Exhibit 10.1

SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (this “Agreement”), is dated as of January 6, 2010,
by and between Clear Skies Solar, Inc., a Delaware corporation (the “Company”),
and the subscribers listed on Schedule I hereto (the “Subscribers”).

WHEREAS, the Company and the Subscribers are executing and delivering this
Agreement in reliance upon an exemption from securities registration afforded by
the provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
D”) as promulgated by the United States Securities and Exchange Commission (the
“Commission”) under the Securities Act of 1933, as amended (the “1933 Act”);

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Subscribers, as
provided herein, and the Subscribers shall purchase for an aggregate of $310,000
(the “Purchase Price”) (i) $341,000 principal amount (“Principal Amount”) of
secured promissory notes of the Company (“Note” or “Notes”), a form of which is
annexed hereto as Exhibit A, convertible into shares of the Company’s Common
Stock, $0.001 par value (the “Common Stock”) at a per share conversion price set
forth in the Notes (“Conversion Price”); (ii) 620,000 shares of the Company’s
Common Stock (“Incentive Shares”); and (iii) share purchase warrants (the
“Warrants”) in the form attached hereto as Exhibit B, to purchase shares of the
Company’s Common Stock (the “Warrant Shares”) (the “Offering”). The Notes,
shares of Common Stock issuable upon conversion of the Notes (the “Conversion
Shares”), the Incentive Shares, the Warrants and the Warrant Shares are
collectively referred to herein as the “Securities”; and

WHEREAS, the aggregate proceeds of the sale of the Notes, Incentive Shares and
the Warrants contemplated hereby shall be held in escrow by Grushko & Mittman,
P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176 (the “Escrow
Agent”) pursuant to the terms of an Escrow Agreement to be executed by the
parties substantially in the form attached hereto as Exhibit C (the “Escrow
Agreement”).

NOW, THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement the Company and the Subscribers hereby agree as
follows:

1.

Closing Date. The “Closing Date” shall be the date that the Purchase Price is
transmitted by wire transfer or otherwise credited to or for the benefit of the
Company. The consummation of the transactions contemplated herein shall take
place at the offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601,
New York, New York 10176, upon the satisfaction or waiver of all conditions to
closing set forth in this Agreement. Subject to the satisfaction or waiver of
the terms and conditions of this Agreement, on the Closing Date, Subscribers
shall purchase and the Company shall sell to Subscribers the Notes, Incentive
Shares and Warrants as described in Section 2 of this Agreement.

2.

Notes, Warrants and Incentive Shares.

(a)

Notes. Subject to the satisfaction or waiver of the terms and conditions of this
Agreement, on the Closing Date, each Subscriber shall purchase and the Company
shall sell to the Subscriber a Note in the Principal Amount designated on
Schedule I hereto for such Subscriber’s Purchase Price indicated thereon.

(b)

Warrants. On the Closing Date, the Company will issue and deliver the Warrants
to the Subscribers. One Warrant will be issued for each Share which would be
issued on the Closing Date assuming the complete conversion of the Notes on the
Closing Date at the Conversion Price. The exercise price to acquire a Warrant
Share upon exercise of a Warrant shall be equal to $0.10, subject to reduction
as described in the Warrants. The Warrants shall be exercisable until three (3)
years after the issue date of the Warrants.

(c)

Incentive Shares. On the Closing Date, the Company will issue to the
Subscribers, an aggregate 620,000 Incentive Shares. The Incentive Shares will be
fully paid and non-assessable.

(d)

Allocation of Purchase Price. The Purchase Price will be allocated among the
components of the Securities so that each component of the Securities will be
fully paid and non-assessable.

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3.

Security Interest. The Subscribers and certain other holders of promissory notes
issued by the Company have been granted a security interest in the assets of the
Company, including ownership of the Subsidiaries, which security interest was
memorialized in a “Security Agreement” dated as of May 8, 2009 and as amended on
July 28, 2009, and September 16, 2009. The Notes and all sums due under the
Notes and the Transaction Documents (as defined in Section 5(c) below) are
included in the term “Obligations” as defined in the Security Agreement and are
secured by the Collateral (as defined in the Security Agreement) in the same
manner and having the same priority as granted to the Subscriber pursuant to the
Security Agreement. The Company will execute such other agreements, documents
and financing statements reasonably requested by the Subscriber, affirm such
security agreement which may be filed at the Company’s expense with the
jurisdictions, states and counties designated by the Subscriber herein. The
Company will also execute all such documents reasonably necessary in the opinion
of the Subscriber to memorialize and further protect the security interest
described herein.

4.

Subscriber Representations and Warranties. Each of the Subscribers hereby
represents and warrants to and agrees with the Company that:

(a)

Organization and Standing of the Subscriber . Subscriber, to the extent
applicable, is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation.

(b)

Authorization and Power . Subscriber has the requisite power and authority to
enter into and perform this Agreement and the other Transaction Documents and to
purchase the Note and Warrant being sold to it hereunder. The execution,
delivery and performance of this Agreement and the other Transaction Documents
by Subscriber and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action, and no
further consent or authorization of Subscriber or its Board of Directors or
stockholders, if applicable, is required. This Agreement and the other
Transaction Documents have been duly authorized, executed and when delivered by
Subscriber and constitute, or shall constitute when executed and delivered, a
valid and binding obligation of Subscriber, enforceable against Subscriber in
accordance with the terms thereof.

(c)

No Conflicts . The execution, delivery and performance of this Agreement and the
other Transaction Documents and the consummation by Subscriber of the
transactions contemplated hereby and thereby or relating hereto do not and will
not (i) result in a violation of Subscriber’s charter documents, bylaws or other
organizational documents, if applicable, (ii) conflict with nor constitute a
default (or an event which with notice or lapse of time or both would become a
default) under any agreement to which Subscriber is a party, nor (iii) result in
a violation of any law, rule, or regulation, or any order, judgment or decree of
any court or governmental agency applicable to Subscriber or its properties
(except for such conflicts, defaults and violations as would not, individually
or in the aggregate, have a material adverse effect on Subscriber). Subscriber
is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement and the
other Transaction Documents nor to purchase the Securities in accordance with
the terms hereof, provided that for purposes of the representation made in this
sentence, Subscriber is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.

(d)

Information on Company. Subscriber has been furnished with or has had access at
the EDGAR Website of the Commission to the Company's filings made with the
Commission (hereinafter referred to collectively as the "Reports"). In addition,
Subscriber may have received in writing from the Company such other information
concerning its operations, financial condition and other matters as Subscriber
has requested in writing, identified thereon as OTHER WRITTEN INFORMATION (such
other information is collectively, the "Other Written Information"), and
considered all factors Subscriber deems material in deciding on the advisability
of investing in the Securities.

(e)

Information on Subscriber. Subscriber is, and will be at the time of the
conversion of the Notes and exercise of the Warrants, an "accredited investor",
as such term is defined in Regulation D promulgated by the Commission under the
1933 Act, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of United
States publicly-owned companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable Subscriber to utilize the information made
available by the Company to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed purchase, which
represents a speculative investment. Subscriber has the authority and is duly
and legally qualified to purchase and own the Securities. Subscriber is able to
bear the risk of such investment for an indefinite period and to afford a
complete loss thereof. The information set forth on Schedule I hereto regarding
Subscriber is accurate.

(f)

Purchase of Notes, Incentive Shares and Warrants. On the Closing Date,
Subscriber will purchase its Note, Incentive Shares and Warrants as principal
for its own account for investment only and not with a view toward, or for
resale in connection with, the public sale or any distribution thereof.

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(g)

Compliance with Securities Act. Subscriber understands and agrees that the
Securities have not been registered under the 1933 Act or any applicable state
securities laws, by reason of their issuance in a transaction that does not
require registration under the 1933 Act (based in part on the accuracy of the
representations and warranties of the Subscriber contained herein), and that
such Securities must be held indefinitely unless a subsequent disposition is
registered under the 1933 Act or any applicable state securities laws or is
exempt from such registration. In any event, and subject to compliance with
applicable securities laws, the Subscriber may enter into lawful hedging
transactions in the course of hedging the position they assume and the
Subscriber may also enter into lawful short positions or other derivative
transactions relating to the Securities, or interests in the Securities, and
deliver the Securities, or interests in the Securities, to close out their short
or other positions or otherwise settle other transactions, or loan or pledge the
Securities, or interests in the Securities, to third parties who in turn may
dispose of these Securities.

(h)

Conversion Shares, Incentive Shares and Warrant Shares Legend. The Conversion
Shares, Incentive Shares and Warrant Shares shall bear the following or similar
legend:

"THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES."

(i)

Notes and Warrants Legend. The Notes and Warrants shall bear the following
legend:

"NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE –OR-EXERCISABLE]
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES."

(j)

Communication of Offer. The offer to sell the Securities was directly
communicated to Subscriber by the Company. At no time was Subscriber presented
with or solicited by any leaflet, newspaper or magazine article, radio or
television advertisement, or any other form of general advertising or solicited
or invited to attend a promotional meeting otherwise than in connection and
concurrently with such communicated offer.

(k)

Restricted Securities. Subscriber understands that the Securities have not been
registered under the 1933 Act and Subscriber will not sell, offer to sell,
assign, pledge, hypothecate or otherwise transfer any of the Securities unless
pursuant to an effective registration statement under the 1933 Act, or unless an
exemption from registration is available. Notwithstanding anything to the
contrary contained in this Agreement, Subscriber may transfer (without
restriction and without the need for an opinion of counsel) the Securities to
its Affiliates (as defined below) provided that each such Affiliate is an
“accredited investor” under Regulation D and such Affiliate agrees to be bound
by the terms and conditions of this Agreement. For the purposes of this
Agreement, an “Affiliate” of any person or entity means any other person or
entity directly or indirectly controlling, controlled by or under direct or
indirect common control with such person or entity. Affiliate includes each
Subsidiary of the Company. For purposes of this definition, “control” means the
power to direct the management and policies of such person or firm, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.

(l)

No Governmental Review. Subscriber understands that no United States federal or
state agency or any other governmental or state agency has passed on or made
recommendations or endorsement of the Securities or the suitability of the
investment in the Securities nor have such authorities passed upon or endorsed
the merits of the offering of the Securities.

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(m)

Correctness of Representations. Subscriber represents that the foregoing
representations and warranties are true and correct as of the date hereof and,
unless Subscriber otherwise notifies the Company prior to the Closing Date,
shall be true and correct as of the Closing Date.

(n)

Survival. The foregoing representations and warranties shall survive the Closing
Date.

5.

Company Representations and Warranties. The Company represents and warrants to
and agrees with each Subscriber that:

(a)

Due Incorporation. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power to own its properties and to
carry on its business as presently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a Material Adverse Effect. For purposes of this
Agreement, a “Material Adverse Effect” shall mean a material adverse effect on
the financial condition, results of operations, prospects, properties or
business of the Company and its Subsidiaries taken as a whole. For purposes of
this Agreement, “Subsidiary” means, with respect to any entity at any date, any
corporation, limited or general partnership, limited liability company, trust,
estate, association, joint venture or other business entity of which more than
30% of (i) the outstanding capital stock having (in the absence of
contingencies) ordinary voting power to elect a majority of the board of
directors or other managing body of such entity, (ii) in the case of a
partnership or limited liability company, the interest in the capital or profits
of such partnership or limited liability company or (iii) in the case of a
trust, estate, association, joint venture or other entity, the beneficial
interest in such trust, estate, association or other entity business is, at the
time of determination, owned or controlled directly or indirectly through one or
more intermediaries, by such entity. As of the Closing Date, all of the
Company’s Subsidiaries and the Company’s ownership interest therein is set forth
on Schedule 5(a).

(b)

Outstanding Stock. All issued and outstanding shares of capital stock and equity
interests in the Company have been duly authorized and validly issued and are
fully paid and non-assessable.

(c)

Authority; Enforceability. This Agreement, the Notes, Conversion Shares,
Incentive Shares, Warrants, Security Agreement, the Escrow Agreement, and any
other agreements delivered together with this Agreement or in connection
herewith (collectively “Transaction Documents”) have been duly authorized,
executed and delivered by the Company and are valid and binding agreements of
the Company enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity. The Company has full corporate power and
authority necessary to enter into and deliver the Transaction Documents and to
perform its obligations thereunder.

(d)

Capitalization and Additional Issuances. The authorized and outstanding capital
stock of the Company and Subsidiaries on a fully diluted basis as of the date of
this Agreement and the Closing Date (not including the Securities) are set forth
on Schedule 5(d). Except as set forth on Schedule 5(d), there are no options,
warrants, or rights to subscribe to, securities, rights, understandings or
obligations convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock or other equity interest of the
Company or any of the Subsidiaries. The only officer, director, employee and
consultant stock option or stock incentive plan or similar plan currently in
effect or contemplated by the Company is described on Schedule 5(d). There are
no outstanding agreements or preemptive or similar rights affecting the
Company's Common Stock.

(e)

Consents. No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Company,
or any of its Affiliates, the OTC Bulletin Board (the “Bulletin Board”) or the
Company's shareholders is required for the execution by the Company of the
Transaction Documents and compliance and performance by the Company of its
obligations under the Transaction Documents, including, without limitation, the
issuance and sale of the Securities. The Transaction Documents and the Company’s
performance of its obligations thereunder have been unanimously approved by the
Company’s Board of Directors. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
governmental authority in the world, including without limitation, the United
States, or elsewhere is required by the Company or any Affiliate of the Company
in connection with the consummation of the transactions contemplated by this
Agreement, except as would not otherwise have a Material Adverse Effect or the
consummation of any of the other agreements, covenants or commitments of the
Company or any Subsidiary contemplated by the other Transaction Documents. Any
such qualifications and filings will, in the case of qualifications, be
effective on the Closing and will, in the case of filings, be made within the
time prescribed by law.

(f)

No Violation or Conflict. Assuming the representations and warranties of the
Subscriber in Section 4 are true and correct, neither the issuance and sale of
the Securities nor the performance of the Company’s obligations under this
Agreement and all other agreements entered into by the Company relating thereto
by the Company will:

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(i)

violate, conflict with, result in a breach of, or constitute a default (or an
event which with the giving of notice or the lapse of time or both would be
reasonably likely to constitute a default) under (A) the articles or certificate
of incorporation, charter or bylaws of the Company, (B) to the Company's
knowledge, any decree, judgment, order, law, treaty, rule, regulation or
determination applicable to the Company of any court, governmental agency or
body, or arbitrator having jurisdiction over the Company or over the properties
or assets of the Company or any of its Affiliates, (C) the terms of any bond,
debenture, note or any other evidence of indebtedness, or any agreement, stock
option or other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company or any of its Affiliates is a party, by which
the Company or any of its Affiliates is bound, or to which any of the properties
of the Company or any of its Affiliates is subject, or (D) the terms of any
"lock-up" or similar provision of any underwriting or similar agreement to which
the Company, or any of its Affiliates is a party except the violation, conflict,
breach, or default of which would not have a Material Adverse Effect; or

(ii)

result in the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company or any of its Affiliates except
in favor of Subscribers as described herein; or

(iii)

except as described on Schedule 5(f)(iii), result in the activation of any
anti-dilution rights or a reset or repricing of any debt, equity or security
instrument of any creditor or equity holder of the Company, or the holder of the
right to receive any debt, equity or security instrument of the Company nor
result in the acceleration of the due date of any obligation of the Company; or

(iv)

except as described on Schedule 5(f)(iv), result in the triggering of any
piggy-back or other registration rights of any person or entity holding
securities of the Company or having the right to receive securities of the
Company.

(g)

The Securities. The Securities upon issuance:

(i)

are, or will be, free and clear of any security interests, liens, claims or
other encumbrances, subject only to restrictions upon transfer under the 1933
Act and any applicable state securities laws;

(ii)

have been, or will be, duly and validly authorized and on the dates of issuance
of the Conversion Shares upon conversion of the Notes, and the Warrant Shares
upon exercise of the Warrants, such Conversion Shares and Warrant Shares will be
duly and validly issued, fully paid and non-assessable and if registered
pursuant to the 1933 Act and resold pursuant to an effective registration
statement or exempt from registration will be free trading, unrestricted and
unlegended;

(iii)

will not have been issued or sold in violation of any preemptive or other
similar rights of the holders of any securities of the Company or rights to
acquire securities of the Company;

(iv)

will not subject the holders thereof to personal liability by reason of being
such holders; and

(v)

assuming the representations and warranties of the Subscribers as set forth in
Section 4 hereof are true and correct, will not result in a violation of Section
5 under the 1933 Act.

(h)

Litigation. There is no pending or, to the best knowledge of the Company,
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its Affiliates that would affect the execution by the Company or the
complete and timely performance by the Company of its obligations under the
Transaction Documents. Except as disclosed in the Reports, there is no pending
or, to the best knowledge of the Company, basis for or threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its Affiliates which
litigation if adversely determined would have a Material Adverse Effect.

(i)

No Market Manipulation. The Company and its Affiliates have not taken, and will
not take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Securities
or affect the price at which the Securities may be issued or resold.

(j)

Information Concerning Company. The Reports and Other Written Information
contain all material information relating to the Company and its operations and
financial condition as of their respective dates which information is required
to be disclosed therein. Since December 31, 2008 and except as modified in the
Reports and Other Written Information or in the Schedules hereto, there has been
no Material Adverse Event relating to the Company's business, financial
condition or affairs. The Reports and Other Written Information including the
financial statements included therein do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, taken as a whole, not misleading in
light of the circumstances and when made.

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(k)

Solvency. Based on the financial condition of the Company as of the Closing
Date, (i) the Company’s fair saleable value of its assets exceeds the amount
that will be required to be paid on or in respect of the Company’s existing
debts and other liabilities (including known contingent liabilities) as they
mature; (ii) the Company’s assets do not constitute unreasonably small capital
to carry on its business for the current fiscal year as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof; and (iii) the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid. The Company does
not intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in
respect of its debt).

(l)

Defaults. The Company is not in violation of its articles of incorporation or
bylaws. Except as set forth in Schedule 5(l), the Company is (i) not in default
under or in violation of any other material agreement or instrument to which it
is a party or by which it or any of its properties are bound or affected, which
default or violation would have a Material Adverse Effect, (ii) not in default
with respect to any order of any court, arbitrator or governmental body or
subject to or party to any order of any court or governmental authority arising
out of any action, suit or proceeding under any statute or other law respecting
antitrust, monopoly, restraint of trade, unfair competition or similar matters,
or (iii) not in violation of any statute, rule or regulation of any governmental
authority which violation would have a Material Adverse Effect.

(m)

No Integrated Offering. Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf, has directly or indirectly made any offers
or sales of any security of the Company nor solicited any offers to buy any
security of the Company under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Bulletin Board. No prior offering will impair the exemptions relied upon in
this Offering or the Company’s ability to timely comply with its obligations
hereunder. Neither the Company nor any of its Affiliates will take any action or
steps that would cause the offer or issuance of the Securities to be integrated
with other offerings which would impair the exemptions relied upon in this
Offering or the Company’s ability to timely comply with its obligations
hereunder. The Company will not conduct any offering other than the transactions
contemplated hereby that may be integrated with the offer or issuance of the
Securities that would impair the exemptions relied upon in this Offering or the
Company’s ability to timely comply with its obligations hereunder.

(n)

No General Solicitation. Neither the Company, nor any of its Affiliates, nor to
its knowledge, any person acting on its or their behalf, has engaged in any form
of general solicitation or general advertising (within the meaning of Regulation
D under the 1933 Act) in connection with the offer or sale of the Securities.

(o)

No Undisclosed Liabilities. The Company has no liabilities or obligations which
are material, individually or in the aggregate, other than those incurred in the
ordinary course of the Company businesses since December 31, 2008 and which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, except as disclosed in the Reports or on Schedule 5(o).

(p)

No Undisclosed Events or Circumstances. Since December 31, 2008, except as
disclosed in the Reports, no event or circumstance has occurred or exists with
respect to the Company or its businesses, properties, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the Reports.

(q)

Banking. Schedule 5(q) contains a list of all financial institutions at which
the Company and Subsidiaries maintain deposit, checking and other accounts. The
list includes the accurate addresses of such financial institutions and account
numbers of such accounts.

(r)

Dilution. The Company's executive officers and directors understand the nature
of the Securities being sold hereby and recognize that the issuance of the
Securities will have a potential dilutive effect on the equity holdings of other
holders of the Company’s equity or rights to receive equity of the Company. The
board of directors of the Company has concluded, in its good faith business
judgment, that the issuance of the Securities is in the best interests of the
Company. The Company specifically acknowledges that its obligation to issue the
Incentive Shares, Conversion Shares upon conversion of the Notes and the Warrant
Shares upon exercise of the Warrants is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests of
other shareholders of the Company or parties entitled to receive equity of the
Company.

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(s)

No Disagreements with Accountants and Lawyers. Except as set forth on Schedule
5(s), there are no material disagreements of any kind presently existing, or
reasonably anticipated by the Company to arise between the Company and the
accountants and lawyers previously and presently employed by the Company,
including but not limited to disputes or conflicts over payment owed to such
accountants and lawyers, nor have there been any such disagreements during the
two years prior to the Closing Date.

(t)

Investment Company. Neither the Company nor any Affiliate of the Company is an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended.

(u)

Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.

(v)

Reporting Company/Shell Company. The Company is a publicly-held company subject
to reporting obligations pursuant to Section 13 of the Securities Exchange Act
of 1934, as amended (the "1934 Act") and has a class of Common Stock registered
pursuant to Section 12(g) of the 1934 Act. Pursuant to the provisions of the
1934 Act, the Company has timely filed all reports and other materials required
to be filed thereunder with the Commission during the preceding twelve months.
As of the Closing Date, the Company is not a “shell company” but is a “former
shell company” as those terms are employed in Rule 144 under the 1933 Act.
However, more than twelve months have elapsed since the filing of the “Form 10”
information as such term is employed in Rule 144 under the 1933 Act.

(w)

Listing. The Company's Common Stock is quoted on the Bulletin Board under the
symbol CSKH. The Company has not received any pending oral or written notice
that its Common Stock is not eligible nor will become ineligible for quotation
on the Bulletin Board nor that its Common Stock does not meet all requirements
for the continuation of such quotation and the Company satisfies all the
requirements for the continued quotation of its Common Stock on the Bulletin
Board.

(x)

DTC Status. The Company’s transfer agent is a participant in, and the Common
Stock is eligible for transfer pursuant to, the Depository Trust Company
Automated Securities Transfer Program. The name, address, telephone number, fax
number, contact person and email address of the Company transfer agent is set
forth on Schedule 5(x) hereto.

(y)

Company Predecessor and Subsidiaries. The Company makes each of the
representations contained in Sections 5(a), (b), (c), (d), (e), (f), (h), (j),
(l), (o), (p), (q), (s), (t) and (u) of this Agreement, as same relate or could
be applicable to each Subsidiary. All representations made by or relating to the
Company of a historical or prospective nature and all undertakings described in
Sections 9(g) through 9(l) shall relate, apply and refer to the Company and its
predecessors and successors. The Company represents that it owns all of the
equity of the Subsidiaries and rights to receive equity of the Subsidiaries
identified on Schedule 5(a), free and clear of all liens, encumbrances and
claims, except as set forth on Schedule 5(a). No person or entity other than the
Company has the right to receive any equity interest in the Subsidiaries. The
Company further represents that the Subsidiaries have not been known by any
other name for the prior five years.

(z)

Correctness of Representations. The Company represents that the foregoing
representations and warranties are true and correct as of the date hereof in all
material respects, and, unless the Company otherwise notifies the Subscribers
prior to the Closing Date, shall be true and correct in all material respects as
of the Closing Date; provided, that, if such representation or warranty is made
as of a different date, in which case such representation or warranty shall be
true as of such date.

(AA)

Survival. The foregoing representations and warranties shall survive the Closing
Date.

6.

Regulation D Offering/Legal Opinion. The offer and issuance of the Securities to
the Subscribers is being made pursuant to the exemption from the registration
provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder. On the Closing Date,
the Company will provide an opinion reasonably acceptable to the Subscribers
from the Company's legal counsel opining on the availability of an exemption
from registration under the 1933 Act as it relates to the offer and issuance of
the Securities and other matters reasonably requested by Subscribers. A form of
the legal opinion is annexed hereto as Exhibit D. The Company will provide, at
the Company's expense, to the Subscriber and Subscriber’s counsel in relation to
the Fee Shares [as defined in Section 8(b)], such other legal opinions, if any,
as are reasonably necessary in each Subscriber’s and such counsel’s opinion for
the issuance and resale of the Conversion Shares, Warrant Shares and Fee Shares
pursuant to an effective registration statement, Rule 144 under the 1933 Act or
an exemption from registration.

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7.1.

Conversion of Notes.

(a)

Upon the conversion of a Note or part thereof, the Company shall, at its own
cost and expense, take all necessary action, including obtaining and delivering
an opinion of counsel, to assure that the Company's transfer agent shall issue
stock certificates in the name of a Subscriber (or its permitted nominee) or
such other persons as designated by Subscriber and in such denominations to be
specified at conversion representing the number of shares of Common Stock
issuable upon such conversion. The Company warrants that no instructions other
than these instructions have been or will be given to the transfer agent of the
Company's Common Stock and that the certificates representing such shares shall
contain no legend other than the legend set forth in Section 4(h). If and when a
Subscriber sells the Conversion Shares, assuming (i) a registration statement
including such Conversion Shares for registration has been filed with the
Commission, is effective and the prospectus, as supplemented or amended,
contained therein is current and (ii) Subscriber or its agent confirms in
writing to the transfer agent that Subscriber has complied with the prospectus
delivery requirements, the Company will reissue the Conversion Shares without
restrictive legend and the Conversion Shares will be free-trading, and freely
transferable. In the event that the Conversion Shares are sold in a manner that
complies with an exemption from registration, the Company will promptly instruct
its counsel to issue to the transfer agent an opinion permitting removal of the
legend indefinitely, if pursuant to Rule 144(b)(1)(i) of the 1933 Act, provided
that Subscriber delivers all reasonably requested representations in support of
such opinion.

(b)

Each Subscriber will give notice of its decision to exercise its right to
convert its Note, interest, or part thereof by telecopying or otherwise
delivering a completed Notice of Conversion (a form of which is annexed as
Exhibit A to the Note) to the Company via confirmed telecopier transmission or
otherwise pursuant to Section 13(a) of this Agreement. Subscriber will not be
required to surrender the Note until the Note has been fully converted or
satisfied. Each date on which a Notice of Conversion is telecopied to the
Company in accordance with the provisions hereof by 6 PM Eastern Time (“ET”) (or
if received by the Company after 6 PM ET, then the next business day) shall be
deemed a “Conversion Date.” The Company will itself or cause the Company’s
transfer agent to transmit the Company's Common Stock certificates representing
the Conversion Shares issuable upon conversion of the Note to Subscriber via
express courier for receipt by Subscriber within five (5) business days after
the Conversion Date (such fifth day being the "Delivery Date"). In the event the
Conversion Shares are electronically transferable, then delivery of the Shares
must be made by electronic transfer provided request for such electronic
transfer has been made by the Subscriber. A Note representing the balance of the
Note not so converted will be provided by the Company to Subscriber if requested
by Subscriber, provided Subscriber delivers the original Note to the Company.

(c)

The Company understands that a delay in the delivery of the Conversion Shares in
the form required pursuant to Section 7.1 hereof later than the Delivery Date
could result in economic loss to the Subscribers. As compensation to Subscribers
for such loss, the Company agrees to pay (as liquidated damages and not as a
penalty) to each applicable Subscriber for late issuance of Conversion Shares in
the form required pursuant to Section 7.1 hereof upon Conversion of the Note,
the amount of $100 per business day after the Delivery Date for each $10,000 of
Note principal amount and interest (and proportionately for other amounts) being
converted of the corresponding Conversion Shares which are not timely delivered.
The Company shall pay any payments incurred under this Section upon demand.
Furthermore, in addition to any other remedies which may be available to the
Subscribers, in the event that the Company fails for any reason to effect
delivery of the Conversion Shares within seven (7) business days after the
Delivery Date, the relevant Subscriber will be entitled to revoke all or part of
the relevant Notice of Conversion by delivery of a notice to such effect to the
Company whereupon the Company and Subscriber shall each be restored to their
respective positions immediately prior to the delivery of such notice, except
that the damages payable in connection with the Company’s default shall be
payable through the date notice of revocation or rescission is given to the
Company.

7.2.

[intentionally omitted]

7.3.

Maximum Conversion. A Subscriber shall not be entitled to convert on a
Conversion Date that amount of a Note nor may the Company make any payment
including principal, interest, or liquidated or other damages by delivery of
Conversion Shares in connection with that number of Conversion Shares which
would be in excess of the sum of (i) the number of shares of Common Stock
beneficially owned by such Subscriber and its Affiliates on a Conversion Date or
payment date, and (ii) the number of Conversion Shares issuable upon the
conversion of the Note with respect to which the determination of this provision
is being made on a calculation date, which would result in beneficial ownership
by Subscriber and its Affiliates of more than 4.99% of the outstanding shares of
Common Stock of the Company on such Conversion Date. For the purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Rule 13d-3 thereunder. Subject to the foregoing, the Subscriber
shall not be limited to aggregate conversions of only 4.99% and aggregate
conversions by the Subscriber may exceed 4.99%. The Subscriber may increase the
permitted beneficial ownership amount up to 9.99% upon and effective after 61
days prior written notice to the Company. Subscriber may allocate which of the
equity of the Company deemed beneficially owned by Subscriber shall be included
in the 4.99% amount described above and which shall be allocated to the excess
above 4.99%.

8

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7.4.

Injunction Posting of Bond. In the event a Subscriber shall elect to convert a
Note or part thereof, the Company may not refuse conversion based on any claim
that Subscriber or any one associated or affiliated with Subscriber has been
engaged in any violation of law, or for any other reason, unless, a final
non-appealable injunction from a court made on notice to Subscriber, restraining
and or enjoining conversion of all or part of such Note shall have been sought
and obtained by the Company and the Company has posted a surety bond for the
benefit of Subscriber in the amount of 120% of the outstanding principal and
accrued but unpaid interest of the Note, or aggregate purchase price of the
Conversion Shares which are sought to be subject to the injunction, which bond
shall remain in effect until the completion of arbitration/litigation of the
dispute and the proceeds of which shall be payable to Subscriber to the extent
the judgment or decision is in Subscriber’s favor.

7.5.

Buy-In. In addition to any other rights available to Subscribers, if the Company
fails to deliver to a Subscriber Conversion Shares by the Delivery Date and if
after the Delivery Date Subscriber or a broker on Subscriber’s behalf purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by Subscriber of the Common Stock which Subscriber was
entitled to receive upon such conversion (a "Buy-In"), then the Company shall
pay to Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) Subscriber's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased
exceeds (B) the aggregate principal and/or interest amount of the Note for which
such conversion request was not timely honored together with interest thereon at
a rate of 15% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated damages and
not as a penalty). For example, if a Subscriber purchases shares of Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of $10,000 of Note principal and/or interest, the Company
shall be required to pay Subscriber $1,000 plus interest. Subscriber shall
provide the Company written notice and evidence indicating the amounts payable
to Subscriber in respect of the Buy-In.

7.6

Adjustments. The Conversion Price, Warrant exercise price and amount of
Conversion Shares and Warrant Shares shall be equitably adjusted and as
otherwise described in this Agreement, the Notes and Warrants.

7.7.

Redemption. The Note shall not be redeemable or callable by the Company, except
as described in the Note.

8.

Fees.

(a)

Brokers. The Company represents that there are no parties entitled to receive
fees, commissions, credit enhancement fees, due diligence fees, lead investor
fees, or similar payments in connection with the Offering.

 

(b)

Subscriber’s Legal Fees. The Company shall pay to Subscribers’ counsel, Grushko
& Mittman, P.C., a fee of 80,000 shares of restricted Common Stock (“Fee
Shares”) as reimbursement for services rendered to the Subscribers in connection
with this Agreement and the Offering. Subscribers’ counsel is hereby granted all
of the registration rights and other rights granted to the Subscribers in
Section 11, including but not limited to, indemnification rights and liquidated
damages. For the purpose of calculating liquidated damages pursuant to this
Agreement and not for tax purposes, each share issued to Subscribers’ counsel
shall have an attributed value of $0.10.

(c)

Company’s Legal Fees. The Company shall pay to Sichenzia Ross Friedman Ference
LLP (“Company Counsel”), a fee of 50,000 shares of restricted Common Stock as
reimbursement for services rendered to the Company in connection with this
Agreement and the Offering. Such fee shall be delivered upon or after Closing.

9.

Covenants of the Company. The Company covenants and agrees with the Subscribers
as follows:

(a)

Stop Orders. Subject to the prior notice requirement described in Section 9(n),
the Company will advise the Subscribers, within twenty-four hours after it
receives notice of issuance by the Commission, any state securities commission
or any other regulatory authority of any stop order or of any order preventing
or suspending any offering of any securities of the Company, or of the
suspension of the qualification of the Common Stock of the Company for offering
or sale in any jurisdiction, or the initiation of any proceeding for any such
purpose. The Company will not issue any stop transfer order or other order
impeding the sale, resale or delivery of any of the Securities, except as may be
required by any applicable federal or state securities laws and unless
contemporaneous notice of such instruction is given to the Subscribers.

9

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(b)

Listing/Quotation. The Company shall promptly secure the quotation or listing of
the Conversion Shares, Incentive Shares and Warrant Shares upon each national
securities exchange, or automated quotation system upon which the Company’s
Common Stock is quoted or listed and upon which such Conversion Shares,
Incentive Shares and Warrant Shares are or become eligible for quotation or
listing (subject to official notice of issuance) and shall maintain same so long
as any Notes and Warrants are outstanding. The Company will maintain the
quotation or listing of its Common Stock on the American Stock Exchange, Nasdaq
Capital Market, Nasdaq Global Market, Nasdaq Global Select Market, Bulletin
Board, or New York Stock Exchange (whichever of the foregoing is at the time the
principal trading exchange or market for the Common Stock (the “Principal
Market”), and will comply in all respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the Principal Market, as
applicable. The Company will provide Subscribers with copies of all notices it
receives notifying the Company of the threatened and actual delisting of the
Common Stock from any Principal Market. As of the date of this Agreement and the
Closing Date, the Bulletin Board is and will be the Principal Market.

(c)

Market Regulations. If required, the Company shall notify the Commission, the
Principal Market and applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Securities to the Subscribers and promptly provide copies thereof to the
Subscribers.

(d)

Filing Requirements. From the date of this Agreement and until the last to occur
of (i) all the Conversion Shares and Incentive Shares have been resold or
transferred by the Subscribers pursuant to a registration statement or pursuant
to Rule 144(b)(1)(i), or (ii) the Notes and Warrants are no longer outstanding
(the date of such latest occurrence being the “End Date”), the Company will (A)
cause its Common Stock to continue to be registered under Section 12(b) or 12(g)
of the 1934 Act, (B) comply in all respects with its reporting and filing
obligations under the 1934 Act, (C) voluntarily comply with all reporting
requirements that are applicable to an issuer with a class of shares registered
pursuant to Section 12(g) of the 1934 Act, if the Company is not subject to such
reporting requirements, and (D) comply with all requirements related to any
registration statement filed pursuant to this Agreement. The Company will use
its best efforts not to take any action or file any document (whether or not
permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate
or suspend such registration or to terminate or suspend its reporting and filing
obligations under said acts until the End Date. Until the End Date, the Company
will continue the listing or quotation of the Common Stock on a Principal Market
and will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Principal Market. The Company
agrees to timely file a Form D with respect to the Securities if required under
Regulation D and to provide a copy thereof to Subscribers promptly after such
filing.

(e)

Use of Proceeds. The proceeds of the Offering will be substantially employed by
the Company for the purposes set forth on Schedule 9(e) hereto. Except as
described on Schedule 9(e), the Purchase Price may not and will not be used for
accrued and unpaid officer and director salaries, payment of financing related
debt, redemption of outstanding notes or equity instruments of the Company nor
non-trade obligations outstanding on the Closing Date. For so long as any Note
is outstanding, the Company will not prepay any financing related debt
obligations, except equipment payments, nor redeem any equity instruments of the
Company without the prior consent of the Subscribers.

(f)

Reservation. Subject to the filing by the Company of the “Amendment” to increase
the authorized shares of the Company’s Common Stock , no later than March 31,
2010, during the period conversion rights exist, the Company will reserve on
behalf of Subscribers from its authorized but unissued Common Stock, a number of
shares of Common Stock equal to 105% of the amount of Common Stock necessary to
allow Subscribers to be able to convert the entire Notes and 100% of the amount
of Warrant Shares issuable upon exercise of the Warrants (“Required
Reservation”). Failure to have sufficient shares reserved pursuant to this
Section 9(f) at any time shall be a material default of the Company’s
obligations under this Agreement and an Event of Default under the Notes. If at
any time Notes and Warrants are outstanding the Company has insufficient Common
Stock reserved on behalf of the Subscribers in an amount less than 105% of the
amount necessary for full conversion of the outstanding Notes principal and
interest at the conversion price that would be in effect on every such date and
100% of the Warrant Shares (“Minimum Required Reservation”), the Company will
promptly reserve the Minimum Required Reservation, or if there are insufficient
authorized and available shares of Common Stock to do so, the Company will take
all action necessary to increase its authorized capital to be able to fully
satisfy its reservation requirements hereunder, including the filing of a
preliminary proxy with the Commission not later than fifteen business days after
the first day the Company has less than the Minimum Required Reservation. The
Company agrees to provide notice to the Subscribers not later than three days
after the date the Company has less than the Minimum Required Reservation
reserved on behalf of the Subscriber.

(g)

DTC Program. At all times that Notes or Warrants are outstanding, the Company
will employ as the transfer agent for the Common Stock, Conversion Shares,
Incentive Shares and Warrant Shares a participant in the Depository Trust
Company Automated Securities Transfer Program.

10

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(h)

Taxes. From the date of this Agreement and until the End Date, the Company will
promptly pay and discharge, or cause to be paid and discharged, when due and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto, and provided, further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefore.

(i)

Insurance. From the date of this Agreement and until the End Date, the Company
will keep its assets which are of an insurable character insured by financially
sound and reputable insurers against loss or damage by fire, explosion and other
risks customarily insured against by companies in the Company’s line of business
and location, in amounts and to the extent and in the manner customary for
companies in similar businesses similarly situated and located and to the extent
available on commercially reasonable terms.

(j)

Books and Records. From the date of this Agreement and until the End Date, the
Company will keep true records and books of account in which full, true and
correct entries will be made of all dealings or transactions in relation to its
business and affairs in accordance with generally accepted accounting principles
applied on a consistent basis.

(k)

Governmental Authorities. From the date of this Agreement and until the End
Date, the Company shall duly observe and conform in all material respects to all
valid requirements of governmental authorities relating to the conduct of its
business or to its properties or assets.

(l)

Intellectual Property. From the date of this Agreement and until the End Date,
the Company shall maintain in full force and effect its corporate existence,
rights and franchises and all licenses and other rights to use intellectual
property owned or possessed by it and reasonably deemed to be necessary to the
conduct of its business, unless it is sold for value. Schedule 9(l) hereto
identifies all of the intellectual property owned by the Company and
Subsidiaries.

(m)

Properties. From the date of this Agreement and until the End Date, the Company
will keep its properties in good repair, working order and condition, reasonable
wear and tear excepted, and from time to time make all necessary and proper
repairs, renewals, replacements, additions and improvements thereto; and the
Company will at all times comply with each provision of all leases and claims to
which it is a party or under which it occupies or has rights to property if the
breach of such provision could reasonably be expected to have a Material Adverse
Effect. The Company will not abandon any of its assets except for those assets
which have negligible or marginal value or for which it is prudent to do so
under the circumstances.

(n)

Confidentiality/Public Announcement. From the date of this Agreement and until
the End Date, the Company agrees that except in connection with a Form 8-K, Form
10-Q, Form 10-K and the registration statement or statements regarding the
Subscribers’ Securities or in correspondence with the Commission regarding same,
it will not disclose publicly or privately the identity of the Subscribers
unless expressly agreed to in writing by Subscribers or only to the extent
required by law and then only upon not less than three days prior notice to
Subscribers. In any event and subject to the foregoing, the Company undertakes
to file a Form 8-K describing the Offering not later than the fourth (4th)
business day after the Closing Date. Prior to the filing date of such Form 8-K,
a draft in the final form will be provided to Subscribers for Subscribers’
review and approval. In the Form 8-K, the Company will specifically disclose the
amount of Common Stock outstanding immediately after the Closing. Upon
delivery by the Company to the Subscribers after the Closing Date of any notice
or information, in writing, electronically or otherwise, and while a Note,
Conversion Shares, Incentive Shares or Warrants are held by Subscribers, unless
the Company has in good faith determined that the matters relating to such
notice do not constitute material, nonpublic information relating to the Company
or Subsidiaries, the Company shall within one business day after any such
delivery publicly disclose such material, nonpublic information on a
Report on Form 8-K. In the event that the Company believes that a notice or
communication to Subscribers contains material, nonpublic information relating
to the Company or Subsidiaries, the Company shall so indicate to Subscribers
prior to delivery of such notice or information. Subscribers will be granted
sufficient time to notify the Company that Subscribers elects not to receive
such information. In such case, the Company will not deliver such information to
Subscribers. In the absence of any such indication, Subscribers shall be allowed
to presume that all matters relating to such notice and information do not
constitute material, nonpublic information relating to the Company or
Subsidiaries.

(o)

Non-Public Information. The Company covenants and agrees that except for the
Reports, Other Written Information and schedules and exhibits to this Agreement
and the Transaction Documents, which information the Company undertakes to
publicly disclose on the Form 8-K described in Section 9(n) above, neither it
nor any other person acting on its behalf will at any time provide Subscribers
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto Subscribers
shall have agreed in writing to accept such information. The Company understands
and confirms that Subscribers shall be relying on the foregoing representations
in effecting transactions in securities of the Company.

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(p)

Negative Covenants. So long as a Note is outstanding, without the consent of the
Subscribers, the Company will not and will not permit any of its Subsidiaries to
directly or indirectly:

(i)

create, incur, assume or suffer to exist any pledge, hypothecation, assignment,
deposit arrangement, lien, charge, claim, security interest, security title,
mortgage, security deed or deed of trust, easement or encumbrance, or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including any lease or title retention agreement,
any financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
perfecting a security interest under the Uniform Commercial Code or comparable
law of any jurisdiction) (each, a “Lien”) upon any of its property, whether now
owned or hereafter acquired except for: (A) the Excepted Issuances (as defined
in Section 12 hereof), and (B) (a) Liens imposed by law for taxes that are not
yet due or are being contested in good faith and for which adequate reserves
have been established in accordance with generally accepted accounting
principles; (b) carriers’, warehousemen’s, mechanics’, material men’s,
repairmen’s and other like Liens imposed by law, arising in the ordinary course
of business and securing obligations that are not overdue by more than 30 days
or that are being contested in good faith and by appropriate proceedings; (c)
pledges and deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other social security laws or
regulations; (d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business; (e) Liens created with respect to the financing of the purchase of new
property in the ordinary course of the Company’s business up to the amount of
the purchase price of such property; (f) easements, zoning restrictions,
rights-of-way and similar encumbrances on real property imposed by law or
arising in the ordinary course of business that do not secure any monetary
obligations and do not materially detract from the value of the affected
property; and (g) Liens set forth on Schedule 9(p)(i) (each of (a) through (g),
a “Permitted Lien”);

 

(ii)

amend its certificate of incorporation, bylaws or its charter documents so as to
materially and adversely affect any rights of the Subscribers (an increase in
the amount of authorized shares and an increase in the number of directors will
not be deemed adverse to the rights of the Subscribers);

(iii)

repay, repurchase or offer to repay, repurchase or otherwise acquire or make any
dividend or distribution in respect of any of its Common Stock, preferred stock,
or other equity securities other than to the extent permitted or required under
the Transaction Documents;

(iv)

engage in any transactions with any officer, director, employee or any Affiliate
of the Company, including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $100,000 other than (i) for payment of salary, or fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company, and (iii) for
other employee benefits, including stock option agreements under any stock
option plan of the Company; or

(v)

prepay or redeem any financing related debt or past due obligations or
securities outstanding as of the Closing Date, or past due obligations (except
with respect to vendor obligations, or any such obligations which in
management’s good faith, reasonable judgment must be repaid to avoid disruption
of the Company’s businesses).

(q)

Further Registration Statements. Except for registration statements on Form S-8,
the Company will not, without the consent of the Subscribers, file with the
Commission or with state regulatory authorities any registration statements or
amend any already filed registration statement to increase the amount of Common
Stock registered therein, or reduce the price of which such company securities
are registered therein, until the expiration of the “Exclusion Period,” which
shall be defined as the sooner of (i) the date all of the registrable securities
have been registered in an effective registration statement, or (ii) until all
the Conversion Shares, Incentive Shares and Warrant Shares are eligible to be
resold by the Subscribers pursuant to a registration statement or Rule
144b(1)(i), without regard to volume limitations for an aggregate of 180 days
following six months after the Closing Date. The Exclusion Period will be tolled
or reinstated, as the case may be, during the pendency of an Event of Default as
defined in the Note.

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(r)

Offering Restrictions. For so long as the Notes are outstanding, the Company
will not enter into any Equity Line of Credit or similar agreement, nor issue
nor agree to issue any floating or Variable Priced Equity Linked Instruments nor
any of the foregoing or equity with price reset rights (collectively, the
“Variable Rate Restrictions”). For purposes hereof, “Equity Line of Credit”
shall include any transaction involving a written agreement between the Company
and an investor or underwriter whereby the Company has the right to “put” its
securities to the investor or underwriter over an agreed period of time and at
an agreed price or price formula, and “Variable Priced Equity Linked
Instruments” shall include: (A) any debt or equity securities which are
convertible into, exercisable or exchangeable for, or carry the right to receive
additional shares of Common Stock either (1) at any conversion, exercise or
exchange rate or other price that is based upon and/or varies with the trading
prices of or quotations for Common Stock at any time after the initial issuance
of such debt or equity security, or (2) with a fixed conversion, exercise or
exchange price that is subject to being reset at some future date at any time
after the initial issuance of such debt or equity security due to a change in
the market price of the Company’s Common Stock since date of initial issuance,
and (B) any amortizing convertible security which amortizes prior to its
maturity date, where the Company is required or has the option to (or any
investor in such transaction has the option to require the Company to) make such
amortization payments in shares of Common Stock which are valued at a price that
is based upon and/or varies with the trading prices of or quotations for Common
Stock at any time after the initial issuance of such debt or equity security
(whether or not such payments in stock are subject to certain equity
conditions). For so long as Notes are outstanding, except for the Excepted
Issuances [as defined in Section 12(b)], the Company will not enter into an
agreement to issue nor issue any equity, convertible debt or other securities
convertible into Common Stock or equity of the Company nor modify any of the
foregoing which may be outstanding at anytime, without the prior written consent
of the Subscribers which consent may be withheld for any reason, if such Common
Stock is issued or may be purchased for less than the greater of (i) $0.09 per
share of Common Stock or (ii) 50% of the closing price of the Common Stock as
reported for the Principal Market on the day such Common Stock is issued and/or
purchased.

(s)

Seniority. Except for Permitted Liens, until the Notes are fully satisfied or
converted, the Company shall not grant nor allow any security interest to be
taken in any assets of the Company or any Subsidiary or any Subsidiary’s assets;
nor issue any debt, equity or other instrument which would give the holder
thereof directly or indirectly, a right in any assets of the Company or any
Subsidiary or any right to payment equal to or superior to any right of the
Subscribers as holders of the Notes in or to such assets or payment, nor issue
or incur any debt not in the ordinary course of business.

(t)

Notices. For so long as the Subscribers hold any Securities, the Company will
maintain a United States address and United States fax number for notice
purposes under the Transaction Documents.

(u)

Transactions With Insiders. Except as described on Schedule 9(u), so long as the
Notes are outstanding, the Company shall not, and shall cause each of its
Subsidiaries not to, enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment, or arrangement relating to the sale, transfer or
assignment of any of the Company’s tangible or intangible assets with any of its
Insiders (as defined below)(or any persons who were Insiders at any time during
the previous two (2) years), or any Affiliates (as defined below) thereof, or
with any individual related by blood, marriage, or adoption to any such
individual. “Affiliate” for purposes of this Section 9(u) means, with respect to
any person or entity, another person or entity that, directly or indirectly, (i)
has a ten percent (10%) or more equity interest in that person or entity, (ii)
has ten percent (10%) or more common ownership with that person or entity, (iii)
controls that person or entity, or (iv) shares common control with that person
or entity. “Control” or “Controls” for purposes hereof means that a person or
entity has the power, direct or indirect, to conduct or govern the policies of
another person or entity. For purposes hereof, “Insiders” shall mean any
officer, director or manager of the Company, including but not limited to the
Company’s president, chief executive officer, chief financial officer and chief
operations officer, and any of their affiliates or family members.

10.

Covenants of the Company Regarding Indemnification.

(a)

The Company agrees to indemnify, hold harmless, reimburse and defend the
Subscribers, the Subscribers’ officers, directors, agents, counsel, Affiliates,
members, managers, control persons, and principal shareholders, against any
claim, cost, expense, liability, obligation, loss or damage (including
reasonable legal fees) of any nature, incurred by or imposed upon the
Subscribers or any such person which results, arises out of or is based upon (i)
any material misrepresentation by Company or breach of any representation or
warranty by Company in this Agreement or in any Exhibits or Schedules attached
hereto in any Transaction Document, or other agreement delivered pursuant hereto
or in connection herewith, now or after the date hereof; or (ii) after any
applicable notice and/or cure periods, any breach or default in performance by
the Company of any covenant or undertaking to be performed by the Company
hereunder, or any other agreement entered into by the Company and Subscribers
relating hereto.

(b)

In no event shall the liability of the Subscribers or permitted successor
hereunder or under any Transaction Document or other agreement delivered in
connection herewith be greater in amount than the dollar amount of the net
proceeds actually received by such Subscriber or successor upon the sale of
Registrable Securities (as defined herein).

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(c)

The procedures set forth in Section 11.6 shall apply to the indemnification set
forth in Section 10(a).

11.

Additional Post-Closing Obligations.

11.1.

Piggy-Back Registrations. If at any time until two years after the Closing Date
there is not an effective registration statement covering all of the Conversion
Shares, Warrant Shares and Incentive Shares and the Company shall determine to
prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the 1933 Act of any
of its equity securities, but excluding Forms S-4 or S-8 and similar forms which
do not permit such registration, then the Company shall send to each holder of
any of the Securities written notice of such determination and, if within
fifteen calendar days after receipt of such notice, any such holder shall so
request in writing, the Company shall include in such registration statement all
or any part of the Conversion Shares, Warrant Shares and Incentive Shares such
holder requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights and any cutbacks in accordance
with guidance provided by the Securities and Exchange Commission (including, but
not limited to, Rule 415). The obligations of the Company under this Section may
be waived by any holder of any of the Securities entitled to registration rights
under this Section 11.1. The holders whose Conversion Shares, Warrant Shares and
Incentive Shares are included or required to be included in such registration
statement are granted the same rights, benefits, liquidated or other damages and
indemnification granted to other holders of securities included in such
registration statement. Notwithstanding anything to the contrary herein, the
registration rights granted hereunder to the holders of Securities shall not be
applicable for such times as such Conversion Shares, Warrant Shares and
Incentive Shares may be sold by the holder thereof without restriction pursuant
to Section 144(b)(1) of the 1933 Act. In no event shall the liability of any
holder of Securities or permitted successor in connection with any Conversion
Shares, Warrant Shares and Incentive Shares included in any such registration
statement be greater in amount than the dollar amount of the net proceeds
actually received by such Subscriber upon the sale of the Conversion Shares,
Warrant Shares and Incentive Shares sold pursuant to such registration or such
lesser amount in proportion to all other holders of Securities included in such
registration statement. All expenses incurred by the Company in complying with
Section 11, including, without limitation, all registration and filing fees,
printing expenses (if required), fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or “blue sky” laws, fees of the NASD, transfer taxes, and fees of
transfer agents and registrars, are called “Registration Expenses.” All
underwriting discounts and selling commissions applicable to the sale of
registrable securities are called "Selling Expenses." The Company will pay all
Registration Expenses in connection with the registration statement under
Section 11. Selling Expenses in connection with each registration statement
under Section 11 shall be borne by the holder and will be apportioned among such
holders in proportion to the number of Shares included therein for a holder
relative to all the Securities included therein for all selling holders, or as
all holders may agree

11.2.

Delivery of Unlegended Shares.

(a)

Within three (3) business days (such third business day being the “Unlegended
Shares Delivery Date”) after the business day on which the Company has received
(i) a notice that Conversion Shares, or any other Common Stock held by
Subscriber has been sold pursuant to a registration statement or Rule 144 under
the 1933 Act, (ii) a representation that the prospectus delivery requirements,
or the requirements of Rule 144, as applicable and if required, have been
satisfied, (iii) the original share certificates representing the shares of
Common Stock that have been sold, and (iv) in the case of sales under Rule 144,
customary representation letters of the Subscriber and, if required,
Subscriber’s broker regarding compliance with the requirements of Rule 144, the
Company at its expense, (y) shall deliver, and shall cause legal counsel
selected by the Company to deliver to its transfer agent (with copies to
Subscriber) an appropriate instruction and opinion of such counsel, directing
the delivery of shares of Common Stock without any legends including the legend
set forth in Section 4(h) above (the “Unlegended Shares”); and (z) cause the
transmission of the certificates representing the Unlegended Shares together
with a legended certificate representing the balance of the submitted Common
Stock certificate, if any, to the Subscriber at the address specified in the
notice of sale, via express courier, by electronic transfer or otherwise on or
before the Unlegended Shares Delivery Date.

(b)

In lieu of delivering physical certificates representing the Unlegended Shares,
upon request of Subscriber, and, if the Company is DTC and/or DWAC eligible, so
long as the certificates therefor do not bear a legend and the Subscriber is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall cause its transfer agent to electronically transmit the Unlegended
Shares by crediting the account of Subscriber’s prime broker with the Depository
Trust Company through its Deposit Withdrawal Agent Commission system, if such
transfer agent participates in such DWAC system. Such delivery must be made on
or before the Unlegended Shares Delivery Date.

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(c)

The Company understands that a delay in the delivery of the Unlegended Shares
pursuant to Section 11 hereof later than the Unlegended Shares Delivery Date
could result in economic loss to a Subscriber. As compensation to a Subscriber
for such loss, the Company agrees to pay late payment fees (as liquidated
damages and not as a penalty) to the Subscriber for late delivery of Unlegended
Shares in the amount of $100 per business day after the Delivery Date for each
$10,000 of purchase price of the Unlegended Shares subject to the delivery
default. If during any 360 day period, the Company fails to deliver Unlegended
Shares as required by this Section 11.2 for an aggregate of thirty days, then
each Subscriber or assignee holding Securities subject to such default may, at
its option, require the Company to redeem all or any portion of the Shares
subject to such default at a price per share equal to the greater of (i) 120%,
or (ii) a fraction in which the numerator is the highest closing price of the
Common Stock during the aforedescribed thirty day period and the denominator of
which is the lowest conversion price during such thirty day period, multiplied
by the price paid by Subscriber for such Common Stock (“Unlegended Redemption
Amount”). The Company shall pay any payments incurred under this Section in
immediately available funds upon demand.

(d)

In the event a Subscriber shall request delivery of Unlegended Shares as
described in Section 11.2 and the Company is required to deliver such Unlegended
Shares pursuant to Section 11.2, the Company may not refuse to deliver
Unlegended Shares based on any claim that such Subscriber or any one associated
or affiliated with such Subscriber has been engaged in any violation of law, or
for any other reason, unless, an injunction or temporary restraining order from
a court, on notice, restraining and or enjoining delivery of such Unlegended
Shares shall have been sought and obtained by the Company and the Company has
posted a surety bond for the benefit of such Subscriber in the amount of 105% of
the amount of the aggregate purchase price of the Common Stock which are subject
to the injunction or temporary restraining order, 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 Subscriber to the extent Subscriber
obtains judgment in Subscriber’s favor.

(e)

 In addition to any other rights available to Subscriber, if the Company fails
to deliver to a Subscriber Unlegended Shares as required pursuant to this
Agreement and after the Unlegended Shares Delivery Date, the Subscriber or a
broker on the Subscriber’s behalf, purchases (in an open market transaction or
otherwise) shares of common stock to deliver in satisfaction of a sale by such
Subscriber of the shares of Common Stock which the Subscriber was entitled to
receive from the Company (a "Buy-In"), then the Company shall pay in cash to the
Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of common stock so
purchased exceeds (B) the aggregate purchase price of the shares of Common Stock
delivered to the Company for reissuance as Unlegended Shares together with
interest thereon at a rate of 15% per annum accruing until such amount and any
accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example, if a Subscriber purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to $10,000 of purchase price of shares of Common Stock
delivered to the Company for reissuance as Unlegended Shares, the Company shall
be required to pay the Subscriber $1,000, plus interest. The Subscriber shall
provide the Company written notice indicating the amounts payable to the
Subscriber in respect of the Buy-In.

11.3.

In the event commencing six months after the Closing Date and ending twenty-four
months thereafter, the Subscriber is not permitted to resell any of the
Conversion Shares without any restrictive legend or if such sales are permitted
but subject to volume limitations or further restrictions on resale as a result
of the unavailability to Subscriber of Rule 144(b)(1)(i) under the 1933 Act or
any successor rule (a “144 Default”), for any reason except for Subscriber’s
status as an Affiliate or “control person” of the Company, or as a result of a
change in current applicable securities laws, then the Company shall pay such
Subscriber as “liquidated damages” and not as a penalty an amount equal to one
percent (1%) for each thirty days (or such lesser pro-rata amount for any period
less than thirty days) thereafter of the purchase price of the Conversion Shares
subject to such 144 Default during the pendency of the 144 Default. Liquidated
Damages shall not be payable pursuant to this Section 11.3 in connection with
Shares for such times as such Shares may be sold by the holder thereof without
restriction pursuant to Section 144(b)(1) of the 1933 Act or pursuant to an
effective registration statement.

12.

(a)

Right of First Refusal. Subject to the rights of the Subscribers as set forth in
the Prior Transactions [as defined in Section 13(m)], until the later of one
year following the Closing Date or for so long as any amount remains outstanding
on the Notes, the Subscribers shall be given not less than fifteen (15) business
days prior written notice of any proposed sale by the Company of its common
stock or other securities or equity linked debt obligations, except in
connection with the Excepted Issuances [as defined in Section 12(b)]. If
Subscribers elect to exercise their rights pursuant to this Section 12(a),
Subscribers shall have the right during the fifteen (15) business days following
receipt of the notice to purchase in the aggregate up to all of such offered
common stock, debt or other securities in accordance with the terms and
conditions set forth in the notice of sale relative to each other in proportion
to the amount principal of the Notes to be issued to them on the Closing Date.
In the event such terms and conditions are modified during the notice period,
Subscribers shall be given prompt notice of such modification and shall have the
right during the fifteen (15) business days following the notice of modification
to exercise such right.

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(b)

Favored Nations Provision. Other than in connection with (i) full or partial
consideration in connection with a strategic merger, acquisition, consolidation
or purchase of substantially all of the securities or assets of a corporation or
other entity which holders of such securities or debt are not at any time
granted registration rights equal to or greater than those granted to the
Subscribers and the Common Stock issuable in connection therewith is issued at
not less than $.09 per share of Common Stock, (ii) the Company’s issuance of
securities in connection with strategic license agreements and other partnering
arrangements so long as such issuances are not for the purpose of raising
capital and which holders of such securities or debt are not at any time granted
registration rights equal to or greater than those granted to the Subscribers
and the Common Stock issuable in connection therewith is issued at not less than
$.09 per share of Common Stock, (iii) the Company’s issuance of Common Stock or
the issuances or grants of options to purchase Common Stock to employees,
directors, and consultants, pursuant to plans described on Schedule 5(d) as such
plans are constituted on the Closing Date, (iv) securities upon the exercise or
exchange of or conversion of any securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of
this Agreement on the terms in effect on the Closing Date and described on
Schedule 5(d), (v) as a result of the exercise of Warrants or conversion of
Notes which are granted or issued pursuant to this Agreement, (vi) the Company’s
issuance of Common Stock or the issuances or grants of options to purchase
Common Stock to consultants and service providers as set forth on Schedule
12(b), and (vii) an issuance of up to $43,000 of convertible promissory notes
and warrants at a conversion price and warrant exercise price of $0.10 to
“friends and family” of the Company which promissory notes and warrants and
supporting documents do not contain any registration rights, or reset provisions
(collectively, the foregoing (i) through (vii) are “Excepted Issuances”), if at
any time the Notes or Warrants are outstanding, the Company shall agree to or
issue (the “Lower Price Issuance”) any Common Stock or securities convertible
into or exercisable for shares of Common Stock (or modify any of the foregoing
which may be outstanding) to any person or entity at a price per share or
conversion or exercise price per share which shall be less than the Conversion
Price in effect at such time, or if less than the Warrant exercise price in
effect at such time, without the consent of the Subscribers, then the Conversion
Price and Warrant exercise price shall automatically be reduced to such other
lower price. The average Purchase Price of the Conversion Shares and average
exercise price in relation to the Warrant Shares shall be calculated separately
for the Conversion Shares and Warrant Shares. Common Stock issued or issuable by
the Company for no consideration or for consideration that cannot be determined
at the time of issue will be deemed issuable or to have been issued for $0.001
per share of Common Stock. For purposes of the issuance and adjustments
described in this paragraph, the issuance of any security of the Company
carrying the right to convert such security into shares of Common Stock or any
warrant, right or option to purchase Common Stock shall result in the issuance
of the additional shares of Common Stock upon the sooner of the agreement to or
actual issuance of such convertible security, warrant, right or options and
again at any time upon any subsequent issuances of shares of Common Stock upon
exercise of such conversion or purchase rights if such issuance is at a price
lower than the Conversion Price or warrant exercise price in effect upon such
issuance. The rights of Subscribers set forth in this Section 12 are in addition
to any other rights the Subscribers have pursuant to this Agreement, the Notes,
any Transaction Document, and any other agreement referred to or entered into in
connection herewith or to which Subscribers and Company are parties.

(c)

Maximum Exercise of Rights. In the event the exercise of the rights described in
Section 12(a) and Section 12(b) would or could result in the issuance of an
amount of Common Stock of the Company that would exceed the maximum amount that
may be issued to Subscribers calculated in the manner described in Section 7.3
of this Agreement, then the issuance of such additional shares of Common Stock
of the Company to Subscribers will be deferred in whole or in part until such
time as Subscribers are able to beneficially own such Common Stock without
exceeding the applicable maximum amount set forth calculated in the manner
described in Section 7.3 of this Agreement and notifies the Company accordingly.

13.

Miscellaneous.

(a)

Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (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 addresses for such
communications shall be: (i) if to the Company, to: Clear Skies Solar, Inc., 200
Old Country Road, Suite 610, Mineola, New York 11501, Attn: Ezra Green, CEO,
facsimile: (516) 281-7150, with a copy to: Harvey Kesner, Esq., Sichenzia Ross
Friedman Ference LLP, 61 Broadway, 32nd Floor, New York, NY 10006, facsimile:
(212) 930-9725, and (ii) if to the Subscribers, to: the addresses and fax
numbers indicated on Schedule I hereto, with an additional copy by fax only to:
Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
facsimile: (212) 697-3575.

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(b)

Entire Agreement; Assignment. This Agreement and other documents delivered in
connection herewith represent the entire agreement between the parties hereto
with respect to the subject matter hereof and may be amended only by a writing
executed by both parties. Neither the Company nor the Subscribers has relied on
any representations not contained or referred to in this Agreement and the
documents delivered herewith. No right or obligation of the Company shall be
assigned without prior notice to and the written consent of the Subscribers.

(c)

Counterparts/Execution. This Agreement may be executed in any number of
counterparts and by the different signatories hereto on separate counterparts,
each of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument. This Agreement
may be executed by facsimile signature and delivered by electronic transmission.

(d)

Law Governing this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state and county of New York. The parties to this Agreement hereby
irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens. The parties executing
this Agreement and other agreements referred to herein or delivered in
connection herewith on behalf of the Company agree to submit to the in personam
jurisdiction of such courts and hereby irrevocably waive trial by jury. The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to
process being served in any suit, action or proceeding in connection with this
Agreement or any other Transaction Document by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by law.

(e)

Specific Enforcement, Consent to Jurisdiction. The Company and Subscribers
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity. Subject to Section 13(d)
hereof, the Company hereby irrevocably waives, and agrees not to assert in any
such suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction in New York 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. Nothing in this Section shall affect or limit any right
to serve process in any other manner permitted by law.

(f)

Damages. In the event the Subscriber is entitled to receive any liquidated
damages pursuant to the Transactions Documents, the Subscriber may elect to
receive the greater of actual damages or such liquidated damages.

(g)

Maximum Payments. Nothing contained herein or in any document referred to herein
or delivered in connection herewith shall be deemed to establish or require the
payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest or dividends
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to the Subscribers and thus refunded to the Company.

(h)

Calendar Days. All references to “days” in the Transaction Documents shall mean
calendar days unless otherwise stated. The terms “business days” and “trading
days” shall mean days that the New York Stock Exchange is open for trading for
three or more hours. Time periods shall be determined as if the relevant action,
calculation or time period were occurring in New York City. Any deadline that
falls on a non-business day in any of the Transaction Documents shall be
automatically extended to the next business day and interest, if any, shall be
calculated and payable through such extended period.

(i)

Captions: Certain Definitions. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement. As used in this Agreement the term “person” shall
mean and include an individual, a partnership, a joint venture, a corporation, a
limited liability company, a trust, an unincorporated organization and a
government or any department or agency thereof.

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(j)

Consent. As used in this Agreement and the Transaction Documents and any other
agreement delivered in connection herewith, “consent of the Subscribers” or
similar language means the consent of holders of not less than 70% of the
outstanding principal amount of the Notes on the date consent is requested (such
amount being a “Majority in Interest”). A Majority in Interest may consent to
take or forebear from any action permitted under or in connection with the
Transaction Documents, modify any Transaction Documents or waive any default or
requirement applicable to the Company, Subsidiaries or Subscribers under the
Transaction Documents provided the effect of such action does not waive any
accrued interest or damages and further provided that the relative rights of the
Subscribers to each other remains unchanged.

(k)

Severability. In the event that any term or provision of this Agreement shall be
finally determined to be superseded, invalid, illegal or otherwise unenforceable
pursuant to applicable law by an authority having jurisdiction and venue, that
determination shall not impair or otherwise affect the validity, legality or
enforceability: (i) by or before that authority of the remaining terms and
provisions of this Agreement, which shall be enforced as if the unenforceable
term or provision were deleted, or (ii) by or before any other authority of any
of the terms and provisions of this Agreement.

(l)

Successor Laws. References in the Transaction Documents to laws, rules,
regulations and forms shall also include successors to and functionally
equivalent replacements of such laws, rules, regulations and forms. A successor
rule to Rule 144(b)(1)(i) shall include any rule that would be available to a
non-Affiliate of the Company for the sale of Common Stock not subject to volume
restrictions and after a six month holding period.

(m)

Consent and Waiver. On May 8, 2009, July 28, 2009 and September 16, 2009,
certain of the Subscribers purchased secured convertible notes and common stock
purchase warrants from the Company substantially similar to the Notes and
Warrants (“Prior Transactions”). The Subscribers, to the extent required,
necessary or permitted in connection with the Prior Transactions, consent to the
Offering and issuance of the Securities as described in the Transaction
Documents. Additionally, the Subscribers consent to the removal of the
reservation of shares requirement in the Transaction Documents and in the
transaction documents relating to the Prior Transactions, until March 31, 2010.
Notwithstanding anything to the contrary contained herein, the Subscribers to
the Prior Transactions shall be entitled to the same reset terms and
anti-dilution protections as set forth in Section 12(b) of the Subscription
Agreement, Sections 2.1(c)(D) and (E) of the Notes and Section 3.3 of the
Warrants.

[SIGNATURE PAGE FOLLOWS]

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SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)

Please acknowledge your acceptance of the foregoing Subscription Agreement by
signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

CLEAR SKIES SOLAR, INC.

a Delaware corporation

By: /s/ Ezra Green                   

Name: Ezra Green

Title: Chief Executive Officer

Dated: January 6, 2010

SUBSCRIBER

PURCHASE PRICE

PRINCIPAL AMOUNT

INCENTIVE SHARES

WARRANTS

MICHAEL BRAUSER

3164 NE 31st Avenue

Lighthouse Pt., FL 33064

Fax: (561) 544-2456

/s/ Michael Brauser

 

$100,000.00

$110,000.00

200,000

1,100,000

19

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SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)

Please acknowledge your acceptance of the foregoing Subscription Agreement by
signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

CLEAR SKIES SOLAR, INC.

a Delaware corporation

By: /s/ Ezra Green                   

Name: Ezra Green

Title: Chief Executive Officer

Dated: January 6, 2010

SUBSCRIBER

PURCHASE PRICE

PRINCIPAL AMOUNT

INCENTIVE SHARES

WARRANTS

ALPHA CAPITAL ANSTALT

Pradafant 7

9490 Furstentums

Vaduz, Lichtenstein

Fax: 011-42-32323196

/s/ Konrad Ackermann   

By: Konrad Ackermann

 

$100,000.00

$110,000.00

200,000

1,100,000

20

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

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C)

Please acknowledge your acceptance of the foregoing Subscription Agreement by
signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

CLEAR SKIES SOLAR, INC.

a Delaware corporation

By: /s/ Ezra Green                   

Name: Ezra Green

Title: Chief Executive Officer

Dated: January 6, 2010

SUBSCRIBER

PURCHASE PRICE

PRINCIPAL AMOUNT

INCENTIVE SHARES

WARRANTS

BARRY HONIG

595 S. Federal Highway, Suite 600

Boca Raton, FL 33432

Fax: (561) 544-2456

/s/ Barry Honig

 

$100,000.00

$110,000.00

200,000

1,100,000

21

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

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (D)

Please acknowledge your acceptance of the foregoing Subscription Agreement by
signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

CLEAR SKIES SOLAR, INC.

a Delaware corporation

By: /s/ Ezra Green                   

Name: Ezra Green

Title: Chief Executive Officer

Dated: January 6, 2010

SUBSCRIBER

PURCHASE PRICE

PRINCIPAL AMOUNT

INCENTIVE SHARES

WARRANTS

ARTHUR GOLDBERG

34 Oak Avenue

Larchmont, NY 10538

Fax: (914) 834-6071

/s/ Arthur Goldberg

 

$10,000.00

$11,000.00

20,000

110,000

22

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SCHEDULE I

SUBSCRIBER AND ADDRESS

PURCHASE PRICE

PRINCIPAL AMOUNT

INCENTIVE SHARES

WARRANT SHARES

MICHAEL BRAUSER

3164 NE 31st Avenue

Lighthouse Pt., FL 33064

Fax: (561) 544-2456

$100,000.00

$110,000.00

200,000

1,100,000

ALPHA CAPITAL ANSTALT

Pradafant 7

9490 Furstentums

Vaduz, Lichtenstein

Fax: 011-42-32323196

$100,000.00

$110,000.00

200,000

1,100,000

BARRY HONIG

595 S. Federal Highway, Suite 600

Boca Raton, FL 33432

Fax: (561) 544-2456

$100,000.00

$110,000.00

200,000

1,100,000

ARTHUR GOLDBERG

34 Oak Avenue

Larchmont, NY 10538

Fax: (914) 834-6071

$10,000.00

$11,000.00

20,000

110,000

TOTALS

$310,000.00

$341,000.00

620,000

3,410,000

23

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LIST OF EXHIBITS AND SCHEDULES

Exhibit A

Form of Note

Exhibit B

Form of Warrant

Exhibit C

Escrow Agreement

Exhibit D

Form of Legal Opinion

Schedule I

List of Subscribers

Schedule 5(a)

Subsidiaries

Schedule 5(d)

Capitalization and Additional Issuances

Schedule 5(f)(iii)

Anti-dilution

Schedule 5(f)(iv)

Registration Rights

Schedule 5(l)

Defaults

Schedule 5(o)

Undisclosed Liabilities

Schedule 5(q)

Banking

Schedule 5(s)

Accountants and Lawyers

Schedule 5(x)

Transfer Agent

Schedule 8(d)

Due Diligence Fee Recipients

Schedule 9(e)

Use of Proceeds

Schedule 9(l)

Intellectual Property

Schedule 9(p)(i)

Liens

Schedule 9(q)

Additional Registrable Securities

Schedule 9(u)

Description of XTRAX Assets

Schedule 11.1

Registration Rights

Schedule 12(b)

Excepted Issuances

24