(b) Prepayments. (i) Except as otherwise indicated in this Note, this Note may beprepaid without premium or penalty at any time after March 15, 2012 following at least forty-five(45) days written notice to Lender and/or the written consent of Lender.          (ii) If Lender shall have given written notice at any time on or prior to January 31, 2012,specifying that Maker is required to prepay this Note pursuant to this Section 1(b)(ii), Makershall prepay this Note without premium or penalty on March 15, 2012.          (iii) If a “Liquidity Event” occurs before the full repayment of the principal balance ofthis Note, the Maker will pay the Lender a premium equal to ten percent (10%) of the thenoutstanding principal balance of this Note upon the closing of the Liquidity Event. As used inthis Section 1, the term “Liquidity Event” means (x) the Maker shall have merged into orconsolidated with another corporation, or merged another corporation into the Maker, on a basiswhereby less than fifty percent (50%) of the total voting power of the surviving corporation isrepresented by shares held by former shareholders of the Maker prior to that merger orconsolidation, or (y) the Maker shall sell substantially all of its assets, with its assets forthis purpose excluding its Fiberstars and United States Commercial units.          (c) Application of Payments. All payments made by Maker under this Note shall beapplied first to any costs or charges payable under this Note, second to accrued interest on theNote and the remainder shall be applied to principal.          (d) Cancellation of Note. Upon payment in full of the principal balance of this Noteand any charges, costs and accrued interest thereon, this Note will be automatically cancelled andMaker’s payment obligations hereunder will be extinguished.**SECTION 2. OTHER PAYMENT TERMS**          (a) Waivers. Maker hereby waives presentment, demand for payment, notice ofnon-payment, protests, notice of protests, notice of dishonor and all other notices in connectionwith this Note. No waiver by Lender shall be deemed to have been made unless such waiver is inwriting and signed by Lender. Lender reserves the right to waive or refrain from waiving any rightor remedy under this Note. No delay or omission on the part of Lender in exercising any right orremedy under this Note shall operate as a waiver of such right or remedy or of any other right orremedy under this Note. A waiver on any one occasion shall not be construed as a bar to or waiverof any such right or remedy on any future occasion.          (b) Default. Upon and after the occurrence of an Event of Default (as hereinafterdefined), Lender, in addition to any other remedies available at law or in equity, or under theSecurity Agreement, shall have the right without presentment, notice or demand of any kind toaccelerate this Note and to declare all of the obligations of Maker under this Note immediately dueand payable.          (c) Event of Default. For purposes of this Note, an ***“Event of Default”***occurs if: (a)the Maker does not make the payment of the principal of, and interest on, this Note when the samebecomes due and payable, and any applicable late payment fee, as provided in Section1(a), and such failure continues for the period on and after the notice specified below; (b) the
 

 
Maker fails to comply with any of its other obligations under this Note, and such failure continuesfor the period and after the notice specified below; (c) the Maker, pursuant to or within themeaning of any Bankruptcy Law (as hereinafter defined): (i) commences a voluntary case; (ii)consents to the entry of an order for relief against it in an involuntary case; (iii) consents tothe appointment of a Custodian (as hereinafter defined) of it or for all or substantially all ofits property; (iv) makes a general assignment for the benefit of its creditors; or (v) a court ofcompetent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for reliefagainst the Maker in an involuntary case; (B) appoints a Custodian of the Maker or for all orsubstantially all of its property; or (C) orders the liquidation of the Maker, and the order ordecree remains unstayed and in effect for 90 days; (d) the Maker shall default under any SeniorIndebtedness, as that term is defined in Section 3; (e) the Maker shall redeem any class of capitalstock junior to the Note; (f) the Maker shall sell substantially all of its assets, with its assetsfor this purpose excluding its Fiberstars and United States Commercial units and its United Kingdomsubsidiary, Crescent Lighting, Ltd; (g) a Change in Control of the Maker shall occur; or (h) thefull-time active employment of Joseph G. Kaveski, as Chief Executive Officer of the Maker or JohnM. Davenport by the Maker shall be voluntarily terminated by Maker or by such individual, unless asuccessor acceptable to Lender shall have been appointed or selected and shall have actually takenoffice within three months following any such termination, in which case the name of such successorshall be substituted for the name of the individual he or she replaces for the purpose of thissection (h).     As used in this Section 2, the term “Bankruptcy Law” means Title 11 of the United States Codeor any similar federal or state law for the relief of debtors. The term “Custodian” means anyreceiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.     A default under clause (a) in Section 2(c) above is not an Event of Default until the Holdernotifies the Maker of such default and the Maker does not cure it within thirty (30) days after thereceipt of such notice, which must specify the default, demand that it be remedied and state thatit is a “Notice of Default.” A default under clause (b) in Section 2(c) above is not an Event ofDefault until the Holder notifies the Maker of such default and the Maker does not cure it withinsixty (60) days after the receipt of such notice, which must specify the default, demand that it beremedied and state that it is a “Notice of Default.”     As used in this Section 2, a “Change in Control” shall be deemed to have occurred if and when:(i) any person or group of persons acting in concert shall have acquired ownership of or the rightto vote or to direct the voting of shares of capital stock of the Maker representing forty percent(40%) or more of the total voting power of the Maker; or (ii) the Maker shall have merged into orconsolidated with another corporation, or merged another corporation into the Maker, on a basiswhereby less than fifty percent (50%) of the total voting power of the surviving corporation isrepresented by shares held by former shareholders of the Maker prior to that merger orconsolidation.**SECTION 3. SUBORDINATION TO SENIOR INDEBTEDNESS.**     Upon (i) an event of default under any Senior Indebtedness, or (ii) any dissolution, windingup, or liquidation of the Maker or of its wholly-owned, British subsidiary, Crescent
 

 
Lighting,Ltd. (“Crescent”), whether or not in a bankruptcy, insolvency, or receivership proceeding, the Makershall not pay, and the Lender shall not be entitled to receive, any of the principal and intereston this Note unless and until the Senior Indebtedness shall have been paid or discharged; provided,however, that notwithstanding the foregoing restrictions, under the terms of the SecurityAgreement, Lender is entitled to payments of proceeds upon the sale of certain Collateral (asdefined in the Security Agreement) and that following the occurrence, and during the continuanceof, any Event of Default Lender shall be entitled to take any and all actions permitted under theSecurity Agreement relating to the Collateral (as defined in the Security Agreement), and, ineither such case, Lender shall be entitled to receive such Collateral or the proceeds of any suchCollateral in accordance with the Security Agreement at any time and apply such proceeds to theprincipal and interest on this Note, in accordance with the terms of Section 1(c). For purposes ofthis Section 3, “Senior Indebtedness” shall mean the principal of and unpaid accrued interest on(x) all indebtedness of the Maker and Crescent to banks, insurance companies, or other financialinstitutions regularly engaged in the business of lending money, which is money borrowed by theMaker or Crescent, whether or not secured, and (y) any such indebtedness or any debentures, notes,or other evidence of indebtedness issued in exchange for such Senior Indebtedness or anyindebtedness arising from the satisfaction of such Senior Indebtedness by a guarantor.**SECTION 4. REPRESENTATIONS OF MAKER**     Maker hereby represents and warrants to Lender as of the Issuance Date:          (a) Organization, Qualifications and Power. Maker is a Delaware corporation and itscertificate of registration is in full force and effect. Maker has all requisite power andauthority to own or lease its properties and assets and to conduct its business as it is presentlybeing conducted and to issue, sell and deliver this Note.          (b) Authorization. The execution and delivery by Maker of this Note and theperformance by Maker of its obligations hereunder have been duly authorized by all requisitelimited liability company action.          (c) Validity. This Note has been duly executed and delivered by Maker and constitutesthe legal, valid and binding obligation of Maker, enforceable against Maker in accordance with itsterms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization,moratorium or other similar laws of the United States (both state and federal), affecting theenforcement of creditors’ rights or remedies in general as may from time to time be in effect andthe exercise by courts of equity powers or their application of public policy.**SECTION 5. MISCELLANEOUS**          (a) Amendments. No amendment or waiver of any provision of this Note, nor consent toany departure by Maker herefrom, shall in any event be effective unless the same shall be inwriting and signed by Lender and then such waiver or consent shall be effective only in thespecific instance and for the specific purpose for which given.
 

 
          (b) Severability. If any term, covenant or provision contained in this Note, or theapplication thereof to any Person or circumstance, shall be determined to be void, invalid, illegalor unenforceable to any extent or shall otherwise operate to invalidate this Note, in whole orpart, then such term, covenant or provision only shall be deemed not contained in this Note; theremainder of this Note shall remain operative and in full force and effect and shall be enforced tothe greatest extent permitted by law as if such clause or provision had never been contained hereinor therein; and the application of such term, covenant or provision to other Persons orcircumstances shall not be affected, impaired or restricted thereby.          (c) Captions. The captions or headings at the beginning of any paragraph or portionof any paragraph in this Note are for the convenience of Maker and Lender and for purpose ofreference only and shall not limit or otherwise alter the meaning of the provisions of this Note.          (d) Interest Computation. All interest payable pursuant to this Note will be computedon the basis of a 365-day year for the actual number of days elapsed. In no contingency or eventwhatsoever shall interest charged hereunder, however such interest may be characterized orcomputed, exceed the highest rate permissible under any law which a court of competent jurisdictionshall, in a final determination, deem applicable hereto. In the event that such a court determinesthat Lender has received interest hereunder in excess of the highest rate applicable hereto, Lendershall promptly refund such excess interest to Maker.          (e) Indemnity. If, after receipt of any payment of, or proceeds applied to thepayment of, all or any part of the obligations of Maker under this Note, Lender is for any reasoncompelled to surrender such payment or proceeds because such payment or application of proceeds isinvalidated, declared fraudulent, set aside, determined to be void or voidable as a preference,impermissible setoff, or a diversion of trust funds, or for any other reason, then the obligationsof Maker under this Note or any part thereof intended to be satisfied shall be revived andcontinue, and this Note and the Security Agreement shall continue in full force as if such paymentor proceeds had not been received by the Lender, and Maker shall be liable to pay to the Lender,and indemnify and hold the Lender harmless for, the amount of such payment or proceeds surrendered.The provisions of this paragraph shall be and remain effective notwithstanding any contrary actionwhich may have been taken by the Lender in reliance upon such payment or application of proceeds,and any such contrary action so taken shall be without prejudice to the Lender’s rights under thisNote or the Security Agreement and shall be deemed to have been conditioned upon such payment orapplication of proceeds having become final and irrevocable. Without prejudice to any otherprovisions of this Note or the Security Agreement, Maker hereby agrees to indemnify the Lenderagainst any loss or expense that the Lender may sustain or incur as a consequence of any default by Maker in payment when due of any amountdue hereunder.          (f) Usury Savings Clause. It is the intention of the parties hereto to comply withapplicable state and federal usury laws from time to time in effect. Accordingly, notwithstandingany provision to the contrary in this Note or any other document related hereto, in no event(including, but not limited to, prepayment or acceleration of the maturity of any obligation) willthis Note or any such other document require the payment or permit the
 

 
collection or receipt of interest in excess of the highest lawful rate. If under any circumstance whatsoever, any provisionof this Note or of any other document pertaining hereto will provide for the payment, collection orreceipt of interest in excess of the highest lawful rate, then, ipso facto, the obligation to befulfilled shall be reduced to the limit of such validity, and if from any such circumstances Lenderwill ever receive anything of value as interest or deemed interest by applicable law under thisNote or any other document pertaining hereto or otherwise an amount that would exceed the highestlawful rate, such amount that would exceed the highest lawful rate shall be applied to thereduction of the principal amount owing under this Note or on account of any other indebtedness ofMaker to Lender, and not to the payment of interest, or if such excessive interest exceeds theunpaid balance of principal of this Note and such other indebtedness, such excess shall be refundedto Maker. In determining whether or not the interest paid or payable with respect to anyindebtedness of Maker to Lender, under any specified contingency, exceeds the highest lawful rate,Maker and Lender will, to the maximum extent permitted by applicable law, (i) characterize anynon-principal payment as an expense, fee or premium rather than as interest, (ii) exclude voluntaryprepayments and the effects thereof, (iii) amortize, prorate, allocate and spread the total amountof interest throughout the full term of such indebtedness (including any extension or renewal) sothat interest thereon does not exceed the maximum amount permitted by applicable law, and/or (iv)allocate interest between portions of such indebtedness, to the end that no such portion shall bearinterest at a rate greater than that permitted by applicable law. Lender expressly disavows anyintention to charge or collect excessive unearned interest or finance charges in the event that thematurity of this Note is accelerated. If at any time the Rate exceeds the highest lawful rate,then the rate at which interest shall accrue hereunder shall automatically be limited to thehighest lawful rate, and shall remain at the highest lawful rate until the total amount of interestaccrued hereunder equals the total amount of interest that would have accrued but for the operationof this sentence. Thereafter, interest shall accrue at the Rate unless and until the Rate againexceeds the highest lawful rate, in which case the immediately preceding sentence shall apply.          (g) Governing Law and Venue. This Note shall in all respects be governed by, andconstrued and interpreted in accordance with, the internal substantive laws of the State of Ohiowithout giving effect to the principles of conflicts of law thereof. Maker and Lender herebyirrevocably submit to the exclusive jurisdiction of the state court sitting the City of Cleveland,for the adjudication of any dispute hereunder and hereby irrevocably waives, and agrees not toassert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenientforum or that the venue of such suit, action or proceeding is improper.          (h) Notices. Any notice, request or other communication required or permittedhereunder will be in writing and be deemed to have been duly given (a) when personally delivered orsent by facsimile transmission (the receipt of which is confirmed in writing), (b) one business dayafter being sent by a nationally recognized overnight courier service or (c) five business daysafter being sent by registered or certified mail, return receipt requested, postage prepaid, to theparties at their respective addresses set forth below.
 

 
       If to Maker: Energy Focus, Inc.    32000 Aurora Road    Solon, Ohio 44321    Attention: Mr. Joseph G. Kaveski                     Chief Executive Officer    Facsimile: 440.848.8561       If to Lender: EF Energy Partners LLC    2171 Mogadore Road    Kent, Ohio 44240    Attention: Joseph K. Zeno                     Facsimile: 330.678.0859          (i) Waiver of Jury Trial. MAKER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANYACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF ORRELATING TO THIS NOTE OR ANY OF THE OTHER RELATED DOCUMENTS OR THE ACTIONS OF LENDER IN THENEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.      ENERGY FOCUS, INC.