NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE 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 TO
THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR
ELIGIBLE TO BE 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.

     

    NACEL
ENERGY CORPORATION

     

    Warrant
To Purchase Common Stock

     

    Series A
Warrant No.: ____________

    Date of
Original Issuance: November 24, 2009 (“Issuance
Date”)

    Date of
3(a)(9) Exchange: April 23, 2010

     

    NACEL
Energy Corporation, a Wyoming corporation (the “Company”),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, IROQUOIS MASTER FUND LTD., the
registered holder hereof or its permitted assigns (the “Holder”),
is entitled, subject to the terms set forth below, to purchase from the Company,
at the Exercise Price (as defined below) then in effect, upon exercise of this
Warrant to Purchase Common Stock (including any Warrants to Purchase Common
Stock issued in exchange, transfer or replacement hereof, the “Warrant”),
at any time or times on or after the Issuance Date, but not after 11:59 p.m.,
New York time, on the Expiration Date (as defined below), 3,750,000 (subject to
adjustment as provided herein) fully paid and nonassessable shares of Common
Stock (as defined below) (the
“Warrant
Shares”). Except as otherwise defined herein, capitalized terms in this
Warrant shall have the meanings set forth in Section 16. This Warrant is one of
the Warrants to Purchase Common Stock (the “SPA
Warrants”) issued pursuant to Section 1 of that certain Securities
Purchase Agreement, dated as of November 23, 2009, by and among the Company and
the investors (the “Buyers”)
referred to therein (the “Securities
Purchase Agreement”).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              1.

            	
              EXERCISE
      OF WARRANT.

            


    

     

    (a)           Mechanics
of Exercise. Subject
to the terms and conditions hereof (including, without limitation, the
limitations set forth in Section 1(f)), this Warrant may be exercised by the
Holder on any day on or after the Issuance Date, in whole or in part, by
delivery (whether via facsimile or otherwise) of a written notice, in the form
attached hereto as Exhibit
A (the “Exercise
Notice”), of the Holder’s election to exercise this Warrant. Within one
(1) Trading Day following an exercise of this Warrant as aforesaid, the Holder
shall deliver payment to the Company of an amount equal to the Exercise Price in
effect on the date of such exercise multiplied by the number of Warrant Shares
as to which this Warrant was so exercised (the “Aggregate
Exercise Price”) in cash or via wire transfer of immediately available
funds if the Holder did not notify the Company in such Exercise Notice that such
exercise was made pursuant to a Cashless Exercise (as defined in Section 1(d)).
The Holder shall not be required to deliver the original of this Warrant in
order to effect an exercise hereunder. Execution and delivery of an Exercise
Notice with respect to less than all of the Warrant Shares shall have the same
effect as cancellation of the original of this Warrant and issuance of a new
Warrant evidencing the right to purchase the remaining number of Warrant Shares.
Execution and delivery of an Exercise Notice for all of the then-remaining
Warrant Shares shall have the same effect as cancellation of the original of
this Warrant after delivery of the Warrant Shares in accordance with the terms
hereof. On or before the second (2nd)
Trading Day following the date on which the Company has received an Exercise
Notice, the Company shall transmit by facsimile an acknowledgment of
confirmation of receipt of such Exercise Notice to the Holder and the Company’s
transfer agent (the “Transfer
Agent”). On or before the third (3rd)
Trading Day following the date on which the Company has received such Exercise
Notice, the Company shall (X) provided that the Transfer Agent is participating
in The Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, upon the request of the Holder,
credit such aggregate number of shares of Common Stock to which the Holder is
entitled pursuant to such exercise to the Holder’s or its designee’s balance
account with DTC through its Deposit/ Withdrawal at Custodian system, or (Y) if
the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver to the Holder or, at the Holder’s
instruction pursuant to the Exercise Notice, the Holder’s agent or designee, in
each case, sent by reputable overnight courier to the address as specified in
the applicable Exercise Notice, a certificate, registered in the Company’s share
register in the name of the Holder or its designee (as indicated in the
applicable Exercise Notice), for the number of shares of Common Stock to which
the Holder is entitled pursuant to such exercise. Upon delivery of an Exercise
Notice, the Holder shall be deemed for all corporate purposes to have become the
holder of record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date such Warrant Shares are credited to the
Holder’s DTC account or the date of delivery of the certificates evidencing such
Warrant Shares (as the case may be). If this Warrant is submitted in connection
with any exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of
Warrant Shares being acquired upon an exercise, then, at the request of the
Holder. the Company shall as soon as practicable and in no event later than five
(5) Business Days after any exercise and at its own expense, issue and deliver
to the Holder (or its designee) a new Warrant (in accordance with Section 7(d))
representing the right to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant, less the number of
Warrant Shares with respect to which this Warrant is exercised. No fractional
shares of Common Stock are to be issued upon the exercise of this Warrant, but
rather the number of shares of Common Stock to be issued shall be rounded up to
the nearest whole number. The Company shall pay any and all taxes which may be
payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.

     

    (b)           Exercise
Price. For
purposes of this Warrant, “Exercise
Price” means $0.30, subject to adjustment as provided
herein.

     

    
      
        
        

      

      
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    (c)           Company’s
Failure to Timely Deliver Securities. If the
Company shall fail, for any reason or for no reason, to issue to the Holder
within five (5) Trading Days after receipt of the applicable Exercise Notice, a
certificate for the number of shares of Common Stock to which the Holder is
entitled and register such shares of Common Stock on the Company’s share
register or to credit the Holder’s balance account with DTC for such number of
shares of Common Stock to which the Holder is entitled upon the Holder’s
exercise of this Warrant (as the case may be) (a “Delivery
Failure”), then, in addition to all other remedies available to the
Holder, the Company shall pay in cash to the Holder on each day after such fifth
(5th)
Trading Day that the issuance of such shares of Common Stock is not timely
effected an amount equal to 2% of the product of (A) the aggregate number of
shares of Common Stock not issued to the Holder on a timely basis and to which
the Holder is entitled and (B) the Closing Sale Price of the Common Stock on the
Trading Day immediately preceding the last possible date on which the Company
could have issued such shares of Common Stock to the Holder without violating
Section 1(a). In addition to the foregoing, if within three (3) Trading Days
after the Company’s receipt of the applicable Exercise Notice, the Company shall
fail to issue and deliver a certificate to the Holder and register such shares
of Common Stock on the Company’s share register or credit the Holder’s balance
account with DTC for the number of shares of Common Stock to which the Holder is
entitled upon the Holder’s exercise hereunder (as the case may be), and if on or
after such third (3rd)
Trading Day the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of
shares of Common Stock issuable upon such exercise that the Holder anticipated
receiving from the Company, then, in addition to all other remedies available to
the Holder, the Company shall, within three (3) Business Days after the Holder’s
request and in the Holder’s discretion, either (i) pay cash to the Holder in an
amount equal to the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased (the “Buy-In
Price”), at which point the Company’s obligation to deliver such
certificate or credit the Holder’s balance account with DTC for the number of
shares of Common Stock to which the Holder is entitled upon the Holder’s
exercise hereunder (as the case may be) (and to issue such shares of Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such shares of Common Stock or
credit the Holder’s balance account with DTC for the number of shares of Common
Stock to which the Holder is entitled upon the Holder’s exercise hereunder (as
the case may be) and pay cash to the Holder in an amount equal to the excess (if
any) of the Buy-In Price over the product of (A) such number of shares of Common
Stock times (B) the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the date of the applicable Exercise Notice.

     

    (d)           Cashless
Exercise.
Notwithstanding anything contained herein to the contrary (other than Section
1(f) below), if at the time of exercise hereof a Registration Statement (as
defined in the Registration Rights Agreement (as defined in the Securities
Purchase Agreement)) is not effective (or the prospectus contained therein is
not available for use) for the resale by the Holder of all of the Warrant
Shares, then the Holder may, in its sole discretion, exercise this Warrant in
whole or in part and, in lieu of making the cash payment otherwise contemplated
to be made to the Company upon such exercise in payment of the Aggregate
Exercise Price, elect instead to receive upon such exercise the “Net Number” of
shares of Common Stock determined according to the following formula (a “Cashless
Exercise”):

     

    
      
        
        

      

      
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    Net Number = (A
x B) - (A x C)

     

                                                                                    
B

     

    For purposes of the
foregoing formula:

     

    A= the
total number of shares with respect to which this Warrant is then being
exercised.

     

    B= as
applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the date of the applicable Exercise Notice if such
Exercise Notice is (1) both executed and delivered pursuant to Section 1(a)
hereof on a day that is not a Trading Day or (2) both executed and delivered
pursuant to Section 1(a) hereof on a Trading Day prior to the opening of
“regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS
promulgated under the federal securities laws) on such Trading Day, (ii) the Bid
Price of the Common Stock as of the time of the Holder’s execution of the
applicable Exercise Notice if such Exercise Notice is executed during “regular
trading hours” on a Trading Day and is delivered within two (2) hours thereafter
pursuant to Section 1(a) hereof and (iii) the Closing Sale Price of the Common
Stock on the date of the applicable Exercise Notice if the date of such Exercise
Notice is a Trading Day and such Exercise Notice is both executed and delivered
pursuant to Section 1(a) hereof after the close of “regular trading hours” on
such Trading Day.

     

    
      C= the
Exercise Price then in effect for the applicable Warrant Shares at the time of
such exercise.

    

     

    (e)          Disputes.  In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the number of Warrant Shares to be issued pursuant to
the terms hereof, the Company shall promptly issue to the Holder the number of
Warrant Shares that are not disputed and resolve such dispute in accordance with
Section 13.

     

    (f)          Limitations
on Exercises. Notwithstanding anything to the contrary contained in this
Warrant, this Warrant shall not be exercisable by the Holder hereof to the
extent (but only to the extent) that the Holder or any of its affiliates would
beneficially own in excess of  4.9% (the “Maximum
Percentage”) of the Common Stock. To the extent the above limitation
applies, the determination of whether this Warrant shall be exercisable
(vis-à-vis other convertible, exercisable or exchangeable securities owned by
the Holder) and of which such securities shall be exercisable (as among all such
securities owned by the Holder or any of its affiliates) shall, subject to such
Maximum Percentage limitation, be determined on the basis of the first
submission to the Company for conversion, exercise or exchange (as the case may
be). No prior inability to exercise this Warrant pursuant to this paragraph
shall have any effect on the applicability of the provisions of this
paragraph with respect to any subsequent determination of exercisability.
For the purposes of this paragraph, beneficial ownership and all determinations
and calculations (including, without limitation, with respect to calculations of
percentage ownership) shall be determined in accordance with Section 13(d) of
the 1934 Act (as defined in the Securities Purchase Agreement) and the rules and
regulations promulgated thereunder. The provisions of this paragraph shall be
implemented in a manner otherwise than in strict conformity with the terms of
this paragraph to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Maximum Percentage beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Maximum Percentage
limitation. The limitations contained in this paragraph shall apply to a
successor Holder of this Warrant. The holders of Common Stock shall be third
party beneficiaries of this paragraph and the Company may not waive this
paragraph without the consent of holders of a majority of its Common Stock. For
any reason at any time, upon the written or oral request of the Holder, the
Company shall within one (1) Business Day confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding, including by
virtue of any prior conversion or exercise of convertible or exercisable
securities into Common Stock, including, without limitation, pursuant to this
Warrant or securities issued pursuant to the Securities Purchase Agreement.


     

    
      
        
        

      

      
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    (g)           Insufficient
Authorized Shares. The
Company shall at all times keep reserved for issuance under this Warrant a
number of shares of Common Stock as shall be necessary to satisfy the Company’s
obligation to issue shares of Common Stock hereunder (without regard to any
limitation otherwise contained herein with respect to the number of shares of
Common Stock that may be acquirable upon exercise of this Warrant). If,
notwithstanding the foregoing, and not in limitation thereof, at any time while
any of the SPA Warrants remain outstanding the Company does not have a
sufficient number of authorized and unreserved shares of Common Stock to satisfy
its obligation to reserve for issuance upon exercise of the SPA Warrants at
least a number of shares of Common Stock equal to the number of shares of Common
Stock as shall from time to time be necessary to effect the exercise of all of
the SPA Warrants then outstanding (the “Required
Reserve Amount”) (an “Authorized
Share Failure”), then the Company shall immediately take all action
necessary to increase the Company’s authorized shares of Common Stock to an
amount sufficient to allow the Company to reserve the Required Reserve Amount
for all the SPA Warrants then outstanding. Without limiting the generality of
the foregoing sentence, as soon as practicable after the date of the occurrence
of an Authorized Share Failure, but in no event later than sixty (60) days after
the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its stockholders for the approval of an increase in the number of
authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its best
efforts to solicit its stockholders’ approval of such increase in authorized
shares of Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.

     

    2.           ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The Exercise Price and number of Warrant Shares issuable upon exercise of
this Warrant are subject to adjustment from time to time as set forth in this
Section 2.

     

    (a)           Stock
Dividends and Splits.  Without
limiting any provision of Section 4, if the Company, at any time on or after the
date of the Securities Purchase Agreement, (i) pays a stock dividend on one or
more classes of its then outstanding shares of Common Stock or otherwise makes a
distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its then outstanding shares of Common Stock
into a larger number of shares or (iii) combines (by combination, reverse stock
split or otherwise) one or more classes of its then outstanding shares of Common
Stock into a smaller number of shares, then in each such case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately after such event.  Any adjustment made pursuant to clause
(i) of this paragraph shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination. If any event requiring an adjustment under this
paragraph occurs during the period that an Exercise Price is calculated
hereunder, then the calculation of such Exercise Price shall be adjusted
appropriately to reflect such event.

     

    
      
        
        

      

      
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    (b)           Adjustment
Upon Issuance of Shares of Common Stock. If and
whenever on or after the date of the Securities Purchase Agreement, the Company
issues or sells, or in accordance with this Section 2 is deemed to have issued
or sold, any shares of Common Stock (including the issuance or sale of shares of
Common Stock owned or held by or for the account of the Company, but excluding
any Excluded Securities (as defined in the Securities Purchase Agreement) issued
or sold or deemed to have been issued or sold) for a consideration per share
(the “New
Issuance Price”) less than a price equal to the Exercise Price in effect
immediately prior to such issue or sale or deemed issuance or sale (such
Exercise Price then in effect is referred to as the “Applicable
Price”) (the foregoing a “Dilutive
Issuance”), then immediately after such Dilutive Issuance, the Exercise
Price then in effect shall be reduced to an amount equal to the New Issuance
Price. For purposes of determining the adjusted Exercise Price under this
Section 2(b), the following shall be applicable:

     

    (i)           Issuance
of Options.  If the Company in any manner grants or sells any
Options and the lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any such Option
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 2(b)(i), the “lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such Options or upon
conversion, exercise or exchange of any Convertible Securities issuable upon
exercise of any such Option” shall be equal to (1) the lower of (x) the sum of
the lowest amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the granting or sale
of such Option, upon exercise of such Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such Option and
(y) the lowest exercise price set forth in such Option for which one share of
Common Stock is issuable upon the exercise of any such Options or upon
conversion, exercise or exchange of any Convertible Securities issuable upon
exercise of any such Option minus (2) the sum of all amounts paid or payable to
the holder of such Option (or any other Person) upon the granting or sale of
such Option, upon exercise of such Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such Option plus
the value of any other consideration received or receivable by, or benefit
conferred on, the holder of such Option (or any other Person). Except as
contemplated below, no further adjustment of the Exercise Price shall be made
upon the actual issuance of such shares of Common Stock or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of such
shares of Common Stock upon conversion, exercise or exchange of such Convertible
Securities.

     

    
      
        
        

      

      
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    (ii)          Issuance
of Convertible Securities.  If the Company in any manner issues
or sells any Convertible Securities and the lowest price per share for which one
share of Common Stock is issuable upon the conversion, exercise or exchange
thereof is less than the Applicable Price, then such share of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
the time of the issuance or sale of such Convertible Securities for such price
per share.  For the purposes of this Section 2(b)(ii), the “lowest
price per share for which one share of Common Stock is issuable upon the
conversion, exercise or exchange thereof” shall be equal to (1) the lower of (x)
the sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to one share of Common Stock upon the issuance or
sale of the Convertible Security and upon conversion, exercise or exchange of
such Convertible Security and (y) the lowest conversion price set forth in such
Convertible Security for which one share of Common Stock is issuable upon
conversion, exercise or exchange thereof minus (2) the sum of all amounts paid
or payable to the holder of such Convertible Security (or any other Person) upon
the issuance or sale of such Convertible Security plus the value of any other
consideration received or receivable by, or benefit conferred on, the holder of
such Convertible Security (or any other Person). Except as contemplated below,
no further adjustment of the Exercise Price shall be made upon the actual
issuance of such shares of Common Stock upon conversion, exercise or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of this
Warrant has been or is to be made pursuant to other provisions of this Section
2(b), except as contemplated below, no further adjustment of the Exercise Price
shall be made by reason of such issue or sale.

     

    (iii)         Change
in Option Price or Rate of Conversion. If the purchase or exercise price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion, exercise or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or exercisable
or exchangeable for shares of Common Stock increases or decreases at any time,
the Exercise Price in effect at the time of such increase or decrease shall be
adjusted to the Exercise Price which would have been in effect at such time had
such Options or Convertible Securities provided for such increased or decreased
purchase price, additional consideration or increased or decreased conversion
rate, as the case may be, at the time initially granted, issued or sold. For
purposes of this Section 2(b)(iii), if the terms of any Option or Convertible
Security that was outstanding as of the date of issuance of this Warrant are
increased or decreased in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the shares of Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such increase or decrease. No
adjustment pursuant to this Section 2(b) shall be made if such adjustment would
result in an increase of the Exercise Price then in effect.

     

    
      
        
        

      

      
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    (iv)        Calculation
of Consideration Received. If any Option or Convertible Security is
issued in connection with the issuance or sale or deemed issuance or sale of any
other securities of the Company, together comprising one integrated transaction,
(x) such Option or Convertible Security (as applicable) will be deemed to have
been issued for consideration equal to the Black Scholes Consideration Value
thereof and (y) the other securities issued or sold or deemed to have been
issued or sold in such integrated transaction shall be deemed to have been
issued for consideration equal to the difference of (I) the aggregate
consideration received by the Company minus (II) the Black Scholes Consideration
Value of each such Option or Convertible Security (as applicable). If any shares
of Common Stock, Options or Convertible Securities are issued or sold or deemed
to have been issued or sold for cash, the consideration received therefor will
be deemed to be the net amount of consideration received by the Company
therefor. If any shares of Common Stock, Options or Convertible Securities are
issued or sold for a consideration other than cash, the amount of such
consideration received by the Company will be the fair value of such
consideration, except where such consideration consists of publicly traded
securities, in which case the amount of consideration received by the Company
for such securities will be the arithmetic average of the VWAPs of such security
for each of the five (5) Trading Days immediately preceding the date of receipt.
If any shares of Common Stock, Options or Convertible Securities are issued to
the owners of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, the amount of consideration therefor will
be deemed to be the fair value of such portion of the net assets and business of
the non-surviving entity as is attributable to such shares of Common Stock,
Options or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or publicly traded securities will be determined
jointly by the Company and the Holder. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event requiring
valuation (the “Valuation
Event”), the fair value of such consideration will be determined within
five (5) Trading Days after the tenth (10th)
day following such Valuation Event by an independent, reputable appraiser
jointly selected by the Company and the Holder. The determination of such
appraiser shall be final and binding upon all parties absent manifest error and
the fees and expenses of such appraiser shall be borne by the
Company.

     

    (v)         Record
Date. If the Company takes a record of the holders of shares of Common
Stock for the purpose of entitling them (A) to receive a dividend or other
distribution payable in shares of Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase shares of Common Stock,
Options or Convertible Securities, then such record date will be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase (as the case may be).

     

    (c)           Number
of Warrant Shares.
Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs
(a) or (b) of this Section 2, the number of Warrant Shares that may be purchased
upon exercise of this Warrant shall be increased or decreased proportionately,
so that after such adjustment the aggregate Exercise Price payable hereunder for
the adjusted number of Warrant Shares shall be the same as the aggregate
Exercise Price in effect immediately prior to such adjustment (without regard to
any limitations on exercise contained herein).

     

    
      
        
        

      

      
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    (d)           Other
Events. In the
event that the Company (or any Subsidiary) shall take any action to which the
provisions hereof are not strictly applicable, or, if applicable, would not
operate to protect the Holder from dilution or if any event occurs of the type
contemplated by the provisions of this Section 2 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company’s board of directors shall in good faith determine and
implement an appropriate adjustment in the Exercise Price and the number of
Warrant Shares (if applicable) so as to protect the rights of the Holder,
provided that no such adjustment pursuant to this Section 2(d) will increase the
Exercise Price or decrease the number of Warrant Shares as otherwise determined
pursuant to this Section 2, provided further that if the Holder does not accept
such adjustments as appropriately protecting its interests hereunder against
such dilution, then the Company’s board of directors and the Holder shall agree,
in good faith, upon an independent investment bank of nationally recognized
standing to make such appropriate adjustments, whose determination shall be
final and binding and whose fees and expenses shall be borne by the
Company.

     

    (e)           Calculations. All
calculations under this Section 2 shall be made to the nearest cent or the
nearest 1/100th
of a share, as applicable. The number of shares of Common Stock outstanding at
any given time shall not include shares owned or held by or for the account of
the Company, and the disposition of any such shares shall be considered an issue
or sale of Common Stock.

     

    3.           RIGHTS
UPON DISTRIBUTION OF ASSETS. In addition to any adjustments pursuant to
Section 2 above, if the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of
shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”),
at any time after the issuance of this Warrant, then, in each such case, the
Holder shall be entitled to participate in such Distribution to the same extent
that the Holder would have participated therein if the Holder had held the
number of shares of Common Stock acquirable upon complete exercise of this
Warrant (without regard to any limitations on exercise hereof, including without
limitation, the Maximum Percentage) immediately before the date on which a
record is taken for such Distribution, or, if no such record is taken, the date
as of which the record holders of shares of Common Stock are to be determined
for the participation in such Distribution (provided, however, to the extent
that the Holder’s right to participate in any such Distributions would result in
the Holder exceeding the Maximum Percentage, then the Holder shall not be
entitled to participate in such Distribution to such extent (or the beneficial
ownership of any such shares of Common Stock as a result of such Distribution to
such extent) and such Distribution to such extent shall be held in abeyance for
the benefit of the Holder until such time, if ever, as its right thereto would
not result in the Holder exceeding the Maximum Percentage).

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	
              4.

            	
              PURCHASE
      RIGHTS; FUNDAMENTAL
  TRANSACTIONS.

            


    

     

    (a)           Purchase
Rights.  In
addition to any adjustments pursuant to Section 2 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the “Purchase
Rights”), then the Holder will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the number of shares of Common
Stock acquirable upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the Maximum
Percentage) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights (provided,
however, to the extent that the Holder’s right to participate in any such
Purchase Right would result in the Holder exceeding the Maximum Percentage, then
the Holder shall not be entitled to participate in such Purchase Right to such
extent (or beneficial ownership of such shares of Common Stock as a result of
such Purchase Right to such extent) and such Purchase Right to such extent shall
be held in abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Maximum
Percentage).

     

    (b)           Fundamental
Transactions.  The
Company shall not enter into or be party to a Fundamental Transaction unless
(i)  the Successor Entity assumes in writing all of the obligations of the
Company under this Warrant and the other Transaction Documents (as defined in
the Securities Purchase Agreement) in accordance with the provisions of this
Section 4(b) pursuant to written agreements in form and substance satisfactory
to the Holder and approved by the Holder prior to such Fundamental Transaction,
including agreements to deliver to the Holder in exchange for this Warrant a
security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Warrant, including, without limitation,
which is exercisable for a corresponding number of shares of capital stock
equivalent to the shares of Common Stock acquirable and receivable upon exercise
of this Warrant (without regard to any limitations on the exercise of this
Warrant) prior to such Fundamental Transaction, and with an exercise price which
applies the exercise price hereunder to such shares of capital stock (but taking
into account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such
adjustments to the number of shares of capital stock and such exercise price
being for the purpose of protecting the economic value of this Warrant
immediately prior to the consummation of such Fundamental Transaction) and
(ii) the Successor Entity (including its Parent Entity) is a publicly
traded corporation whose common stock is quoted on or listed for trading on an
Eligible Market. Upon the consummation of each Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and
after the date of the applicable Fundamental Transaction, the provisions of this
Warrant and the other Transaction Documents referring to the “Company” shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant and the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein. Upon consummation of each
Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon exercise of this Warrant at any
time after the consummation of the applicable Fundamental Transaction, in lieu
of the shares of Common Stock (or other securities, cash, assets or other
property (except such items still issuable under Sections 3 and 4(a) above,
which shall continue to be receivable thereafter)) issuable upon the exercise of
this Warrant prior to the applicable Fundamental Transaction, such shares of
publicly traded common stock (or its equivalent) of the Successor Entity
(including its Parent Entity) which the Holder would have been entitled to
receive upon the happening of the applicable Fundamental Transaction had this
Warrant been exercised immediately prior to the applicable Fundamental
Transaction (without regard to any limitations on the exercise of this Warrant),
as adjusted in accordance with the provisions of this Warrant. In addition to
and not in substitution for any other rights hereunder, prior to the
consummation of each Fundamental Transaction pursuant to which holders of shares
of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a “Corporate
Event”), the Company shall make appropriate provision to insure that the
Holder will thereafter have the right to receive upon an exercise of this
Warrant at any time after the consummation of the applicable Fundamental
Transaction but prior to the Expiration Date, in lieu of the shares of the
Common Stock (or other securities, cash, assets or other property (except such
items still issuable under Sections 3 and 4(a) above, which shall continue to be
receivable thereafter)) issuable upon the exercise of the Warrant prior to such
Fundamental Transaction, such shares of stock, securities, cash, assets or any
other property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of the applicable Fundamental Transaction had this Warrant been exercised
immediately prior to the applicable Fundamental Transaction (without regard to
any limitations on the exercise of this Warrant). Provision made pursuant to the
preceding sentence shall be in a form and substance reasonably satisfactory to
the Holder.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (c)           Black
Scholes Value.
Notwithstanding the foregoing and the provisions of Section 4(b) above, in the
event of a Fundamental Transaction, if the Holder has not exercised this Warrant
in full prior to the consummation of such Fundamental Transaction, at the
request of the Holder delivered before the ninetieth (90th)
day after the consummation of such Fundamental Transaction, the Company or the
Successor Entity (as the case may be) shall purchase
this Warrant from the Holder on the date of such request by paying to the
Holder cash in an amount equal to the Black Scholes Value.

     

    (d)           Application.
The provisions of this Section 4 shall apply similarly and equally to successive
Fundamental Transactions and Corporate Events and shall be applied as if this
Warrant (and any such subsequent warrants) were fully exercisable and without
regard to any limitations on the exercise of this Warrant (provided that the
Holder shall continue to be entitled to the benefit of the Maximum Percentage,
applied however with respect to shares of capital stock registered under the
1934 Act and thereafter receivable upon exercise of this Warrant (or any such
other warrant)).

     

    5.           NONCIRCUMVENTION.
The Company hereby covenants and agrees that the Company will not, by amendment
of its Articles of Incorporation (as defined in the Securities Purchase
Agreement), Bylaws (as defined in the Securities Purchase Agreement) or through
any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of the
SPA Warrants, the maximum number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).

     

    
      
        
        

      

      
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    6.           WARRANT
HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically
provided herein, the Holder, solely in its capacity as a holder of this Warrant,
shall not be entitled to vote or receive dividends or be deemed the holder of
share capital of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the Holder, solely in its capacity as
the Holder of this Warrant, any of the rights of a stockholder of the Company or
any right to vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which it is then entitled to receive upon the due exercise of
this Warrant.  In addition, nothing contained in this Warrant shall be
construed as imposing any liabilities on the Holder to purchase any securities
(upon exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 6, the Company shall provide the Holder
with copies of the same notices and other information given to the stockholders
of the Company generally, contemporaneously with the giving thereof to the
stockholders.

     

    
      	
              7. 

            	
              REISSUANCE
      OF WARRANTS.

            


    

     

    (a)           Transfer
of Warrant. If this
Warrant is to be transferred, the Holder shall surrender this Warrant to the
Company, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Warrant (in accordance with Section 7(d)), registered as the
Holder may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less than the total number of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section 7(d)) to the Holder representing the right to
purchase the number of Warrant Shares not being transferred.

     

    (b)           Lost,
Stolen or Mutilated Warrant. Upon
receipt by the Company of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant (as to which a written
certification and the indemnification contemplated below shall suffice as such
evidence), and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary and
reasonable form and, in the case of mutilation, upon surrender and cancellation
of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with Section 7(d)) representing the right to purchase the
Warrant Shares then underlying this Warrant.

     

    (c)           Exchangeable
for Multiple Warrants. This
Warrant is exchangeable, upon the surrender hereof by the Holder at the
principal office of the Company, for a new Warrant or Warrants (in accordance
with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant
will represent the right to purchase such portion of such Warrant Shares as is
designated by the Holder at the time of such surrender; provided, however, no
warrants for fractional shares of Common Stock shall be given.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (d)           Issuance
of New Warrants.
Whenever the Company is required to issue a new Warrant pursuant to the terms of
this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
(ii) shall represent, as indicated on the face of such new Warrant, the right to
purchase the Warrant Shares then underlying this Warrant (or in the case of a
new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant
Shares designated by the Holder which, when added to the number of shares of
Common Stock underlying the other new Warrants issued in connection with such
issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such
new Warrant which is the same as the Issuance Date, and (iv) shall have the same
rights and conditions as this Warrant.

     

    8.           NOTICES.  Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement. The Company shall provide the Holder with prompt
written notice of all actions taken pursuant to this Warrant, including in
reasonable detail a description of such action and the reason therefor. Without
limiting the generality of the foregoing, the Company will give written notice
to the Holder (i) immediately upon each adjustment of the Exercise Price and the
number of Warrant Shares, setting forth in reasonable detail, and certifying,
the calculation of such adjustment(s) and (ii) at least fifteen (15) days prior
to the date on which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the shares of Common Stock, (B)
with respect to any grants, issuances or sales of any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
to holders of shares of Common Stock or (C) for determining rights to vote with
respect to any Fundamental Transaction, dissolution or liquidation, provided in
each case that such information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder and (iii) at least ten
(10) Trading Days prior to the consummation of any Fundamental
Transaction.  To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information regarding the Company
or any of its subsidiaries, the Company shall simultaneously file such notice
with the SEC (as defined in the Securities Purchase Agreement) pursuant to a
Current Report on Form 8-K. It is expressly understood and agreed that the time
of execution specified by the Holder in each Exercise Notice shall be definitive
and may not be disputed or challenged by the Company.

     

    9.           AMENDMENT
AND WAIVER.  Except as otherwise provided herein, the
provisions of this Warrant (other than Section 1(f)) may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the Holder. The Holder shall be entitled, at its option, to the
benefit of any amendment of (i) any other similar warrant issued under the
Securities Purchase Agreement or (ii) any other similar warrant. No waiver shall
be effective unless it is in writing and signed by an authorized representative
of the waiving party.

     

    10.         SEVERABILITY.  If
any provision of this Warrant or the application thereof becomes or is declared
by a court of competent jurisdiction to be illegal, void or unenforceable, the
remainder of the terms of this Warrant will continue in full force and
effect.

     

    
      
        
        

      

      
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    11.         GOVERNING
LAW. This Warrant shall be governed by and construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Warrant shall be governed by, the
internal laws of the State of Illinois, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Illinois or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Illinois.

     

    12.         CONSTRUCTION;
HEADINGS. This Warrant shall be deemed to be jointly drafted by the
Company and the Holder and shall not be construed against any Person as the
drafter hereof.  The headings of this Warrant are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Warrant. Terms used in this Warrant but defined in the other Transaction
Documents shall have the meanings ascribed to such terms on the Closing Date (as
defined in the Securities Purchase Agreement) in such other Transaction
Documents unless otherwise consented to in writing by the Holder.

     

    13.         DISPUTE
RESOLUTION. In the case of a dispute as to the determination of the
Exercise Price, the Closing Sale Price, the Bid Price or fair market value or
the arithmetic calculation of the Warrant Shares (as the case may be), the
Company or the Holder (as the case may be) shall submit the disputed
determinations or arithmetic calculations (as the case may be) via facsimile (i)
within two (2) Business Days after receipt of the applicable notice giving rise
to such dispute to the Company or the Holder (as the case may be) or (ii) if no
notice gave rise to such dispute, at any time after the Holder learned of the
circumstances giving rise to such dispute (including, without limitation, as to
whether any issuance or sale or deemed issuance or sale was an issuance or sale
or deemed issuance or sale of Excluded Securities). If the Holder and the
Company are unable to agree upon such determination or calculation (as the case
may be) of the Exercise Price, the Closing Sale Price, the Bid Price or fair
market value or the number of Warrant Shares (as the case may be) within three
(3) Business Days of such disputed determination or arithmetic calculation being
submitted to the Company or the Holder (as the case may be), then the Company
shall, within two (2) Business Days submit via facsimile (a) the disputed
determination of the Exercise Price, the Closing Sale Price, the Bid Price or
fair market value (as the case may be) to an independent, reputable investment
bank selected by the Company and approved by the Holder or (b) the disputed
arithmetic calculation of the Warrant Shares to the Company’s independent,
outside accountant. The Company shall cause at its expense the investment bank
or the accountant (as the case may be) to perform the determinations or
calculations (as the case may be) and notify the Company and the Holder of the
results no later than ten (10) Business Days from the time it receives such
disputed determinations or calculations (as the case may be). Such investment
bank’s or accountant’s determination or calculation (as the case may be) shall
be binding upon all parties absent demonstrable error.

     

    
      
        
        

      

      
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    14.         REMEDIES,
CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder to
pursue actual damages for any failure by the Company to comply with the terms of
this Warrant. The Company covenants to the Holder that there shall be no
characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments,
exercises and the like (and the computation thereof) shall be the amounts to be
received by the Holder and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the performance thereof). The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the holder of this Warrant shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required. The Company shall provide all information and
documentation to the Holder that is requested by the Holder to enable the Holder
to confirm the Company’s compliance with the terms and conditions of this
Warrant (including, without limitation, compliance with Section 2 hereof). The
issuance of shares and certificates for shares as contemplated hereby upon the
exercise of this Warrant shall be made without charge to the Holder or such
shares for any issuance tax or other costs in respect thereof, provided that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than the Holder or its agent on its behalf.

     

    15.         TRANSFER.
This Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company, except as may otherwise be required by Section 2(g) of
the Securities Purchase Agreement.

     

    16.         CERTAIN
DEFINITIONS.  For purposes of this Warrant, the following terms
shall have the following meanings:

     

    (a)           “Bid
Price” means, for any security as of the particular time of
determination, the bid price for such security on the Principal Market as
reported by Bloomberg as of such time of determination, or, if the Principal
Market is not the principal securities exchange or trading market for such
security, the bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg
as of such time of determination, or if the foregoing does not apply, the bid
price of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg as of such time of
determination, or, if no bid price is reported for such security by Bloomberg as
of such time of determination, the average of the bid prices of any market
makers for such security as reported in the “pink sheets” by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.) as of such time of determination.
If the Bid Price cannot be calculated for a security as of the particular time
of determination on any of the foregoing bases, the Bid Price of such security
as of such time of determination shall be the fair market value as mutually
determined by the Company and the Holder. If the Company and the Holder are
unable to agree upon the fair market value of such security, then such dispute
shall be resolved in accordance with the procedures in Section 13. All such
determinations shall be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during such
period.

     

    
      
        
        

      

      
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    (b)           “Black
Scholes Consideration Value” means the value of the applicable Option or
Convertible Security (as the case may be) calculated using the Black Scholes
Option Pricing Model obtained from the “OV” function on Bloomberg as of the
applicable date of determination and for purposes of such calculation utilizing
(i) an underlying price per share equal to the Closing Sale Price of the Common
Stock on the Trading Day immediately preceding the public announcement of the
execution of definitive documents with respect to the issuance of such Option or
Convertible Security (as the case may be), (ii) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the remaining term
of such Option or Convertible Security (as the case may be) as of the date of
issuance of such Option or Convertible Security (as the case may be) and (iii)
an expected volatility equal to the greater of 100% and the 100 day volatility
obtained from the HVT function on Bloomberg as of the Trading Day
immediately following the date of issuance of such Option or Convertible
Security (as the case may be).

     

    (c)           “Black
Scholes Value” means the value of the unexercised portion of this Warrant
that remained on the date of the Holder’s request pursuant to Section 4(c)
calculated using the Black Scholes Option Pricing Model obtained from the “OV”
function on Bloomberg as of the applicable date of determination and for
purposes of such calculation utilizing (i) an underlying price per share equal
to the greater of (1) the highest Closing Sale Price of the Common Stock during
the period beginning on the Trading Day immediately preceding the announcement
of the applicable Fundamental Transaction and ending on the Trading Day
immediately following the consummation of the applicable Fundamental Transaction
and (2) the sum of the price per share being offered in cash in the applicable
Fundamental Transaction (if any) plus the value of the non-cash consideration
being offered in the applicable Fundamental Transaction (if any), (ii) a
risk-free interest rate corresponding to the U.S. Treasury rate for a period
equal to the remaining term of this Warrant as of the date of consummation of
the applicable Fundamental Transaction and (iii) an expected volatility equal to
the greater of 100% and the 100 day volatility obtained from the HVT function on
Bloomberg as of the Trading Day immediately following the public announcement of
the applicable Fundamental Transaction.

     

    (d)           “Bloomberg”
means Bloomberg, L.P.

     

    (e)           “Business
Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.

     

    (f)           “Closing
Sale Price” means, for any security as of any date, the last closing
trade price for such security on the Principal Market, as reported by Bloomberg,
or, if the Principal Market begins to operate on an extended hours basis and
does not designate the closing trade price, then the last trade price of such
security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if
the Principal Market is not the principal securities exchange or trading market
for such security, the last trade price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing does not apply, the last trade price
of such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no last trade price is
reported for such security by Bloomberg, the average of the ask prices of any
market makers for such security as reported in the “pink sheets” by Pink Sheets
LLC (formerly the National Quotation Bureau, Inc.). If the Closing Sale Price
cannot be calculated for a security on a particular date on any of the foregoing
bases, the Closing Sale Price of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved in accordance with the procedures
in Section 13. All such determinations shall be appropriately adjusted for
any stock dividend, stock split, stock combination or other similar transaction
during such period.

     

    
      
        
        

      

      
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    (g)           “Common
Stock” means (i) the Company’s shares of common stock, $0.001 par
value per share, and (ii) any capital stock into which such common stock shall
have been changed or any share capital resulting from a reclassification of such
common stock.

     

    (h)           “Convertible
Securities” means any stock or other security (other than Options) that
is at any time and under any circumstances, directly or indirectly, convertible
into, exercisable or exchangeable for, or which otherwise entitles the holder
thereof to acquire, any shares of Common Stock.

     

    (i)   
        “Eligible
Market” means The New York Stock Exchange, the NYSE Amex, the Nasdaq
Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or the
Principal Market.

     

    (j)        
   “Expiration
Date” means the date that is the fifth (5th)
anniversary of the Issuance Date or, if such date falls on a day other than a
Business Day or on which trading does not take place on the Principal Market (a
“Holiday”),
the next date that is not a Holiday.

     

    (k)           “Fundamental
Transaction” means that (i) the Company or any of its Subsidiaries shall,
directly or indirectly, in one or more related transactions, (1) consolidate or
merge with or into (whether or not the Company or any of its Subsidiaries is the
surviving corporation) another Person, or (2) sell, lease, license, assign,
transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company or any of its Subsidiaries to another
Person, or (3) allow another Person to make a purchase, tender or exchange offer
that is accepted by the holders of more than 50% of the outstanding shares of
Voting Stock of the Company (not including any shares of Voting Stock of the
Company held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such purchase, tender or
exchange offer), or (4) consummate a stock or share purchase agreement or other
business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than 50% of the outstanding shares of Voting
Stock of the Company (not including any shares of Voting Stock of the Company
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination), or (5) reorganize,
recapitalize or reclassify its Common Stock, or (ii) any “person” or “group” (as
these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act
and the rules and regulations promulgated thereunder) is or shall become the
“beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or
indirectly, of 50% of the aggregate ordinary voting power represented by issued
and outstanding Voting Stock of the Company.

     

    (l) 
          “Options”
means any rights, warrants or options to subscribe for or purchase shares of
Common Stock or Convertible Securities.

     

    
      
        
        

      

      
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    (m)          “Parent
Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person and whose common stock or equivalent equity
security is quoted or listed on an Eligible Market, or, if there is more than
one such Person or Parent Entity, the Person or Parent Entity with the largest
public market capitalization as of the date of consummation of the Fundamental
Transaction.

     

    (n)           “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, any other
entity or a government or any department or agency thereof.

     

    (o)           “Principal
Market” means the OTC Bulletin Board.

     

    (p)           “Successor
Entity” means the Person (or, if so elected by the Holder, the Parent
Entity) formed by, resulting from or surviving any Fundamental Transaction or
the Person (or, if so elected by the Holder, the Parent Entity) with which such
Fundamental Transaction shall have been entered into.

     

    (q)           “Trading
Day” means any day on which the Common Stock is traded on the Principal
Market, or, if the Principal Market is not the principal trading market for the
Common Stock, then on the principal securities exchange or securities market on
which the Common Stock is then traded, provided that “Trading Day” shall not
include any day on which the Common Stock is scheduled to trade on such exchange
or market for less than 4.5 hours or any day that the Common Stock is suspended
from trading during the final hour of trading on such exchange or market (or if
such exchange or market does not designate in advance the closing time of
trading on such exchange or market, then during the hour ending at 4:00:00 p.m.,
New York time) unless such day is otherwise designated as a Trading Day in
writing by the Holder.

     

    (r)           “Voting
Stock” of a Person means capital stock of such Person of the class or
classes pursuant to which the holders thereof have the general voting power to
elect, or the general power to appoint, at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not
at the time capital stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).

     

    (s)           “VWAP”
means, for any security as of any date, the dollar volume-weighted average price
for such security on the Principal Market (or, if the Principal Market is not
the principal trading market for such security, then on the principal securities
exchange or securities market on which such security is then traded) during the
period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New
York time, as reported by Bloomberg through its “Volume at Price” function or,
if the foregoing does not apply, the dollar volume-weighted average price of
such security in the over-the-counter market on the electronic bulletin board
for such security during the period beginning at 9:30:01 a.m., New York time,
and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.). If VWAP cannot be calculated for such security on such date on any of the
foregoing bases, the VWAP of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder. If the Company and
the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in Section 13.
All such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such
period.

     

    [signature
page follows]

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common
Stock to be duly executed as of the Issuance Date set out
above.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    NACEL
      ENERGY CORPORATION

                                  	 
      
	 
      	 
      
	
                                    By:

                                  	
                                    /s/
      Mark Schaftlein

                                  	 
      
	      
                                    Name:

                                  	
                                    Mark
      Schaftlein

                                  	 
	      
                                    Title:

                                  	
                                    Director

                                    President

                                  	 


                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
A

     

    EXERCISE
NOTICE

     

    TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
TO PURCHASE COMMON STOCK

     

    NACEL
ENERGY CORPORATION

     

    The
undersigned holder hereby exercises the right to purchase _________________ of
the shares of Common Stock (“Warrant
Shares”) of NACEL Energy Corporation, a Wyoming corporation (the “Company”),
evidenced by Series A Warrant No. _______ (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.

     

    1.           Form
of Exercise Price.  The Holder intends that payment of the
Exercise Price shall be made as:

     

    
      	
               
      

            	
              ____________

            	
              a
      “Cash
      Exercise” with respect to _________________ Warrant Shares;
      and/or

            


    

     

    
      	
               
      

            	
              ____________

            	
              a
      “Cashless
      Exercise” with respect to _______________ Warrant
      Shares.

            


    

     

    In the
event that the Holder has elected a Cashless Exercise with respect to some or
all of the Warrant Shares to be issued pursuant hereto, the Holder hereby
represents and warrants that (i) this Exercise Notice was executed by the Holder
at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,
the Bid Price as of such time of execution of this Exercise Notice was
$________.

     

    2.           Payment
of Exercise Price. In the event that the Holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the Holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.

     

    3.           Delivery
of Warrant Shares.  The Company shall deliver to Holder, or its
designee or agent as specified below, __________ Warrant Shares in accordance
with the terms of the Warrant.  Delivery shall be made to Holder, or
for its benefit, to the following address:

     

    _______________________

    _______________________

    _______________________

    _______________________

     

    Date:
_______________ __, ______

     

    
      
        
          
            
              	 
      
	
                         Name
      of Registered
Holder

                    


            

          

        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        
          
            	
                    By:

                  	 
      
	 
      	
                    Name:

                  
	 
      	
                    Title:

                  


          

        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ACKNOWLEDGMENT

     

    The
Company hereby acknowledges this Exercise Notice and hereby directs
______________ to issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated _________, 2009, from the
Company and acknowledged and agreed to by _______________.

     

    
      
        
          
            
              
                
                  	
                          NACEL
      ENERGY CORPORATION

                        
	 
      	 
      
	
                          By:

                        	 
      	 
      
	
                          Name:

                        	 
      
	
                          Title: