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PROMISSORY NOTE
 
FACE AMOUNT
 
$2,553,125
PRICE
 
$2,375,000
INTEREST RATE
 
7% per annum
NOTE NUMBER
 
March-2007-101
ISSUANCE DATE
 
March 26, 2007
MATURITY DATE
 
December 26, 2007
   
 

FOR VALUE RECEIVED, Sunrise Energy Resources, Inc., a Delaware corporation, and
all of its subsidiaries (the "Company") (OTC BB: SEYR) hereby promises to pay to
the order of DUTCHESS PRIVATE EQUITIES FUND, LTD., a Cayman Island exempted
company (the "Holder"), by the Maturity Date, or earlier, the Face Amount of Two
Million Five Hundred and Fifty-three Thousand One Hundred Twenty-five Dollars
($2,553,125) plus accrued interest U.S., (this "Note") in such amounts, at such
times and on such terms and conditions as are specified herein. The Company and
the Holder are sometimes hereinafter collectively referred to as the "Parties"
and each a "Party" to this Agreement.
 
Article 1
Method of Payment/Interest

 
Section 1.1 Payments made to the Holder by the Company in satisfaction of this
Note (referred to as a "Payment," or "Payments", or the amounts outlined as the
"Payment Amount") based upon the following schedule:
 
Payment due on April 26, 2007 will be in the amount of twenty thousand dollars
($20,000);
 
Payment due on May 26, 2007 will be in the amount of twenty thousand dollars
($20,000);
 
Payment due on June 26, 2007 will be in the amount of twenty thousand dollars
($20,000);
 
Payment due on July 26, 2007 will be in the amount of twenty thousand dollars
($20,000);

Payment due on August 26, 2007 and the 26th business day of each month
thereafter until this Note is paid in full will be in the amount of five hundred
fifteen thousand one hundred and seventy dollars and fifty-seven cents
($515,170.57).

Any outstanding balance on the Note upon Maturity shall be due and payable
immediately to the Holder at such time.

 
 
 
 
 
 
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Payments made during a month that exceed the Payment Amount due shall NOT be
applied to any future Payments due to the Holder by the Company; provided,
however, that such Payments will reduce the unpaid Face Amount of the Note
accordingly.
 
Section 1.2    If before Maturity the Company raises any funds in excess of $1
million (one million US dollars) from a third-party, whether involving the
issuance of debt or equity, including any equity line agreements with the Holder
or a third party (a "Financing"), then the Company shall pay to the Holder one
hundred percent (100%) of the net proceeds therefrom in excess of the first $1
million as prepayment of the Face Amount of this Note, Interest and penalties,
if any, then due. A Financing will also include the sale by the Company of any
of its assets which are deemed to be material to the Company (excluding assets
sold in the normal course of business). All prepayments described in this
Section 1.2 shall be made to the Holder within three (3) business days of the
Company's receipt of proceeds from the Financing. Failure to comply with this
Section 1.2 shall constitute an Event of Default (as described in Article 4
hereof). The Holder may, but is not required to, waive all or part of this
Section 1.2 upon request from the Company, and any such waiver shall not be
unreasonably withheld.
 
Section 1.3    The Company shall pay seven percent (7%) annual coupon on the
unpaid Face Amount of this Note, commencing on the Issuance Date (the
"Interest"). The Interest shall compound daily, pro rata for partial periods.
 
Section 1.4    Notwithstanding any provision to the contrary in this Note,
within the first six (6) months, the Company may pay in full to the Holder
ninety-seven and one-half percent (97.5%) of the balance due on the Face Amount,
in readily available funds at any time and from time to time without penalty. In
the event of repayment of the ninety-seven and one-half percent (97.5%) of the
balance due on the Face Amount within six (6) months the Company shall be deemed
to have fully repaid the Note and shall become free and clear of any and all
obligations to the Holder.
 
Article 2
Collateral

 
Section 2.1    The Company does hereby agree to issue to the Holder for use as
Collateral forty (40) signed Put Notices consistent with the conditions set
forth in Article 12. In the event, the Holder uses the Collateral in full, the
Company shall immediately deliver to the Holder additional Put Notices to the
extent of the outstanding Face Amount as requested by the Holder.

Section 2.2    Upon the completion of the Company's obligation to the Holder of
the Face Amount of this Note, the Company will not be under any further
obligation to complete additional Puts. All remaining Put sheets shall be marked
"VOID" by the Holder and returned to the Company at the Company's request.

Section 2.3    The above collateral Put Notices come into effect only in the
Event of Default (as hereinafter defined). The Company shall not be obligated to
deliver any shares of its common stock related to the collateral Put Notices
unless an Event of Default has occurred. The Company may, at its discretion,
place all such collateral Put Notice in escrow to be released in the Event of
Default pursuant to instruction by the Company.
 
 
 
 
 
 
 
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Article 3
Unpaid Amounts

 
Section 3.1    In the event that the Company has not repaid the Face Amount by
the Maturity Date (the "Residual Amount"), then as liquidated damages (the
"Liquidated Damages"), the Face Amount shall be increased by ten percent (10.0%)
as an initial penalty and an additional two and one-half percent (2.5%) per
month (pro rata for partial periods), compounded daily, for each month until the
Face Amount is paid in full. Further, if a Residual Amount remains at Maturity,
it shall constitute an Event of Default hereunder. The Parties acknowledge that
the Liquidated Damages are not interest under this Note and shall not constitute
a penalty.
 
Article 4
Defaults and Remedies

 
Section 4.1    Events of Default. An "Event of Default" occurs if any one of the
following occur:
 
(a)    The Company does not make a Payment within three (3) business days of a
Payment Date, or a Residual Amount on the Note exists on the Maturity Date;
 
(b)    The Company, pursuant to or within the meaning of any Bankruptcy Law (as
defined below): (i) commences a voluntary case; (ii) consents to the entry of an
order for relief against it in an involuntary case; (iii) consents to the
appointment of a Custodian (as defined below) of the Company or for its
property; (iv) makes an assignment for the benefit of its creditors; or (v) a
court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that: (A) is for relief against the Company in an involuntary case; (B)
appoints a Custodian of the Company or for its property; or (C) orders the
liquidation of the Company, and the order or decree remains unstayed and in
effect for sixty (60) calendar days;
 
(c)    The Company's $0.001 par value common stock (the "Common Stock") is
suspended or is no longer listed on any recognized exchange, including an
electronic over-the-counter bulletin board, in excess of two (2) consecutive
trading days (excluding suspensions of not more than one (1) trading day
resulting from business announcements by the Company);
 
(d)    The registration statement for the shares underlying the current Equity
Line of Credit is not effective for any reason;
 
(e)     The Company breaches a material term of this Agreement or any of the
Company's representation or warranties hereunder were false when made;
 
(f)      The Company fails to carry out Puts, including any paperwork needed, in
a timely manner;
 
(g)     An event of default occurs under any agreement given as security for the
obligations and liabilities under this Note, including, without limitation the
Security Agreement of even date herewith among the Company, TOV Energy-Servicing
Company Esko Pivnich ("Esko"); and Pari, Ltd. ("Pari"), and the Holder (the
"Security Agreement").
 
 
 
 
 
 
 
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(h)    The occurrence of any event which is described elsewhere in this Note as
constituting an Event of Default hereunder.
 
As used in this Section 4.1, the term "Bankruptcy Law" means Title 11 of the
United States Code or any similar federal or state law for the relief of
debtors, and the term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
 
 Section 4.2    Remedies. Upon the occurrence of each and every Event of
Default, the Holder may seek any or all of the following remedies to the extent
of the Residual Amount:
 
(a)    The Holder may elect to execute the Puts in an amount that will repay the
Holder and fully enforce the Holder's rights under the Security Agreement as
well as the Secured Continuing Unconditional Guaranty of even date herewith
among Pari, Esko and the Holder (the "Guaranty")
 
(b)    The Holder may increase the Face Amount of the Note by ten percent
(10.0%) as an initial penalty and an additional two and one-half percent (2.5%)
per month (pro rata for partial periods), compounded daily, until such Event of
Default is cured (if capable of being cured) or this Note, together with all
interest thereon, is repaid in full (i.e., exercise the Liquidated Damages
option). The Parties acknowledge that the Liquidated Damages are not interest
under this Note and shall not constitute a penalty.
 
(c)    The Holder may elect to stop any further funding to the Company excluding
the Equity Line of Credit.
 
(d)    As more fully described herein, the Holder may also do either (i) or (ii)
below, but not both; provided, however, that the Holder may only utilize (i)
below in the event of default pursuant to Section 4.1 and such default is not
cured by the Company within thirty five (35) days:
 
(i)    Switch the Residual Amount to a three-year ("Convertible Maturity Date"),
eighteen percent (18%) interest bearing convertible debenture at a floating rate
discount of twenty-five percent (25%) to the prevailing market price during
conversion, and with such other terms described hereinafter (the "Convertible
Debenture"). The Convertible Debenture shall be considered closed ("Convertible
Closing Date") as of the date of the Event of Default.
 
(ii)   The Holder may increase the Payment Amount described under Article 1
hereof to fulfill the repayment of the Residual Amount, by using the Collateral
Put Notices. The Company shall provide full cooperation to the Holder in
directing funds owed to the Holder on any Put made by the Company to the
Investor. The Company agrees to diligently carry out the terms outlined in the
Equity Line for delivery of any such shares. In the event the Company is not
diligently fulfilling its obligation to direct funds owed to the Holder from
Puts to the Holder, as reasonably determined by the Holder, the Holder may,
after giving the Company five (5) business days advance notice to cure same,
elect to increase the Face Amount of the Note by two and one-half percent (2.5%)
per day, compounded daily, in addition to and on top of any additional remedies
available to the Holder under this Note.
 
 
 
 
 
 
 
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Section 4.3    Conversion Privilege
 
(a)    In the event that a Convertible Debenture is issued by the Company
pursuant to Section 4.2(d)(i), the Holder shall have the right to convert the
Convertible Debenture into shares of Common Stock at any time following the
Convertible Closing Date and before the close of business on the Convertible
Maturity Date. The number of shares of Common Stock issuable upon the conversion
of the Convertible Debenture shall be determined pursuant to Section 4.4 hereof,
but the number of shares issuable shall be rounded up to the nearest whole
share.
 
(b)    In the event all or any portion of the Convertible Debenture remains
outstanding on the Convertible Maturity Date (the "Debenture Residual Amount"),
the unconverted portion of such Convertible Debenture will automatically be
converted into shares of Common Stock on such date in the manner set forth in
Section 4.4 hereof.
 
Section 4.4    Conversion Procedure
 
(a)    The Holder may elect to convert the Residual Amount in whole or in part
any time and from time to time following the Convertible Closing Date. Such
conversion shall be effectuated by providing the Company, or its attorney, with
that portion of the Convertible Debenture to be converted together with a
facsimile or electronic mail of the signed notice of conversion (the "Notice of
Conversion"). The date on which the Notice of Conversion is effective
("Conversion Date") shall be deemed to be the date on which the Holder has
delivered to the Company a facsimile or electronically mailed the Notice of
Conversion (receipt being via a confirmation of the time such facsimile or
electronic mail to the Company as provided by the Holder). The Holder can elect
to either reissue the Convertible Debenture, or continually convert the
remaining Residual Amount under the Debenture.
 
(b)    Common Stock to be Issued. Upon the conversion of the Convertible
Debenture by the Holder, the Company shall instruct its transfer agent to issue
stock certificates without restrictive legends or stop transfer instructions,
if, at that time, a registration statement covering the underlying shares of
Common Stock has been declared effective (or with proper restrictive legends if
the registration statement has not as yet been declared effective), in specified
denominations representing the number of shares of Common Stock issuable upon
such conversion. In the event that the Convertible Debenture is deemed saleable
under Rule 144 of the Securities Act, the Company shall, upon a Notice of
Conversion, instruct the transfer agent to issue free trading certificates
without restrictive legends, subject to other applicable securities laws. The
Company is responsible to for all costs associated with the issuance of the
shares, including but not limited to the opinion letter, overnight delivery of
the certificates and any other costs that arise. The Company shall act as
registrar of the Shares of Common Stock to be issued and shall maintain an
appropriate ledger containing the necessary information with respect to each
Convertible Debenture. The Company warrants that no instructions have been given
or will be given to the transfer agent which limit, or otherwise prevent resale
and that the Common Stock shall otherwise be freely resold, except as may be set
forth herein or subject to applicable law.
 
 
 
 
 
 
 
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(c)    Conversion Rate. The Holder is entitled to convert the Convertible
Debenture Residual Amount, plus accrued interest and penalties, anytime
following the Convertible Closing Date, at the lesser of either (i) seventy-five
percent (75%) of the lowest closing bid price during the fifteen (15) trading
days immediately preceding the Notice of Conversion or (ii) 100% of the lowest
bid price for the twenty (20) trading days immediately preceding the Convertible
Closing Date ("Fixed Conversion Price"). No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded up to the nearest whole share.
 
(d)    Nothing contained in the Convertible Debenture shall be deemed to
establish or require the Company to pay interest to the Holder at a rate in
excess of the maximum rate permitted by applicable law. In the event that the
rate of interest required to be paid exceeds the maximum rate permitted by
governing law, the rate of interest required to be paid thereunder shall be
automatically reduced to the maximum rate permitted under the governing law and
such excess shall be returned with reasonable promptness by the Holder to the
Company. In the event this Section 4.4(d) applies, the Parties agree that the
terms of this Note shall remain in full force and effect except as is necessary
to make the interest rate comply with applicable law.
 
(e)    The Holder shall be treated as a shareholder of record on the date the
Company is required to issue the Common Stock to the Holder. If prior to the
issuance of stock certificates, the Holder designates another person as the
entity in the name of which the stock certificates requesting the Convertible
Debenture are to be issued, the Holder shall provide to the Company evidence
that either no tax shall be due and payable as a result of such transfer or that
the applicable tax has been paid by the Holder or such person. If the Holder
converts any part of the Convertible Debentures, or will be, the Company shall
issue to the Holder a new Convertible Debenture equal to the unconverted amount,
immediately upon request by the Holder.
 
(f)     Within four (4) business days after receipt of the documentation
referred to in this Section, the Company shall deliver a certificate for the
number of shares of Common Stock issuable upon the conversion. In the event the
Company does not make delivery of the Common Stock as instructed by Holder
within four (4) business days after the Conversion Date, the Company shall pay
to the Holder an additional one percent (1.0%) per day in cash of the full
dollar value of the Debenture Residual Amount then remaining after conversion,
compounded daily; provided, however, that the Company shall not be liable for
any amounts under this Section 4.4(f) in the event that the delay in the
issuance of the Common Stock is as a result of actions by the Holder or outside
of the control of the Company. The Company shall use reasonably commercial
efforts to ensure that its transfer agent, Computer Share, timely complies with
any instructions to issue shares as may be required.
 
 
 
 
 
 
 
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(g)    The Company shall at all times reserve (or make alternative written
arrangements for reservation or contribution of shares) and have available all
Common Stock necessary to meet conversion of the Convertible Debentures by the
Holder of the entire amount of Convertible Debentures then outstanding. If, at
any time, the Holder submits a Notice of Conversion and the Company does not
have sufficient authorized but unissued shares of Common Stock (or alternative
shares of Common Stock as may be contributed by stockholders of the Company)
available to effect, in full, a conversion of the Convertible Debentures (a
"Conversion Default," the date of such default being referred to herein as the
"Conversion Default Date"), the Company shall issue to the Holder all of the
shares of Common Stock which are available. Any Convertible Debentures, or any
portion thereof, which cannot be converted due to the Company's lack of
sufficient authorized common stock (the "Unconverted Debentures"), may be deemed
null and void upon written notice sent by the Holder to the Company. The Company
shall provide notice of such Conversion Default ("Notice of Conversion Default")
to the Holder, by facsimile, within one (1) business days of such default.
 
(h)    The Company agrees to pay the Holder payments for a Conversion Default
("Conversion Default Payments") in the amount of (N/365) multiplied by 0.24, the
product of which is then multiplied by the initial issuance price of the
outstanding or tendered but not converted Convertible Debentures held by the
Holder, where N equals the number of days from the Conversion Default Date to
the date (the "Authorization Date") that the Company authorizes a sufficient
number of shares of Common Stock to effect conversion of all remaining
Convertible Debentures. The Company shall send notice ("Authorization Notice")
to the Holder that additional shares of Common Stock have been authorized, the
Authorization Date, and the amount of Holder's accrued Conversion Default
Payments. The accrued Conversion Default shall be paid in cash or shall be
convertible into Common Stock at the conversion rate set forth in Section 4.4(c)
hereof, upon written notice sent by the Holder to the Company, which Conversion
Default shall be payable as follows: (i) in the event the Holder elects to take
such payment in cash, cash payment shall be made to the Holder within five (5)
business days, or (ii) in the event Holder elects to take such payment in stock,
the Holder may convert at the conversion rate set forth in Section 4.4(c) hereof
until the expiration of the conversion period.
 
(i)     The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Convertible Debentures in full will cause the Holder to suffer
irreparable harm, and that the actual damages to the Holder will be difficult to
ascertain. Accordingly, the parties agree that it is appropriate to include in
this Agreement a provision for liquidated damages. The Parties acknowledge and
agree that the liquidated damages provision set forth in this section represents
the parties' good faith effort to quantify such damages and, as such, agree that
the form and amount of such liquidated damages are reasonable, and under the
circumstances, do not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to deliver the Common Stock
pursuant to the terms of this Convertible Debenture.
 
(j)     If, by the fourth (4th) business day after the Conversion Date, any
portion of the shares of the Convertible Debentures have not been delivered to
the Holder and the Holder purchases, in an open market transaction or otherwise,
shares of Common Stock (the "Covering Shares") necessary to make delivery of
shares which would had been delivered if the full amount of the shares to be
converted had been delivered to the Holder, then the Company shall pay to the
Holder, in addition to any other amounts due to Holder pursuant to this
Convertible Debenture, and not in lieu thereof, the Buy-In Adjustment Amount (as
defined below). The "Buy In Adjustment Amount" is the amount equal to the
excess, if any, of (x) the Holder's total purchase price (including brokerage
commissions, if any) for the Covering Shares, minus (y) the net proceeds (after
brokerage commissions, if any) received by the Holder from the sale of the Sold
Shares. The Company shall pay the Buy-In Adjustment Amount to the Holder in
immediately available funds within five (5) business days of written demand by
the Holder. By way of illustration only and not in limitation of the foregoing,
if the Holder purchases shares of Common Stock having a total purchase price
(including brokerage commissions) of $11,000 to cover a Buy-In with respect to
shares of Common Stock it sold for net proceeds of $10,000, the Buy-In
Adjustment Amount which the Company will be required to pay to the Holder will
be $1,000.
 
 
 
 
 
 
 
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Article 5
Additional Financing and Registration Statements

 
Section 5.1    The Company will not enter into any additional financing
agreements whether for debt or equity, without prior expressed written consent
from the Holder, which may be given or withheld in Holder's sole and absolute
discretion.
 
Section 5.2    The Company agrees that it shall not file any registration
statement which includes any of its Common Stock (other than registration
statements associated with registering shares on Form S-4, Form S-8 (covering
shares of the Company's Common Stock issued pursuant to a bona fide employee
stock option plan or other Company common stock benefit plan approved by the
Board of Directors) or other limited purpose form) until such time as the Note
is paid in full (the "Lock-Up Period") or unless and until Holder gives its
prior written consent (which may be given or withheld in Holder's sole and
absolute discretion), except for any registration statements the Company is
contractually obligated to file pursuant to a Financing that may be conducted by
the Company before Maturity, provided a copy of the agreement for such financing
is provided by the Company to the Holder.
 
Section 5.3    If at any time while this Note is outstanding, the Company issues
or agrees to issue to any entity or person ("Third-Party") for any reason
whatsoever, any common stock or securities convertible into or exercisable for
shares of common stock (or modify any such terms in effect prior to the
execution of this Note) (a "Third Party Financing"), at terms deemed by the
Holder to be more favorable to the Third-Party, then the Company grants to the
Holder the right, at the Holder's election, to modify the terms of this Note to
match or conform to the more favorable term or terms of the Third-Party
Financing. The rights of the Holder in this Section 5.3 are in addition to all
other rights the Holder has pursuant to this Note and the related Security
Agreement between the Holder and the Company.
 
Violation of any Section under this Article 5 shall constitute an Event of
Default and the Holder may elect to take the action or actions outlined in
Article 4 hereof.
 
 
 
 
 
 
 
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Article 6
Notice

 
Section 6.1    Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Note must be in writing and
will be deemed to have been delivered (i) upon delivery, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided a confirmation
of transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one (1) day after deposit with a nationally
recognized overnight delivery service, so long as it is properly addressed. The
addresses and facsimile numbers for such communications shall be:
 
If to the Company:
 
Attn: Roman Livson
Sunrise Energy Resources, Inc
551 FIFTH AVENUE
SUITE 2020
NEW YORK NY 10017
Telephone: 212-973-0063
Fax: 212-214-0310

If to the Holder:

Dutchess Capital Management, LLC
Douglas Leighton
50 Commonwealth Ave, Suite 2
Boston, MA 02116
Telephone: (617) 301-4700
Facsimile: (617) 249-0947

Section 6.2    The Parties are required to provide each other with five (5)
business days prior notice to the other party of any change in address, phone
number or facsimile number.
 
Article 7
Time

 
Where this Note authorizes or requires the payment of money or the performance
of a condition or obligation on a Saturday or Sunday or a holiday on which the
United States Stock Markets ("US Markets") are closed ("Holiday"), such payment
shall be made or condition or obligation performed on the last business day
preceding such Saturday, Sunday or Holiday. A "business day" shall mean a day on
which the US Markets are open for a full day or half day of trading.
 
Article 8
No Assignment.

 
This Note and the obligations hereunder shall not be assigned.
 
 
 
 
 
 
 
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Article 9
Rules of Construction.

 
In this Note, unless the context otherwise requires, words in the singular
number include the plural, and in the plural include the singular, and words of
the masculine gender include the feminine and the neuter, and when the tense so
indicates, words of the neuter gender may refer to any gender. The numbers and
titles of sections contained in the Note are inserted for convenience of
reference only, and they neither form a part of this Note nor are they to be
used in the construction or interpretation hereof. Wherever, in this Note, a
determination of the Company is required or allowed, such determination shall be
made by a majority of the Board of Directors of the Company and, if it is made
in good faith, it shall be conclusive and binding upon the Company.
 
Article 10
Governing Law

 
The validity, terms, performance and enforcement of this Note shall be governed
and construed by the provisions hereof and in accordance with the laws of the
Commonwealth of Massachusetts applicable to agreements that are negotiated,
executed, delivered and performed solely in the Commonwealth of Massachusetts.
 
Article 11
Disputes Subject to Arbitration

 
The Parties shall submit all disputes arising under this Note to arbitration in
Boston, Massachusetts before a single arbitrator of the American Arbitration
Association (the "AAA"). The arbitrator shall be selected by application of the
rules of the AAA, or by mutual agreement of the Parties, except that such
arbitrator shall be an attorney admitted to practice law in the Commonwealth of
Massachusetts. No Party will challenge the jurisdiction or venue provisions
provided in this Article 11. Nothing in this Article 11 shall limit the Holder's
right to obtain an injunction for a breach of this Note from any court of law.
Any injunction obtained shall remain in full force and effect until the
arbitrator, as set forth in this Article 11 fully adjudicates the dispute.
 
Article 12
Conditions to Closing

 
The Company shall have delivered the proper Collateral to the Holder before
Closing of this Note.
 
Article 13
Closing Costs

 
The Company agrees to pay for related expenses associated with the proposed
transaction of fifteen thousand dollars ($15,000). This amount shall cover, but
is not limited to, the following: due diligence expenses, document creation
expenses, closing costs, and transaction administration expenses. All such
structuring and administration expenses shall be deducted from the first
Closing.
 
The Company shall pay sixty thousand dollars ($60,000) to the Holder upon
Closing.
 
 
 
 
 
 
 
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Article 14
Indemnification

 
In consideration of the Holder's execution and delivery of this Agreement and
the acquisition and funding by the Holder of this Note and in addition to all of
the Company's other obligations under the documents contemplated hereby, the
Company shall defend, protect, indemnify and hold harmless the Holder and all of
its shareholders, officers, directors, employees, counsel, and direct or
indirect investors and any of the foregoing person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnities") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including,
without limitation, reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in the Note, or any other
certificate, instrument or document contemplated hereby or thereby, or (ii) any
breach of any covenant, agreement or obligation of the Company contained in the
Note or any other certificate, instrument or document contemplated hereby or
thereby, except insofar as any such misrepresentation, breach or any untrue
statement, alleged untrue statement, omission or alleged omission is made in
reliance upon and in conformity with written information furnished to the
Company by, or on behalf of, the Holder or is based on illegal trading of the
Common Stock by the Holder. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities that is permissible under applicable law. The indemnity provisions
contained herein shall be in addition to any cause of action or similar rights
the Holder may have, and any liabilities the Holder may be subject to.
 
Article 15
Incentive Shares

The Company shall issue fifty thousand (50,000) shares of unregistered,
restricted Common Stock to the Holder as an incentive for the investment
("Incentive Shares"). The Incentive Shares shall be issued and delivered
immediately to the Holder and shall carry piggyback registration rights and may
be included in one or more registration statements filed by the Company covering
shares to be registered for its own account or for the account of selling
securityholders, or both (other than a registration statement associated with
registering shares on Form S-4, S-8 or other limited purpose form). The Company
shall notify the Holder of its intent to file a registration statement and the
Holder shall promptly accept or decline from including the Incentive Shares in
such registration statement The Company's failure to issue the Incentive Shares
constitutes an Event of Default and the Holder may elect to enforce the remedies
outlined in Article 4. The Company's obligation to provide the Holder with the
Incentive Shares, as set forth herein, shall survive the operation of the
Agreement and any default on this obligation shall provide the Holder with all
rights, remedies and default provisions set forth in this Note, or otherwise
available by law.
 
 
 
 
 
 
 
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Article 16
Use of Proceeds

 
The Company shall use the funds for capital expenditures, working capital and
general corporate purposes.
 
Article 17
Waiver

 
The Holder's delay or failure at any time or times hereafter to require strict
performance by Company of any obligations, undertakings, agreements or covenants
shall not waive, affect, or diminish any right of the Holder under this Note to
demand strict compliance and performance herewith. Any waiver by the Holder of
any Event of Default shall not waive or affect any other Event of Default,
whether such Event of Default is prior or subsequent thereto and whether of the
same or a different type. None of the undertakings, agreements and covenants of
the Company contained in this Note, and no Event of Default, shall be deemed to
have been waived by the Holder, nor may this Note be amended, changed or
modified, unless such waiver, amendment, change or modification is evidenced by
a separate instrument in writing specifying such waiver, amendment, change or
modification and signed by the Holder.
 
Article 18
Senior Obligation

 
The Company shall cause this Note to be senior in right of payment to all other
current or future debt of the Company. The Company warrants that it has taken
all necessary steps to subordinate its other obligations to the rights of the
Holder under this Note and the failure to do so shall constitute an Event of
Default.
 
Article 19
Transactions With Affiliates

 
The Company shall not, and shall cause each of its Subsidiaries to not enter
into, amend, modify or supplement, or permit any Subsidiary to enter into,
amend, modify or supplement, any agreement, transaction, commitment or
arrangement with any of its or any Subsidiary's officers, directors, persons who
were officers or directors at any time during the previous two (2) years,
shareholders who beneficially own five percent (5%) or more of the Common Stock,
or affiliates or with any individual related by blood, marriage or adoption to
any such individual or with any entity in which any such entity or individual
owns a five percent (5%) or more beneficial interest (each a "Related Party")
during the Lock-Up Period.
 
Article 20
Equity Line Obligations

 
At the request of the Holder, at any time after the Company's current effective
registration statement for the Equity Line of Credit with Dutchess Private
Equities Fund (File No: 333-137360), has five hundred thousand (500,000) shares
or less remaining for issuance and, if so permitted under Rule 415 of the
Securities Act of 1933, as amended, or the general guidelines (if any)
promulgated by the United States Securities and Exchange Commission (the "SEC"
or the "Commission"), the Company shall immediately prepare and file a new
registration statement for the registration of additional shares as set forth in
a related Investment Agreement on the same terms and conditions as the
Investment Agreement dated September 7, 2006. The Holder shall also retain the
right to determine the date of the filing of such registration statement, but in
no event sooner than twenty (20) business days prior to a notice being given to
the Company. The Company shall respond to any and all SEC comments or
correspondence, whether written or oral, direct or indirect, formal or informal
("Comments"), within seven (7) business days of receipt by the Company of such
Comments. To the extent necessary and applicable to the Holder, the Holder shall
assist the Company in responding to any such Comments. The seven (7) business
day period shall be extended as may be required by delays caused by the Holder;
and, provided further, that such seven (7) business day period shall be extended
an additional two (2) business days for responses to SEC Staff accounting
comments. The Company shall undertake best efforts to cause any such
registration statement relating to these securities to become effective no later
than two (2) business days after notice from the SEC that the Registration
Statement has been cleared of all comments. Failure to do any action outlined in
this Article 20 shall constitute an Event of Default and the Holder may seek to
take actions as outlined in Article 4.
 
 
 
 
 
 
 
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Article 21
Security

 
This Note shall be secured by and the Holder shall have full right to exercise
its rights and remedies under (i) the Security Agreement and (ii) the Guaranty.
 
Article 22
Miscellaneous

 
Section 22.1    This Note may be executed in two (2) or more counterparts, all
of which taken together shall constitute one instrument. Execution and delivery
of this Note by exchange of facsimile copies bearing the facsimile signature of
a Party shall constitute a valid and binding execution and delivery of this Note
by such Party. Such facsimile copies shall constitute enforceable original
documents.
 
Section 22.2    The Company warrants that the execution, delivery and
performance of this Note by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby will not (i) result in a
violation of the Articles of Incorporation, any Certificate of Designations,
Preferences and Rights of any outstanding series of preferred stock of the
Company or the Bylaws, (ii) conflict with, or constitute a material default (or
an event which with notice or lapse of time or both would become a material
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, contract, indenture
mortgage, indebtedness or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree, including United States federal and state
securities laws and regulations and the rules and regulations of the principal
securities exchange or trading market on which the Common Stock is traded or
listed (the "Principal Market"), applicable to the Company or any of its
Subsidiaries (which for purposes of this Note means any entity in which the
Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Neither the Company nor its Subsidiaries is
in violation of any term of, or in default under, the Articles of Incorporation,
any Certificate of Designations, Preferences and Rights of any outstanding
series of preferred stock of the Company or the Bylaws or their organizational
charter or Bylaws, respectively, or any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries, except for
possible conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations that would not individually or in the aggregate
have a Material Adverse Effect (as defined below). The business of the Company
and its Subsidiaries is not being conducted, and shall not be conducted, in
violation of any law, statute, ordinance, rule, order or regulation of any
governmental authority or agency, regulatory or self-regulatory agency, or
court, except for possible violations the sanctions for which either
individually or in the aggregate would not have a Material Adverse Effect. The
Company is not required to obtain any consent, authorization, permit or order
of, or make any filing or registration (except the filing of a registration
statement) with, any court, governmental authority or agency, regulatory or
self-regulatory agency or other third party in order for it to execute, deliver
or perform any of its obligations under, or contemplated by, this Note in
accordance with the terms hereof or thereof. All consents, authorizations,
permits, orders, filings and registrations which the Company is required to
obtain pursuant to the preceding sentence have been obtained or effected on or
prior to the date hereof and are in full force and effect as of the date hereof.
The Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing. The Company is not, and will not be, in
violation of the listing requirements of the Principal Market as in effect on
the date hereof and is not aware of any facts which would lead to delisting of
the Common Stock by the Principal Market.
 
 
 
 
 
 
 
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Section 22.3    The Company and its Subsidiaries are corporations duly organized
and validly existing in good standing under the laws of the respective
jurisdictions of their incorporation, and have the requisite corporate power and
authorization to own their properties and to carry on their business as now
being conducted. Both the Company and its Subsidiaries are duly qualified to do
business and are in good standing in every jurisdiction in which their ownership
of property or the nature of the business conducted by them makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Note, "Material Adverse Effect" means any material adverse effect
on the business, properties, assets, operations, results of operations,
financial condition or prospects of the Company and its Subsidiaries, if any,
taken as a whole, or on the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection herewith, or on the
authority or ability of the Company to perform its obligations under the Note.
 
Section 22.4    Authorization; Enforcement; Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform its obligations under this Note, and to issue this Note and
Incentive Shares in accordance with the terms hereof and thereof; (ii) the
execution and delivery of this Note by the Company and the consummation by it of
the transactions contemplated hereby and thereby, including without limitation
the reservation for issuance and the issuance of the Incentive Shares pursuant
to this Note, have been duly and validly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors, or its shareholders; (iii) this Note has been duly and
validly executed and delivered by the Company; and (iv) this Note constitutes
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
 
 
 
 
 
 
 
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Section 22.5    The execution and delivery of this Note shall not alter the
prior written agreements between the Company and the Holder, consisting of the
Investment Agreement and Registration Rights Agreement. This Note is the final
agreement between the Company and the Holder with respect to the terms and
conditions set forth herein, and, the terms of this Note may not be contradicted
by evidence of prior, contemporaneous, or subsequent oral agreements of the
Parties. The execution and delivery of this Note is done in conjunction with the
previously executed Security Agreement (as defined in Article 21 hereof).
 
Section 22.6    There are no disagreements of any kind presently existing, or
reasonably anticipated by the Company to arise, between the Company and the
accountants, auditors and lawyers formerly or presently used by the Company,
including but not limited to disputes or conflicts over payment owed to such
accountants, auditors or lawyers.
 
Section 22.7    All representations made by or relating to the Company of a
historical nature and all undertakings described herein shall relate and refer
to the Company, its predecessors, and the Subsidiaries.
 
Section 22.8    The only officer, director, employee and consultant stock option
or stock incentive plan currently in effect or contemplated by the Company has
been submitted to the Holder or is described or within past filings with the
SEC. The Company agrees not to initiate or institute any new stock option or
stock incentive plan without the prior written consent of the Holder.
 
Section 22.9    The Company acknowledges that its failure to timely meet any of
its obligations hereunder, including, but without limitation, its obligations to
make Payments, deliver shares and, as necessary, to register and maintain
sufficient number of Shares, will cause the Holder to suffer irreparable harm
and that the actual damage to the Holder will be difficult to ascertain.
Accordingly, the parties agree that it is appropriate to include in this Note a
provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties'
good faith effort to quantify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and do not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to deliver the Common Stock pursuant to the terms of this Note.
 
Section 22.10   In the event that any rules, regulations, oral or written
interpretations or comments, whether written or oral, formal or informal, from
the SEC, NASD, NYSE, NASDAQ or other governing or regulatory body, prohibit or
hinder any operation of this Agreement or the Equity Line, the Parties hereby
agree that those specific terms and conditions shall be negotiated in good faith
on similar terms within a commercially reasonable time period, but in no event
greater than ten (10) business days, and shall not alter, diminish or affect any
other rights, duties, obligations or covenants in this Note and that all terms
and conditions will remain in full force and effect except as is necessary to
make those specific terms and conditions comply with applicable rule,
regulation, interpretation or Comment. Failure for the Company to agree to such
new terms as necessary to achieve the intent of the original documents, shall
constitute an Event of Default and the Holder may therefore elect to take
actions as outlined in Article 4 hereof; provided, however, that the Holder must
act in a commercially reasonable manner for an Event of Default as provided
hereunder to occur.
 
 
 
 
 
 
 
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Section 22.11    The Company hereby represent and warrants to the Holder that:
(i) it is voluntarily issuing this Note of its own freewill, (ii) it is not
issuing this Note under economic duress, (iii) the terms of this Note are
reasonable and fair to the Company, and (iv) the Company has had independent
legal counsel of its own choosing review this Note, advise the Company with
respect to this Note, and represent the Company in connection with its issuance
of this Note.
 
Section 22.12    Intentionally Deleted.

[BALANCE OF PAGE LEFT BLANK INTENTIONALLY]
 
 
 
 
 
 
 
 
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by its
authorized officer as of the date first indicated above.

SUNRISE ENERGY RESOURCES, INC
   
By:
/s/ Konstantin Tsiryulnikov
Name:
Konstantin Tsiryulnikov
Title:
President and CEO
   
By:
/s/ Roman Livson
Name:
Roman Livson
Title:
Chief Financial Officer
   
DUTCHESS PRIVATE EQUITIES FUND, LTD.
           
By:
/s/ Douglas H. Leigton
Name:
Douglas H. Leighton
Title:
Director

 
 
 
 
 
 
 
 
 
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