Document:

Unassociated Document

     

    Exhibit
10.6

    

    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 (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

    

    
      	 
      	
              Right
      to Purchase ________ shares of Common Stock of Clear Skies Solar, Inc.
      (subject to adjustment as provided
herein)

            

    

    

    FORM
OF COMMON STOCK PURCHASE WARRANT

    
      
        	
                No.
      _____  

              	
                Issue
      Date: May
      ___,
      2009

              

      

    

     

    CLEAR
SKIES SOLAR, INC., a corporation organized under the laws of the State of
Delaware (the “Company”), hereby certifies
that, for value received, _________ or its assigns (the “Holder”), is entitled, subject
to the terms set forth below, to purchase from the Company at any time after the
Issue Date until 5:00 p.m., E.S.T on the third anniversary of the Issue Date
(the “Expiration Date”),
up to ______ fully paid and non-assessable shares of Common Stock at a per share
purchase price of $0.15.  The aforedescribed purchase price per share,
as adjusted from time to time as herein provided, is referred to herein as the
“Purchase
Price."  The number and character of such shares of Common
Stock and the Purchase Price are subject to adjustment as provided
herein.  The Company may reduce the Purchase Price for some or all of
the Warrants, temporarily or permanently, provided such reduction is made as to
all outstanding Warrants for all Holders of such
Warrants.  Capitalized terms used and not otherwise defined herein
shall have the meanings set forth in that certain Subscription Agreement (the
“Subscription
Agreement”), dated as of May ___, 2009, entered into by the Company, the
Holder and the other signatories thereto.

    

    As used
herein the following terms, unless the context otherwise requires, have the
following respective meanings:

     

    (a)           The
term “Company” shall
mean Clear Skies Solar, Inc., a Delaware corporation, and any corporation which
shall succeed or assume the obligations of Clear Skies Solar, Inc.
hereunder.

     

    (b)           The
term “Common Stock”
includes (i) the Company's Common Stock, $0.001 par value per share, as
authorized on the date of the Subscription Agreement, and (ii) any other
securities into which or for which any of the securities described in
(i) may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c)           The
term “Other Securities”
refers to any stock (other than Common Stock) and other securities of the
Company or any other person (corporate or otherwise) which the holder of the
Warrant at any time shall be entitled to receive, or shall have received, on the
exercise of the Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4 or
otherwise.

     

    (d)           The term “Warrant
Shares” shall mean the Common Stock issuable
upon exercise of this Warrant.

     

    1.           Exercise of
Warrant.

     

    1.1.           Number of Shares Issuable
upon Exercise.  From and after the Issue Date through and
including the Expiration Date, the Holder hereof shall be entitled to receive,
upon exercise of this Warrant in whole in accordance with the terms of Section 1.2 or
upon exercise of this Warrant in part in accordance with Section 1.3,
shares of Common Stock of the Company, subject to adjustment pursuant to Section 4 below
and Sections
11.4 and 12(b) of the
Subscription Agreement.

     

    1.2.           Full
Exercise.  This Warrant may be
exercised in full by the Holder hereof by delivery to the Company of an original or facsimile copy of the
form of subscription attached as Exhibit A hereto (the “Subscription
Form”) duly executed by such Holder and
delivery within two days
thereafter of payment, in cash, wire transfer or by certified or official bank
check payable to the order of the Company, in the amount obtained by multiplying
the number of shares of Common Stock for which this Warrant is then exercisable
by the Purchase Price then in
effect.  The original Warrant is not required to be surrendered to the
Company until it has been fully exercised.

     

    1.3.           Partial
Exercise.  This
Warrant may be exercised in part (but not for a fractional share) by delivery of
a Subscription Form in the
manner and at the place provided in Section 1.2, except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying
(a) the number of whole shares of Common Stock designated by the Holder in
the Subscription Form by
(b) the Purchase Price then in effect.  On any such partial
exercise, provided the Holder has surrendered the
original Warrant, the Company, at its expense, will forthwith issue and deliver
to or upon the order of the Holder hereof a new Warrant of like tenor, in the
name of the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, the whole number of shares of Common
Stock for which such Warrant may still be exercised.

     

    1.4.           Fair Market
Value.  For purposes of this Warrant, the Fair Market Value of a share
of Common Stock as of a particular date (the "Determination Date") shall
mean:

     

    (a)           If
the Company's Common Stock is traded on an exchange or is quoted on the NASDAQ
Global Market, NASDAQ Global Select Market, the NASDAQ Capital Market, the New
York Stock Exchange or the American Stock Exchange, LLC, then the average of the closing sale prices of
the Common Stock for the
five (5) Trading Days
immediately prior to (but not including) the Determination
Date;

     

    (b)           If
the Company's Common Stock is not traded on an exchange or on the NASDAQ Global
Market, NASDAQ Global Select Market, the NASDAQ Capital Market, the New York
Stock Exchange or the American Stock Exchange, Inc., but is traded on the OTC
Bulletin Board or in the over-the-counter market or Pink Sheets, then the
average of the closing bid and ask prices reported for the five (5) Trading Days immediately prior to (but
not including) the Determination Date;

     

    (c)           Except
as provided in clause (d) below and Section 3.1, if the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree, or in the absence of such an agreement, by arbitration in
accordance with the rules then standing of the American Arbitration Association,
before a single arbitrator to be chosen from a panel of persons qualified by
education and training to pass on the matter to be decided; or

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (d)           If
the Determination Date is the date of a liquidation, dissolution or winding up,
or any event deemed to be a liquidation, dissolution or winding up pursuant to
the Company's charter, then all amounts to be payable per share to holders of
the Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock then
issuable upon exercise of all of the Warrants are outstanding at the
Determination Date.

     

    1.5.           Company
Acknowledgment.  The Company will, at the time of the exercise
of the Warrant, upon the request of the Holder hereof, acknowledge in writing
its continuing obligation to afford to such Holder any rights to which such
Holder shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such Holder any such rights.

     

    1.6.           Delivery of
Stock Certificates, etc. on Exercise. The Company agrees that, provided the
full purchase price listed in the Subscription Form is received as specified in
Section
1.2, the shares of Common
Stock purchased upon exercise of this Warrant shall be deemed to be issued
to the Holder hereof as the record owner of such shares as of the close of
business on the date on which delivery of a Subscription Form shall have
occurred and payment made for such shares as aforesaid. As soon as practicable after the exercise of this
Warrant in full or in part, and in any event within three (3)
business days thereafter
(“Warrant Share
Delivery Date”), the Company at its expense (including
the payment by it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the Holder hereof, or as such Holder (upon payment by such Holder
of any applicable transfer taxes) may direct in compliance with applicable
securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and
non-assessable shares of Common Stock (or Other Securities) to which such Holder
shall be entitled on such exercise, plus, in lieu of any fractional share to
which such Holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share of Common Stock, together with any other stock or
other securities and property (including cash, where applicable) to which such
Holder is entitled upon such exercise pursuant to Section 1 or otherwise.  The Company
understands that a delay in the delivery of the Warrant Shares after the Warrant
Share Delivery Date could result in economic loss to the Holder.  As
compensation to the Holder for such loss, the Company agrees to pay (as
liquidated damages and not
as a penalty) to the Holder for late issuance of Warrant Shares upon exercise of
this Warrant the proportionate amount of $100 per business day after the Warrant
Share Delivery Date for each $10,000 of Purchase Price of Warrant Shares for which this Warrant is exercised
which are not timely delivered.  The Company shall pay any payments
incurred under this Section in immediately available funds upon
demand.  Furthermore, in addition to any other remedies which may be
available to the Holder, in the event that the Company
fails for any reason to effect delivery of the Warrant Shares by the Warrant
Share Delivery Date, the Holder may revoke all or part of the relevant Warrant
exercise by delivery of a notice to such effect to the Company, whereupon the Company and the Holder
shall each be restored to their respective positions immediately prior to the
exercise of the relevant portion of this Warrant, except that the liquidated
damages described above shall be payable through the date notice of revocation or rescission is
given to the Company.

     

    1.7.           Buy-In.   In addition to any other rights
available to the Holder, if the Company fails to deliver to a Holder the Warrant
Shares as required pursuant to this Warrant, within seven (7)
business days after the
Warrant Share Delivery Date and the Holder or a broker on the Holder’s behalf, purchases (in an open market
transaction or otherwise) shares of common stock to deliver in satisfaction of a
sale by such Holder of the Warrant Shares which the Holder was entitled to receive from
the Company (a "Buy-In"), then the Company shall pay in cash
to the Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (A) the Holder's total purchase price (including
brokerage commissions, if
any) for the shares of common stock so purchased exceeds (B) the aggregate
Purchase Price of the Warrant Shares required to have been delivered
together with interest thereon at a rate of 15% per annum, accruing until
such amount and any accrued interest thereon is paid in full (which amount shall
be paid as liquidated damages and not as a penalty).  For example, if a Holder purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to $10,000 of Purchase Price of Warrant Shares to
have been received upon exercise of this Warrant, the Company shall be required
to pay the Holder $1,000,
plus interest. The Holder
shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the
Buy-In.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.           Cashless
Exercise.

     

    (a)           Payment
upon exercise may be made at the option of the Holder either in (i) cash, wire
transfer or by certified or official bank check payable to the order of the
Company equal to the applicable aggregate Purchase Price, (ii) by delivery of
Common Stock issuable upon exercise of the Warrants in accordance with
Section (b) below or (iii) by a combination of any of the
foregoing methods, for the number of Common Stock specified in such form (as
such exercise number shall be adjusted to reflect any adjustment in the total
number of shares of Common Stock issuable to the holder per the terms of this
Warrant) and the holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully-paid and non-assessable shares of Common
Stock (or Other Securities) determined as provided
herein.  Notwithstanding the immediately preceding sentence, payment
upon exercise may be made in the manner described in Section 2(b) below
commencing ninety-one (91) days after the Issue Date, only with respect to
Warrant Shares not included for
unrestricted public resale in an effective Registration Statement on the date
notice of exercise is given by the Holder.

     

    (b)           Subject
to the provisions herein to the contrary, if the Fair Market Value of one share
of Common Stock is greater than the Purchase Price (at the date of calculation
as set forth below), in lieu of exercising this Warrant for cash, the holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being cancelled) by delivery of a properly endorsed
Subscription Form delivered to the Company by any means described in Section 13, in which
event the Company shall issue to the holder a number of shares of Common Stock
computed using the following formula:

     

    X=Y (A-B)

              A

    
      

      
        	
                        Where  

              	
                X=

              	
                the
      number of shares of Common Stock to be issued to the
  Holder

              

      

    

    

    
      	
               
      

            	
              Y=

            	
              the
      number of shares of Common Stock purchasable under the Warrant or, if only
      a portion of the Warrant is being exercised, the portion of the Warrant
      being exercised (at the date of such
  calculation)

            

    

     

    
      	
               
      

            	
              A=

            	
              Fair Market
      Value

            

    

     

    
      	
               
      

            	
              B=

            	
              Purchase
      Price (as adjusted to the date of such
  calculation)

            

    

     

    For
purposes of Rule 144 promulgated under the 1933 Act, it is intended, understood
and acknowledged that the Warrant Shares issued in a cashless exercise
transaction in the manner described above shall be deemed to have been acquired
by the Holder, and the holding period for the Warrant Shares shall be deemed to
have commenced, on the date this Warrant was originally issued pursuant to the
Subscription Agreement.

     

    3.           Adjustment for
Reorganization, Consolidation, Merger, etc.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.1.           Fundamental Transaction. 
If, at any time while this Warrant is outstanding, (A) the Company 
effects any merger or  consolidation  of the Company with or into
another entity, (B) the Company effects any sale of all or
substantially all of its assets in one or
a series of related transactions,  (C)
any tender offer or exchange offer (whether by the
Company or another entity) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their
shares for other securities, cash or property, (D) the Company
consummates a stock purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, or spin-off) with one or
more persons or entities whereby such other persons or entities acquire more
than the 50% of the outstanding shares of Common Stock (not including any shares
of Common Stock held by such other persons or entities making or party to, or
associated or affiliated with the other persons or entities making or party to,
such stock purchase agreement or other business combination), (E) any "person"
or "group" (as these terms are used for purposes of Sections 13(d) and 14(d) of
the 1934 Act) is or shall become the "beneficial owner" (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate
Common Stock of the Company, or (F) the Company effects any
reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such
case, a "Fundamental 
Transaction"), then, upon any subsequent exercise of this
Warrant, the Holder shall have the right to receive, for each Warrant Share that
would have been issuable upon such exercise immediately prior to the occurrence
of such Fundamental Transaction, at the option of the Holder, (a) upon
exercise of this Warrant, the number of shares of Common Stock of the
successor or acquiring corporation or of the Company, if it is the
surviving corporation, and any additional consideration (the "Alternate
Consideration") receivable upon or as a result of
such reorganization, reclassification, merger,
consolidation or disposition of assets by a Holder of the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event or (b) if the Company is
acquired in (1) a transaction where the consideration paid to the holders
of the Common Stock consists solely of cash, (2) a “Rule 13e-3 transaction” as
defined in Rule 13e-3 under the 1934 Act, or (3) a transaction involving a
person or entity not traded on a national securities exchange, the Nasdaq Global
Select Market, the Nasdaq Global Market or the Nasdaq Capital
Market, cash equal to the Black-Scholes Value. 
For purposes of any such exercise, the determination of the
Purchase Price shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Purchase Price among the Alternate Consideration in
a reasonable manner reflecting the relative value of any different components of
the Alternate Consideration.  If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction.  To the extent necessary to
effectuate the foregoing provisions, any successor to the Company or
surviving entity in such Fundamental Transaction shall issue to the Holder a
new warrant consistent with
the foregoing provisions and evidencing the
Holder's right to exercise such warrant into Alternate
Consideration.  The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of
this Section
3.1 and insuring that this Warrant (or any such replacement
security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.  “Black-Scholes Value” shall be
determined in accordance with the Black-Scholes Option Pricing Model obtained
from the “OV” function on Bloomberg L.P. using (i) a price per share of Common
Stock equal to the VWAP of the Common Stock for the Trading Day immediately
preceding the date of consummation of the applicable Fundamental Transaction,
(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 such
request and (iii) an expected volatility equal to the 100 day volatility
obtained from the HVT function on Bloomberg L.P. determined as of the Trading
Day immediately following the public announcement of the applicable Fundamental
Transaction.

    

    3.2.           Continuation of
Terms.  Upon any reorganization, consolidation, merger or
transfer (and any dissolution following any transfer) referred to in this Section 3, this
Warrant shall continue in full force and effect and the terms hereof shall be
applicable to the Other Securities and property receivable on the exercise of
this Warrant after the consummation of such reorganization, consolidation or
merger or the effective date of dissolution following any such transfer, as the
case may be, and shall be binding upon the issuer of any Other Securities,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person shall have expressly assumed the terms of this Warrant as provided
in Section 4.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.3           Share
Issuance.  Until
the Expiration Date, if the Company shall issue any Common Stock except for the
Excepted Issuances (as defined in the Subscription Agreement), prior to the complete exercise of
this Warrant for a consideration less than the Purchase Price that would be in
effect at the time of such issuance, then, and thereafter successively upon
each such issuance, the Purchase Price shall be reduced to
such other lower price for
then outstanding Warrants.  For purposes of this adjustment, the
issuance of any security or debt instrument of the Company carrying the right to
convert such security or debt instrument into Common Stock or of any warrant,
right or option to purchase Common Stock shall
result in an adjustment to the Purchase Price upon the issuance of the
above-described security, debt instrument, warrant, right, or option if such
issuance is at a price lower than the Purchase Price in effect upon
such issuance and again at any time upon
any actual, permitted,
optional, or allowed issuances of shares of Common Stock upon
any actual, permitted,
optional, or allowed exercise of such conversion or purchase
rights if such issuance is at a price lower than the Purchase Price in effect
upon any actual, permitted,
optional, or allowed such
issuance.  Common Stock issued or issuable by the Company for no
consideration will be deemed issuable or to have been issued for $0.001 per
share of Common Stock.

     

    4.           Extraordinary Events
Regarding Common Stock.  In the event that the Company shall
(a) issue additional shares of Common Stock as a dividend or other
distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 4. The
number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof, be entitled to receive shall be adjusted to
a number determined by multiplying the number of shares of Common Stock that
would otherwise (but for the provisions of this Section 4) be
issuable on such exercise by a fraction of which (a) the numerator is the
Purchase Price that would otherwise (but for the provisions of this Section 4) be in
effect, and (b) the denominator is the Purchase Price in effect on the date of
such exercise.

     

    5.           Certificate as to
Adjustments.  In each case of any adjustment or readjustment in
the shares of Common Stock (or Other Securities) issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or readjustment
in accordance with the terms of the Warrant and prepare a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding, and (c) the Purchase Price and the
number of shares of Common Stock to be received upon exercise of this Warrant,
in effect immediately prior to such adjustment or readjustment and as adjusted
or readjusted as provided in this Warrant. The Company will forthwith mail a
copy of each such certificate to the Holder of the Warrant and any Warrant Agent
of the Company (appointed pursuant to Section 11
hereof).

     

    6.           Reservation of Stock, etc.
Issuable on Exercise of Warrant; Financial
Statements.   The Company will at all times reserve and
keep available, solely for issuance and delivery on the exercise of the
Warrants, all shares of Common Stock (or Other Securities) from time to time
issuable on the exercise of the Warrant.  This Warrant entitles the
Holder hereof, upon written request, to receive copies of all financial and
other information distributed or required to be distributed to the holders of
the Company's Common Stock.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    7.           Assignment; Exchange of
Warrant.  Subject to compliance with applicable securities
laws, this Warrant, and the rights evidenced hereby, may be transferred by any
registered holder hereof (a "Transferor"). On the surrender
for exchange of this Warrant, with the Transferor's endorsement in the form of
Exhibit B attached hereto (the “Transferor Endorsement Form")
and together with an opinion of counsel reasonably satisfactory to the Company
that the transfer of this Warrant will be in compliance with applicable
securities laws, the Company will issue and deliver to or on the order of the
Transferor thereof a new Warrant or Warrants of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "Transferee"), calling in the
aggregate on the face or faces thereof for the number of shares of Common Stock
called for on the face or faces of the Warrant so surrendered by the
Transferor.

     

    8.           Replacement of
Warrant.  On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, the Company at its expense, twice only, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.

     

    9.           Registration
Rights.  The Holder of this Warrant has been granted certain
registration rights by the Company.  These registration rights are set
forth in the Subscription Agreement.  The terms of the Subscription
Agreement are incorporated herein by this reference.

     

    10.           Maximum
Exercise.  The
Holder shall not be entitled to exercise this Warrant on an exercise
date, in connection with
that number of shares of Common Stock which would be in excess of the sum of
(i) the number of shares of Common Stock beneficially owned by the Holder
and its affiliates on an exercise date, and (ii) the number of shares of
Common Stock issuable upon the exercise of this Warrant with respect to which
the determination of this limitation is being made on an exercise date, which
would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock on such date.  For the purposes of
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the 1934 Act and Rule 13d-3
thereunder.  Subject to the foregoing, the Holder shall
not be limited to aggregate exercises which would result in the issuance of more
than 4.99%.  The restriction described in this
paragraph may be waived, in whole or in part, upon sixty-one (61) days
prior notice from the Holder to the Company to increase such percentage to up to
9.99%, but not in excess of 9.99%.  The Holder may decide whether to
convert a Convertible Note or exercise this Warrant to achieve an actual 4.99%
or up to 9.99% ownership position as described above, but not in excess of
9.99%.

     

    11.           Warrant
Agent.  The Company may, by written notice to the Holder of the
Warrant, appoint an agent (a “Warrant Agent”) for the
purpose of issuing Common Stock (or Other Securities) on the exercise of this
Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and
replacing this Warrant pursuant to Section 8, or
any of the foregoing, and thereafter any such issuance, exchange or replacement,
as the case may be, shall be made at such office by such Warrant
Agent.

     

    12.           Transfer on the Company's
Books.  Until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the
contrary.

     

    13.           Notices.   All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.  The
addresses for such communications shall be:  if to the Company, to:
Clear Skies Solar, Inc., 200 Old Country Road, Suite 610,
Mineola, New York 11501,
Attn: Ezra
Green, CEO, facsimile: (516) 281-7150, with
a copy by fax only to:  Harvey Kesner, Sichenzia Ross Friedman Ference
LLP, 61 Broadway, 32nd Floor, New York, NY 10006, facsimile: (212) 930-9725, and
(ii) if to the Holder, to the address and facsimile number listed on the first
paragraph of this Warrant, with a copy by fax only to: Grushko & Mittman,
P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, facsimile: (212)
697-3575.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    14.           Law Governing This
Warrant.  This Warrant shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of laws.  Any action brought by either party against the
other concerning the transactions contemplated by this Warrant shall be brought
only in the state courts of New York or in the federal courts located in the
state and county of New York.  The parties to this Warrant hereby
irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non
conveniens.  The Company and Holder waive trial by
jury.  The prevailing party shall be entitled to recover from the
other party its reasonable attorney's fees and costs.  In the event
that any provision of this Warrant or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law.  Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.   Each party hereby
irrevocably waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this Agreement or
any other Transaction Document by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by law.

     

    

     

    [SIGNATURE
PAGE FOLLOWS]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.

     

    
      
        	 	
                CLEAR
      SKIES SOLAR, INC.

              	 
	 	 	 	 
	
              	
                By:
      

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

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exhibit A

    

    FORM OF
SUBSCRIPTION

    (to be
signed only on exercise of Warrant)

     

    TO:  CLEAR
SKIES SOLAR, INC.

     

    The
undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable
box):

     

    
      
        	
                 

              	 
      	
                ________
      shares of the Common Stock covered by such Warrant; or

              
	
                ___

              	 
      	
                the
      maximum number of shares of Common Stock covered by such Warrant pursuant
      to the cashless exercise procedure set forth in Section 2 of the
      Warrant.

              
	 
      	 
      	 
      
	
                The
      undersigned herewith makes payment of the full purchase price for such
      shares at the price per share provided for in such Warrant, which is
      $___________.  Such payment takes the form of (check applicable
      box or boxes):

              
	 
      	 
      	 
      
	
                 

              	 
      	
                $__________
      in lawful money of the United States; and/or

              
	
                ___

              	 
      	
                the
      cancellation of such portion of the attached Warrant as is exercisable for
      a total of _______ shares of Common Stock (using a Fair Market Value of
      $_______ per share for purposes of this calculation);
    and/or

              
	 
      	 
      	 
      
	
                ___

              	 
      	
                the
      cancellation of such number of shares of Common Stock as is necessary, in
      accordance with the formula set forth in Section 2 of the Warrant, to
      exercise this Warrant with respect to the maximum number of shares of
      Common Stock purchasable pursuant to the cashless exercise procedure set
      forth in Section 2.

              

      

       

      
        The
undersigned requests that the certificates for such shares be issued in the name
of, and delivered to                                                                                     
whose address is___________________________________________________                                                                                                    
       
          

                       

        

      

    

    The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the within Warrant shall be made
pursuant to registration of the Common Stock under the Securities Act of 1933,
as amended (the "Securities Act"), or pursuant to an exemption from registration
under the Securities Act.

     

    
      
        	
                Date:___________________

              	
              	
              
	 	 	

                (Signature
      must conform to name of holder as specified on the face of the
      Warrant)

              
	 	 	
              	 
	 	 	 
	 	 	 
	 	 	

                (Address) 

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    Exhibit B

     

    FORM OF
TRANSFEROR ENDORSEMENT

    (To be
signed only on transfer of Warrant)

     

    For value
received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading "Transferees" the right represented by
the within Warrant to purchase the percentage and number of shares of Common
Stock of CLEAR SKIES SOLAR, INC. to which the within Warrant relates specified
under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of CLEAR SKIES
SOLAR, INC. with full power of substitution in the premises.

     

    

    
      	
              Transferees

            	
              Percentage
      Transferred

            	
              Number
      Transferred

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      

    

    

    
       

      
        
          	
                  Date:___________,________

                	 	
                	 
	 	 	 	

                  (Signature
      must conform to name of holder as specified on the face of the
      Warrant)

                
	 	 	 	
                
	Signed
      in the presence of: 	 	 	 
	                  
    	 	 	   
      
	
                  (Name)

                	 	 	 
      
	 	 	 	

                  (Address) 

                
	 	 	 	 
	 	 	 	 
	ACCEPTED
      AND AGREED:	 	 	 
	[TRANSFEREE]	 	 	 
	 	 	 	
                  (Address) 

                
	 	 	 	 
	 	 	 	 
	
                  (Name)Unassociated Document

     

    Exhibit 10.7

    

    SECURITY
AGREEMENT

    

    1.           Identification.

    

    This Security Agreement (the
“Agreement”), dated as of May 8, 2009, is entered into by and
between Clear Skies Solar, Inc., a Delaware corporation (“Debtor”), the lenders set forth on Schedule
I hereto (the “Lenders”).

    

    2.           Recitals.

    

    2.1           At or about the date hereof,
the Lenders are making loans (the “Loan”) to Debtor. It is beneficial to
Debtor that the
Loan is made.

    

                  
 2.2           The Loan will be evidenced by promissory
notes (“Notes”) issued by Debtor on or about the date of this Agreement
pursuant to subscription agreement (the “Subscription Agreement”) to which Debtor and Lenders are parties.  The
Notes are in the principal amount of
$400,000 and were or will be executed by Debtor as “Borrower” or “Debtor” for the benefi
t of each Lender as
the “Holder” or “Lender” thereof.

    

    2.3           In consideration of the Loan made and to be made by Lenders to Debtor and for other good and valuable
consideration, and as security for the performance by Debtor of its obligations under the Notes, and as security for the repayment of the
Loan and all other sums due from Debtor to
Lenders arising under the Transaction Documents
(as defined in the
Subscription Agreement) and
any other agreement between or among them (collectively, the “Obligations”), Debtor, for good and valuable
consideration, receipt of which is acknowledged, has agreed to grant to the Lenders a security interest in the Collateral
(as such term is hereinafter defined), on the terms and conditions hereinafter
set forth.  Obligations include all future
advances and
loans by Lenders to Debtor that may be made pursuant to the Subscription
Agreement or any other
agreements.

    

    2.4           The following defined terms which are
defined in the Uniform Commercial Code in effect in the State of New York on the date hereof are
used herein as so defined:  Accounts, Chattel Paper, Documents,
Equipment, General Intangibles, Instruments, Inventory and Proceeds.  Other capitalized terms
employed herein shall have the meanings attributed to them in the Subscription
Agreement.

    

    3.           Grant of
General Security Interest in Collateral.

    

    3.1 As security for the Obligations of Debtor,
Debtor hereby grants the
Lenders, a security interest in the
Collateral.

    

    3.2 “Collateral” shall mean all of the following property of Debtor:

    

    (A)           All now owned and hereafter acquired
right, title and interest
of Debtor in, to and in
respect of all Accounts, Goods, real or personal property, all present and
future books and records relating to the foregoing and all products and
Proceeds of the foregoing,
and as set forth below:

    

    (i)           All now owned and hereafter acquired
right, title and interest
of Debtor in, to and in
respect of all: Accounts, interests in goods represented by Accounts, returned,
reclaimed or repossessed goods with respect thereto and rights as an unpaid
vendor; contract rights; Chattel Paper; investment property; General Intangibles
(including but not limited to, tax and duty claims and refunds, registered and
unregistered patents, trademarks, service marks, certificates, copyrights trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, choses in
action and other claims, and existing and future leasehold interests and claims in and to equipment, real estate and fixtures);
Documents; Instruments; letters of credit, bankers’ acceptances or guaranties; cash moneys,
deposits; securities, bank accounts, deposit accounts, credits and other
property now or hereafter owned or held in any capacity by Debtor, as well as agreements or property
securing or relating to any of the items referred to above;

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

                                                    (ii)           Goods:  All now owned and hereafter
acquired right, title and
interest of Debtor in, to
and in respect of goods, including, but not limited
to:

    

    (a)           All Inventory, wherever located, whether
now owned or hereafter acquired, of whatever kind, nature or description,
including all raw materials, work-in-process, finished goods, and materials
to be used or consumed in
Debtor’s business; finished goods, timber cut or to be cut, oil, gas,
hydrocarbons, and minerals extracted or to be extracted, and all names or marks affixed to or to
be affixed thereto for purposes of selling same by the seller, manufacturer,
lessor or licensor thereof
and all Inventory which may
be returned to Debtor by
its customers or
repossessed by Debtor and
all of Debtors’ right, title and interest in and to
the foregoing (including
all of Debtor’s rights as a seller of
goods);

    

    (b)           All Equipment and fixtures, wherever located, whether now owned
or hereafter acquired, including, without limitation, all machinery, furniture
and fixtures, and any and all additions, substitutions, replacements (including
spare parts), and accessions thereof and thereto (including, but not limited to Debtor’s rights to acquire any of the foregoing,
whether by exercise of a purchase option or otherwise);

    

    (iii)           Property:  All now owned and hereafter
acquired right, title and
interests of Debtor in, to
and in respect of any other personal property in or upon which
Debtor has or may hereafter
have a security interest, lien or right of setoff;

    

                                    (iv)           Books and
Records:  All
present and future books and records relating to any of the above including,
without limitation, all computer programs, printed output and computer
readable data in the possession or control of the
Debtor, any computer
service bureau or other third party; and

    

                             
      (v)           Products and
Proceeds:  All
products and Proceeds of the foregoing in whatever form and wherever
located, including, without
limitation, all insurance proceeds and all claims against third parties for loss
or destruction of or damage to any of the foregoing.

    

    (B)           All now owned and hereafter acquired
right, title and interest
of Debtor in, to and in
respect of the
following:

    

    (i)           all shares of stock, partnership
interests, member interests or other equity interests from time to time acquired
by Debtor, in any current
Subsidiary or any Subsidiary that is not a Subsidiary of the Debtor
on the date hereof (“Future
Subsidiaries”), the
certificates representing such shares, and other rights, contractual or
otherwise, in respect thereof and all dividends, distributions, cash,
instruments, investment property and other property from time to time received,
receivable or otherwise distributed in respect
of or in exchange for any or all of such shares, interests or equity;
and

    

    (ii)           all security entitlements of Debtor in,
and all Proceeds of any and all of the foregoing in each case, whether now owned
or hereafter acquired by
Debtor and howsoever its interest therein may arise or appear (whether by
ownership, security interest, lien, claim or otherwise).

      

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    3.3           The Lenders are hereby specifically authorized, after
the Maturity Date (defined in the Notes) accelerated or otherwise, and after the occurrence of an Event of Default (as defined herein)
and the expiration of any applicable cure period, to transfer any Collateral
into the name of the Lenders and to take any and all action deemed
advisable to the Lenders to remove any transfer restrictions affecting
the Collateral.

    

    3.4           Additional Security.

    

    (a) Debtor is the owner of property
described on Schedule 3.4 hereto (“Mojave Property”).  In the event the Debtor
does not file its Form 10-K in the manner required under the 1934 Act on or before May 18, 2009, then
the Debtor will, not later than June 8, 2009, prepare and file such documents as
are necessary to grant, memorialize and perfect in Lenders a perfected senior
security interest in the Mojave Property (collectively, the “Mortgage”).  In the event the Mortgage
is not timely filed, then Debtor shall promptly deliver to Lenders in the
aggregate 5,000,000 shares of Common Stock (“Liquidated Damages Shares”) in proportion to the amount of Notes
acquired by them pursuant to the Subscription
Agreement.  Debtor shall be required to file the Mortgage regardless
of the obligation to issue and deliver such 5,000,000 shares of Common
Stock.

    

    (b)  In the event Debtor does not raise
$5,000,000 as an investment in the Mojave Property on or before six months after the date of
this Agreement and the Lenders do not already hold a Mortgage, then Debtor must
either (i) promptly file the Mortgage, or (ii) issue Liquidated Damages Shares
to the Lenders in addition to any Liquidated Damages Shares that may have been issued pursuant to Section
3.4(a)
above.

    

    4.           Perfection of Security
Interest.

    

    4.1           Debtor
shall prepare, execute and deliver to the Lenders UCC-1 Financing
Statements.  The Lenders are instructed to prepare and file at
Debtor’s cost and expense, financing statements in such jurisdictions deemed
advisable to Lenders, including but not limited to the State of
Delaware.

    

    4.2             All
other certificates and instruments constituting Collateral from time to time
required to be pledged to Lenders pursuant to the terms hereof (the “Additional
Collateral”) shall be delivered to Lenders promptly upon receipt thereof by or
on behalf of Debtor.  All such certificates and instruments shall be
held by or on behalf of Lenders pursuant hereto and shall be delivered in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment or undated stock powers executed in blank,
all in form and substance satisfactory to Lenders.  If any Collateral
consists of uncertificated securities, unless the immediately following sentence
is applicable thereto, Debtor shall cause Lenders (or its custodian, nominee or
other designee) to become the registered holder thereof, or cause each issuer of
such securities to agree that it will comply with instructions originated by
Lenders with respect to such securities without further consent by
Debtor.  If any Collateral consists of security entitlements, Debtor
shall transfer such security entitlements to Lenders (or its custodian, nominee
or other designee) or cause the applicable securities intermediary to agree that
it will comply with entitlement orders by Lenders without further consent by
Debtor.

    

    4.3           If
Debtor shall receive, by virtue of Debtor being or having been an owner of any
Collateral, any (i) stock certificate (including, without limitation, any
certificate representing a stock dividend or distribution in connection with any
increase or reduction of capital, reclassification, merger, consolidation, sale
of assets, combination of shares, stock split, spin-off or split-off),
promissory note or other instrument, (ii) option or right, whether as an
addition to, substitution for, or in exchange for, any Collateral, or otherwise,
(iii) dividends payable in cash (except such dividends permitted to be retained
by Debtor pursuant to Section 5.2 hereof) or in securities or other property or
(iv) dividends or other distributions in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus, Debtor shall receive such stock certificate,
promissory note, instrument, option, right, payment or distribution in trust for
the benefit of Lenders, shall segregate it from Debtor’s other property and
shall deliver it forthwith to Lenders, in the exact form received, with any
necessary endorsement and/or appropriate stock powers duly executed in blank, to
be held by Lenders as Collateral and as further collateral security for the
Obligations.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    5.           Distribution.

    

    5.1           So long as an Event of Default does not exist, Debtor shall be entitled to exercise all voting power pertaining
to any of the Collateral, provided such exercise is not contrary to the interests of the
Lenders and does not impair the
Collateral.

    

    5.2.                      At any time an Event of Default exists or has occurred and is continuing, all rights of Debtor, upon notice given by
Lenders, to exercise the
voting power and receive payments, which it would otherwise be entitled to
pursuant to Section 5.1, shall cease and all such rights shall thereupon
become vested in Lenders,
which shall thereupon have the sole right to exercise such voting power and
receive such payments.

    

    5.3           All dividends, distributions, interest
and other payments which
are received by Debtor contrary to the provisions of Section
5.2 shall be received in trust for the
benefit of Lenders as security and Collateral for payment of the
Obligation, shall be segregated from other funds
of Debtor, and shall be forthwith paid over to
Lenders as Collateral in the exact form received with any
necessary endorsement and/or appropriate stock powers duly executed in blank, to
be held by Lenders as Collateral and as further collateral
security for the Obligations.

    

    6.           Further
Action By Debtor; Covenants
and Warranties.

    

    6.1           Subject to the terms of this Agreement,
Lenders at all times shall have a perfected
security interest in the
Collateral. Debtor
represents that, other than the security interests described on Schedule
6.1, it has and will
continue to have full title
to the Collateral free from any liens, leases, encumbrances, judgments or other
claims.  The Lenders’ security interest in the Collateral
constitutes and will continue to constitute a first, prior and indefeasible
security interest in favor of Lenders, subject only to the security interests
described on Schedule
6.1. Debtor will do all acts and things, and
will execute and file all instruments (including, but not limited to, security
agreements, financing statements, continuation statements, etc.) reasonably requested by
Lenders to establish,
maintain and continue the perfected security interest of Lenders in the perfected Collateral, and will
promptly on demand, pay all costs and expenses of filing and recording,
including the costs of any searches reasonably deemed necessary by
Lenders from time to time to establish and
determine the validity and the continuing priority of the security interest of
Lenders, and also pay all
other claims and charges that, in the opinion of Lenders are reasonably likely to materially prejudice, imperil or
otherwise affect the Collateral or Lenders’ security interests
therein.

    

    6.2           Except (i) in connection with sales of Collateral,
in the ordinary course of business, for fair value and in cash, (ii) the assets described on Schedule
6.2 (referred to as the
“XTRAX Assets”) which may be sold, transferred or
assigned to an entity in which Debtor holds not less than 20% of the outstanding
equity and right to receive equity at the time the XTRAX Assets are conveyed,
and (iii) for Collateral which is substituted by
assets of identical or greater value (subject to the consent of the
Lenders) or which
is inconsequential in
value, Debtor will not
sell, transfer, assign or pledge those items of Collateral (or allow any such
items to be sold,
transferred, assigned or pledged), without the prior written consent of
Lenders other than a transfer of the Collateral
to a wholly-owned United States formed and located subsidiary on prior notice to Lenders, and provided the Collateral remains
subject to the security
interest herein described.  Although Proceeds of Collateral are
covered by this Agreement, this shall not be construed to mean that
Lenders consent to any sale of the Collateral,
except as provided herein.  Sales of Collateral in the ordinary course of
business and as described above shall be free of the security interest
of Lenders and Lenders shall promptly execute such documents
(including without limitation releases and termination statements) as may be required by
Debtor to evidence or effectuate the
same.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    6.3           Debtor will, at all reasonable times
during regular business hours and upon reasonable notice, allow
Lenders or their representatives free and complete access
to the Collateral and all
of Debtor’s records that in any way relate to the Collateral, for such
inspection and examination as Lenders reasonably deem
necessary.

    

    6.4           Debtor, at its sole cost and expense,
will protect and defend this Security Agreement, all of the rights of
Lenders hereunder, and the Collateral
against the claims and
demands of all other persons.

    

    6.5           Debtor will promptly notify
Lenders of any levy, distraint or other seizure
by legal process or otherwise of any part of the Collateral, and of any
threatened or filed claims or proceedings that are reasonably likely to affect or impair any of
the rights of Lenders under this Security Agreement in any
material respect.

    

    6.6           Debtor, at its own expense, will obtain
and maintain in force insurance policies covering losses or damage to those
items of Collateral which
constitute physical personal property, which insurance shall be of the types
customarily insured against by companies in the same or similar business,
similarly situated, in such amounts (with such deductible amounts) as is
customary for such companies under the same or similar
circumstances, similarly
situated.  Debtor
shall make the Lenders loss payee thereon to the extent of its
interest in the Collateral. Lenders are hereby irrevocably (until the
Obligations are indefeasibly paid in full) appointed Debtor’s attorney-in-fact to endorse any check
or draft that may be payable to Debtor so that Lenders may collect the proceeds payable for any
loss under such insurance.  The proceeds of such insurance, less any
costs and expenses incurred or paid by Lenders in the collection thereof, shall be
applied either toward the cost of the repair or replacement of the items damaged
or destroyed, or on account of any sums secured hereby, whether or not then due
or payable.

    

    6.7           In order to protect the Collateral
and Lenders’ interest therein, Lenders may, at Lenders’ option, and without any obligation to do
so, pay, perform and discharge any and all amounts, costs, expenses and
liabilities herein agreed to be paid or performed by Debtor upon Debtor’s failure to do so.  All amounts expended by
Lenders in so doing shall become part of the
Obligations secured hereby, and shall be immediately due and payable by Debtor
to Lenders upon demand and shall bear interest at the lesser of
15% per annum or the highest legal amount allowed from the dates of such
expenditures until paid.

    

    6.8           Upon the request of Lenders, Debtor will furnish to Lenders within five (5) business days
thereafter, or to any proposed assignee of this Security Agreement, a written
statement in form reasonably satisfactory to
Lenders, duly acknowledged,
certifying the amount of the principal and interest and any other sum then owing
under the Obligations, whether to its knowledge any claims, offsets or defenses
exist against the Obligations or against this Security Agreement, or any of the terms
and provisions of any other
agreement of Debtor
securing the Obligations.  In connection with any assignment by
Lenders of this Security Agreement, Debtor hereby agrees to cause the
insurance policies required hereby to be carried by Debtor, if any, to be
endorsed in form satisfactory to Lenders or to such assignee, with loss payable
clauses in favor of such assignee, and to cause such endorsements to be
delivered to Lenders within ten (10) calendar days after
request therefor by
Lenders.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    6.9           Debtor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Lenders from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer
endorsements, powers of attorney, certificates, reports and other reasonable
assurances or instruments and take further steps relating to the Collateral and
other property or rights covered by the security interest hereby granted, as the
Lenders may reasonably require to perfect their
security interest
hereunder.

    

    6.10           Debtor represents and warrants that they are the true and lawful
exclusive owners of the Collateral, free and clear of any liens, encumbrances and claims other than those listed on Schedule
6.1.

    

    6.11           Debtor hereby agrees not to divest
itself of any right under the Collateral except as permitted herein absent prior
written approval of the Lenders, except to a subsidiary organized and
located in the United States on prior notice to Lenders provided the Collateral remains subject to
the security interest herein described.

               

    6.12           Debtor shall cause each Subsidiary of
Debtor in existence on the
date hereof and each Future
Subsidiary to execute and deliver to Lenders promptly and in any event
within ten (10) days after
the formation, acquisition or change in status thereof (A) if requested by
Lenders, a security and pledge agreement
substantially in the form of this Agreement together with (x) certificates
evidencing all of the capital stock of each Subsidiary of and any entity owned by
such Subsidiary, (y) undated stock powers executed in blank with signatures
guaranteed, and (z) such opinion of counsel and such approving certificate of
such Subsidiary as Lenders may reasonably request in respect
of complying with any
legend on any such certificate or any other matter relating to such shares and
(B) such other agreements,
instruments, approvals, legal opinions or other documents reasonably requested
by Lenders in order to create, perfect, establish
the first priority of or
otherwise protect any lien purported to be covered by any such pledge and
security agreement or otherwise to effect the intent that all property and
assets of such Subsidiary shall become Collateral for the
Obligations.  For purposes of this Agreement, “Subsidiary” means, with respect to any entity at
any date, any corporation, limited or general partnership, limited liability
company, trust, estate, association, joint venture or other business
entity, of which more than 30% of
(A) the outstanding
capital stock having (in the absence of contingencies) ordinary voting power to
elect a majority of the board of directors or other managing body of such
entity, (B) in the case of a partnership or limited liability company, the
interest in the capital or profits of such
partnership or limited liability company or (C) in the case of a trust,
estate, association, joint venture or other entity, the beneficial interest in
such trust, estate, association or other entity is, at the time of
determination, owned or controlled directly or
indirectly through one or more intermediaries, by such
entity.  Schedule
6.12
annexed hereto contains a list of all Subsidiaries of
the Debtor as of the date of
this Agreement.

    

    6.13           Debtor will notify Lenders within ten days of the occurrence of any change of
Debtor’s name, domicile, address or jurisdiction of
incorporation.  The timely giving of this
notice is a material obligation of Debtor.

    

    7.           Power of
Attorney.

    

    At any time an Event of Default has occurred, and only after the applicable cure period
as set forth in this Agreement and the other Transaction Documents, and is continuing, Debtor hereby irrevocably constitutes
and appoints Lenders as the true and lawful attorney of Debtor, with full power of
substitution, in the place and stead of Debtor and
in the name of Debtor or
otherwise, at any time or times, in the discretion of the Lenders, to take any action and to execute any
instrument or document which the Lenders may deem necessary or advisable to
accomplish the purposes of
this Agreement.  This power of attorney is coupled with an interest
and is irrevocable until the Obligations are satisfied.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    8.           Performance
By The Lenders.

    

    If Debtor fails to perform any material covenant,
agreement, duty or
obligation of Debtor under this Agreement,
Lenders may, after any applicable cure period,
at any time or times in its discretion, take action to effect performance of
such obligation.  All reasonable expenses of the Lenders incurred in connection with the
foregoing authorization shall be payable by
Debtor as provided in
Paragraph
12.1 hereof.  No
discretionary right, remedy or power granted to the Lenders under any part of this Agreement shall
be deemed to impose any obligation whatsoever on the Lenders with respect thereto, such rights, remedies and powers
being solely for the protection of the Lenders.

    

    9.           Event of
Default.

    

    An event of default (“Event of Default”) shall be deemed to have occurred
hereunder upon the occurrence of any event of default as defined and described in this Agreement, in the Notes, the Subscription Agreement, Transaction Documents (as defined in
the Subscription Agreement), and any other agreement to which Debtor
and Lenders are parties.   Upon and
after any Event of Default, after the applicable cure period, if any, any or all of
the Obligations shall become immediately due and payable at the option of the
Lenders, and the Lenders may dispose of Collateral as provided
below.  A default
by Debtor of any of its material obligations pursuant to this Agreement and any of the
Transaction Documents shall be an Event of Default hereunder and an “Event of Default” as defined in the Notes, and Subscription
Agreement.

    

    10.           Disposition
of Collateral.

    

    Upon and after any Event of Default
which is then continuing,

    

    10.1           The Lenders may exercise their rights with respect to each and every
component of the
Collateral, without regard
to the existence of any other security or source of payment for, in order to satisfy the
Obligations.  In
addition to other rights
and remedies provided for herein or otherwise available to it, the Lenders shall have all of the rights and
remedies of a lender on default under the Uniform Commercial Code then in effect
in the State of New York.

    

    10.2           If any notice to Debtor of the sale or other disposition of Collateral
is required by then applicable law, five (5) business days prior written notice (which
Debtor agrees is reasonable notice within the meaning
of Section 9.612(a) of the Uniform Commercial Code) shall be given to
Debtor of the time and
place of any sale of
Collateral which Debtor
hereby agrees may be by private sale.  The
rights granted in this Section are in addition to any and all rights available
to Lenders under the Uniform Commercial
Code.

    

    10.3           The Lenders are authorized, at any such sale, if the
Lenders deem it advisable to do so, in order to
comply with any applicable securities laws, to restrict the prospective bidders
or purchasers to persons who will represent and agree, among other things, that
they are purchasing the
Collateral for their own account for investment, and not with a view to the
distribution or resale thereof, or otherwise to restrict such sale in such other
manner as the Lenders deem advisable to ensure such
compliance.  Sales made subject to such restrictions shall be deemed to have
been made in a commercially reasonable manner.

    

    10.4           All proceeds received by the
Lenders in respect of any sale, collection or
other enforcement or disposition of Collateral, shall be applied (after
deduction of any amounts
payable to the Lenders pursuant to Paragraph
12.1 hereof) against the
Obligations.   Upon payment in full of all Obligations,
Debtor shall be entitled to
the return of all Collateral, including cash, which has not been used or applied
toward the payment of
Obligations or used or applied to any and all costs or expenses of the
Lenders incurred in connection with the
liquidation of the Collateral (unless another person is legally entitled
thereto).  Any assignment of Collateral by the Lenders to Debtor shall be without representation or
warranty of any nature whatsoever and wholly without recourse.  To the
extent allowed by law, Lenders may purchase the Collateral and pay for
such purchase by offsetting the purchase price with sums owed to
Lenders by Debtor arising under the Obligations or any
other source.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    10.5           Rights of
Lenders to Appoint
Receiver.   Without limiting, and
in addition to, any other rights, options and remedies Lenders have under the Transaction Documents, the
UCC, at law or in equity,
or otherwise, upon the occurrence and continuation of an Event of Default,
Lenders shall have the right to apply for and
have a receiver appointed by a court of competent jurisdiction.  Debtor
expressly agrees that such
a receiver will be able to manage, protect and preserve the Collateral and
continue the operation of
the business of Debtor to
the extent necessary to collect all revenues and profits thereof and to apply
the same to the payment of all expenses and other charges of such receivership,
including the compensation
of the receiver, until a sale or other disposition of such Collateral shall be
finally made and
consummated.  Debtor waives any right to require a bond to be
posted by or on behalf of any such receiver.

    

    11.           Waiver of
Automatic Stay.   Debtor acknowledges and agrees that
should a proceeding under any bankruptcy or insolvency law be commenced by or
against Debtor, or if any of the Collateral should become the subject of any
bankruptcy or insolvency proceeding, then the Lenders should be entitled to, among other relief to which
the Lenders may be entitled under the
Notes, Subscription Agreement, Transaction Documents, and any other agreement to which the
Debtor and Lenders are parties (collectively “Loan Documents”) and/or applicable law, an order from the court granting
immediate relief from the automatic stay pursuant to 11 U.S.C. Section 362 to
permit the Lenders to exercise all of their rights and remedies pursuant to the
Loan Documents and/or applicable law.  DEBTOR EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED
BY 11 U.S.C. SECTION 362.  FURTHERMORE, DEBTOR EXPRESSLY ACKNOWLEDGES AND AGREES THAT
NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR
OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY,
INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE
LENDERS TO ENFORCE ANY OF ITS RIGHTS AND
REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW.   Debtor hereby consents to any motion for
relief from stay which may
be filed by the Lenders in any bankruptcy or insolvency
proceeding initiated by or against Debtor, and further agrees not to file any
opposition to any motion for relief from stay filed by the Lenders.  Debtor represents,
acknowledges and agrees
that this provision is a specific and material aspect of this Agreement, and
that the Lenders would not agree to the terms of this
Agreement if this waiver were not a part of this Agreement.  Debtor
further represents, acknowledges and agrees that this waiver is knowingly, intelligently
and voluntarily made, that neither the Lenders nor any person acting on behalf of the
Lenders has made any representations to induce
this waiver, that Debtor has been represented (or has had the opportunity to be
represented) in the signing
of this Agreement and in the making of this waiver by independent legal counsel
selected by Debtor and that Debtor has had the opportunity to discuss this
waiver with counsel.   Debtor further agrees that any bankruptcy
or insolvency proceeding initiated by Debtor will
only be brought in the Federal Court within the Southern District of New
York.

    

    12.           Miscellaneous.

    

    12.1                      Expenses.  Debtor shall pay to the Lenders, on demand, the amount of any and all
reasonable expenses, including, without limitation,
attorneys’ fees, legal expenses and
brokers’ fees, which the Lenders may incur in connection with (a) sale,
collection or other enforcement or disposition of Collateral; (b) exercise or
enforcement of any the rights, remedies or powers of the Lenders hereunder or with respect to any or all
of the Obligations upon breach or threatened breach; or (c) failure by
Debtor to perform and
observe any agreements of Debtor contained herein which are performed by
Lenders.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    12.2                      Waivers,
Amendment and
Remedies.  No
course of dealing by the Lenders and no failure by the Lenders to exercise, or delay by the
Lenders in exercising, any right, remedy or
power hereunder shall operate as a waiver thereof, and no single or partial
exercise thereof shall preclude any other or further exercise
thereof or the exercise of any other right, remedy or power of the Lenders.  No amendment, modification
or waiver of any provision of this Agreement and no consent to any departure by Debtor
therefrom shall, in any
event, be effective unless
contained in a writing signed by the Lenders, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for which given.
The rights, remedies and
powers of the Lenders, not only hereunder, but also under any instruments
and agreements evidencing or securing the Obligations and under applicable law
are cumulative, and may be exercised by the Lenders from time to time in such order as the
Lenders may elect.

    

    12.3                      Notices.  All notices or other communications given or made
hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being faxed (provided that a copy is
delivered by first class mail) to the party to receive the same at its address set forth below or to such
other address as either party shall hereafter give to the other by notice duly
made under this Section:

     

    
      
        	 
      	
                To Debtor:

              	
                Clear Skies Solar,
      Inc.

              
	 
      	 
      	
                200 Old Country Road, Suite
      610

              
	 
      	 
      	
                Mineola, NY
      11501

              
	 
      	 
      	
                Attn: Ezra Green,
      CEO

              
	 
      	 
      	
                Fax: (516)
      281-7150

              

      

      
        	 
      	
                With
      a copy by fax only to:

              	
                Harvey
      Kesner

              
	 
      	 
      	
                Sichenzia
      Ross Friedman Ference LLP

              
	 
      	 
      	
                61
      Broadway, 32nd
      Floor

              
	 
      	 
      	
                New
      York, NY 10006

              
	 
      	 
      	
                Fax:
      (212) 930-9725

              
	 
      	 
      	 
      
	
              	
                To Lender:

              	To the addresses set forth on
      Schedule I
	 	 	 
	 
      	 
      	 
      
	
              	with a copy by fax only to:	 
      
	 
      	 
      	 
      
	
              	 
      	Grushko & Mittman,
      P.C.
	
              	 
      	551 Fifth Avenue, Suite
      1601
	
              	 
      	New York, New York
      10176
	
              	 
      	Fax: (212)
      697-3575

      

    

     

    Any party may change its address by
written notice in accordance with this paragraph.

    

    12.4                      Term;
Binding Effect.  This Agreement shall (a)
remain in full force and
effect until payment and satisfaction in full of all of the Obligations; (b) be binding upon Debtor, and its successors and permitted
assigns; and (c) inure to the benefit of the Lenders and its successors and
assigns.

    

    12.5                      Captions.  The captions of Paragraphs,
Articles and Sections in this Agreement have been included for convenience of
reference only, and shall not define or limit the provisions of this agreement and have no legal or other significance
whatsoever.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    12.6                      Governing
Law; Venue;
Severability.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to conflicts
of laws principles that
would result in the application of the substantive laws of another
jurisdiction, except
to the extent that the perfection of the security interest granted hereby in
respect of any item of Collateral may be governed by the law of another
jurisdiction.  Any legal action or proceeding against Debtor with
respect to this Agreement must be brought only in the courts in the State of New
York or of the United States for
the Southern District of New York, and, by execution and delivery of this Agreement, Debtor hereby irrevocably accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the
aforesaid courts. Debtor
hereby irrevocably waives any objection which they may now or hereafter have to
the laying of venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Agreement brought in the aforesaid
courts and hereby further irrevocably waives and agrees not to plead or claim in
any such court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.  If any provision of this Agreement, or the application
thereof to any person or circumstance, is held invalid, such invalidity shall
not affect any other provisions which can be given effect without the invalid
provision or application, and to this end the provisions hereof shall be severable and the
remaining, valid provisions shall remain of full force and
effect.

    

    12.7                      Entire
Agreement.  This
Agreement contains the entire agreement of the parties and supersedes all other
agreements and understandings, oral or written, with respect to the matters contained
herein.

    

    12.8                      Counterparts/Execution.  This Agreement may be
executed in any number of counterparts and by the different signatories hereto
on separate counterparts, each of which, when so executed, shall be deemed
an original, but all such
counterparts shall constitute but one and the same instrument.  This
Agreement may be executed by facsimile signature and delivered by electronic transmission.

    

    13.           Termination;
Release.  When
the Obligations have been indefeasibly paid and performed in full or all
outstanding Notes have been converted to common stock pursuant to the terms of
the Notes and the Subscription Agreements, this Agreement shall be terminated, and the Lenders, at the request and sole expense of the
Debtor, will execute and deliver to the
Debtor the proper
instruments (including UCC termination statements) acknowledging the termination
of the Security Agreement, and duly assign, transfer and deliver to the
Debtor, without recourse,
representation or warranty of any kind whatsoever, such of the
Collateral,  as may be in the possession of the Lenders.

    

    14.           Lenders
Powers.

    

    14.1                      Lenders
Powers.  The
powers conferred on the Lenders hereunder are solely to protect
Lenders’ interest in the Collateral and shall not
impose any duty on it to
exercise any such powers.

    

    14.2                      Reasonable
Care.  The
Lenders are required to exercise reasonable care in
the custody and preservation of any Collateral in its possession; provided,
however, that the Lenders shall be deemed to have exercised reasonable care in the custody
and preservation of any of the Collateral if it takes such action for that
purposes as any owner thereof reasonably requests in writing at times other than
upon the occurrence and during the continuance of any Event of Default, but failure of the
Lenders to comply with any such request at any
time shall not in itself be deemed a failure to exercise reasonable
care.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    14.3           Majority in
Interest.   The rights of the Lenders hereunder, except as
otherwise set forth herein
shall be exercised upon the approval of Lenders holding 70% of the outstanding
Obligations (“Majority in
Interest”) at the time such
approval is sought or given.  Possession of any tangible or physical
Collateral shall be held by Alpha Capital Anstalt pursuant to this Agreement and on behalf of
all Lenders as to their respective rights.  The Collateral, to the
extent it may be transferred to Lenders, may be held in the name of Alpha
Capital Anstalt or in “street name”.  Unless agreed to otherwise
by a Majority in Interest, Alpha Capital Anstalt
is authorized to act on behalf of all the Lenders in connection with the Lenders
rights under this Agreement.

    

    

    [THIS SPACE INTENTIONALLY LEFT
BLANK]

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    IN WITNESS WHEREOF,
the undersigned have
executed and delivered this
Security Agreement, as of the date first written above.

     

    
      
        	      
                “DEBTOR” 

              	 	 	 	 
	      
                CLEAR
      SKIES SOLAR, INC. 

              	 	 	 	 
	      
                a Delaware corporation

              	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:
      	
                /s/
      Ezra
      Green

              	 	 	
              	 
	Its:	Chief Executive Officer 	 	 	
              	 

      

    

     

     

    

    “LENDERS”

     

    
      	 	 	 	 	 
	
              /s/ Konrad
      Ackerman,
      Director

            	 	 	
              /s/
      Barry Honig

            	 
	
              ALPHA
      CAPITAL ANSTALT

            	 	 	
              BARRY
      HONIG

            	 

    

     

    
       

      
        
          	 	 	 	 	 
	
                  /s/
      Michael Brauser

                	 	 	
                	 
	
                        
                    MICHAEL
      BRAUSER

                  

                	 	 	
                	 

        

      

    

     

    

    

    

    This Security Agreement may be
signed by facsimile
signature and

    delivered by confirmed facsimile
transmission.

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    

    Schedule
I

     

    
      	
              LENDER AND
      ADDRESS

            	 	
              PURCHASE
    PRICE

            	 	 	
              NOTE
    PRINCIPAL

            	 	 	
              WARRANT
    SHARES

            	 
	
              ALPHA
      CAPITAL ANSTALT

               

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

               

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

               

            	 	$	50,000	 	 	$	50,000	 	 	 	500,000	 

    

    

    
      
         

      

      
        13

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