is unable to issue Common Stock in
accordance with the Holder's Conversion Notice (the "Mandatory Prepayment") at a
price per share equal to the Triggering Event Prepayment Price as of such
Conversion Date (the "Mandatory Prepayment Price");

                                 (ii)        void its Conversion Notice and
retain or have returned, as the case may be, this Note that was to be converted
pursuant to the Conversion Notice (provided that the Holder's voiding its
Conversion Notice shall not effect the Company's obligations to make any
payments which have accrued prior to the date of such notice).

In the event a Holder shall elect to convert any portion of its Notes as
provided herein, the Company cannot refuse conversion based on any claim that
such Holder or anyone associated or affiliated with such Holder has been engaged
in any violation of law, violation of an agreement to which such Holder is a
party or for any reason whatsoever, unless, an injunction from a court, on
notice, restraining and or adjoining conversion of all or of said Notes shall
have been issued and the Company posts a surety bond for the benefit of such
Holder in an amount equal to 130% of the principal amount of the Notes the
Holder has elected to convert, which bond shall remain i n effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Holder in the event it obtains judgment.

                     (b)        Mechanics of Fulfilling Holder's Election. The
Company shall immediately send via facsimile to the Holder, upon receipt of a
facsimile copy of a Conversion Notice from the Holder which cannot be fully
satisfied as described in Section 3.7(a) above, a notice of the Company's
inability to fully satisfy the Conversion Notice (the "Inability to Fully
Convert Notice"). Such Inability to Fully Convert Notice shall indicate (i) the
reason why the Company is unable to fully satisfy such holder's Conversion
Notice, (ii) the amount of this Note which cannot be converted and (iii) the
applicable Mandatory Prepayment Price. The Holder shall notify the Company of
its election pursuant to Section 3.7(a) above by delivering written notice via
facsimile to the Company ("Notice in Response to Inability to Convert").

                     (c)        Payment of Prepayment Price. If the Holder shall
elect to have its Notes prepaid pursuant to Section 3.7(a)(i) above, the Company
shall pay the Mandatory Prepayment Price to the Holder within thirty (30) days
of the Company's receipt of the Holder's Notice in Response to Inability to
Convert, provided that prior to the Company's receipt of the Holder's Notice in
Response to Inability to Convert the Company has not delivered a notice to the
Holder stating, to the satisfaction of the Holder, that the event or condition
resulting i n the Mandatory Prepayment has been cured and all Conversion Shares
issuable to the Holder can and will be delivered to the Holder in accordance
with the terms of this Note. If the Company shall fail to pay the applicable
Mandatory Prepayment Price to the Holder on a timely basis as described in this
Section 3.7(c) (other than pursuant to a dispute as to the determination of the
arithmetic calculation of the Prepayment Price), in addition to any remedy the
Holder may have under this Note and the Purchase Agreement, such unpaid amount
shall bear interest at the rate of two percent (2%) per month (prorated for
partial months) until paid in full. Until the full Mandatory Prepayment Price is
paid in full to the Holder, the Holder may (i) void the Mandatory Prepayment
with respect to that portion of the Note for which the full Mandatory Prepayment
Price has not been paid, (ii) receive back such Note, and (iii) require that the
Conversion Price of such returned Note be adjusted to the lesser of (A) the
Conversion Price as in effect on the date on which the Holder voided the
Mandatory Prepayment and (B) the lowest Closing Bid Price during the period
beginning on the Conversion Date and ending on the date the Holder voided the
Mandatory Prepayment.

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                     (d)        Pro-rata Conversion and Prepayment. In the event
the Company receives a Conversion Notice from more than one holder of the Notes
on the same day and the Company can convert and prepay some, but not all, of the
Notes pursuant to this Section 3.7, the Company shall convert and prepay from
each holder of the Notes electing to have its Notes converted and prepaid at
such time an amount equal to such holder's pro-rata amount (based on the
principal amount of the Notes held by such holder relative to the principal
amount of the Notes outstanding) of all the Notes being converted and prepaid at
such time.

                     Section 3.8        No Rights as Shareholder. Nothing
contained in this Note shall be construed as conferring upon the Holder, prior
to the conversion of this Note, the right to vote or to receive dividends or to
consent or to receive notice as a shareholder in respect of any meeting of
shareholders for the election of directors of the Company or of any other
matter, or any other rights as a shareholder of the Company.

ARTICLE IV

MISCELLANEOUS

                     Section 4.1        Notices. Any notice, demand, request,
waiver or other communication required or permitted to be given hereunder shall
be in writing and shall be effective (a) upon hand delivery by telex (with
correct answer back received), telecopy or facsimile at the address or number
designated in the Purchase Agreement (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The Company will give written notice to
the Holder at least ten (10) days prior to the date on which the Company takes a
record (x) with respect to any dividend or distribution upon the Common Stock,
(y) with respect to any pro rata subscription offer to holders of Common Stock
or (z) for determining rights to vote with respect to any Organic Change,
dissolution, liquidation or winding-up and in no event shall such notice be
provided to such holder prior to such information being made known to the
public. The Company will also give written notice to the Holder at least ten
(10) days prior to the date on which any Organic Change, dissolution,
liquidation or winding-up will take place and in no event shall such notice be
provided to the Holder prior to such information being made known to the public.

                    Section 4.2        Governing Law. This Note shall be
governed by and construed in accordance with the internal laws of the State of
Nevada, without giving effect to any of the conflicts of law principles which
would result in the application of the substantive law of another jurisdiction.
This Note shall not be interpreted or construed with any presumption against the
party causing this Note to be drafted.

                     Section 4.3        Headings. Article and section headings
in this Note are included herein for purposes of convenience of reference only
and shall not constitute a part of this Note for any other purpose.

                     Section 4.4        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, at law or in equity (including, without limitation, a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a holder's right to pursue actual 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
thereof 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 and material harm to the Holder and that the remedy at law for any
such breach may be inadequate. Therefore the Company agrees that, in the event
of any such breach or threatened breach, the Holder shall be entitled, in
addition to all other available rights and remedies, at law or in equity, to
seek and obtain such equitable relief, including but not limited to an
injunction restraining any such breach or threatened breach, without the
necessity of showing economic loss and without any bond or other security being
required.

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                     Section 4.5        Enforcement Expenses. The Company agrees
to pay all costs and expenses of enforcement of this Note, including, without
limitation, reasonable attorneys' fees and expenses.

                     Section 4.6        Binding Effect. The obligations of the
Company and the Holder set forth herein shall be binding upon the successors and
assigns of each such party, whether or not such successors or assigns are
permitted by the terms hereof.

                     Section 4.7        Amendments. This Note may not be
modified or amended many manner except in writing executed by the Company and
the Holder.

                     Section 4.8        Compliance with Securities Laws. The
Holder of this Note acknowledges that this Note is being acquired solely for the
Holder's own account and not as a nominee for any other party, and for
investment, and that the Holder shall not offer, sell or otherwise dispose of
this Note. This Note and any Note issued in substitution or replacement therefor
shall be stamped or imprinted with a legend in substantially the following form:

> > > > "THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
> > > > AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE
> > > > SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY
> > > > THE COMPANY OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE
> > > > REASONABLY SATISFACTORY TO THE COMPANY THAT THIS NOTE MAY BE SOLD,
> > > > TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION
> > > > FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS."

                     Section 4.9        Consent to Jurisdiction. Each of the
Company and the Holder (i) hereby irrevocably submits to the exclusive
jurisdiction of the State of Nevada for the purposes of any suit, action or
proceeding arising out of or relating to this Note and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the Holder
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under the Purchase Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing in this Section
4.9 shall affect or limit any right to serve process in any other manner
permitted by law. Each of the Company and the Holder hereby agree that the
prevailing party in any suit, action or proceeding arising out of or relating to
this Note shall be entitled to reimbursement for reasonable legal fees from the
non-prevailing party.

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                    Section 4.10        Parties in Interest. This Note shall be
binding upon, inure to the benefit of and be enforceable by the Company, the
Holder and their respective successors and permitted assigns.

                     Section 4.11        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.

                     Section 4.12        Company Waivers. Except as otherwise
specifically provided herein, the Company and all others that may become liable
for all or any part of the obligations evidenced by this Note, hereby waive
presentment, demand, notice of nonpayment, protest and all other demands' and
notices in connection with the delivery, acceptance, performance and enforcement
of this Note, and do hereby consent to any number of renewals of extensions of
the time or payment hereof and agree that any such renewals or extensions may be
made without notice to any such persons and without affecting their liability
herein and do further consent to the release of any person liable hereon, all
without affecting the liability of the other persons, firms or Company liable
for the payment of this Note, AND DO HEREBY WAIVE TRlAL BY JURY.

                     (a)        No delay or omission on the part of the Holder
in exercising its rights under this Note, or course of conduct relating hereto,
shall operate as a waiver of such rights or any other right of the Holder, nor
shall any waiver by the Holder of any such right or rights on any one occasion
be deemed a waiver of the same right or rights on any future occasion.

                     (b)        THE COMPANY ACKNOWLEDGES THAT THE TRANSACTION OF
WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED
BY APPLICA BLE LAW, HEREBY WAIVES ITS RIGHT TO NOTICE AN D HEA R ING

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WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR
ASSIGNS MAY DESIRE TO USE.

 

LITHIUM EXPLORATION GROUP, INC.

 

  By: [sig.jpg]     Name: Alexander Walsh     Title: Chief Executive Officer

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FORM OF

NOTICE OF CONVERSION

(To be Executed by the Registered Holder in order to Convert the Note)

The undersigned hereby irrevocably elects to convert
$                             of the principal amount of the above Note No. ___
into shares of Common Stock of Lithium Exploration Group, Inc. (the "Company")
according to the conditions hereof, as of the date written below.

Date of Conversion:
____________________________________________________________________________

Applicable Conversion Price:
_____________________________________________________________________

Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Date of Conversion:
___________________________________________________________________________________________

Signature:     
_________________________________________________________________________________

Print Name:   
_________________________________________________________________________________

Address:      
_________________________________________________________________________________

                       _________________________________________________________________________________

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