Unassociated Document


     

    Exhibit 10.5

    


    NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (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.

     

    
      
        	
                Principal Amount: $__________

              	
                Issue Date: May ___, 2009

              


      

    

     

     

    FORM OF SECURED CONVERTIBLE
PROMISSORY NOTE

    


    FOR VALUE
RECEIVED, CLEAR SKIES SOLAR, INC., a Delaware corporation (hereinafter called
“Borrower”), hereby
promises to pay to the order of _______ (the “Holder”), without demand, the
sum of ________ ($_______) (“Principal Amount”), with
interest accruing thereon, on May ___, 2010 (the “Maturity Date”), if not sooner
paid.

    


    This Note has been entered into pursuant
to the terms of a subscription agreement between the Borrower, the Holder and the other signatories thereto
(“Other
Holders”) dated at or about the date hereof
(the “Subscription
Agreement”), who have been issued Notes pursuant
to the Subscription Agreement (“Other
Notes”) and shall be governed by the terms of
such Subscription Agreement.  Unless otherwise separately defined
herein, all capitalized terms used in this Note shall have the same meaning as is set forth in the
Subscription Agreement.  The following terms shall apply to this
Note:

    


    ARTICLE I

    


    GENERAL
PROVISIONS

    


    1.1           Interest
Rate.   Interest payable on this Note shall accrue at the
annual rate of six percent (6%) and be payable on the Maturity Date, accelerated
or otherwise, when the principal and remaining accrued but unpaid interest shall
be due and payable, or sooner as described below.

    


    1.2           Payment
Grace Period.  The Borrower shall not
have any grace period to pay any monetary amounts due under this
Note.  During the pendency of an Event of Default (as described in
Article III), a default interest rate of eighteen percent (18%) per annum shall
be in effect.

    


    1.3           Conversion
Privileges.  The Conversion Rights set forth in Article II shall
remain in full force and effect immediately from the date hereof and until the
Note is paid in full regardless of the occurrence of an Event of
Default.  This Note shall be payable in full on the Maturity Date,
unless previously converted into Common Stock in accordance with Article II
hereof.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    1.4           Prepayment.  This
Note may be prepaid by the Borrower in whole, at any time, or in part, from time
to time, without penalty or premium, upon thirty (30) days prior written notice
to the Holder.  Upon receipt of such notice, the Holder may determine
to convert the Note pursuant to Article
II.

    


    ARTICLE II

    


    CONVERSION RIGHTS

    


    The
Holder shall have the right to convert the principal and any interest due under
this Note into Shares of the Borrower's Common Stock, $.001 par value per share
(“Common Stock”) as set
forth below.

    


    2.1.           Conversion into the
Borrower's Common Stock.

    


    (a)           The
Holder shall have the right from and after the date of the issuance of this Note
and then at any time until this Note is fully paid, to convert any outstanding
and unpaid principal portion of this Note, and accrued interest, at the election
of the Holder (the date of giving of such notice of conversion being a "Conversion Date") into fully
paid and non-assessable shares of Common Stock as such stock exists on the date
of issuance of this Note, or any shares of capital stock of Borrower into which
such Common Stock shall hereafter be changed or reclassified, at the conversion
price as defined in Section 2.1(b) hereof
(the "Fixed Conversion
Price"), determined as provided herein.  Upon delivery to the
Borrower of a completed Notice of Conversion, a form of which is annexed hereto
as Exhibit A,
Borrower shall issue and deliver to the Holder within three (3) business days
after the Conversion Date (such third day being the “Delivery Date”) that number of
shares of Common Stock for the portion of the Note converted in accordance with
the foregoing.  At the election of the Holder, the Borrower will
deliver accrued but unpaid interest on the Note, if any, through the Conversion
Date directly to the Holder on or before the Delivery Date.  The
number of shares of Common Stock to be issued upon each conversion of this Note
shall be determined by dividing that portion of the principal of the Note and
interest, if any, to be converted, by the Conversion Price.

    


    (b) Subject
to adjustment as provided in Section 2.1(c)
hereof, the fixed conversion price per share shall be equal to $0.10 (“Fixed Conversion
Price”).

    


    (c)           
The Fixed Conversion Price and number and kind of shares or other securities to
be issued upon conversion determined pursuant to Section 2.1(a), shall
be subject to adjustment from time to time upon the happening of certain events
while this conversion right remains outstanding, as follows:

    


    A.           Merger, Sale
of Assets, etc.  If (A) the Borrower effects any merger or  consolidation
of the Borrower with or into another entity, (B) the
Borrower effects any sale of all or
substantially all of its assets in one or a series of related
transactions,  (C) any tender offer or exchange offer (whether by the
Borrower or another entity) is completed
pursuant to which holders of Common Stock are permitted to tender or exchange
their shares for other securities, cash or property, (D) the Borrower consummates a stock purchase agreement
or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with one or more persons or
entities whereby such other persons or entities acquire more than the 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by such other persons or entities making or party to, or associated or
affiliated with the other persons or entities making or party to, such stock
purchase agreement or other business combination), (E) any "person" or "group"
(as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934
Act) is or shall become the "beneficial owner" (as defined in Rule 13d-3 under
the 1934 Act), directly or indirectly, of 50% of the aggregate Common Stock of
the Borrower, or (F) the Borrower effects any reclassification of the
Common Stock or any compulsory share exchange pursuant to which the Common Stock
is effectively converted into or exchanged for other securities, cash or
property (in any such case, a "Fundamental  Transaction"), this Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall thereafter be deemed to
evidence the right to convert into such number and kind of shares or other
securities and property as would have been issuable or distributable on account
of such Fundamental Transaction, upon or with respect to the securities subject
to the conversion right immediately prior to such Fundamental Transaction.  The foregoing provision
shall similarly apply to successive Fundamental Transactions of a similar nature by any such
successor or purchaser.  Without limiting the generality of the
foregoing, the anti-dilution provisions of this Section shall apply to such
securities of such successor or purchaser after any such Fundamental Transaction.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    B.           Reclassification,
etc.  If the Borrower at any time shall, by reclassification or
otherwise, change the Common Stock into the same or a different number of
securities of any class or classes that may be issued or outstanding, this Note,
as to the unpaid principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase an adjusted number of
such securities and kind of securities as would have been issuable as the result
of such change with respect to the Common Stock immediately prior to such
reclassification or other change.

    


    C.           Stock Splits, Combinations
and Dividends.  If the shares of Common Stock are subdivided or
combined into a greater or smaller number of shares of Common Stock, or if a
dividend is paid on the Common Stock in shares of Common Stock, the Conversion
Price shall be proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of shares, in
each such case by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.

    


                                
   D.           Share
Issuance.   So long as this Note
is outstanding, if the Borrower shall issue any Common Stock except for the
Excepted Issuances (as defined in the Subscription Agreement), prior to the
complete conversion or payment of this Note, for a consideration per share that
is less than the Fixed Conversion Price that would be in effect at the time of
such issue, then, and thereafter successively upon each such issuance, the Fixed
Conversion Price shall be reduced to such other lower issue
price.  For purposes of this adjustment, the issuance of any security
or debt instrument of the Borrower carrying the right to convert such security
or debt instrument into Common Stock or of any warrant, right or option to
purchase Common Stock shall result in an adjustment to the Fixed Conversion
Price upon the issuance of the above-described security, debt instrument,
warrant, right, or option and again upon the issuance of shares of Common Stock
upon exercise of such conversion or purchase rights if such issuance is at a
price lower than the then applicable Fixed Conversion Price. Common Stock
issued or issuable by the Borrower for no consideration will be deemed issuable
or to have been issued for $0.001 per share of Common Stock.  The reduction of the Fixed
Conversion Price described in this paragraph is in addition to the other rights
of the Holder described in the Subscription Agreement.

    


    (d)           Whenever
the Conversion Price is adjusted pursuant to Section 2.1(c) above,
the Borrower shall promptly mail to the Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a statement of the
facts requiring such adjustment.

    


    (e)           During
the period the conversion right exists, Borrower will reserve from its
authorized and unissued Common Stock not less than an amount of Common Stock
equal to 150% of the amount of shares of Common Stock issuable upon the full
conversion of this Note.  Borrower represents that upon issuance, such
shares will be duly and validly issued, fully paid and
non-assessable.  Borrower agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents who are
charged with the duty of executing and issuing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon the conversion
of this Note.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    2.2           Method of
Conversion.  This Note may be converted by the Holder in whole
or in part as described in Section 2.1(a) hereof
and the Subscription Agreement.  Upon partial conversion of this Note,
a new Note containing the same date and provisions of this Note shall, at the
request of the Holder, be issued by the Borrower to the Holder for the principal
balance of this Note and interest which shall not have been converted or
paid.

    


    2.3.           Maximum
Conversion.  The Holder shall not be entitled to convert on a
Conversion Date that amount of the Note in connection with that number of shares
of Common Stock which would be in excess of the sum of (i) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates on a
Conversion Date, (ii) any Common Stock issuable in connection with the
unconverted portion of the Note, and (iii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock of the Borrower on such Conversion
Date.  For the purposes of the provision to 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 Regulation 13d-3
thereunder.  Subject to the foregoing, the Holder shall not be limited
to aggregate conversions of 4.99%.  The Holder shall have the
authority and obligation to determine whether the restriction contained in this
Section 2.3
will limit any conversion hereunder and to the extent that the Holder determines
that the limitation contained in this Section applies, the determination of
which portion of the Notes are convertible shall be the responsibility and
obligation of the Holder.  The Holder may waive the conversion
limitation described in this Section 2.3, in whole
or in part, upon and effective after 61 days prior written notice to the
Borrower to increase such percentage to up to 9.99%.

    


    ARTICLE
III

    


    EVENT
OF DEFAULT

    


    The
occurrence of any of the following events of default ("Event of Default") shall, at
the option of the Holder hereof, make all sums of principal and interest then
remaining unpaid hereon and all other amounts payable hereunder immediately due
and payable, upon demand, without presentment, or grace period, all of which
hereby are expressly waived, except as set forth below:

    


    3.1           Failure to Pay Principal or
Interest.  The Borrower fails to pay any installment of
principal, interest or other sum due under this Note when due.

    


    3.2           Breach of
Covenant.  The Borrower breaches any material covenant or other
term or condition of the Subscription Agreement, Transaction Documents or this
Note in any material respect and such breach, if subject to cure, continues for
a period of five (5) business days after written notice to the Borrower from the
Holder.

    


    3.3           Breach of Representations
and Warranties.  Any material representation or warranty of the
Borrower made herein, in the Subscription Agreement, Transaction Documents, or
in any agreement, statement or certificate given in writing pursuant hereto or
in connection therewith shall be false or misleading in any material respect as
of the date made and the Closing Date.

    


    3.4           Liquidation.   Any
dissolution, liquidation or winding up of Borrower or any substantial portion of
its business.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    3.5           Cessation of
Operations.   Any cessation of operations by Borrower or
Borrower admits it is otherwise generally unable to pay its debts as such debts
become due.

     

    3.6           Maintenance of
Assets.   The failure by Borrower to maintain any material
intellectual property rights, personal, real property or other assets which are
necessary to conduct its business (whether now or in the future).

    


    3.7           Receiver or
Trustee.  The Borrower or any Subsidiary of Borrower shall make
an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business; or such a receiver or trustee shall otherwise be
appointed.

    


    3.8           Judgments.  Any
money judgment, writ or similar final process shall be entered or filed against
Borrower or any of its property or other assets for more than $250,000, unless
stayed vacated or satisfied within thirty (30) days.

    


    3.9           Bankruptcy.  Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings or
relief under any bankruptcy law or any law, or the issuance of any notice in
relation to such event, for the relief of debtors shall be instituted by or
against the Borrower or any Subsidiary of Borrower.

    


    3.10           Delisting.   Delisting
of the Common Stock from any Principal Market; failure to comply with the
requirements for continued listing on a Principal Market for a period of five
(5) consecutive trading days; or notification from a Principal Market that the
Borrower is not in compliance with the conditions for such continued listing on
such Principal Market; provided, however, that so long as the Borrower files its
2008 10-K by May 18, 2009, the lateness of such filling will not be an Event of
Default under this Section
3.10.

    


    3.11           Non-Payment.   A
default by the Borrower under any one or more obligations in an aggregate
monetary amount in excess of $200,000 for more than twenty (20) days after the
due date, unless the Borrower is contesting the validity of such obligation in
good faith.

    


    3.12           Stop
Trade.  An SEC or judicial stop trade order or Principal Market
trading suspension that lasts for five or more consecutive trading
days.

    


    3.13           Failure to Deliver Common
Stock or Replacement Note.  Borrower's failures to timely
deliver Common Stock to the Holder pursuant to and in the form required by this
Note and Sections 7 and 11 of the Subscription Agreement, or, if required, a
replacement Note.

    


    3.14           Reservation
Default.   Failure by the Borrower to have reserved for
issuance upon conversion of the Note or upon exercise of the Warrants issued in
connection with the Subscription Agreement, the number of shares of Common Stock
as required in the Subscription Agreement, this Note and the
Warrants.

    


    3.15           Financial Statement
Restatement.  The restatement after the date hereof of any
financial statements filed by the Borrower with the Securities and Exchange
Commission for any date or period from two years prior to the Issue Date of this
Note and until this Note is no longer outstanding, if the result of such
restatement would, by comparison to the unrestated financial statements, have
constituted a Material Adverse Effect.

    


    3.16           Other Note
Default.  The occurrence of any Event of Default under any
Other Note.

    


    3.17           Reverse
Splits.   The Borrower effectuates a reverse split of its
Common Stock without twenty (20) days prior written notice to the
Holder.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    3.18           Event Described in
Subscription Agreement.  The occurrence of an Event of Default
as described in the Subscription Agreement that, if susceptible to cure, is not
cured during any designated cure period.

    


    3.19           Executive Officers Breach of
Duties.  Any of Borrower’s named executive officers or
directors is convicted of a violation of securities laws, or a settlement in
excess of $250,000 is reached by any such officer or director relating to a
violation of securities laws, breach of fiduciary duties or
self-dealing.

    


    3.20           Cross
Default.  A default by the Borrower of a material term,
covenant, warranty or undertaking of any other agreement to which the Borrower
and Holder are parties, or the occurrence of a material event of default under
any such other agreement to which Borrower and Holder are parties which is not
cured after any required notice and/or cure period.

    


    3.21           XTRAX.  Notwithstanding anything in
this Note, the Subscription Agreement or the Transaction Documents, in the event
the Company spins out its XTRAX business as described in the Subscription
Agreement, it shall not be deemed an Event of Default.

    


    ARTICLE
IV

    


    SECURITY
INTEREST

    


    4.           Security
Interest/Waiver of Automatic Stay.   This Note is secured
by a security interest granted to the Holder pursuant to a Security Agreement,
as delivered by Borrower to Holder.  The Borrower acknowledges and
agrees that should a proceeding under any bankruptcy or insolvency law be
commenced by or against the Borrower, or if any of the Collateral (as defined in
the Security Agreement) should become the subject of any bankruptcy or
insolvency proceeding, then the Holder should be entitled to, among other relief
to which the Holder may be entitled under the Transaction Documents and any
other agreement to which the Borrower and Holder are parties (collectively,
"Loan
Documents") and/or
applicable law, an order from the court granting immediate relief from the
automatic stay pursuant to 11 U.S.C. Section 362 to permit the Holder to
exercise all of its rights and remedies pursuant to the Loan Documents and/or
applicable law. THE BORROWER EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY
IMPOSED BY 11 U.S.C. SECTION 362.  FURTHERMORE, THE BORROWER EXPRESSLY
ACKNOWLEDGES AND AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION
OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION,
11 U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN
ANY WAY THE ABILITY OF THE HOLDER TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES
UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW.  The Borrower hereby
consents to any motion for relief from stay that may be filed by the Holder in
any bankruptcy or insolvency proceeding initiated by or against the Borrower
and, further, agrees not to file any opposition to any motion for relief from
stay filed by the Holder.  The Borrower represents, acknowledges and
agrees that this provision is a specific and material aspect of the Loan
Documents, and that the Holder would not agree to the terms of the Loan
Documents if this waiver were not a part of this Note. The Borrower further
represents, acknowledges and agrees that this waiver is knowingly, intelligently
and voluntarily made, that neither the Holder nor any person acting on behalf of
the Holder has made any representations to induce this waiver, that the Borrower
has been represented (or has had the opportunity to he represented) in the
signing of this Note and the Loan Documents and in the making of this waiver by
independent legal counsel selected by the Borrower and that the Borrower has
discussed this waiver with counsel.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ARTICLE
V

    


    MISCELLANEOUS

    


    5.1           Failure or Indulgence Not
Waiver.  No failure or delay on the part of the Holder hereof
in the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.  All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.

     

    5.2           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 first 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 Borrower 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 by fax only 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 Holder, to the
name, address and facsimile number set forth on the front page of this Note,
with a copy by fax only to Grushko
& Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
facsimile: (212) 697-3575.

     

    5.3           Amendment
Provision.  The term “Note” and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or
supplemented.

     

    5.4           Assignability.  This
Note shall be binding upon the Borrower and its successors and assigns, and
shall inure to the benefit of the Holder and its successors and
assigns.  The Borrower may not assign its obligations under this
Note.

     

    5.5           Cost of
Collection.  If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection, including
reasonable attorneys’ fees.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    5.6           Governing
Law.  This Note
shall be governed by and construed in accordance with the laws of the State of
New York without regard to conflicts of laws principles that would result in the
application of the substantive laws of another
jurisdiction.  Any action brought by either party against the
other concerning the transactions contemplated by this Agreement must be brought
only in the civil or state courts of New York or in the federal courts located
in the State and county of New York.  Both parties and the individual
signing this Agreement on behalf of the Borrower agree to submit to the
jurisdiction of such courts.  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 Note is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or unenforceability of
any other provision of this Note. Nothing contained herein shall be deemed or
operate to preclude the Holder from bringing suit or taking other legal action
against the Borrower in any other jurisdiction to collect on the Borrower's
obligations to Holder, to realize on any collateral or any other security for
such obligations, or to enforce a judgment or other decision in favor of the
Holder.  This
Note shall be deemed an unconditional obligation of Borrower for the payment of
money and, without limitation to any other remedies of Holder, may be enforced
against Borrower by summary proceeding pursuant to New York Civil Procedure Law
and Rules Section 3213 or any similar rule or statute in the jurisdiction where
enforcement is sought.  For purposes of such rule or statute, any
other document or agreement to which Holder and Borrower are parties or which
Borrower delivered to Holder, which may be convenient or necessary to determine
Holder’s rights hereunder or Borrower’s obligations to Holder are deemed a part
of this Note, whether or not such other document or agreement was delivered
together herewith or was executed apart from this Note.

     

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

     

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

     

    5.9           Redemption.  This Note may not be
redeemed or called without the consent of the Holder except as described in this
Note or the Subscription Agreement.

    


    5.10           Shareholder
Status.  The
Holder shall not have rights as a shareholder of the Borrower with respect to
unconverted portions of this Note.  However, the Holder will have the
rights of a shareholder of the Borrower with respect to the Shares of Common
Stock to be received after delivery by the Holder of a Conversion Notice to the
Borrower.

    


    


    [SIGNATURE
PAGE TO FOLLOW]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN WITNESS WHEREOF, Borrower
has caused this Note to be signed in its name by an authorized officer as of the
____ day of May, 2009.

     

    
      	 	CLEAR SKIES SOLAR,
      INC.	 
	 	 	 	 
	
            	
              By:
      

            	/s/ 	 
	 	 	Name:
      Ezra Green	 
	 	 	Title:
      Chief Executive
      Officer	 


    

     

    


    
      
        	WITNESS: 	 	 	 	 
	 	 	 	 	 
	
              	 	 	
              	 


      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    NOTICE OF
CONVERSION

    


    (To be executed by the Registered Holder
in order to convert the Note)

    


    


    The undersigned hereby elects to convert
$_________ of the principal and $_________ of the interest due on the Note
issued by CLEAR SKIES
SOLAR, INC. on May ___, 2009 into Shares of Common Stock of
CLEAR SKIES SOLAR,
INC. (the “Borrower”)
according to the conditions set forth in such Note, as of the date written
below.

    
 

    


    Date of
Conversion:____________________________________________________________________

     

     

    Conversion
Price:______________________________________________________________________

    


    


    Number of Shares of Common Stock
Beneficially Owned on the Conversion Date: Less than 5% of the outstanding
Common Stock of CLEAR SKIES
SOLAR, INC.

    


    


    Shares To Be
Delivered:________________________________________________________________

    


    


    Signature:___________________________________________________________________________

    
 

    


    Print
Name:__________________________________________________________________________

    


    


    Address:____________________________________________________________________________

    


     ____________________________________________________________________________