Unassociated Document


     

    Exhibit 10.4

     

    SUBSCRIPTION
AGREEMENT

     

    THIS SUBSCRIPTION
AGREEMENT (this
“Agreement”), is dated as of May 8, 2009, 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 $400,000 (the “Purchase
Price”) (i) $400,000 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”); and (ii) 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 Warrants and the Warrant Shares are collectively referred to herein as
the “Securities.”; and

     

    WHEREAS, the aggregate proceeds of the sale of
the Notes 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 and Warrants as
described in Section 2 of this Agreement.

    


    2.           Notes and
Warrants.

    


    (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.

     

    
      
        
        

      

      
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    (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 $0.15, 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)           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.

    


    (d)           Distribution of Purchase
Price.  Notwithstanding anything to the contrary contained in
this Agreement or otherwise, pursuant to the terms of the Escrow Agreement, on
the Closing Date the Escrow Agent shall deliver to the Company $110,000 of the
Purchase Price, and the remainder of the Purchase Price shall be delivered by
the Escrow Agent to the Company promptly (within one (1) business day) of the
filing with the Commission of the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2008 (the “2008 10-K”), provided such
filing is made on or prior to 4:30 P.M. on May 18, 2009 and if the 2008 10-K is
not filed by such date the Subscribers shall have the right to direct the Escrow
Agent to return the balance of the Purchase Price to the applicable
Subscribers.

    


    3.           Security
Interest.   The Subscriber will be granted a security
interest in certain assets of the Company and Subsidiaries (as defined in
Section 5(a) of this Agreement), which security interest will be
memorialized in a “Security
Agreement,” a form of which is annexed hereto as Exhibit
D.   The Company will execute such other agreements,
documents and financing statements reasonably requested by the Subscribers,
which will be filed at the Company’s expense with the jurisdictions, states and
counties designated by the Subscribers.

    


                      
     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.

     

    
      
        
        

      

      
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    (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  and Warrants.  On the Closing Date, Subscriber
will purchase its Note 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.

    


    (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 and
Warrant Shares Legend.  The Conversion 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."

     

    
      
        
        

      

      
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    (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.

     

    
      
        
        

      

      
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    (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.

    


    (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,
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.

     

    
      
        
        

      

      
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    (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:

     

    (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

     

    
      
        
        

      

      
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   (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,
2007 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.

     

    (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).

     

    
      
        
        

      

      
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    (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,
2007 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 September 30, 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.

     

    
      
        
        

      

      
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    (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 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.

     

    (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, except
for the Company’s 2008 10-K, which has not yet been filed.  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
CSKHE.  Except for notification that the 2008 10-K has not yet been
filed, (i) the Company has not received any 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 (ii) 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.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (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 E.  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.

    


                       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.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (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%.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    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 or 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 150,000
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 a cash fee of $15,000
as reimbursement for
services rendered to the Company in connection with this Agreement and
the Offering.  Such fee shall be
paid out of the first funds received by the Company pursuant to Section 2(d) above.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    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.

     

    (b)           Listing/Quotation.  The
Company shall promptly secure the quotation or listing of the Conversion 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 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 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.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (e)           Use of
Proceeds.   The proceeds of the Offering will be employed
by the Company for expenses of the Offering and general working
capital.  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.   Prior to the Closing,
the Company undertakes to reserve on behalf of Subscribers from its authorized but unissued Common
Stock, a number of shares
of Common Stock equal to
150% 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 125% 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 and Warrant Shares a participant
in the Depository Trust Company Automated Securities Transfer
Program.

     

    (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.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (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 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.

    


    (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:

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (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 a
registration statement filed exclusively on behalf of the Subscribers, the Company will not, without the
consent of the Subscribers, file with the Commission or with state regulatory
authorities any registration statements (excluding Forms S-8) 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 [as defined in Section 11.1] have been registered in an
effective registration statement, or (ii) until all the Conversion Shares and Warrant Shares have been
resold by the Subscribers
pursuant to a registration
statement or Rule 144b(1)(i), without regard to volume
limitations.  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).

     

    (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.  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. Notwithstanding
anything herein to the contrary, the Company may spin out, in a transaction in
which Ezra Green may hold an equity interest, the technology and business known
as XTRAX as described on Schedule
9(u), provided that such spin out is effectuated with a company that is
listed on a Principal Market and the ownership of the Company of such acquiring
public company following such transaction is not less than 20%.

     

    
      
        
        

      

      
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    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).

     

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

     

    11.1.        Registration
Rights.  The Company hereby grants the following
registration rights to holders of the Securities.

     

    (i)           On one occasion, commencing ninety-one days after the Closing Date, but
not later than one year after the Closing Date, upon a
written request therefor from any record holder or holders of more than 50% of
the Conversion Shares issued and issuable upon conversion of the outstanding
Notes and outstanding Warrant Shares, the Company shall prepare and file with
the Commission a registration statement under the 1933 Act registering the
Registrable Securities, as defined in Section 11.1(iv) hereof, which are the
subject of such request for unrestricted public resale by the holder
thereof.  For purposes of Sections 11.1(i) and 11.1(ii), Registrable
Securities shall not include Securities which are (A) registered for resale in
an effective registration statement, (B) included for registration in a pending
registration statement, (C) which have been issued without further transfer
restrictions after a sale or transfer pursuant to Rule 144 under the 1933 Act or
(D) which may be resold under Rule 144 without volume
limitations.  Upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of the Registrable
Securities that such registration statement is to be filed and shall include in
such registration statement Registrable Securities for which it has received
written requests within ten days after the Company gives such written
notice.  Such other requesting record holders shall be deemed to have
exercised their demand registration right under this Section
11.1(i).

     

    (ii)           If the Company at any time proposes to
register any of its securities under the 1933 Act for sale to the public,
whether for its own account or for the account of other security holders or
both, except with respect to registration statements on Forms S-4,
S-8 or another form not
available for registering the Registrable Securities for sale to the public,
provided the Registrable Securities are not otherwise registered for resale by
the Subscribers or Holder pursuant to an effective registration statement, each
such time it will give at least ten (10) days' prior written notice to the
record holder of the Registrable Securities of its intention so to do. Upon the
written request of the holder, received by the Company within ten (10) days
after the giving of any such notice by the Company, to register any of the
Registrable Securities not previously registered, the Company will cause such
Registrable Securities as to which registration shall have been so requested to
be included with the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent required to permit the
sale or other disposition of the Registrable Securities so registered by the
holder of such Registrable Securities (the “Seller” or “Sellers”). In the event that any registration
pursuant to this Section
11.1(ii) shall be, in whole
or in part, an underwritten public offering of common stock of the Company, the
number of shares of Registrable Securities to be included in such an
underwriting may be reduced by the managing underwriter if and to the extent
that the Company and the underwriter shall reasonably be of the opinion that
such inclusion would adversely affect the marketing of the securities to be sold
by the Company therein; provided, however, that the Company shall notify the
Seller in writing of any such reduction. Notwithstanding the foregoing
provisions, or Section
11.4 hereof, the Company
may withdraw or delay or suffer a delay of any registration statement referred
to in this Section
11.1(ii) without thereby
incurring any liability to the Seller.

     

    
      
        
        

      

      
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    (iii)           If, at the time any written request for
registration is received by the Company pursuant to Section 11.1(i), the Company
has determined to proceed with the actual preparation and filing of a
registration statement under the 1933 Act in connection with the proposed offer
and sale for cash of any of its securities for the Company's own account and the
Company actually does file such other registration statement, such written
request shall be deemed to have been given pursuant to Section 11.1(ii) rather
than Section 11.1(i), and the rights of the holders of Registrable Securities
covered by such written request shall be governed by Section
11.1(ii).

     

    (iv)           The Company shall file with the
Commission a Form S-1 registration statement (the “Registration
Statement”) (or such other
form that it is eligible to use) in order to register the Registrable Securities
for resale and distribution under the 1933 Act within thirty (30) calendar days after the Closing Date
(the “Filing
Date”), and use its best efforts to cause the Registration Statement to be
declared effective not
later than ninety (90) days after the Closing Date
(the “Effective
Date”).  The
Company will register not less than a number of shares of common stock in the
aforedescribed registration statement that is equal to 125% of the Conversion Shares issued and issuable upon
conversion of all of the Notes and 100% of the Warrant Shares issuable
upon exercise of the Warrants (collectively the “Registrable
Securities”). The
Registrable Securities shall be reserved and set aside exclusively for the
benefit of each Subscriber and Warrant holder, pro rata, and not issued, employed or reserved
for anyone other than each Subscriber and Warrant holder.  The
Registration Statement will immediately be amended or additional registration
statements will be immediately filed by the Company as necessary to register
additional shares of Common Stock to allow the public resale of all Common Stock
included in and issuable by virtue of the Registrable
Securities.  Except as set forth on Schedule
11.1 or with the written consent of the
Subscribers, no securities of the Company other
than the Registrable Securities will be included in the Registration
Statement.  It shall be deemed a Non-Registration Event if at any time
after the date the Registration Statement is declared effective by the
Commission (“Actual Effective
Date”) the Company has
registered for unrestricted resale on behalf of the Subscribers fewer than
110% of the amount of Common Shares
issuable upon full conversion of all sums due under the Notes and Warrant Shares
(the difference between such 110% and the actual amount of shares
registered being the “Shortfall”).  In such event, the
Company shall take all actions necessary to cause at least 105% of the amount of shares of Common
Stock issuable upon full conversion of all sums due under the Notes and 100% of
the Warrant Shares to be registered within ninety (90) days after the first day such
Shortfall exists.  Failure to file the Registration Statement within
thirty (30) days after the first day such Shortfall first exists or failure to
cause such registration to become effective within ninety (90) days after such Shortfall first
exists shall be a Non-Registration Event.

     

                            
11.2.       Registration
Procedures. If and whenever
the Company is required by the provisions of Section 11.1 to effect the registration of any
Registrable Securities under the 1933 Act, the Company will, as expeditiously as
possible:

     

    
      
        
        

      

      
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    (a)           subject to the timelines provided in
this Agreement, prepare and file with the Commission a registration statement
required by Section 11.1 with respect to such securities and use
its best efforts to cause such registration statement to become and remain
effective for the period of the distribution contemplated thereby (determined as
herein provided), promptly provide to the holders of the Registrable Securities
copies of all filings and Commission letters of comment and notify the Sellers  (by telecopier and by e-mail addresses
provided by the
Subscribers) and Grushko
& Mittman, P.C. (by telecopier and by email to Counslers@aol.com) on or before the second  business day thereafter that the Company
receives notice that (i) the Commission has no comments or no further comments
on the registration statement, and (ii) the registration
statement has been declared effective [failure to timely provide notice as
required by this Section 11.2(a) shall be a material breach of the Company’s
obligation and an Event of Default as defined in the Notes and a Non-Registration Event as
defined in Section 11.4 of this Agreement];

     

    (b)           prepare and file with the Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective until such registration statement has been
effective for a period of one (1) year, and comply with the provisions of the
1933 Act with respect to the disposition of all of the Registrable Securities
covered by such registration statement in accordance with the Sellers’ intended method of disposition set
forth in such registration statement for such period;

     

    (c)           furnish to the Sellers, at the Company’s expense, such number
of copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or their disposition of the securities
covered by such registration statement or make them electronically
available;

     

    (d)           use its reasonable best efforts to register or
qualify the Registrable Securities covered by such registration statement under
the securities or “blue sky” laws of New York and such jurisdictions as the
Sellers shall request in writing, provided,
however, that the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process in any
such jurisdiction;

     

    (e)           list the Registrable Securities covered
by such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;

     

    (f)           notify the Sellers within twenty-four (24) hours of the happening of any event of
which the Company has knowledge as a result of which the prospectus contained in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing or which becomes subject to a Commission, state or
other governmental order suspending the effectiveness of the registration
statement covering any of the Registrable Securities;

     

    (g)           provided same would not be in violation
of the provision of Regulation FD under the 1934 Act, make available for
inspection by the Sellers during reasonable business
hours,  and any
attorney, accountant or other agent retained by the Sellers, all publicly available,
non-confidential financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all publicly available, non-confidential information
reasonably requested by the Sellers, attorney, accountant or agent in
connection with such registration statement at such requesting Seller’s
expense; and

     

    
      
        
        

      

      
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     (h)           provide to the Sellers copies of the Registration Statement
and amendments thereto five
(5) business days prior to
the filing thereof with the Commission.  Any Seller’s failure to
comment on any registration statement or other document provided to a Subscriber
or its counsel shall not be construed to constitute approval thereof nor the
accuracy thereof.

     

    11.3.         Provision of
Documents.  In
connection with each registration described in this Section 11, each Seller will furnish to the Company in writing
such information and representation letters with respect to itself and the
proposed distribution by it as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities
laws.

     

    11.4.        
 Non-Registration
Events.  The
Company agrees that the Sellers will suffer damages if the
Registration Statement is not filed by the Filing Date and not declared
effective by the Commission by the Effective Date, and any registration statement required
under Section
11.1(i) or 11.1(ii) is not filed within 60 days after
written request and declared effective by the Commission within 90 days after
such request, and maintained in the manner and within the
time periods contemplated by Section 11 hereof, and it would not be feasible to
ascertain the extent of such damages with precision.  Accordingly, if
(A) the Registration Statement is not filed on or before the Filing Date, (B)
the Registration Statement
is not declared effective
on or before the
required Effective Date,
(C) due to the action or inaction of the Company the Registration Statement is
not declared effective within three (3) business days after receipt by the
Company or its attorneys of a written or oral communication from the Commission
that the Registration Statement will not be reviewed or that the Commission has
no further comments, (D) if the registration statement described in Section 11.1(i) or 11.1(ii) is not filed within 60 days after such
written request, or is not declared effective within 120 days after such written
request, or (E) any registration statement described in Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and declared effective but
shall thereafter cease to be effective without being succeeded within
twenty-five (25) business days by an effective
replacement or amended registration statement or for a period of time which
shall exceed forty
(45) days in the aggregate
per year (defined as every rolling period of 365 consecutive days commencing on
the Actual Effective Date) (each such event referred to in clauses A through
E of this Section 11.4 is referred to herein as a
"Non-Registration
Event"), then the exercise price of the Warrants shall
automatically be reduced to $0.10 per Warrant Share and the Company shall deliver to the holder
of Registrable Securities, as Liquidated
Damages, an amount equal to
one percent (1%) for each thirty (30) days (or such lesser pro-rata amount for
any period of less than thirty (30) days) of the principal amount of the
outstanding Notes and purchase price of Conversion Shares and Warrant Shares issued upon
conversion of Notes and exercise (but excluding cashless exercise) of Warrants
held by Subscribers which are subject to such
Non-Registration Event.  The Company must pay the Liquidated Damages
in cash.  The Liquidated Damages must be paid within ten (10) days
after the end of each thirty (30) day period or shorter part thereof for which
Liquidated Damages are payable.  In the event a Registration Statement
is filed by the Filing Date but is withdrawn prior to being declared effective
by the Commission, then such Registration Statement will be deemed to have not
been filed and Liquidated Damages will be calculated accordingly.  All
oral or written comments received from the Commission relating to a registration
statement must be responded to within ten (10) business days after receipt of
comments from the Commission.  Failure to timely respond to Commission
comments is a Non-Registration Event for which Liquidated Damages shall accrue
and be payable by the Company to the holders of Registrable Securities at the
same rate and amounts set forth above calculated from the date the response was
required to have been made.  Liquidated Damages shall not be payable
pursuant to this Section
11.4 in connection with
Registrable Securities for such times as such Registrable Securities may be sold
by the holder thereof without restriction pursuant to Section 144(b)(1)(i) of
the 1933 Act. To the extent that the
registration of any or all of the Registrable Securities by the Company on a
registration statement is prohibited (the “Non-Registered
Shares”) as a result of rules, regulations, positions or releases issued
or actions taken by the Commission pursuant to its authority with respect to
Rule 415 and the Company has registered at such time the maximum number of
Registrable Securities permissible upon consultation with the Commission
(applied on a pro rata basis based on the total number of unregistered
Registrable Securities held by each Seller), then the Liquidated Damages
described in this Section 11.4 shall not be applicable to such Non-Registered
Shares for so long as such Rule 415 related impediment is extant, however the
aforedescribed reduction of the Warrant exercise price shall be
applied.

     

    
      
        
        

      

      
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    11.5.        Expenses.  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 FINRA, 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 any registration statement described in Section 11.  Selling Expenses
in connection with each
such registration statement
shall be borne by the Seller and may be apportioned among the
Sellers in proportion to the number of
shares included on behalf
of the Seller relative to the aggregate number of shares included under such registration statement for all Sellers, or as all Sellers thereunder may
agree.

     

    11.6.         Indemnification
and Contribution.

     

    (a)           In the event of a registration of any
Registrable Securities under the 1933 Act pursuant to Section 11, the Company
will, to the extent permitted by law, indemnify and hold harmless the
Seller, each of the officers, directors, agents, Affiliates,
members, managers, control persons, and principal shareholders of the Seller, each underwriter of such Registrable
Securities thereunder and each other person, if any, who controls such
Seller or underwriter within the meaning of
the 1933 Act, against any losses, claims, damages or liabilities, joint or
several, to which the Seller, or such underwriter or controlling
person may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Registrable Securities was registered under the 1933 Act pursuant to Section 11,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances when made, and will subject to the provisions of Section
11.6(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable to
the Seller to the extent that any such damages
arise out of or are based upon an untrue statement or omission made in any
preliminary prospectus if (i) the Seller failed to send or deliver a copy of the
final prospectus delivered by the Company to the Seller with or prior to the delivery of
written confirmation of the sale by the Seller to the person asserting the claim from
which such damages arise, (ii) the final prospectus would have corrected such
untrue statement or alleged untrue statement or such omission or alleged
omission, or (iii) to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information furnished
by any such Seller in writing specifically for use in such
registration statement or prospectus.

     

    (b)           In the event of a registration of any of
the Registrable Securities under the 1933 Act pursuant to Section 11, each
Seller severally but not jointly will, to the
extent permitted by law, indemnify and hold harmless the Company, and each
person, if any, who controls the Company within the meaning of the 1933 Act,
each officer of the Company who signs the registration statement, each
director of the Company, each underwriter and
each person who controls
any underwriter within the meaning of the 1933 Act, against all losses, claims,
damages or liabilities, joint or several, to which the Company or such officer,
director, underwriter or controlling person may become subject under the 1933
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the registration
statement under which such Registrable Securities were registered under the 1933
Act pursuant to Section 11, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or
action; provided, however,
that the Seller will be liable hereunder in any such
case if and only to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon and in conformity with
information pertaining to such Seller, as such, furnished in writing to the
Company by such Seller specifically for use in such
registration statement or prospectus, and provided, further, however, that the
liability of the Seller hereunder shall be limited to the net
proceeds actually received by the Seller from the sale of Registrable Securities
pursuant to such registration
statement.

     

    
      
        
        

      

      
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    (c)           Promptly after receipt by an indemnified
party hereunder of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party in writing thereof,
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to such indemnified party other than under this
Section 11.6(c) and shall only relieve it from any liability which it may have
to such indemnified party under this Section 11.6(c), except and only if and to
the extent the indemnifying party is prejudiced by such omission. In case any
such action shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 11.6(c)
for any legal expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of investigation
and of liaison with counsel so selected, provided, however, that, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnifying party shall have reasonably concluded
that there may be reasonable defenses available to indemnified party which are different from or additional
to those available to the indemnifying party or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified parties, as a group, shall have the right to
select one separate counsel, reasonably satisfactory to the
indemnified and indemnifying party, and to assume such legal defenses and
otherwise to participate in the defense of such action, with the reasonable
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as
incurred.

     

    (d)           In order to provide for just and
equitable contribution in the event of joint liability under the 1933 Act in any
case in which either (i) a Seller, or any controlling person of a
Seller, makes a claim for indemnification
pursuant to this Section 11.6 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 11.6 provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of the Seller or controlling person of the
Seller in circumstances for which
indemnification is not provided under this Section 11.6; then, and in each such
case, the Company and the Seller will contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (after
contribution from others) in such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (y) the Seller will not be required to contribute any
amount in excess of the public offering price of all such securities sold by it
pursuant to such registration statement; and (z) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation and provided, further, however, that the
liability of the Seller hereunder shall be limited to the net
proceeds actually received by the Seller from the sale of Registrable Securities
pursuant to such registration statement.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    11.7.         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, Warrant Shares or any other Common Stock held by
Subscriber has been sold pursuant to the 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(i) 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
Subscribers, 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.

    


    (c)           The Company understands that a delay in
the delivery of the Unlegended Shares pursuant to Section 11.7 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 Unlegended Shares
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 11.7 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)
105%, 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 11.7 and the Company is required to deliver
such Unlegended Shares pursuant to Section 11.7, 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.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    (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.

    


                                
11.8.          In the event commencing six months after the Closing Date
and ending twenty-four  (24) months thereafter, the Subscriber is not
permitted to resell any of the Conversion Shares or Warrant
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 including but not
limited to failure by the Company to file quarterly, annual or any other filings
by the required filing dates, 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 for each thirty days (or such lesser pro-rata amount for any period
less than thirty days) an
amount equal to 1% of the
purchase price of the Conversion Shares and Warrant Shares
subject to such 144
Default.  Liquidated Damages shall not be payable pursuant to this
Section 11.8 in connection with Shares for such
times as such Shares may be sold by the holder thereof without volume or other
restrictions  pursuant to Section
144(b)(1)(i) of the 1933 Act or pursuant to an effective
registration statement.

    


    12.           (a)           Right of
First Refusal.  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.

    


    (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, (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, (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 including the permissible amendment thereof after
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,
and (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) (collectively, the foregoing (i)
through (vi) 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.  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.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    (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.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

     (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.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    (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.

     

    (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.

     

    


     

    [SIGNATURE
PAGE FOLLOWS]

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    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:
      May 8, 2009	 


      

    

     

    


    


    


    


    
      	
              SUBSCRIBER

            	 	
              PURCHASE PRICE AND NOTE
      PRINCIPAL

            	 	 	
              WARRANTS

            	 
	
              ALPHA
      CAPITAL ANSTALT

               

               

               

               

              /s/ Konrad
      Ackerman                                                                                         
      

              By:
      Konrad Ackerman, Director

               

            	 	$	175,000.00	 	 	 	1,750,000	 


    

    


    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    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:
      May 8, 2009	 


        

      

    

    


    


    


     

     

    
      	
              SUBSCRIBER

            	 	
              PURCHASE PRICE AND NOTE
      PRINCIPAL

            	 	 	
              WARRANTS

            	 
	
              BARRY
      HONIG

               

               

               

               

              /s/ Barry
      Honig                                                                                                      
      

               

            	 	$	175,000.00	 	 	 	1,750,000	 


    

    


    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    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:
      May 8, 2009	 


        

      

       

    

    


    


     

     

    
      	
              SUBSCRIBER

            	 	
              PURCHASE PRICE AND NOTE
      PRINCIPAL

            	 	 	
              WARRANTS

            	 
	
              MICHAEL
      BRAUSER

               

               

               

               

               

               

              /s/ Michael
      Brauser                                                                                               
      

               

            	 	$	50,000.00	 	 	 	500,000	 


    

    


    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    


    SCHEDULE
I

     

    
      	
              SUBSCRIBER AND
      ADDRESS

            	 	
              PURCHASE
    PRICE

            	 	 	
              NOTE
    PRINCIPAL

            	 	 	
              WARRANT
    SHARES

            	 
	
              ALPHA
      CAPITAL ANSTALT

               

            	 	$	175,000	 	 	$	175,000	 	 	 	1,750,000	 
	
              BARRY
      HONIG

               

            	 	$	175,000	 	 	$	175,000	 	 	 	1,750,000	 
	
              MICHAEL
      BRAUSER

               

            	 	$	50,000	 	 	$	50,000	 	 	 	500,000	 


    

     

    
      
        
        

      

      
        32