[FORM
      OF CONVERTIBLE NOTE]

     

    NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
      IN A
      FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
      UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
      SAID
      ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
      WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
      BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE
      TERMS
      OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL
      AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON
      CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
      PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

     

    Rancher
      Energy Corp.

     

    Convertible
      Note

     

    
      	
              Issuance
                Date: December [__], 2006

            	
              Original
                Principal Amount: U.S.
                $_____________

            


    

    


    FOR
      VALUE RECEIVED,
      Rancher
      Energy Corp., a Nevada corporation (the "Company"),
      hereby promises to pay to [BUYERS] or registered assigns ("Holder")
      the
      amount set out above as the Original Principal Amount (as reduced pursuant
      to
      the terms hereof pursuant to conversion or otherwise, the "Principal")
      when
      due, whether upon the Maturity Date (as defined below), acceleration, redemption
      or otherwise (in each case in accordance with the terms hereof) and to pay
      interest ("Interest"),
      if
      any, on any outstanding Principal at the Interest Rate as may be required by
      Section 2 hereof. This Convertible Note (including all Convertible Notes issued
      in exchange, transfer or replacement hereof, this "Note")
      is one
      of an issue of Convertible Notes issued pursuant to the Securities Purchase
      Agreement (as defined below) on the Closing Date (collectively, the
      "Notes"
      and
      such other Convertible Notes, the "Other Notes").
      Certain capitalized terms used herein are defined in Section 26.

     

    (1)
      PAYMENTS
      OF PRINCIPAL.
      On the
      Maturity Date, the Company shall pay to the Holder an amount in cash
      representing all outstanding Principal, accrued and unpaid Interest, if any,
      and
      accrued and unpaid Late Charges, if any, on such Principal and Interest. The
      "Maturity Date"
      shall
      be [INSERT DATE THAT IS 120 DAYS FROM ISSUANCE DATE], as may be extended at
      the
      option of the Holder (i) in the event that, and for so long as, a Trigger Event
      (as defined in Section 4(a)) shall have occurred and be continuing on the
      Maturity Date (as may be extended pursuant to this Section 1) or any event
      that
      shall have occurred and be continuing that with the passage of time and the
      failure to cure would result in a Trigger Event, (ii) through the date that
      is
      ten (10) Business Days after the consummation of a Change of Control in the
      event that a Change of Control is publicly announced or a Change of Control
      Notice (as defined in Section 5(b)) is delivered prior to the Maturity Date
      and
      (iii) for an additional ninety (90) day period in the event that as of the
      Maturity Date the Stockholder Approval has not been obtained. Other than as
      specifically permitted by the Note, the Company may not prepay any portion
      of
      the outstanding Principal, accrued and unpaid Interest or accrued and unpaid
      Late Charges, if any, on Principal and Interest.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (2)
      INTEREST;
      INTEREST RATE.
      Prior
      to
      the occurrence of a Trigger Event, no Interest shall accrue on the outstanding
      Principal of this Note. From
      and
      after the occurrence and during the continuance of a Trigger Event, Interest
      shall accrue on such outstanding Principal at an interest rate equal to twelve
      percent (12.0%) per annum commencing on the date of the occurrence of such
      Trigger Event. In the event that such Trigger Event is subsequently cured,
      and
      no other Trigger Events have occurred and are continuing, Interest shall cease
      to accrue hereunder as of the date of such cure; provided that the Interest
      as
      calculated and unpaid at such interest rate during the continuance of such
      Trigger Event shall continue to apply to the extent relating to the days after
      the occurrence of such Trigger Event through and including the date of cure
      of
      such Trigger Event.
      Any
      Interest that shall accrue hereunder shall be payable upon any conversion or
      redemption of this Note in accordance with the terms set forth herein and on
      the
      Maturity Date.

     

    (3)
      CONVERSION
      OF NOTES.
      This
      Note shall be convertible into shares of the Company's common stock, par value
      $0.00001 per share (the "Common
      Stock"),
      on
      the terms and conditions set forth in this Section 3.

     

    (a)
      Conversion
      Right.
      At any
      time or times on or after the Stockholder Approval Date, the Holder shall be
      entitled to convert any portion of the outstanding and unpaid Conversion Amount
      (as defined below) into fully paid and nonassessable shares of Common Stock
      in
      accordance with Section 3(c), at the Conversion Rate (as defined below). The
      Company shall not issue any fraction of a share of Common Stock upon any
      conversion. If the issuance would result in the issuance of a fraction of a
      share of Common Stock, the Company shall round such fraction of a share of
      Common Stock up to the nearest whole share. The Company shall pay any and all
      taxes that may be payable with respect to the issuance and delivery of Common
      Stock upon conversion of any Conversion Amount; provided
      that the
      Company shall not be required to pay any tax that may be payable in respect
      of
      any issuance of Common Stock to any Person other than the converting Holder
      or
      with respect to any income tax due by the Holder with respect to such Common
      Stock.

     

    (b)
      Conversion
      Rate.
      The
      number of shares of Common Stock issuable upon conversion of any Conversion
      Amount pursuant to Section 3(a) shall be determined by dividing (x) such
      Conversion Amount by (y) the Conversion Price (the "Conversion
      Rate").

     

    (i)
      "Conversion
      Amount"
      means
      the sum of (A) the portion of the Principal to be converted, redeemed or
      otherwise with respect to which this determination is being made, (B) accrued
      and unpaid Interest with respect to such Principal, if any, and (C) accrued
      and
      unpaid Late Charges with respect to such Principal and Interest, if
      any.

     

    
      
        
        

      

      
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    (ii)
      "Conversion
      Price"
      means,
      as of any Conversion Date (as defined below) or other date of determination,
      $1.50, subject to adjustment as provided herein.

     

    (c)
      Mechanics
      of Conversion.

     

    (i)
      Optional
      Conversion.
      To
      convert any Conversion Amount into shares of Common Stock on any date (a
      "Conversion
      Date"),
      the
      Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt
      on or
      prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice
      of conversion in the form attached hereto as Exhibit
      I
      (the
      "Conversion
      Notice")
      to the
      Company and (B) if required by Section 3(c)(iii), surrender this Note to a
      common carrier for delivery to the Company as soon as practicable on or
      following such date (or an indemnification undertaking with respect to this
      Note
      in the case of its loss, theft or destruction). On or before the second
      (2nd)
      Trading
      Day following the date of receipt of a Conversion Notice, the Company shall
      transmit by facsimile a confirmation of receipt of such Conversion Notice to
      the
      Holder and the Company's transfer agent (the "Transfer
      Agent").
      On or
      before the third (3rd)
      Trading
      Day following the date of receipt of a Conversion Notice (the "Share
      Delivery Date"),
      the
      Company shall (X) provided that the Transfer Agent is participating in the
      Depository Trust Company ("DTC")
      Fast
      Automated Securities Transfer Program, credit such aggregate number of shares
      of
      Common Stock to which the Holder shall be entitled to the Holder's or its
      designee's balance account with DTC through its Deposit Withdrawal Agent
      Commission system or (Y) if the Transfer Agent is not participating in the
      DTC
      Fast Automated Securities Transfer Program, issue and deliver to the address
      as
      specified in the Conversion Notice, a certificate, registered in the name of
      the
      Holder or its designee, for the number of shares of Common Stock to which the
      Holder shall be entitled. If this Note is physically surrendered for conversion
      as required by Section 3(c)(iii) and the outstanding Principal of this Note
      is
      greater than the Principal portion of the Conversion Amount being converted,
      then the Company shall as soon as practicable and in no event later than three
      (3) Business Days after receipt of this Note and at its own expense, issue
      and
      deliver to the holder a new Note (in accordance with Section 16(d)) representing
      the outstanding Principal not converted. The Person or Persons entitled to
      receive the shares of Common Stock issuable upon a conversion of this Note
      shall
      be treated for all purposes as the record holder or holders of such shares
      of
      Common Stock on the Conversion Date. 

     

    (ii)
      If
      within
      five (5) Trading Days after the Company's receipt of the facsimile copy of
      a
      Conversion Notice the Company shall fail to issue and deliver a certificate
      to
      the Holder or credit the Holder's balance account with DTC for the number of
      shares of Common Stock to which the Holder is entitled upon such holder's
      conversion of any Conversion Amount (a
      "Conversion
      Failure"),
      and if
      on or after such Trading Day the Holder purchases (in an open market transaction
      or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder
      of
      Common Stock issuable upon such conversion that the Holder anticipated receiving
      from the Company (a "Buy-In"),
      then
      the Company shall, within three (3) Trading 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 and other
      out-of-pocket expenses, 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 (and to issue
      such Common Stock) shall terminate, or (ii) promptly honor its obligation to
      deliver to the Holder a certificate or certificates representing such Common
      Stock 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 Bid Price on the Conversion Date.

     

    
      
        
        

      

      
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    (iii)
      Registration;
      Book-Entry.
      The
      Company shall maintain a register (the "Register")
      for
      the recordation of the names and addresses of the holders of each Note and
      the
      principal amount of the Notes held by such holders (the "Registered
      Notes").
      The
      entries in the Register shall be conclusive and binding for all purposes absent
      manifest error. The Company and the holders of the Notes shall treat each Person
      whose name is recorded in the Register as the owner of a Note for all purposes,
      including, without limitation, the right to receive payments of principal and
      interest hereunder, notwithstanding notice to the contrary. A Registered Note
      may be assigned or sold in whole or in part only by registration of such
      assignment or sale on the Register. Upon its receipt of a request to assign
      or
      sell all or part of any Registered Note by a Holder, the Company shall record
      the information contained therein in the Register and issue one or more new
      Registered Notes in the same aggregate principal amount as the principal amount
      of the surrendered Registered Note to the designated assignee or transferee
      pursuant to Section 16. Notwithstanding anything to the contrary set forth
      herein, upon conversion of any portion of this Note in accordance with the
      terms
      hereof, the Holder shall not be required to physically surrender this Note
      to
      the Company unless (A) the full Conversion Amount represented by this Note
      is
      being converted or (B) the Holder has provided the Company with prior written
      notice (which notice may be included in a Conversion Notice) requesting
      reissuance of this Note upon physical surrender of this Note. The Holder and
      the
      Company shall maintain records showing the Principal, Interest and Late Charges,
      if any, converted and the dates of such conversions or shall use such other
      method, reasonably satisfactory to the Holder and the Company, so as not to
      require physical surrender of this Note upon conversion.

     

    (iv)
      Pro
      Rata Conversion; Disputes.
      In the
      event that the Company receives a Conversion Notice from more than one holder
      of
      Notes for the same Conversion Date and the Company can convert some, but not
      all, of such portions of the Notes submitted for conversion, the Company shall
      convert from each holder of Notes electing to have Notes converted on such
      date
      a pro rata amount of such holder's portion of its Notes submitted for conversion
      based on the principal amount of Notes submitted for conversion on such date
      by
      such holder relative to the aggregate principal amount of all Notes submitted
      for conversion on such date. In the event of a dispute as to the number of
      shares of Common Stock issuable to the Holder in connection with a conversion
      of
      this Note, the Company shall issue to the Holder the number of shares of Common
      Stock not in dispute and resolve such dispute in accordance with Section
      21.

     

    (v)
      Automatic
      Conversion.
      On the
      Stockholder Approval Date all of the Conversion Amount then remaining under
      this
      Note shall be converted into fully paid, validly issued and nonassessable shares
      of Common Stock in accordance with Section 3(c) hereof at the Conversion Rate
      as
      of the Mandatory Conversion Date (as defined below) with respect to the
      Conversion Amount (the "Automatic
      Conversion").
      The
      Company shall deliver, within not more than one (1) Trading Day following
      the Stockholder Approval Date, a
      written
      notice thereof by facsimile and overnight courier to all, but not less than
      all,
      of the holders of Notes and the Transfer Agent (the "Automatic
      Conversion Notice"
      and the
      date all of the holders received such notice is referred to as the "Automatic
      Conversion Notice Date").
      The
      Mandatory Conversion Notice shall state (1) the aggregate Conversion Amount of
      the Notes that shall be subject to the Automatic Conversion pursuant hereto
      (and
      analogous provisions under the Other Notes) and (2) the number of shares of
      Common Stock to be issued to the Holder on the applicable Conversion Date.
      The
      mechanics of conversion set forth in Section 3(c) shall apply to the Automatic
      Conversion as if the Company and the Transfer Agent had received from the Holder
      on the Stockholder Approval Date a Conversion Notice with respect to the
      Conversion Amount remaining under this Note. 

     

    
      
        
        

      

      
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    (4)
      RIGHTS
      UPON TRIGGER EVENT.

     

    (a)
      Trigger
      Event.
      Each of
      the following events shall constitute a "Trigger
      Event":

     

    (i)
      the
      failure of the applicable Registration Statement required to be filed pursuant
      to the Registration Rights Agreement to be declared effective by the SEC on
      or
      prior to the date that is sixty (60) days after the applicable Effectiveness
      Deadline (as defined in the Registration Rights Agreement), or, while the
      applicable Registration Statement is required to be maintained effective
      pursuant to the terms of the Registration Rights Agreement, the effectiveness
      of
      the applicable Registration Statement lapses for any reason (including, without
      limitation, the issuance of a stop order) or is unavailable to any holder of
      the
      Notes for sale of all of such holder's Registrable Securities (as defined in
      the
      Registration Rights Agreement) in accordance with the terms of the Registration
      Rights Agreement, and such lapse or unavailability continues for a period of
      ten
      (10) consecutive days or for more than an aggregate of thirty (30) days in
      any
      365-day period (other than days during an Allowable Grace Period (as defined
      in
      the Registration Rights Agreement));

     

    (ii)
      the
      suspension from trading or failure of the Common Stock to be listed on the
      Principal Market or an Eligible Market for a period of five (5) consecutive
      Trading Days or for more than an aggregate of ten (10) Trading Days in any
      365-day period;

     

    (iii)
      the
      Company's (A) failure to cure a Conversion Failure by delivery of the required
      number of shares of Common Stock within ten (10) Trading Days after the
      applicable Conversion Date or (B) notice, written or oral, to any holder of
      the
      Notes, including by way of public announcement or through any of its agents,
      at
      any time, of its intention not to comply with a request for conversion of any
      Notes into shares of Common Stock that is tendered in accordance with the
      provisions of the Notes;

     

    (iv)
      at
      any
      time following the tenth (10th)
      consecutive Business Day that the Holder's Authorized Share Allocation is less
      than the number of shares of Common Stock that the Holder would be entitled
      to
      receive upon a conversion of the full Conversion Amount of this Note (without
      regard to any limitations on conversion);

     

    
      
        
        

      

      
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    (v)
      the
      Company's failure to pay to the Holder any amount of Principal (including,
      without limitation, any redemption payments), Interest, Late Charges or other
      amounts when and as due under this Note or any other Transaction Document (as
      defined in the Securities Purchase Agreement) or any other agreement, document,
      certificate or other instrument delivered in connection with the transactions
      contemplated hereby and thereby to which the Holder is a party, except, in
      the
      case of a failure to pay any Interest and Late Charges when and as due, in
      which
      case only if such failure continues for a period of at least five (5) Business
      Days;

     

    (vi)
      A)
      any
      payment default or other default occurs under any Indebtedness of the Company
      or
      any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase
      Agreement) (other than Permitted Senior Indebtedness) that results in a
      redemption of or acceleration prior to maturity of $1,000,000 or more of such
      Indebtedness in the aggregate, (B) any material default occurs under any
      Indebtedness of the Company (other than Permitted Senior Indebtedness) or any
      of
      its Subsidiaries having an aggregate outstanding balance in excess of $1,000,000
      and such default continues uncured for more than ten (10) Business Days, other
      than, in each case (A) or (B) above, a default with respect to any Other Notes,
      or (C) any "event of default" occurs under the Permitted Senior
      Indebtedness;

     

    (vii)
      the
      Company or any of its Subsidiaries, pursuant to or within the meaning of Title
      11, U.S. Code, or any similar Federal, foreign or state law for the relief
      of
      debtors (collectively, "Bankruptcy
      Law"),
      (A)
      commences a voluntary case, (B) consents to the entry of an order for relief
      against it in an involuntary case, (C) consents to the appointment of a
      receiver, trustee, assignee, liquidator or similar official (a "Custodian"),
      (D)
      makes a general assignment for the benefit of its creditors or (E) admits in
      writing that it is generally unable to pay its debts as they become
      due;

     

    (viii)
      a
      court
      of competent jurisdiction enters an order or decree under any Bankruptcy Law
      that (A) is for relief against the Company or any of its Subsidiaries in an
      involuntary case, (B) appoints a Custodian of the Company or any of its
      Subsidiaries or (C) orders the liquidation of the Company or any of its
      Subsidiaries;

     

    (ix)
      a
      final
      judgment or judgments for the payment of money aggregating in excess of
      $1,000,000 are rendered against the Company or any of its Subsidiaries and
      which
      judgments are not, within sixty (60) days after the entry thereof, bonded,
      discharged or stayed pending appeal, or are not discharged within sixty (60)
      days after the expiration of such stay; provided, however, that any judgment
      which is covered by insurance or an indemnity from a credit worthy party shall
      not be included in calculating the $1,000,000 amount set forth above so long
      as
      the Company provides the Holder a written statement from such insurer or
      indemnity provider (which written statement shall be reasonably satisfactory
      to
      the Holder) to the effect that such judgment is covered by insurance or an
      indemnity and the Company will receive the proceeds of such insurance or
      indemnity within thirty (30) days of the issuance of such judgment;

     

    (x)
      the
      Company breaches any representation, warranty, covenant or other term or
      condition of any Transaction Document, except, in the case of a breach of a
      covenant which is curable, only if such breach continues for a period of at
      least ten (10) consecutive Business Days;

     

    
      
        
        

      

      
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    (xi)
      any
      breach or failure in any respect to comply with Section 12 of this Note;
      or

     

    (xii)
      any
      Trigger Event (as defined in the Other Notes) occurs with respect to any Other
      Notes.

     

    (b)
      Redemption
      Right.
      Upon
      the occurrence of a Trigger Event with respect to this Note or any Other Note,
      the Company shall within (1) Business Day deliver written notice thereof via
      facsimile or e-mail and overnight courier (a "Trigger
      Event Notice")
      to the
      Holder. At any time after the earlier of the Holder's receipt of a Trigger
      Event
      Notice and the Holder becoming aware of a Trigger Event, the Holder may require
      the Company to redeem all or any portion of this Note by delivering written
      notice thereof (the "Trigger
      Event Redemption Notice")
      to the
      Company, which Trigger Event Redemption Notice shall indicate the portion of
      this Note the Holder is electing to redeem. Each portion of this Note subject
      to
      redemption by the Company pursuant to this Section 4(b) shall be redeemed by
      the
      Company at a price equal to the Conversion Amount to be redeemed (the
      "Trigger
      Event Redemption
      Price").
      Redemptions required by this Section 4(b) shall be made in accordance with
      the
      provisions of Section 10. To the extent redemptions required by this Section
      4(b) are deemed or determined by a court of competent jurisdiction to be
      prepayments of the Note by the Company, such redemptions shall be deemed to
      be
      voluntary prepayments. The parties hereto agree that in the event of the
      Company's redemption of any portion of the Note under this Section 4(b), the
      Holder's damages would be uncertain and difficult to estimate because of the
      parties' inability to predict future interest rates and the uncertainty of
      the
      availability of a suitable substitute investment opportunity for the Holder.
      Accordingly, any Redemption Premium due under this Section 4(b) is intended
      by
      the parties to be, and shall be deemed, a reasonable estimate of the Holder's
      actual loss of its investment opportunity and not as a penalty.

     

    (5)
      RIGHTS
      UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

     

    (a)
      Assumption.
      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 Note and the other Transaction Documents in accordance with
      the provisions of this Section 5(a) pursuant to written agreements in form
      and
      substance satisfactory to the Required Holders and approved by the Required
      Holders prior to such Fundamental Transaction, including agreements to deliver
      to each holder of Notes in exchange for such Notes a security of the Successor
      Entity evidenced by a written instrument substantially similar in form and
      substance to the Notes, including, without limitation, having a principal amount
      and interest rate equal to the principal amounts then outstanding and the
      interest rates of the Notes held by such holder, having similar conversion
      rights as the Notes and having similar ranking to the Notes, and satisfactory
      to
      the Required Holders 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 occurrence of any Fundamental
      Transaction, the Successor Entity shall succeed to, and be substituted for
      (so
      that from and after the date of such Fundamental Transaction, the provisions
      of
      this Note 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 Note with the same effect
      as if
      such Successor Entity had been named as the Company herein. Upon consummation
      of
      the Fundamental Transaction, the Successor Entity shall deliver to the Holder
      confirmation that there shall be issued upon conversion or redemption of this
      Note at
      any
      time after the consummation of the Fundamental Transaction, in lieu of the
      shares of the Company's Common Stock (or
      other
      securities, cash, assets or other property) issuable
      upon the conversion or redemption of the Notes prior to such Fundamental
      Transaction,
      such
      shares of the publicly traded common stock (or their equivalent) of the
      Successor Entity (including its Parent Entity), as adjusted in accordance with
      the provisions of this Note. The
      provisions of this Section shall apply similarly and equally to successive
      Fundamental Transactions and shall be applied without regard to any limitations
      on the conversion or redemption of this Note.

     

    
      
        
        

      

      
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    (b)
      Redemption
      Right.
      No
      sooner than fifteen (15) days nor later than ten (10) days prior to the
      consummation of a Change of Control, but not prior to the public announcement
      of
      such Change of Control, the Company shall deliver written notice thereof via
      facsimile and overnight courier to the Holder (a "Change
      of Control Notice").
      At
      any time during the period beginning on the date of the Holder's receipt of
      a
      Change of Control Notice and ending twenty (20) Trading Days after the
      consummation of such Change of Control, the Holder may require the Company
      to
      redeem all or any portion of this Note by delivering written notice thereof
      ("Change
      of Control Redemption Notice")
      to the
      Company, which Change of Control Redemption Notice shall indicate the Conversion
      Amount the Holder is electing to redeem. The portion of this Note subject to
      redemption pursuant to this Section 5 shall be redeemed by the Company in cash
      at a price equal to the greater of (i) the product of (x) the Conversion Amount
      being redeemed and (y) the quotient determined by dividing (A) the greater
      of
      the Closing Sale Price of the Common Stock immediately prior to the consummation
      of the Change of Control, the Closing Sale Price immediately following the
      public announcement of such proposed Change of Control and the Closing Sale
      Price of the Common Stock immediately prior to the public announcement of such
      proposed Change of Control by (B) the Conversion Price and (ii) 125% of the
      Conversion Amount being redeemed (the "Change
      of Control Redemption Price").
      Redemptions required by this Section 5 shall be made in accordance with the
      provisions of Section 10 and shall have priority to payments to stockholders
      in
      connection with a Change of Control. To the extent redemptions required by
      this
      Section 5(b) are deemed or determined by a court of competent jurisdiction
      to be
      prepayments of the Note by the Company, such redemptions shall be deemed to
      be
      voluntary prepayments. Notwithstanding anything to the contrary in this Section
      5, until the Change of Control Redemption Price is paid in full, the Conversion
      Amount submitted for redemption under this Section 5(c) may be converted, in
      whole or in part, by the Holder into Common Stock pursuant to Section 3. The
      parties hereto agree that in the event of the Company's redemption of any
      portion of the Note under this Section 5(b), the Holder's damages would be
      uncertain and difficult to estimate because of the parties' inability to predict
      future interest rates and the uncertainty of the availability of a suitable
      substitute investment opportunity for the Holder. Accordingly, any redemption
      premium due under this Section 5(b) is intended by the parties to be, and shall
      be deemed, a reasonable estimate of the Holder's actual loss of its investment
      opportunity and not as a penalty.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

    (6)
      RIGHTS
      UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.

     

    (a)
      Purchase
      Rights.
      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 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 conversion of this Note (without taking into account any
      limitations or restrictions on the convertibility of this Note) 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 Common Stock are to be determined for the grant, issue or
      sale
      of such Purchase Rights.

     

    (b)
      Other
      Corporate Events.
      In
      addition to and not in substitution for any other rights hereunder, prior to
      the
      consummation of any 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 a conversion of this Note, (i) in
      addition to the shares of Common Stock receivable upon such conversion, such
      securities or other assets to which the Holder would have been entitled with
      respect to such shares of Common Stock had such shares of Common Stock been
      held
      by the Holder upon the consummation of such Corporate Event (without taking
      into
      account any limitations or restrictions on the convertibility of this Note)
      or
      (ii) in lieu of the shares of Common Stock otherwise receivable upon such
      conversion, such securities or other assets received by the holders of shares
      of
      Common Stock in connection with the consummation of such Corporate Event in
      such
      amounts as the Holder would have been entitled to receive had this Note
      initially been issued with conversion rights for the form of such consideration
      (as opposed to shares of Common Stock) at a conversion rate for such
      consideration commensurate with the Conversion Rate. Provision made pursuant
      to
      the preceding sentence shall be in a form and substance satisfactory to the
      Required Holders. The provisions of this Section shall apply similarly and
      equally to successive Corporate Events and shall be applied without regard
      to
      any limitations on the conversion or redemption of this Note.

     

    (7)
      ADJUSTMENT
      OF CONVERSION PRICE UPON SUBDIVISION OR COMBINATION OF COMMON
      STOCK.
      If the
      Company at any time on or after the Subscription Date subdivides (by any stock
      split, stock dividend, recapitalization or otherwise) one or more classes of
      its
      outstanding shares of Common Stock into a greater number of shares, the
      Conversion Price in effect immediately prior to such subdivision will be
      proportionately reduced. If the Company at any time on or after the Subscription
      Date combines (by combination, reverse stock split or otherwise) one or more
      classes of its outstanding shares of Common Stock into a smaller number of
      shares, the Conversion Price in effect immediately prior to such combination
      will be proportionately increased.

     

    (8)
      NONCIRCUMVENTION.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Certificate of Incorporation, Bylaws 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 Note, and will at all
      times in good faith carry out all of the provisions of this Note and take all
      action as may be required to protect the rights of the Holder of this Note.
      

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    (9)
      RESERVATION
      OF AUTHORIZED SHARES.

     

    (a)
      Reservation.
      Following the Stockholder Approval Date, so long as any of the Notes are
      outstanding, the Company shall take all action necessary to reserve and keep
      available out of its authorized and unissued Common Stock, solely for the
      purpose of effecting the conversion of the Notes, 130% of the number of shares
      of Common Stock as shall from time to time be necessary to effect the conversion
      of all of the Notes then outstanding; provided that at no time shall the number
      of shares of Common Stock so reserved be less than the number of shares required
      to be reserved by the previous sentence (without regard to any limitations
      on
      conversions) (the "Required
      Reserve Amount").
      The
      number of shares of Common Stock reserved for conversions of the Notes and
      each
      increase in the number of shares so reserved shall be allocated pro rata among
      the holders of the Notes based on the principal amount of the Notes held by
      each
      holder at the Closing (as defined in the Securities Purchase Agreement) or
      increase in the number of reserved shares, as the case may be (the "Authorized
      Share Allocation").
      In
      the event that a holder shall sell or otherwise transfer any of such holder's
      Notes, each transferee shall be allocated a pro rata portion of such holder's
      Authorized Share Allocation. Any shares of Common Stock reserved and allocated
      to any Person which ceases to hold any Notes shall be allocated to the remaining
      holders of Notes, pro rata based on the principal amount of the Notes then
      held
      by such holders.

     

    (b)
      Insufficient
      Authorized Shares.
      If at
      any time following the Stockholder Approval Date while any of the Notes 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 conversion of the Notes at least a number of shares of Common
      Stock equal to 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 the Notes 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.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

    (10)
      HOLDER'S
      REDEMPTIONS.

     

    (a)
      Mechanics.
      The
      Company shall deliver the applicable Trigger Event Redemption Price to the
      Holder within five (5) Business Days after the Company's receipt of the Holder's
      Trigger Event Redemption Notice. If the Holder has submitted a Change of Control
      Redemption Notice in accordance with Section 5(b), the Company shall deliver
      the
      applicable Change of Control Redemption Price to the Holder concurrently with
      the consummation of such Change of Control if such notice is received prior
      to
      the consummation of such Change of Control and within five (5) Business Days
      after the Company's receipt of such notice otherwise. In the event of a
      redemption of less than all of the Conversion Amount of this Note, the Company
      shall promptly cause to be issued and delivered to the Holder a new Note (in
      accordance with Section 16(d)) representing the outstanding Principal which
      has
      not been redeemed. In the event that the Company does not pay the applicable
      Redemption Price to the Holder within the time period required, at any time
      thereafter and until the Company pays such unpaid Redemption Price in full,
      the
      Holder shall have the option, in lieu of redemption, to require the Company
      to
      promptly return to the Holder all or any portion of this Note representing
      the
      Conversion Amount that was submitted for redemption and for which the applicable
      Redemption Price (together with any Late Charges thereon) has not been paid.
      Upon the Company's receipt of such notice, (x) the Redemption Notice shall
      be
      null and void with respect to such Conversion Amount, (y) the Company shall
      immediately return this Note, or issue a new Note (in accordance with Section
      16(d)) to the Holder representing such Conversion Amount and (z) the Conversion
      Price of this Note or such new Notes shall be adjusted to the lesser of (A)
      the
      Conversion Price as in effect on the date on which the Redemption Notice is
      voided and (B) the lowest Closing Bid Price of the Common Stock during the
      period beginning on and including the date on which the Redemption Notice is
      delivered to the Company and ending on and including the date on which the
      Redemption Notice is voided. The Holder's delivery of a notice voiding a
      Redemption Notice and exercise of its rights following such notice shall not
      affect the Company's obligations to make any payments of Late Charges which
      have
      accrued prior to the date of such notice with respect to the Conversion Amount
      subject to such notice.

    
       

    

    (b)  Redemption
      by Other Holders.
      Upon
      the Company's receipt of notice from any of the holders of the Other Notes
      for
      redemption or repayment as a result of an event or occurrence substantially
      similar to the events or occurrences described in Section 4(b) or Section 5(b)
      (each, an "Other
      Redemption Notice"),
      the
      Company shall immediately, but no later than one (1) Business Day of its receipt
      thereof, forward to the Holder by facsimile a copy of such notice. If the
      Company receives a Redemption Notice and one or more Other Redemption Notices,
      during the seven (7) Business Day period beginning on and including the date
      which is three (3) Business Days prior to the Company's receipt of the Holder's
      Redemption Notice and ending on and including the date which is three (3)
      Business Days after the Company's receipt of the Holder's Redemption Notice
      and
      the Company is unable to redeem all principal, interest and other amounts
      designated in such Redemption Notice and such Other Redemption Notices received
      during such seven (7) Business Day period, then the Company shall redeem a
      pro
      rata amount from each holder of the Notes (including the Holder) based on the
      principal amount of the Notes submitted for redemption pursuant to such
      Redemption Notice and such Other Redemption Notices received by the Company
      during such seven (7) Business Day period.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    (11)
      VOTING
      RIGHTS.
      The
      Holder shall have no voting rights as the holder of this Note, except
      as
      required by law, including, but not limited to, Chapter 78 of the Nevada Revised
      Statutes, and as expressly provided in this Note.

     

    (12)
      COVENANTS.

     

    (a)
      Rank.All
      payments due under this Note (A) shall rank pari
      passu
      with all
      Other Notes and (B) shall be senior to all other Indebtedness of the Company
      and
      its Subsidiaries, other than Permitted Senior Indebtedness.

     

    (b)
      Incurrence
      of Indebtedness.
      So long
      as this Note is outstanding, the Company shall not, and the Company shall not
      permit any of its Subsidiaries to, directly or indirectly, incur or guarantee,
      assume or suffer to exist any Indebtedness, other than (i) the Indebtedness
      evidenced by this Note and the Other Notes and (ii) other Permitted
      Indebtedness.

     

    (c)
      Existence
      of Liens.
      So long
      as this Note is outstanding, the Company shall not, and the Company shall not
      permit any of its Subsidiaries to, directly or indirectly, allow or suffer
      to
      exist any mortgage, lien, pledge, charge, security interest or other encumbrance
      upon or in any property or assets (including accounts and contract rights)
      owned
      by the Company or any of its Subsidiaries (collectively, "Liens")
      other
      than Permitted Liens. 

     

    (d)
      Restricted
      Payments.
      The
      Company shall not, and the Company shall not permit any of its Subsidiaries
      to,
      directly or indirectly, redeem, defease, repurchase, repay or make any payments
      in respect of, by the payment of cash or cash equivalents (in whole or in part,
      whether by way of open market purchases, tender offers, private transactions
      or
      otherwise), all or any portion of any Permitted Indebtedness (other than this
      Note and the Other Notes), whether by way of payment in respect of principal
      of
      (or premium, if any) or interest on such Indebtedness, if at the time such
      payment is due or is otherwise made or, after giving effect to such payment,
      an
      event constituting, or that with the passage of time and without being cured
      would constitute, a Trigger Event has occurred and is continuing.

     

    (e)
      Restriction
      on Redemption and Cash Dividends.
      Until
      all of the Notes have been converted, redeemed or otherwise satisfied in
      accordance with their terms, the Company shall not, directly or indirectly,
      redeem, repurchase or declare or pay any cash dividend or distribution on its
      capital stock without the prior express written consent of the Required
      Holders.

     

    (13)
      PARTICIPATION.
      The
      Holder, as the holder of this Note, shall be entitled to receive such dividends
      paid and distributions made to the holders of Common Stock to the same extent
      as
      if the Holder had converted this Note into Common Stock (without regard to
      any
      limitations on conversion herein or elsewhere) and had held such shares of
      Common Stock on the record date for such dividends and distributions. Payments
      under the preceding sentence shall be made concurrently with the dividend or
      distribution to the holders of Common Stock. 

     

    (14)
      VOTE
      TO ISSUE, OR CHANGE THE TERMS OF, NOTES.
      The
      affirmative vote at a meeting duly called for such purpose or the written
      consent without a meeting of the Required Holders shall be required for any
      change or amendment to this Note or the Other Notes. No
      consideration shall be offered or paid to any holder of Notes to amend or
      consent to a waiver or modification of the Notes unless the same consideration
      also is offered to all of the holders of Notes.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

    

    (15)
      TRANSFER.
      This
      Note may be offered, sold, assigned or transferred by the Holder without the
      consent of the Company, subject only to the provisions of Section 2(f) of the
      Securities Purchase Agreement.

     

    (16)
      REISSUANCE
      OF THIS NOTE.

     

    (a)
      Transfer.
      If this
      Note is to be transferred, the Holder shall surrender this Note to the Company,
      whereupon the Company will forthwith issue and deliver upon the order of the
      Holder a new Note (in accordance with Section 16(d)), registered as the Holder
      may request, representing the outstanding Principal being transferred by the
      Holder and, if less then the entire outstanding Principal is being transferred,
      a new Note (in accordance with Section 16(d)) to the Holder representing the
      outstanding Principal not being transferred. The Holder and any assignee, by
      acceptance of this Note, acknowledge and agree that, by reason of the provisions
      of Section 3(c)(iii) following conversion or redemption of any portion of this
      Note, the outstanding Principal represented by this Note may be less than the
      Principal stated on the face of this Note.

     

    (b)
      Lost,
      Stolen or Mutilated Note.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Note, and, in the case of loss,
      theft or destruction, of any indemnification undertaking by the Holder to the
      Company in customary form and, in the case of mutilation, upon surrender and
      cancellation of this Note, the Company shall execute and deliver to the Holder
      a
      new Note (in accordance with Section 16(d)) representing the outstanding
      Principal.

     

    (c)
      Note
      Exchangeable for Different Denominations.
      This
      Note is exchangeable, upon the surrender hereof by the Holder at the principal
      office of the Company, for a new Note or Notes (in accordance with Section
      16(d)
      and in principal amounts of at least $100,000) representing in the aggregate
      the
      outstanding Principal of this Note, and each such new Note will represent such
      portion of such outstanding Principal as is designated by the Holder at the
      time
      of such surrender.

     

    (d)
      Issuance
      of New Notes.
      Whenever the Company is required to issue a new Note pursuant to the terms
      of
      this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall
      represent, as indicated on the face of such new Note, the Principal remaining
      outstanding (or in the case of a new Note being issued pursuant to Section
      16(a)
      or Section 16(c), the Principal designated by the Holder which, when added
      to
      the principal represented by the other new Notes issued in connection with
      such
      issuance, does not exceed the Principal remaining outstanding under this Note
      immediately prior to such issuance of new Notes), (iii) shall have an issuance
      date, as indicated on the face of such new Note, which is the same as the
      Issuance Date of this Note, (iv) shall have the same rights and conditions
      as
      this Note, and (v) shall represent accrued and unpaid Interest and Late Charges
      on the Principal and Interest of this Note, if any, from the Issuance
      Date.

     

    (17)
      REMEDIES,
      CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
      RELIEF.
      The
      remedies provided in this Note shall be cumulative and in addition to all other
      remedies available under this Note and any of 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 Holder's right to pursue
      actual and consequential damages for any failure by the Company to comply with
      the terms of this Note. Amounts set forth or provided for herein with respect
      to
      payments, conversion 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 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.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

    

    (18)
      PAYMENT
      OF COLLECTION, ENFORCEMENT AND OTHER COSTS.
      If (a)
      this Note is placed in the hands of an attorney for collection or enforcement
      or
      is collected or enforced through any legal proceeding or the Holder otherwise
      takes action to collect amounts due under this Note or to enforce the provisions
      of this Note or (b) there occurs any bankruptcy, reorganization, receivership
      of
      the Company or other proceedings affecting Company creditors' rights and
      involving a claim under this Note, then the Company shall pay the costs incurred
      by the Holder for such collection, enforcement or action or in connection with
      such bankruptcy, reorganization, receivership or other proceeding, including,
      but not limited to, financial advisory fees and attorneys' fees and
      disbursements.

     

    (19)
      CONSTRUCTION;
      HEADINGS.
      This
      Note shall be deemed to be jointly drafted by the Company and all the Purchasers
      and shall not be construed against any person as the drafter hereof. The
      headings of this Note are for convenience of reference and shall not form part
      of, or affect the interpretation of, this Note.

     

    (20)
      FAILURE
      OR INDULGENCE NOT WAIVER.
      No
      failure or delay on the part of the Holder in the exercise of any power, right
      or privilege hereunder shall operate as a waiver thereof, nor shall any single
      or partial exercise of any such power, right or privilege preclude other or
      further exercise thereof or of any other right, power or privilege.

     

    (21)
      DISPUTE
      RESOLUTION.
      In the
      case of a dispute as to the determination of the Closing Bid Price, the Closing
      Sale Price or the Weighted Average Price or the arithmetic calculation of the
      Conversion Rate or any Redemption Price, the Company shall submit the disputed
      determinations or arithmetic calculations via facsimile within one (1) Business
      Day of receipt, or deemed receipt, of the Conversion Notice or Redemption Notice
      or other event giving rise to such dispute, as the case may be, to the Holder.
      If the Holder and the Company are unable to agree upon such determination or
      calculation within one (1) Business Day of such disputed determination or
      arithmetic calculation being submitted to the Holder, then the Company shall,
      within one (1) Business Day submit via facsimile (a) the disputed determination
      of the Closing Bid Price, the Closing Sale Price or the Weighted Average Price
      to an independent, reputable investment bank selected by the Company and
      approved by the Holder or (b) the disputed arithmetic calculation of the
      Conversion Rate or any Redemption Price to the Company's independent, outside
      accountant. The Company, at the Company's expense, shall cause the investment
      bank or the accountant, as the case may be, to perform the determinations or
      calculations and notify the Company and the Holder of the results no later
      than
      five (5) Business Days from the time it receives the disputed determinations
      or
      calculations. Such investment bank's or accountant's determination or
      calculation, as the case may be, shall be binding upon all parties absent
      demonstrable error.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

    

    (22)
      NOTICES;
      PAYMENTS.

     

    (a)
      Notices.
      Whenever notice is required to be given under this Note, 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 Note, including
      in
      reasonable detail a description of such action and the reason therefore. Without
      limiting the generality of the foregoing, the Company will give written notice
      to the Holder (i) immediately upon any adjustment of the Conversion Price,
      setting forth in reasonable detail, and certifying, the calculation of such
      adjustment and (ii) at least twenty (20) 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 Common Stock, (B) with respect to any pro rata
      subscription offer to holders 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.

     

    (b)
      Payments.
      Whenever any payment of cash is to be made by the Company to any Person pursuant
      to this Note, such payment shall be made in lawful money of the United States
      of
      America by a check drawn on the account of the Company and sent via overnight
      courier service to such Person at such address as previously provided to the
      Company in writing (which address, in the case of each of the Purchasers, shall
      initially be as set forth on the Schedule of Buyers attached to the Securities
      Purchase Agreement); provided that the Holder may elect to receive a payment
      of
      cash via wire transfer of immediately available funds by providing the Company
      with prior written notice setting out such request and the Holder's wire
      transfer instructions. Whenever any amount expressed to be due by the terms
      of
      this Note is due on any day which is not a Business Day, the same shall instead
      be due on the next succeeding day which is a Business Day and, in the case
      of
      any Interest Date which is not the date on which this Note is paid in full,
      the
      extension of the due date thereof shall not be taken into account for purposes
      of determining the amount of Interest due on such date. Any amount of Principal
      or other amounts due under the Transaction Documents which is not paid when
      due
      shall result in a late charge being incurred and payable by the Company in
      an
      amount equal to interest on such amount at the rate of twelve percent (12%)
      per
      annum from the date such amount was due until the same is paid in full
      ("Late
      Charge").

     

    (23)
      CANCELLATION.
      After
      all Principal, accrued Interest and other amounts at any time owed on this
      Note
      have been paid in full, this Note shall automatically be deemed canceled, shall
      be surrendered to the Company for cancellation and shall not be
      reissued.

     

    (24)
      WAIVER
      OF NOTICE.
      To the
      extent permitted by law, the Company hereby waives demand, notice, protest
      and
      all other demands and notices in connection with the delivery, acceptance,
      performance, default or enforcement of this Note and the Securities Purchase
      Agreement.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

       

    

    (25)
      GOVERNING
      LAW; JURISDICTION;
      SEVERABILITY; JURY TRIAL.
      This
      Note shall be construed and enforced in accor-dance with, and all questions
      concerning the construction, validity, interpretation and performance of this
      Note shall be governed by, the internal laws of the State of New York, without
      giving effect to any choice of law or conflict of law provision or rule (whether
      of the State of New York or any other jurisdictions) that would cause the
      application of the laws of any jurisdictions other than the State of New York.
      The Company hereby irrevocably submits to the exclusive jurisdiction of the
      state and federal courts sitting in The City of New York, Borough of Manhattan,
      for the adjudication of any dispute hereunder or in connection herewith or
      with
      any transaction contemplated hereby or discussed herein, and hereby irrevocably
      waives, and agrees not to assert in any suit, action or proceeding, any claim
      that it is not personally subject to the jurisdiction of any such court, that
      such suit, action or proceeding is brought in an inconvenient forum or that
      the
      venue of such suit, action or proceeding is improper. Nothing contained herein
      shall be deemed to limit in any way any right to serve process in any manner
      permitted by law. In the event that any provision of this Note is invalid or
      unenforceable under any applicable statute or rule of law, then such provision
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any such
      provision which may prove invalid or unenforceable under any law shall not
      affect the validity or enforceability of any other provision of this Note.
      Nothing contained herein shall be deemed or operate to preclude the Holder
      from
      bringing suit or taking other legal action against the Company in any other
      jurisdiction to collect on the Company's obligations to the Holder, to realize
      on any collateral or any other security for such obligations, or to enforce
      a
      judgment or other court ruling in favor of the Holder. THE
      COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED
      HEREBY.

     

    (26)
      CERTAIN
      DEFINITIONS.
      For
      purposes of this Note, the following terms shall have the following
      meanings:

     

    (a)
      "Approved
      Stock Plan"
      means
      any employee benefit plan which has been or hereafter is approved by the Board
      of Directors of the Company, pursuant to which the Company's securities may
      be
      issued to any employee, officer or director for services provided to the
      Company.

     

    (b)
      "Bloomberg"
      means
      Bloomberg Financial Markets.

     

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

     

    (d)
      "Change
      of Control"
      means
      any Fundamental Transaction other than (A) any reorganization, recapitalization
      or reclassification of Common Stock, in which holders of the Company's voting
      power immediately prior to such reorganization, recapitalization or
      reclassification continue after such reorganization, recapitalization or
      reclassification to hold publicly traded securities and, directly or indirectly,
      the voting power of the surviving entity or entities necessary to elect a
      majority of the members of the board of directors (or their equivalent if other
      than a corporation) of such entity or entities, or (B) pursuant to a migratory
      merger effected solely for the purpose of changing the jurisdiction of
      incorporation of the Company.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

       

    

    (e)
      "Closing
      Bid Price"
      and
      "Closing
      Sale Price"
      means,
      for any security as of any date, the last closing bid price and last closing
      trade price, respectively, 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 bid price or the closing
      trade price, as the case may be, then the last bid price or last trade price,
      respectively, 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 closing bid price or
      last
      trade price, respectively, 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 do not apply, the last closing bid price or
      last
      trade price, respectively, of such security in the over-the-counter market
      on
      the electronic bulletin board for such security as reported by Bloomberg, or,
      if
      no closing bid price or last trade price, respectively, is reported for such
      security by Bloomberg, the average of the bid prices, or the ask prices,
      respectively, 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 Bid Price or the Closing Sale Price cannot be calculated for a
      security on a particular date on any of the foregoing bases, the Closing Bid
      Price or the Closing Sale Price, as the case may be, 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 pursuant
      to
      Section 21. All such determinations to be appropriately adjusted for any stock
      dividend, stock split, stock combination or other similar transaction during
      the
      applicable calculation period.

     

    (f)
      "Closing
      Date"
      shall
      have the meaning set forth in the Securities Purchase Agreement, which date
      is
      the date the Company initially issued Notes pursuant to the terms of the
      Securities Purchase Agreement.

     

    (g)
      "Contingent
      Obligation"
      means,
      as to any Person, any direct or indirect liability, contingent or otherwise,
      of
      that Person with respect to any indebtedness, lease, dividend or other
      obligation of another Person if the primary purpose or intent of the Person
      incurring such liability, or the primary effect thereof, is to provide assurance
      to the obligee of such liability that such liability will be paid or discharged,
      or that any agreements relating thereto will be complied with, or that the
      holders of such liability will be protected (in whole or in part) against loss
      with respect thereto.

     

    (h)
      "Convertible
      Securities"
      means
      any stock or securities (other than Options) directly or indirectly convertible
      into or exercisable or exchangeable for Common Stock.

     

    (i)
      "Eligible
      Market"
      means
      The New York Stock Exchange, Inc., the American Stock Exchange, The NASDAQ
      Global Select Market, The NASDAQ Global Market or The NASDAQ Capital
      Market.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

       

    

    (j)
      "Effective
      Date"
      has the
      meaning ascribed to such term in the Registration Rights Agreement.

     

    (k)
      "Excluded
      Securities"
      means
      any Common Stock issued or issuable: (i) in connection with any Approved Stock
      Plan; (ii) upon conversion of the Notes or the exercise of the Warrants; (iii)
      upon conversion of any Options or Convertible Securities which are outstanding
      on the day immediately preceding the Subscription Date, provided that the terms
      of such Options or Convertible Securities are not amended, modified or changed
      on or after the Subscription Date; (iv) in connection with mergers,
      acquisitions, strategic business partnerships or joint ventures, in each case
      with non-affiliated third parties and otherwise on an arm's-length basis, the
      primary purpose of which is not to raise additional capital and (v) upon the
      issuance of Options or the exercise of any Options issued to financial
      institutions in connection with commercial credit agreements or issuance of
      non-convertible debt by the Company.

     

    (l)
      "Fundamental
      Transaction"
      means
      that the Company shall, directly or indirectly, in one or more related
      transactions, (i) consolidate or merge with or into (whether or not the Company
      is the surviving corporation) another Person or Persons, or (ii) sell, assign,
      transfer, convey or otherwise dispose of all or substantially all of the
      properties or assets of the Company to another Person, or (iii) allow another
      Person to make a purchase, tender or exchange offer that is accepted by the
      holders of more than the 50% of the outstanding shares of Voting Stock (not
      including any shares of Voting Stock 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 (iv) consummate a stock 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 the 50% of the
      outstanding shares of Voting Stock (not including any shares of Voting Stock
      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 purchase
      agreement or other business combination), (v) reorganize, recapitalize or
      reclassify its Common Stock or (vi) any "person" or "group" (as these terms
      are
      used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall
      become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
      Act),
      directly or indirectly, of 50% of the aggregate ordinary voting power
      represented by issued and outstanding Common Stock.

     

    (m)
      "GAAP"
      means
      United States generally accepted accounting principles, consistently
      applied.

     

    (n)
      "Indebtedness"
      of any
      Person means, without duplication (i) all indebtedness for borrowed money,
      (ii)
      all obligations issued, undertaken or assumed as the deferred purchase price
      of
      property or services, including (without limitation) "capital leases" in
      accordance with generally accepted accounting principles (other than trade
      payables entered into in the ordinary course of business), (iii) all
      reimbursement or payment obligations with respect to letters of credit, surety
      bonds and other similar instruments, (iv) all obligations evidenced by notes,
      bonds, debentures or similar instruments, including obligations so evidenced
      incurred in connection with the acquisition of property, assets or businesses,
      (v) all indebtedness created or arising under any conditional sale or other
      title retention agreement, or incurred as financing, in either case with respect
      to any property or assets acquired with the proceeds of such indebtedness (even
      though the rights and remedies of the seller or bank under such agreement in
      the
      Trigger Event are limited to repossession or sale of such property), (vi) all
      monetary obligations under any leasing or similar arrangement which, in
      connection with generally accepted accounting principles, consistently applied
      for the periods covered thereby, is classified as a capital lease, (vii) all
      indebtedness referred to in clauses (i) through (vi) above secured by (or for
      which the holder of such Indebtedness has an existing right, contingent or
      otherwise, to be secured by) any mortgage, lien, pledge, charge, security
      interest or other encumbrance upon or in any property or assets (including
      accounts and contract rights) owned by any Person, even though the Person which
      owns such assets or property has not assumed or become liable for the payment
      of
      such indebtedness, and (viii) all Contingent Obligations in respect of
      indebtedness or obligations of others of the kinds referred to in clauses (i)
      through (vii) above.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

       

    

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

     

    (p)
      "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.

     

    (q)
      "Permitted
      Indebtedness"
      means
      (i) the Indebtedness evidenced by this Note and the Other Notes and (ii)
      Permitted Senior Indebtedness and (iii) bonds required to be posted by the
      company to obtain regulatory permits, licenses or insurance as part of
      conducting its business.

     

    (r)
      "Permitted
      Senior Indebtedness"
      the
      principal of (and premium, if any), interest on, and all fees and other amounts
      (including, without limitation, any reasonable out-of-pocket costs, enforcement
      expenses (including reasonable out-of-pocket legal fees and disbursements),
      collateral protection expenses and other reimbursement or indemnity obligations
      relating thereto) payable by Company and/or its Subsidiaries under or in
      connection with (1) debt financing with one or more lenders to be obtained
      for
      the primary purpose of funding the acquisition, exploration and/or development
      of oil and gas properties, including construction of gathering, compression
      and
      fluid infrastructure, and working capital and (2) debt financing with one or
      more lenders that is secured by revenues from oil and gas production from the
      Company's properties; provided, however, that the aggregate amount of
      Indebtedness outstanding at any time under clause (2) of the foregoing does
      not
      exceed $7,500,000.

     

    (s)
      "Permitted
      Liens"
      means
      (i) any Lien for taxes not yet due or delinquent or being contested in good
      faith by appropriate proceedings for which adequate reserves have been
      established in accordance with GAAP, (ii) any statutory Lien arising in the
      ordinary course of business by operation of law with respect to a liability
      that
      is not yet due or delinquent, (iii) any Lien created by operation of law, such
      as materialmen's liens, mechanics' liens and other similar liens, arising in
      the
      ordinary course of business with respect to a liability that is not yet due
      or
      delinquent or that are being contested in good faith by appropriate proceedings,
      (iv) Liens (A) upon or in any equipment acquired or held by the Company or
      any
      of its Subsidiaries to secure the purchase price of such equipment or
      indebtedness incurred solely for the purpose of financing the acquisition or
      lease of such equipment, or (B) existing on such equipment at the time of its
      acquisition, provided that the Lien is confined solely to the property so
      acquired and improvements thereon, and the proceeds of such equipment, (v)
      Liens
      incurred in connection with the extension, renewal or refinancing of the
      indebtedness secured by Liens of the type described in clauses (i) and (iv)
      above, provided that any extension, renewal or replacement Lien shall be limited
      to the property encumbered by the existing Lien and the principal amount of
      the
      Indebtedness being extended, renewed or refinanced does not increase, (vi)
      leases or subleases and licenses and sublicenses granted to others in the
      ordinary course of the Company's business, not interfering in any material
      respect with the business of the Company and its Subsidiaries taken as a whole,
      (vii) Liens in favor of customs and revenue authorities arising as a matter
      of law to secure payments of custom duties in connection with the importation
      of
      goods, (viii)
      Liens
      arising from judgments, decrees or attachments in circumstances not constituting
      a Trigger Event under Section 4(a)(vii), and (ix) Liens securing Permitted
      Senior Indebtedness.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

       

    

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

     

    (u)
      "Principal
      Market"
      means
      the NASD OTC Bulletin Board.

     

    (v)
      "Redemption
      Notices"
      means,
      collectively, the Trigger Event Redemption Notices and the Change of Control
      Redemption Notices, each of the foregoing, individually, a Redemption
      Notice.

     

    (w)
      "Redemption
      Premium"
      means
      (i) in the case of the Trigger Events described in Section 4(a)(i) - (vi) and
      (ix) - (xii), 125% or (ii) in the case of the Trigger Events described in
      Section 4(a)(vii) - (viii), 100%.

     

    (x)"Redemption
      Prices"
      means,
      collectively, the Trigger Event Redemption Price and the Change of Control
      Redemption Price, each of the foregoing, individually, a Redemption
      Price.

     

    (y)
      "Registration
      Rights Agreement"
      means
      that certain registration rights agreement dated as of the Subscription Date
      by
      and among the Company and the initial holders of the Notes relating to, among
      other things, the registration of the resale of the Common Stock issuable upon
      conversion of the Notes and exercise of the Warrants.

     

    (z)
      "Required
      Holders"
      means
      the holders of Notes representing at least two-thirds (2/3rd)
      of the
      aggregate principal amount of the Notes then outstanding.

     

    (aa)
      "SEC"
      means
      the United States Securities and Exchange Commission. 

     

    (bb)
      "Securities
      Purchase Agreement"
      means
      that certain securities purchase agreement dated as of the Subscription Date
      by
      and among the Company and the initial holders of the Notes pursuant to which
      the
      Company issued the Notes. 

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

       

    

    (cc)
      "Stockholder
      Approval"
      has the
      meaning ascribed to such term in the Securities Purchase Agreement.

     

    (dd)
      "Stockholder
      Approval Date"
      has the
      meaning ascribed to such term in the Securities Purchase Agreement.

     

    (ee)
      "Subscription
      Date"
      means
      December [__], 2006.

     

    (ff)
      "Subsidiary"
      means
any
      entity in which the Company, directly or indirectly, owns any of the capital
      stock or holds an equity or similar interest. 

     

    (gg)
      "Successor
      Entity"
      means
      the Person, which may be the Company, formed by, resulting from or surviving
      any
      Fundamental Transaction or the Person with which such Fundamental Transaction
      shall have been made, provided that if such Person is not a publicly traded
      entity whose common stock or equivalent equity security is quoted or listed
      for
      trading on an Eligible Market, Successor Entity shall mean such Person's Parent
      Entity.

     

    (hh)
      "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).

     

    (ii)
      "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).

     

    (jj)
      "Warrants"
      has the
      meaning ascribed to such term in the Securities Purchase Agreement, and shall
      include all warrants issued in exchange therefor or replacement
      thereof.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

       

    

    (kk)
      "Weighted
      Average Price"
      means,
      for any security as of any date, the dollar volume-weighted average price for
      such security on the Principal Market during the period beginning at 9:30:01
      a.m., New York Time (or such other time as the Principal Market publicly
      announces is the official open of trading), and ending at 4:00:00 p.m., New
      York
      Time (or such other time as the Principal Market publicly announces is the
      official close of trading) as reported by Bloomberg through its "Volume at
      Price" functions, 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 (or such other time as such market publicly
      announces is the official open of trading), and ending at 4:00:00 p.m., New
      York
      Time (or such other time as such market publicly announces is the official
      close
      of trading) 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 the Weighted Average
      Price cannot be calculated for a security on a particular date on any of the
      foregoing bases, the Weighted Average 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 pursuant to Section 21.
      All
      such determinations to be appropriately adjusted for any stock dividend, stock
      split, stock combination or other similar transaction during the applicable
      calculation period.

     

    (27)
      DISCLOSURE.
      Upon
      receipt or delivery by the Company of any notice in accordance with the terms
      of
      this Note, unless the Company has in good faith determined that the matters
      relating to such notice do not constitute material, nonpublic information
      relating to the Company or its Subsidiaries, the Company shall within four
      (4)
      Business Days after any such receipt or delivery publicly disclose such
      material, nonpublic information on a Current Report on Form 8-K or otherwise.
      In
      the event that the Company believes that a notice contains material, nonpublic
      information, relating to the Company or its Subsidiaries, the Company shall
      indicate to the Holder contemporaneously with delivery of such notice, and
      in
      the absence of any such indication, the Holder shall be allowed to presume
      that
      all matters relating to such notice do not constitute material, nonpublic
      information relating to the Company or its Subsidiaries.

     

    [Signature
      Page Follows]

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    


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

     

    
      	 	 	 
	 	
              RANCHER
                ENERGY CORP.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              Name:

            
	 	
              Title:

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
      I

     

    RANCHER
      ENERGY CORP.

     

    CONVERSION
      NOTICE

     

    Reference
      is made to the Convertible Note (the "Note")
      issued
      to the undersigned by Rancher Energy Corp. (the "Company").
      In
      accordance with and pursuant to the Note, the undersigned hereby elects to
      convert the Conversion Amount (as defined in the Note) of the Note indicated
      below into shares of Common Stock par value $0.00001 per share (the
      "Common
      Stock")
      of the
      Company, as of the date specified below.

     

     

    
      	
              Date
                of Conversion: 

            	 
	 	 
	
              Aggregate
                Conversion Amount to be converted: 

            	 
	 	 
	
              Please
                confirm the following information: 

            	 
	 	 
	
              Conversion
                Price: 

            	 
	 	 
	
              Number
                of shares of Common Stock to be issued: 

            	 
	 	 
	
              Please
                issue the Common Stock into which the Note is being converted in
                the
                following name and to the following address: 

            
	 	 
	
              Issue
                to: 

            	 
	 	 
	 	 
	 	 
	 	 
	 	 
	
              Facsimile
                Number: 

            	 
	 	 
	
              Authorization: 

            	 
	 	 
	
              By: 

            	 
	 	 
	
              Title: 

            	 
	 	 
	
              Dated: 

            	 
	 	 
	
              Account
                Number: 

            	 
	
              (if
                electronic book entry transfer) 

            	 
	 	 
	
              Transaction
                Code Number: 

            	 
	
              (if
                electronic book entry transfer) 

            	 


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    ACKNOWLEDGMENT

     

    The
      Company hereby acknowledges this Conversion Notice and hereby directs Pacific
      Stock Transfer Company to issue the above indicated number of shares of Common
      Stock in accordance with the Transfer Agent Instructions dated November __,
      2006
      from the Company and acknowledged and agreed to by Pacific Stock Transfer
      Company.

     

    
      	 	 	 
	 	
              RANCHER
                ENERGY CORP.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              Name:

            
	 	
              Title: