Document:

Employment, Employment Separation and General Release Agreement, May 26, 2006

 Exhibit 10.72 
 EMPLOYMENT, EMPLOYMENT SEPARATION 
 AND GENERAL RELEASE AGREEMENT 
 This Employment, Employment Separation and General Release Agreement (this “Separation Agreement”), is entered into this 31st day of May
2006, by and between Layle K. Smith, an individual (“Executive”), and Hexion Specialty Chemicals Inc., a New Jersey corporation (the “Company”). 
 WHEREAS, Executive has been employed as the President, Epoxy & Phenolic Resins for the Company; and 
 WHEREAS, Executive desires to resign from the Company and Executive and the Company mutually agreed to terminate Executive’s employment
relationship with the Company upon the terms set forth herein; 
 NOW, THEREFORE, in consideration of the covenants undertaken and the
releases contained in this Separation Agreement, Executive and the Company agree as follows: 
 I. Employment and Resignation.

 A. Resignation. Executive irrevocably resigns as an officer, director, employee, member, manager and in any
other capacity with the Company and each of its affiliates, effective as of the Separation Date. The “Separation Date” shall be the day preceding the first day that the Executive commences employment with a new employer, but no
later than June 30, 2006. Concurrently with the execution of this Separation Agreement, Executive shall execute the letter attached as Exhibit A hereto and promptly deliver such letter to the Company. The Company and its affiliates
accept such resignation. Executive acknowledges and agrees that all payments due to Executive from the Company after the Separation Date shall be determined under this Separation Agreement. 
 B. Termination of Prior Employment Agreements. Executive shall have no further rights pursuant to any prior agreement
with the Company or any of its affiliates governing the terms of Executive’s employment by any of them, except to the extent necessary to effect the payments contemplated by Section II.B. 
 II. Severance. 
 A. Severance Pay. The Company shall pay as severance pay to Executive an aggregate amount equal to $420,000, less legally required withholding and authorized deductions. Such amount shall be paid in a series of
substantially equal installment payments (each constituting a fraction of the aggregate severance amount and with such installments paid not less frequently than monthly) over a period not to extend beyond March 15, 2007. The Company shall
commence such installments within thirty (30) days following the Separation Date. The Company agrees that in the event that Executive accepts employment that requires he relocate outside of Texas, all remaining payments under this section will
be accelerated and paid as a cash lump sum payment promptly following Executive’s notice to the Company of his 

  

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relocation and providing such information to support the relocation requirement as the Company may reasonably request. 
 B. Remaining Payments. Executive and the Company acknowledge and agree that Executive is entitled to payment of the
following amounts at the times indicated: (1) the amount of Executive’s prorated bonus earned for 2006 under the Company’s Incentive Compensation Plan (“ICP”), as determined by the Company’s Board of Directors in
its sole discretion, such amount to be paid at the same time bonuses for 2006 are paid to ICP participants generally; and (2) the amount of the dividend payment to be made in respect of Executive’s vested stock options pursuant to that
certain letter agreement between Executive and the Company dated May 31, 2005, such amount to be paid on or as soon as practicable after June 1, 2007 as provided in such letter agreement. The parties hereby agree that the amount referred
to in clause (2) above is $693,007.00 (subject to tax withholding). In addition, Executive’s benefit pursuant to the Hexion Specialty Chemicals Retirement Savings Plan will be paid in accordance with the terms and conditions of that plan.
The Company also agrees to reimburse Executive for any business expenses incurred by him on or before the Separation Date in the course of performing his obligations for the Company in accordance with the Company’s usual expense reimbursement
policies and procedures; provided that Executive submits such expenses to the Company for reimbursement no later than July 28, 2006 and provided that such expenses are reasonable, customary, and generally consistent with past expenses submitted
by Executive for reimbursement by the Company. 
 C. No Other Benefits. The severance payments and
benefits pursuant to this Section II are for and in lieu of any other payments or benefits (and, except as specifically provided herein, none shall accrue) beyond the Separation Date. Executive specifically acknowledges and agrees that he is not,
and will not be, entitled to receive any severance pay or other benefits pursuant to any severance plan or policy of the Company or any of its affiliates. Executive acknowledges and agrees that he has received all compensation and benefits due to
him from the Company other than as expressly provided in this Section II. 
 III. Non-Disparagement. Executive agrees that he
shall not (1) directly or indirectly, make or ratify any statement, public or private, oral or written, to any person that disparages, either professionally or personally, the Company or any of its affiliates, past and present, and each of
them, as well as its and their trustees, directors, officers, members, managers, partners, agents, attorneys, insurers, employees, stockholders, representatives, assigns, and successors, past and present, and each of them, or (2) make any
statement or engage in any conduct that has the purpose or effect of disrupting the business of the Company or any of its affiliates. Neither the Company’s Board of Directors, any senior executive officer of the Company with the authority to
speak for the Company, nor any other officer or employee of the Company with the authority to speak on behalf of the Company as a whole as to matters of fundamental high level importance to the Company (such as, for example, corporate earnings,
corporate restructurings, and similar fundamental issues) and speaking in that capacity in a formal setting shall, directly or indirectly, make or ratify any statement, public or private, oral or written, to any person that disparages, either
professionally or personally, Executive. Nothing in this Section III shall in any way prohibit Executive, the Company, the Company’s Board of Directors, or any senior executive officer of the Company from disclosing such information as may be
required by law, or by judicial or administrative process or order or the rules of any 

  

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securities exchange or similar self-regulatory organization applicable to Executive, the Company, the Company’s Board of Directors, or any senior
executive officer of the Company in the circumstances. 
 IV. Release. Executive on behalf of himself, his descendants,
dependents, heirs, executors, administrators, assigns, and successors, and each of them, hereby covenants not to sue and fully releases and discharges the Company and each of its parents, subsidiaries and affiliates, past and present, as well as its
and their trustees, directors, officers, members, managers, partners, agents, attorneys, insurers, employees, stockholders, representatives, assigns, and successors, past and present, and each of them, hereinafter together and collectively referred
to as the “Releasees,” with respect to and from any and all claims, wages, demands, rights, liens, agreements, contracts, covenants, actions, suits, causes of action, obligations, debts, costs, expenses, attorneys’ fees, damages,
judgments, orders and liabilities of whatever kind or nature in law, equity or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which he now owns or holds or he has at any time heretofore
owned or held or may in the future hold as against any of said Releasees, arising out of or in any way connected with his service as an officer, director, employee, member or manager of any Releasee, his separation from his position as an officer,
director, employee, manager and/or member, as applicable, of any Releasee, or any other transactions, occurrences, acts or omissions or any loss, damage or injury whatever, known or unknown, suspected or unsuspected, resulting from any act or
omission by or on the part of said Releasees, or any of them, committed or omitted prior to the date of this Separation Agreement including, without limiting the generality of the foregoing, any claim under Title VII of the Civil Rights Act of 1964,
the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, any state or local anti-discrimination laws or regulations, or any claim for severance pay, bonus, sick leave, holiday pay, vacation pay, life insurance, health or
medical insurance or any other fringe benefit, workers’ compensation or disability; provided that such release shall not apply to any obligation created by or arising out of this Separation Agreement, or otherwise specifically provided
for in Section II for which receipt or satisfaction has not been acknowledged. 
 V. Additional Waiver. It is the intention of
Executive in executing this instrument that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, Executive expressly consents that this Separation Agreement
shall be given full force and effect according to each and all of its express terms and provisions, including those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims,
demands and causes of action hereinabove specified. Executive acknowledges that he may hereafter discover claims or facts in addition to or different from those which Executive now knows or believes to exist with respect to the subject matter of
this Separation Agreement and which, if known or suspected at the time of executing this Separation Agreement, may have materially affected this settlement. Nevertheless, Executive hereby waives any right, claim or cause of action that might arise
as a result of such different or additional claims or facts. 
 VI. ADEA Waiver. Executive expressly acknowledges and agrees
that by entering into this Separation Agreement, he is waiving any and all rights or claims that he may have arising under the Age Discrimination in Employment Act of 1967, as amended, which have 

  

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arisen on or before the date of execution of this Separation Agreement. Executive further expressly acknowledges and agrees that: 
 A. In return for this Separation Agreement, he will receive consideration beyond that which he was already entitled to receive
before entering into this Separation Agreement; 
 B. He is hereby advised in writing by this Separation Agreement to
consult with an attorney before signing this Separation Agreement; 
 C. He was given a copy of this Separation
Agreement on May 26, 2006 and informed that he had twenty one (21) days within which to consider this Separation Agreement; and 
 D. He was informed that he had seven (7) days following the date of execution of this Separation Agreement in which to revoke this Separation Agreement. 
 VII. No Transferred Claims. Executive warrants and represents that he has not heretofore assigned or transferred to any person not a party
to this Separation Agreement any released matter or any part or portion thereof and he shall defend, indemnify and hold the Company and each of its affiliates harmless from and against any claim (including the payment of attorneys’ fees and
costs actually incurred whether or not litigation is commenced) based on or in connection with or arising out of any such assignment or transfer made, purported or claimed. 
 VIII. Confidential Information. 
 A. Executive, in the performance of Executive’s services on behalf of the Company and its affiliates, has had access to, received and been entrusted with confidential information, including but in no way
limited to development, marketing, organizational, financial, management, administrative, production, distribution and sales information, data, specifications and processes presently owned or at any time in the future developed, by the Company, its
affiliates, or its or their agents or consultants, or used presently or at any time in the future in the course of its or their business that is not otherwise part of the public domain (collectively, the “Confidential Material”).
All such Confidential Material is considered secret and was made available to Executive in confidence. Executive represents that he has held all such information confidential and will continue to do so. 
 B. Except in the performance of services on behalf of the Company and its affiliates, Executive shall not, directly or indirectly
for any reason whatsoever, disclose or use any such Confidential Material, unless 1) such Confidential Material ceases (through no fault of Executive’s) to be confidential because it has become part of the public domain or 2) he is otherwise
obligated to disclose such information by the lawful order of any competent jurisdiction. All records, files, drawings, documents, equipment and other tangible items, wherever located, relating in any way to the Confidential Material or otherwise to
the business of the Company or any of its affiliates, which Executive prepares, uses or encounters, shall be and remain the sole and exclusive property of the appropriate entity or entities and shall be included in the Confidential Material. Upon
the Separation Date, or whenever requested by the Company, Executive shall promptly deliver to the Company any and all of the Confidential Material, not 

  

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previously delivered to the Company, that may be or at any previous time has been in Executive’s possession or under Executive’s control.

 IX. Non-Compete. Executive hereby acknowledges and agrees in consideration for the payments and other benefits set forth in
this Separation Agreement, for the period commencing on the date hereof and ending on the first anniversary of the Separation Date, without the prior written consent of the Company, the Executive shall not, directly or indirectly, either as
principal, manager, agent, consultant, officer, director, stockholder, partner, member, investor, lender or employee or in any other capacity, carry on, be engaged in or have any financial interest in any business within the chemicals industry,
including, without limitation, any business that is in material competition with the business of the Company and/or its affiliates. For purposes hereof, a business shall be deemed to be in competition with the Company if it is significantly involved
in the rendering of any service significantly purchased, sold, dealt in or rendered by the Company and/or its affiliates. As used in the preceding sentence, the term “significantly” shall be deemed to refer to activities generating
gross annual sales of at least $25 million. Nothing in this shall be construed so as to preclude Executive from investing in any publicly held company provided Executive’s beneficial ownership of any class of such company’s securities does
not exceed 5% of the outstanding securities of such class. Executive understands that the foregoing restrictions may limit his ability to earn a livelihood in a business that competes with the business of the Company and/or its affiliates, but he
nevertheless believes that he has received and will receive sufficient consideration and other benefits as an employee of the Company and/or its affiliates and as otherwise provided hereunder to clearly justify such restrictions which, in any event
(given his education, skills and ability), Executive does not believe would prevent him from otherwise earning a living. Executive has carefully considered the nature and extent of the restrictions placed upon him by this Separation Agreement, and
hereby acknowledges and agrees that the same are reasonable in time and territory and do not confer a benefit upon the Company or any of its affiliates disproportionate to the detriment which the same may cause Executive. 
 X. Soliciting Customers. Executive promises and agrees that he will not, for the period commencing on the date hereof and ending on the
first anniversary of the Separation Date, influence or attempt to influence any customers of the Company or any of its affiliates, either directly or indirectly, to divert their business in any product line sold, dealt in or rendered by the Company
and/or its affiliates (or any product line similar to such product line) to any individual, partnership, firm, corporation or other entity which is currently or at that particular point in time in competition with (or has plans to engage in business
which would be in competition with) the business of the Company or any of its affiliates. Executive acknowledges that during his employment with the Company, he was given access to Confidential Material of the Company and its affiliates, and that
such Confidential Material constitutes the Company’s trade secrets. Executive acknowledges and agrees that this restriction is necessary in order for the Company to preserve and protect its legitimate proprietary interest in its Confidential
Material and trade secrets. 
 XI. Soliciting Employees. Executive promises and agrees that he will not, for the period
commencing on the date hereof and ending on the first anniversary of the Separation Date, directly or indirectly solicit any employee of the Company or any of its affiliates who 

  

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earned annually $25,000 or more as an employee of such entity during the last six months of his or her own employment to work for any business, individual,
partnership, firm, or corporation. 
 XII. Cooperation. Executive agrees to cooperate with the Company in any actual or
threatened litigation that arises against or is brought by the Company or any of its affiliates at any time after the Separation Date, including but not limited to participating in interviews with the Company’s counsel to assist the Company in
any such litigation. To the extent such services are requested by the Company, the Company shall reimburse Executive for his reasonable out-of-pocket expenses incurred in providing such services. 
 XIII. Miscellaneous. 
 A. Successors. 
 1. This Separation Agreement is personal to Executive and shall not,
without the prior written consent of the Company, be assignable by Executive. 
 2. This Separation Agreement shall inure to the benefit of
and be binding upon the Company and its respective successors and assigns and any such successor or assignee shall be deemed substituted for the Company under the terms of this Separation Agreement for all purposes. As used herein,
“successor” and “assignee” shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires the ownership of the Company or to which
the Company assigns this Separation Agreement by operation of law or otherwise. 
 B. Waiver. No waiver
of any breach of any term or provision of this Separation Agreement shall be construed to be, nor shall be, a waiver of any other breach of this Separation Agreement. No waiver shall be binding unless in writing and signed by the party waiving the
breach. 
 C. Modification. This Separation Agreement may not be amended or modified other than by a
written agreement executed by Executive and the Chief Executive Officer of the Company or his designee. 
 D.
Complete Agreement. This Separation Agreement constitutes and contains the entire agreement and final understanding concerning Executive’s relationship with the Company and its affiliates and the other subject matters addressed
herein between the parties, and supersedes and replaces all prior negotiations and all agreements proposed or otherwise, whether written or oral, concerning the subject matters hereof. Any representation, promise or agreement not specifically
included in this Separation Agreement shall not be binding upon or enforceable against either party. This Separation Agreement constitutes an integrated agreement. Notwithstanding the preceding provisions of this Section XIII.D: (1) the rights
of the Company or any of its affiliates pursuant to any confidentiality, non-compete, trade secret, inventions, securities transfer, investor rights, or similar agreement shall continue in effect and are not integrated into this Agreement;
(2) the provisions of any applicable benefit plan and/or award agreement shall continue in effect and are not integrated into this Agreement to the extent necessary to effect the payments and benefits specifically provided for in Section II.B;
and (3)

  

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the Investor Rights Agreement to which Executive is a party as well as the Operating Agreement of Hexion LLC shall continue in effect and are not integrated
into this Agreement. 
 E. Severability. If any provision of this Separation Agreement or the application
thereof is held invalid, the invalidity shall not affect other provisions or applications of the Separation Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of this Separation
Agreement are declared to be severable. 
 F. Choice of Law. This Separation Agreement shall be deemed to
have been executed and delivered within the State of Texas, and the rights and obligations of the parties hereunder shall be construed and enforced in accordance with, and governed by, the laws of the State of Texas without regard to principles of
conflict of laws. 
 G. Cooperation in Drafting. Each party has cooperated in the drafting and
preparation of this Separation Agreement. Hence, in any construction to be made of this Separation Agreement, the same shall not be construed against any party on the basis that the party was the drafter. 
 H. Notices. Any notice provided for in this Separation Agreement must be in writing and must be either personally
delivered, transmitted via telecopier, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated or at such other
address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder and received when delivered personally, when received if
transmitted via telecopier, five days after deposit in the U.S. mail and one day after deposit with a reputable overnight courier service. 
 If to the Company, to: 
 Hexion Specialty Chemicals, Inc. 
 180 East Broad Street 
 Columbus, OH 43215

 Facsimile: (614) 225-2108 
 Attention: Craig Morrison President and CEO 
 with a copy (which shall not constitute notice) to: 
 Hexion LLC 
 c/o Apollo Management V, L.P.

 9 West 57th Street 
 New York, New York 10019 
 Facsimile: (212) 515-3288 
 Attention: Josh Harris 
 and 
  

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 O’Melveny & Myers LLP 
 Times Square Tower 
 7 Times Square

 New York, New York 10036 
 Facsimile: (212) 326-2061 
 Attention: John Scott, Esq. and Taurie Zeitzer, Esq. 
 If to Executive, to Executive’s address set forth on the signature page hereto. 
 I. Counterparts. This Separation Agreement may be executed in counterparts, and each counterpart, when executed,
shall have the efficacy of a signed original. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose. 
 J. Arbitration. Any dispute, claim or controversy arising out of or relating to this Separation Agreement, its enforcement or interpretation, or because of an alleged breach, default, or
misrepresentation in connection with any of its provisions, including the determination of the scope or applicability of this agreement to arbitrate, shall be submitted to final and binding arbitration in the State of Texas in accordance with Texas
law and the procedures of the American Arbitration Association. The determination of the arbitrators shall be conclusive and binding on the Company and Executive, and judgment may be entered on the arbitrators’ award in any court having
jurisdiction. 
 K. Advice of Counsel. In entering this Separation Agreement, the parties
represent that they have relied upon the advice of their attorneys, who are attorneys of their own choice, and that the terms of this Separation Agreement have been completely read and explained to them by their attorneys, and that those terms are
fully understood and voluntarily accepted by them. 
 L. Supplementary Documents. All parties agree to
cooperate fully and to execute any and all supplementary documents and to take all additional actions that may be necessary or appropriate to give full force to the basic terms and intent of this Separation Agreement and which are not inconsistent
with its terms. 
 M. Headings. The section headings contained in this Separation Agreement are
inserted for convenience only and shall not affect in any way the meaning or interpretation of this Separation Agreement. 
 N. Taxes. The Company has the right to withhold from any payment hereunder or under any other agreement between the Company and Executive the amount required by law to be withheld with respect to such payment or
other benefits provided to Executive. Other than as to such withholding right, Executive shall be solely responsible for any taxes due as a result of the payments and benefits received by Executive contemplated by this Separation Agreement.

 O. Indemnification. The Company agrees that (1) if Executive is made a party, or is
threatened to be made a party, to any threatened or actual action, suit or proceeding whether civil, criminal, administrative, investigative, appellate or other (a “Proceeding”) by reason of the fact that he is or was a director,
officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee, agent, manager, consultant or 

  

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representative of another person or (2) if any claim, demand, request, investigation, controversy, threat, discovery request or request for testimony or
information (a “Claim”) is made, or threatened to be made, that arises out of or relates to Executive’s service in any of the foregoing capacities, whether arising before or after the Separation Date, then Executive shall be
indemnified and held harmless by the Company to the fullest extent legally permitted or authorized by the Company’s articles of incorporation or bylaws or, if greater, by the laws of the State of New Jersey, against any and all costs, expenses,
liabilities and losses (including, without limitation, attorney’s fees, judgments, interest, expenses of investigating, defending or obtaining indemnity with respect to any Proceeding or Claim, penalties, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) incurred or suffered by Executive in connection therewith. Neither the failure of the Company to have made a determination in connection with any request for indemnification that Executive has satisfied
any applicable standard of conduct, nor a determination by the Company that Executive has not met any applicable standard of conduct, shall create a presumption that Executive has not met an applicable standard of conduct. 
 [Remainder of page intentionally left blank.] 
  

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 I have read the foregoing Separation Agreement and I accept and agree to the provisions it contains and
hereby execute it voluntarily with full understanding of its consequences. 
 EXECUTED this 31st day of May, 2006, at Harris County, Texas.

  

	
	“Executive”
	
	 /s/ Layle K. Smith

	 Layle K. Smith

	
	 1894 Seacrest Drive

	
	 Lummi Island, WA 98262-8624

 EXECUTED this 31st day of May, 2006, at Franklin County, Ohio. 
  

			
	“Company”
	
	 Hexion Specialty Chemicals, Inc.,
 a New Jersey corporation

	
	 /s/ Craig O. Morrison

	 By:
	 	 Craig O. Morrison

	 Its:
	 	 CEO

  

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 EXHIBIT A 
 RESIGNATION LETTER 
 Date: June __, 2006 
  

	To:	The Board of Directors of Hexion LLC. and Hexion Specialty Chemicals, Inc. 

  

	From:	Layle K. Smith 

 I hereby resign as an employee, officer,
director, member, manager and in any other capacity with Hexion Specialty Chemicals, Inc., and with each of its respective affiliates, effective as of the date first set forth above. 
  

	
	
	   
	 Layle K. Smith

  

 A-1 

 EXHIBIT B 
 ENDORSEMENT 
 I, Layle K. Smith, hereby acknowledge that I was given 21 days to consider the
foregoing Employment, Employment Separation and General Release Agreement and voluntarily chose to sign the Employment, Employment Separation and General Release Agreement prior to the expiration of the 21-day period. 
 I declare under penalty of perjury under the laws of the state of Texas, that the foregoing is true and correct. 
 EXECUTED this 31st day of May 2006, at Harris County, Texas. 
  

	
	
	   
	 Layle K. Smith

  

 B-1Exhibit 4.1

EVIN #____

THIS NOTE, AND THE SHARES OF COMMON STOCK NOR ANY OTHER SECURITIES ISSUABLE UPON
CONVERSION OF THIS NOTE (COLLECTIVELY THE "SECURITIES") HAVE BEEN OR WILL BE
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY
OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT
THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS
LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE AND ANY
SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE.

                              ENERGY VENTURE, INC.
                         10% Convertible Promissory Note

$____________                                                 ________ ___, 2006

FOR VALUE RECEIVED, Energy Venture, Inc., a Delaware corporation (the
"Company"), promises to pay to the order of _________________ (the "Payee" or
the "Holder of this Note") or registered assigns on August 31, 2007 (the
"Maturity Date"), the principal amount of _____________ Dollars ($________) (the
"Principal Amount") in such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public and
private debts. Interest on this Note shall accrue on the Principal Amount
outstanding from time to time at a rate of ten percent (10%) per annum. Payment
of accrued interest shall be made either in immediately available funds
quarterly in arrears or in shares of the Company's common stock upon maturity of
this Note, depending on the whether the Holder of this Note elected to receive
interest in the form of cash or shares of the Company's common stock (the
"Common Stock"). Such election must be made by the Holder of this Note at the
time of subscription for this Note.

      This Note and other identical Notes in the aggregate principal amount of
up to $1,500,000, or $1,800,000 if the Company elects to exercise its right to
accept over subscriptions (collectively, the "Notes") are issued to the Payee
and other purchasers of Notes in connection with a private placement of Notes by
the Company (the "Financing"), pursuant to the Company's Confidential Memorandum
(the "Memorandum"), and a Subscription Agreement between the Company and the
Payee (the "Subscription Agreement"), a copy of which documents are available
for inspection at the Company's principal office.

      Notwithstanding any provision to the contrary contained herein, this Note
is subject and entitled to certain terms, conditions, covenants and agreements
contained in the Subscription Agreement. Any transferee of this Note, by its
acceptance hereof, assumes the obligations of the Payee in the Subscription
Agreement with respect to the conditions and procedures for transfer of this
Note. Reference to the Subscription Agreement shall in no way impair the
absolute and unconditional obligation of the Company to pay both principal
hereof and interest hereon as provided herein.

                                       1
<PAGE>

      Each payment by the Company pursuant to this Note shall be made without
set-off or counterclaim and in immediately available funds.

      The Company (i) waives presentment, demand, protest or notice of any kind
in connection with this Note and (ii) agrees, in the event of an Event of
Default, to pay to the holder of this Note, on demand, all costs and expenses
(including reasonable legal fees and expenses) incurred in connection with the
enforcement and collection of this Note.

      1. Prepayment. This Note and all other Notes may be prepaid in whole but
not in part prior to the Maturity Date if the Company sends written notice of
such prepayment to each Holder at least twenty-five (25) days prior to the
prepayment date and each Noteholder during such 25-day period shall have the
right to convert the Note into Conversion Shares as provided herein.

      2. Events of Default.

            A. The term "Event of Default" shall mean any of the events set
forth in this Section:

                  (i) Non-Payment of Obligations. The Company shall default in
      the payment of the principal or accrued interest on this Note when and as
      the same shall become due and payable, whether by acceleration or
      otherwise;

                  (ii) Bankruptcy, Insolvency, etc. The Company shall: (a)
      generally fail or be unable to pay, or admit in writing its inability to
      pay, its debts as they become due; (b) apply for, consent to, or acquiesce
      in, the appointment of a trustee, receiver, sequestrator or other
      custodian for the Company or any of its property, or make a general
      assignment for the benefit of creditors; (c) in the absence of such
      application, consent or acquiesce in, permit or suffer to exist the
      appointment of a trustee, receiver, sequestrator or other custodian for
      the Company or for any part of its property, and such trustee, receiver,
      sequestrator or other custodian shall not be discharged within thirty (30)
      days; (d) permit or suffer to exist the commencement of any bankruptcy,
      reorganization, debt arrangement or other case or proceeding under any
      bankruptcy or insolvency law, or any dissolution, winding up or
      liquidation proceeding, in respect of the Company, and, if such case or
      proceeding is not commenced by the Company or converted to a voluntary
      case, such case or proceeding shall be consented to or acquiesced in by
      the Company or shall result in the entry of an order for relief or shall
      remain for sixty (60) days undismissed; or (e) take any corporate action
      authorizing, or in furtherance of, any of the foregoing; and

                  (iii) Subscription Agreement; Etc. The Company shall violate
      any material representation, warranty, covenant, agreement or obligation
      set forth in the Subscription Agreement, and such default shall continue
      after ten (10) days after notice thereof to the Company.

            B. Action if Event of Default. If any Event of Default shall occur
for any reason, whether voluntary or involuntary, and be continuing, the Payee

                                       2
<PAGE>

may, upon notice to the Company, (i) allow the Note to remain outstanding and
continue to accrue interest at the rate provided for above or (ii) declare all
or any portion of the outstanding Principal Amount of the Note together with
interest accrued thereon to be due and payable and any or all other obligations
hereunder to be due and payable, whereupon the full unpaid Principal Amount (or
any portion thereof so demanded), such accrued interest and any and all other
such obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand, or presentment.

            C. Remedies. In case any Event of Default shall occur and be
continuing, the Payee may proceed to protect and enforce its rights by a
proceeding seeking the specific performance of any covenant or agreement
contained in this Note or in aid of the exercise of any power granted in this
Note or may proceed to enforce the payment of this Note or to enforce any other
legal or equitable rights as such holder shall determine.

      3. Conversion.

            A. Holder's Conversion Right. At any time and from time to time, the
Holder of this Note shall be entitled to convert any portion of the Principal
Amount and/or accrued but unpaid interest into fully paid and non-assessable
shares of Common Stock, in accordance with this Section 3(A) and Sections 3(B)
and Section 3(C). The Company shall not issue any fraction of a share of Common
Stock upon any conversion. All shares of Common Stock (including fractions
thereof) issuable upon conversion of the Notes by a holder thereof shall be
aggregated for purposes of determining whether the conversion would result in
the issuance of a fraction of a share of Common Stock. If, after the
aforementioned aggregation, the issuance would result in the issuance of a
fraction of a share of Common Stock, the Company shall, in lieu of issuing such
fractional share, pay to the holder the portion of the Note not so converted
into shares of Common Stock.

            B. Conversion Price. Subject to anti-dilution adjustment as provided
in Section 3D, the "Conversion Price" of the outstanding Principal Amount of the
Notes shall be equal to fifty cents ($0.50). The Principal Amount and interest
thereon so elected by the Holder to be converted (the "Converted Amount"), will
convert into that number of shares of Common Stock determined by dividing the
Converted Amount by the Conversion Price, as adjusted at the time of conversion.

            C. Mechanics of Conversion. To convert the Note into shares of
Common Stock on any date (a "Conversion Date"), the holder thereof shall (i)
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 (ii) surrender to a common carrier for delivery to the Company within three
(3) business days of such date the original Note being converted (or an
indemnification undertaking with respect to such Note in the case of their loss,
theft or destruction); provided, however, notwithstanding anything to the
contrary provided herein or elsewhere, the Holder in its sole option and in its
sole discretion shall have the absolute right to instead of submitting the

                                       3
<PAGE>

original Note to the Company as provided above upon a conversion of the Note,
not submit the Note to the Company upon a conversion and have the Company reduce
the Principal Amount being converted on the Company's books and records in the
amount as expressly provided in the Conversion Notice, which shall have the same
effect as if the Holder submitted the original Note. On or before the third
(3rd) business day following the date of receipt of a Conversion Notice and the
original Note, or an affidavit that the Holder lost its original Note (the
"Share Delivery Date"), the Company shall 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 the Principal Amount represented by the Note(s)
submitted for conversion pursuant to this Section is greater than the Converted
Amount, and the Holder has elected to submit the original Note to the Company
then the Company shall, as soon as practicable and in no event later than three
(3) business days after receipt of the Notes (the "Note Delivery Date") and at
its own expense, issue and deliver to the holder a new Note representing the
Principal Amount not converted. The person or persons entitled to receive the
shares of Common Stock issuable upon a conversion of Note shall be treated for
all purposes as the record holder or holders of such shares of Common Stock on
the Conversion Date.

            D. Anti-Dilution Provisions. The Conversion Price in effect at any
time and the number and kind of securities issuable upon conversion of the Notes
shall be subject to adjustment from time to time upon the happening of certain
events as follows:

                  (i) Adjustment for Stock Splits and Combinations. If the
      Company at any time or from time to time on or after the date of any
      issuance of any Notes (the "Original Issuance Date"), effects a
      subdivision of the outstanding Common Stock, the Conversion Price then in
      effect immediately before that subdivision shall be proportionately
      decreased, and conversely, if the Company at any time or from time to time
      on or after the Original Issuance Date combines the outstanding shares of
      Common Stock into a smaller number of shares, the Conversion Price then in
      effect immediately before the combination shall be proportionately
      increased. Any adjustment under this subsection (i) shall become effective
      at the close of business on the date the subdivision or combination
      becomes effective.

                  (ii) Adjustment for Certain Dividends and Distributions. If
      the Company at any time or from time to time on or after the Original
      Issuance Date makes, or fixes a record date for the determination of
      holders of Common Stock entitled to receive, a dividend or other
      distribution payable in additional shares of Common Stock, then and in
      each such event the Conversion Price then in effect shall be decreased as
      of the time of such issuance or, in the event such record date is fixed,
      as of the close of business on such record date, by multiplying the
      Conversion Price then in effect by a fraction (1) the numerator of which
      is the total number of shares of Common Stock issued and outstanding
      immediately prior to the time of such issuance or the close of business on
      such record date and (2) the denominator of which shall be the total
      number of shares of Common Stock issued and outstanding immediately prior
      to the time of such issuance or the close of business on such record date
      plus the number of shares of Common Stock issuable in payment of such
      dividend or distribution; provided, however, that if such record date is
      fixed and such dividend is not fully paid or if such

                                       4
<PAGE>

      distribution is not fully made on the date fixed therefor, the Conversion
      Price shall be recomputed accordingly as of the close of business on such
      record date and thereafter the Conversion Price shall be adjusted pursuant
      to this subsection (ii) as of the time of actual payment of such dividends
      or distributions.

                  (iii) Adjustments for Other Dividends and Distributions. In
      the event the Company at any time or from time to time on or after the
      Original Issuance Date makes, or fixes a record date for the determination
      of holders of Common Stock entitled to receive, a dividend or other
      distribution payable in securities of the Company other than shares of
      Common Stock, then and in each such event provision shall be made so that
      the holders of the Notes shall receive upon conversion thereof, in
      addition to the number of shares of Common Stock receivable thereupon, the
      amount of securities of the Company which they would have received had
      their Notes been converted into Common Stock on the date of such event and
      had they thereafter, during the period from the date of such event to and
      including the conversion date, retained such securities receivable by them
      as aforesaid during such period, subject to all other adjustments called
      for during such period under this subsection (e) with respect to the
      rights of the holders of the Notes

                  (iv) Adjustment for Reclassification, Exchange and
      Substitution. In the event that at any time or from time to time on or
      after the Original Issuance Date, the Common Stock issuable upon the
      conversion of the Notes is changed into the same or a different number of
      shares of any class or classes of stock, whether by recapitalization,
      reclassification or otherwise (other than a subdivision or combination of
      shares or stock dividend or a reorganization, merger, consolidation or
      sale of assets, provided for elsewhere in this subsection (D)), then and
      in any such event each holder of the Notes shall have the right thereafter
      to convert such stock into the kind and amount of stock and other
      securities and property receivable upon such recapitalization,
      reclassification or other change, by holders of the maximum number of
      shares of Common Stock into which Notes could have been converted
      immediately prior to such recapitalization, reclassification or change,
      all subject to further adjustment as provided herein.

                  (v) Reorganizations, Mergers, Consolidations or Sales of
      Assets. If at any time or from time to time on or after the Original
      Issuance Date there is a capital reorganization of the Common Stock (other
      than a recapitalization, subdivision, combination, reclassification or
      exchange of shares provided for elsewhere in this subsection (D)) or a
      merger or consolidation of the Company with or into another corporation,
      or the sale of all or substantially all of the Company's properties and
      assets to any other person, then, as a part of such reorganization,
      merger, consolidation or sale, provision shall be made so that the holders
      of the Notes shall thereafter be entitled to receive upon conversion of
      the Notes the number of shares of stock or other securities or property to
      which a holder of the number of shares of Common Stock deliverable upon
      conversion would have been entitled on such capital reorganization,
      merger, consolidation, or sale. In any such case, appropriate adjustment
      shall be made in the application of the provisions of this subsection (D)
      with respect to the rights of the holders of the Notes after the
      reorganization, merger, consolidation or sale to the end that the
      provisions of this subsection (D) (including adjustment of the Conversion
      Price then in effect and the number of shares issuable upon conversion of
      the Notes) shall be applicable after that event and be as nearly
      equivalent as may be practicable.

                                       5
<PAGE>

                  (vi) No Adjustments in Certain Circumstances. No adjustment in
      the Conversion Price shall be required unless such adjustment would
      require an increase or decrease of at least one ($0.01) cent in such
      price; provided, however, that any adjustments which by reason of this
      subsection (vii) are not required to be made shall be carried forward and
      taken into account in any subsequent adjustment required to be made
      hereunder. All calculations under this Section shall be made to the
      nearest cent or to the nearest one-hundredth of a share, as the case may
      be.

            E. No Impairment. The Company will not directly and/or indirectly
through any reorganization, transfer of assets, consolidation, merger,
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 to be observed
or performed hereunder by the Company but will at all times in good faith assist
in the carrying out of all the provisions of this Section 6 and in the taking of
all such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Notes against impairment.

            F. Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section, the
Company at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the holder of this Note(s) a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Company
shall, upon the written request at any time of the holder of this Note(s),
furnish or cause to be furnished to such holder a like certificate setting forth
(i) such adjustments and readjustments, (ii) Conversion Price at the time in
effect, and (iii) the number of shares of Common Stock and the amount, if any,
of other property which at the time would be received upon the conversion of the
this Note(s).

            G. Stock Purchase Rights. If at any time or from time to time, the
Company grants or issues to the record holders of the Common Stock any options,
warrants or rights (collectively, "Stock Purchase Rights") entitling any holder
of Common Stock to purchase Common Stock or any security convertible into or
exchangeable for Common Stock or to purchase any other stock or securities of
the Company, the holder of this Note(s) shall be entitled to acquire, upon the
terms applicable to such Stock Purchase Rights, the aggregate Stock Purchase
Rights which the holder of this Note(s) could have acquired if it had been the
record holder of the maximum number of shares of Common Stock issuable upon
conversion of this Note(s) on both (x) the record date for such grant or
issuance of such Stock Purchase Rights, and (y) the date of the grant or
issuance of such Stock Purchase Rights.

            H. Stamp Taxes, etc. The Company shall pay all documentary, stamp or
other transactional taxes attributable to the issuance or delivery of shares of
Common Stock, upon conversion of this Note; provided, however, that the Company
shall not be required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate for such shares
in a name other than that of the holder of this Note, and the Company shall not

                                       6
<PAGE>

be required to issue or deliver any such certificate unless and until the person
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the Company's satisfaction that such tax
has been paid.

            I. Validity of Stock. All shares of Common Stock which may be issued
upon conversion of this Note will, upon issuance by the Company in accordance
with the terms of this Note, be validly issued, free from all taxes and liens
with respect to the issuance thereof (other than those created by the holders),
free from all pre-emptive or similar rights and fully paid and non-assessable.

            J. Reservation of Shares. The Company covenants and agrees that it
will at all times have authorized and reserved, solely for the purpose of such
possible conversion, out of its authorized but unissued shares, a sufficient
number of shares of its Common Stock to provide for the exercise in full of the
conversion rights contained in this Note.

            K. Notice of Certain Transactions. In case at any time:

                  (i) The Company shall declare any dividend upon, or other
      distribution in respect of, its Common Stock;

                  (ii) The Company shall offer for subscription to the holders
      of its Common Stock any additional shares of stock of any class or any
      other securities convertible into shares of stock or any rights to
      subscribe thereto;

                  (iii) There shall be any capital reorganization or
      reclassification of the capital stock of the Company, or a sale of all or
      substantially all of the assets of the Company, or a consolidation or
      merger of the Company with another corporation (other than a merger with a
      subsidiary in which merger the Company is the continuing corporation and
      which does not result in any reclassification); or

                  (iv) There shall be a voluntary or involuntary dissolution;
      liquidation or winding-up of the Company;

      then, in any one or more of said cases, the Company shall cause to be
      mailed to the Payee at the earliest practicable time (and, in any event
      not less than twenty (20) days before any record date or other date set
      for definitive action), written notice of the date on which the books of
      the Company shall close or a record shall be taken for such dividend,
      distribution or subscription rights or such reorganization,
      reclassification, sale, consolidation, merger or dissolution, liquidation
      or winding-up shall take place, as the case may be. Such notice shall also
      set forth such facts as shall indicate the effect of such action (to the
      extent such effect may be known at the date of such notice) on the
      Conversion Price and the kind and amount of the shares of stock and other
      securities and property deliverable upon the conversion of this Note. Such
      notice shall also specify the date as of which the holders of the Common
      Stock of record shall participate in said dividend, distribution or
      subscription rights or shall be entitled to exchange their Common Stock
      for securities or other property deliverable upon such reorganization,
      reclassification, sale, consolidation, merger or dissolution, liquidation
      or winding-up, as the case may be.

                                       7
<PAGE>

      Nothing herein shall be construed as the consent of the Holder of this
Note to any action otherwise prohibited by the terms of this Note or as a waiver
of any such prohibition.

      4. Waivers.

            A. No failure or delay on the part of the Payee in exercising any
power or right under this Note shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. No notice
to or demand on the Company in any case shall entitle it to any notice or demand
in similar or other circumstances. No waiver or approval by the Payee shall,
except as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.

            B. To the extent that the Company makes a payment or payments to the
Payee, and such payment or payments or any part thereof are subsequently for any
reason invalidated, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied, and all rights
and remedies therefor, shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.

      5. Miscellaneous.

            A. Parties in Interest. All covenants, agreements and undertakings
in this Note binding upon the Company or the Payee shall bind and inure to the
benefit of the successors and permitted assigns of the Company and the Payee,
respectively, whether so expressed or not.

            B. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York without regard to
the conflicts of laws principles thereof. The parties hereto hereby irrevocably
agree that any suit or proceeding arising directly and/or indirectly pursuant to
or under this Agreement, shall be brought solely in a federal or state court
located in the City, County and State of New York. By its execution hereof, the
parties hereby covenant and irrevocably submit to the in personam jurisdiction
of the federal and state courts located in the City, County and State of New
York and agree that any process in any such action may be served upon any of
them personally, or by certified mail or registered mail upon them or their
agent, return receipt requested, with the same full force and effect as if
personally served upon them in New York City. The parties hereto expressly and
irrevocably waive any claim that any such jurisdiction is not a convenient forum
for any such suit or proceeding and any defense or lack of in personam
jurisdiction with respect thereto. In the event of any such action or
proceeding, the party prevailing therein shall be entitled to payment from the
other party hereto of its reasonable counsel fees and disbursements.

                                       8
<PAGE>

            C. Notices. All notices required or permitted under this Note shall
be given in accordance with the Subscription Agreement.

            D. Waiver of Jury Trial. THE PAYEE AND THE COMPANY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED AND
DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE PAYEE OR THE COMPANY.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE'S PURCHASING THIS NOTE.

      IN WITNESS WHEREOF, this Note has been executed and delivered on the date
specified above by the duly authorized representative of the Company.

                                            ENERGY VENTURE, INC.

                                            By:_________________________________
                                            Name:
                                            Title:

                                       9
<PAGE>

                                    EXHIBIT I

                              ENERGY VENTURE, INC.
                                CONVERSION NOTICE

      Reference is made to the 10% Convertible Promissory Note (the "Note") of
Energy Venture, Inc. (the "Company"). In accordance with and pursuant to the
Note, the undersigned hereby elects to convert such Principal Amount (as defined
in the Note) all accrued but unpaid interest indicated below into shares of
common stock (the "Common Stock"), of the Company, as of the date specified
below.

      Date of Conversion:_______________________________________________________

      Principal Amount to be converted:_________________________________________

      Accrued but unpaid interest to be converted:______________________________

      Note to be Converted: EVIN Note No.:______________________________________

      Number of Shares of Common Stock to be issued on conversion of Principal
      Amount and/or all accrued but unpaid interest:____________________________

      Conversion Price Used:____________________________________________________

      Please deliver the Common Stock into which the Principal Amount is being
converted to the following address:

                        ________________________________

                        ________________________________

                        ________________________________

                        ________________________________

                                       10

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