Document:

Exhibit
10.1

    

    EXCHANGE
AGREEMENT

     

    This
Exchange Agreement (this “Agreement”) is
effective as of March 19, 2010, among Solar Enertech Corp. a Delaware
corporation (the “Company”), and
Capital Ventures International (the “Holder”).

     

    WHEREAS, the Holder is the
holder of that certain Series B Convertible Note, dated as of March 2007 (the
“Original
Note”); and

     

     WHEREAS, subject to the
terms and conditions set forth in this Agreement and pursuant to Sections
3(a)(9) and 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), the
Company desires to exchange with the Holder, and the Holder, desires to exchange
with the Company, the Original Note for shares of Common Stock and a new Note,
as more fully described in this Agreement.

     

    NOW, THEREFORE, in
consideration of the mutual covenants contained in this Agreement, and for other
good and valuable consideration the receipt and adequacy of which are hereby
acknowledged, the Company and the Holder agree as follows (with capitalized
terms used here in and not otherwise defined having the meanings set forth in
the Original Warrant):

     

    1.          
 Exchange of the Original
Note.  On the terms and
subject to the conditions set forth herein, effective as of March 19, 2010 (the
“Closing
Date”), the Holder hereby sells, assigns, delivers and transfers to the
Company all of its right, title and interest in and to the Original Note in
exchange for (a) (i) 666,666 shares of the Company’s Common Stock, plus (ii)
283,498 shares of the Company’s Common Stock, which represent such number of
shares in respect of accrued but unpaid interest under the Original Note as of
the Closing Date, at an issuance price equal to 90% of the 5-day Weighted
Average Price (as defined in the Original Note) of the Common Stock ending on
the day prior to the Closing Date (collectively, the “Exchange Shares”) and
(b) a new Series B-1 Convertible Note in the form attached hereto as Exhibit A (the “Exchange
Note”).

    

    2.           
Deliveries.   On
the date one Business Day following the date hereof, the Company shall deliver
to the Holder (a) the Exchange Shares by electronic delivery at the applicable
balance account at the Depositary Trust Company (“DTC”) in accordance
with the instructions set forth on Schedule A hereto and
(b) a duly executed copy of the Exchange Note.

    

    3.           
Representations and
Warranties

    

    (a)           Mutual Representations and
Warranties. Each
party hereto hereby makes the following representations and warranties to the
other party hereto:

    

    (i)           It
is duly organized and validly existing, in good standing under the laws of its
jurisdiction of incorporation or organization.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (ii)           (A)
It has full power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby, and (B) the person who has executed this
Agreement on its behalf is duly authorized to do so and thereby bind the party
on whose behalf he or she is purporting to act.

    

    (iii)           This
Agreement is its valid and binding agreement, enforceable against it in
accordance with its terms.

    

    (iv)           Neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will violate, result in a breach of any of the
terms or provisions of, constitute a default (or any event that, with the giving
of notice or the passage of time or both would constitute a default) under,
accelerate any obligations under, or conflict with, (i) its charter, articles or
certificate of incorporation, partnership agreement or bylaws (or other
organizational documents), if applicable, or any agreement, indenture or other
instrument to which it is a party or by which it or its properties are bound,
(ii) any judgment, decree, order or award or any court, governmental body or
arbitrator to which it is subject or (iii) any law, rule or regulation
applicable to it.

    

    (b)           Representations, Warranties
and Covenants of the Company.  The Company hereby represents,
warrants and covenants to the Holder that:

    

    (i)           The
Exchange Shares and the Exchange Note are duly authorized and, upon issuance in
accordance with the terms hereof, shall be validly issued and free from all
taxes, liens and charges with respect to the issue thereof and the Exchange
Shares shall be fully paid and nonassessable with the Holder being entitled to
all rights accorded to a holder of Common Stock.  As of the Closing
Date, the Company shall have duly authorized and reserved for issuance a number
of shares of Common Stock which equals the number of shares of Common Stock
issuable upon conversion of the Exchange Note (the “Note
Shares”).  Upon conversion in accordance with the Exchange
Note, the Note Shares will be validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common
Stock.  The offer and issuance by the Company of the Exchange Shares
and Exchange Note is exempt from registration under the Securities
Act.

    

    (ii)           
The Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency or any
regulatory or self-regulatory agency or any other person, including, without
limitation, any other security holders of the Company, in order for it to
execute, deliver or perform any of its obligations under or contemplated by this
Agreement.  All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date
hereof.  Except with respect to its share price and stockholders
equity and except as has been disclosed in writing to the Holder, the Company is
not in violation of the listing requirements of the Principal Market and has no
knowledge of any facts that would reasonably lead to delisting or suspension of
the Common Stock in the foreseeable future.

    
      
         

      

      
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    (iii)           The
exchange of the Original Note for the Exchange Shares and Exchange Note is being
consummated pursuant to Sections 3(a)(9) and Rule 149 of the Securities
Act.  The Company has not engaged in any general solicitation or
engaged or agreed to compensate any broker or agent in connection with the
transactions contemplated by this Agreement.   None of the
Company, its subsidiaries, any of their affiliates, and any person acting on
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would require registration of any of the Exchange Shares under the Securities
Act or cause this Exchange to be integrated with prior offerings by the Company
for purposes of Securities Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the
Company are listed or designated.  None of the Company, its
subsidiaries, their affiliates and any person acting on their behalf will take
any action or steps referred to in the preceding sentence that would require
registration of any of the Exchange Shares under the Securities Act or cause
this Exchange to be integrated with other offerings.

    

    (iv)           The
Company is current in its filings of all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as
amended.  Assuming the accuracy of Holder’s representations and
warranties in Section 3(c), to the Company’s knowledge, upon issuance, the
Exchange Shares and the Note Shares will be eligible for resale by the Holder to
the public under Rule 144 without registration under the Securities Act;
provided, however, that if the Company becomes subject to the restrictions under
Rule 144(i), the Company shall use its reasonable best efforts to provide for
the resale by the holder to the public under Section 4(1) of the Securities
Act.

    

    (v)             The
Company confirms that neither it nor any other person acting on its behalf has
provided the Holder or their agent or counsel with any information that
constitutes or could reasonably be expected to constitute material, nonpublic
information other than the terms of this Exchange which will be publicly
disclosed pursuant to Section 4(a).    The Company
understands and confirms that the Holder will rely on the foregoing
representations in effecting transactions in securities of the
Company.

    

    (vi)           The
Company and its counsel will concurrently with the execution of this Agreement
deliver to its transfer agent any required legal opinions or documentation
necessary to effect the delivery of the Exchange Shares to the Holder as
required hereby and such Exchange Shares shall be delivered to the Holder no
later than by the third (3rd) trading date from the date hereof.  The
Company shall be responsible for the fees of its transfer agent and all DTC fees
associated with the issuance of the Exchange Shares
hereunder.

    
      
         

      

      
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    (c)           Representations, Warranties
and Covenants of the Holder. The Holder hereby represents and warrants to
the Company that the Holder: (i) is the sole legal and  beneficial
owner of the Original Note and the Original Warrant free and clear of any liens,
encumbrances, pledges, security interests or other restrictions or claims of
third parties, (ii) is an “accredited investor” (as defined in Regulation D
under the Act) and is acquiring the Exchange Shares for its own account and not
with a view to any distribution thereof except in compliance with the Securities
Act; (iii) is not an "affiliate" of the Company (as defined in Rule 144), (iv)
has made all investigations that it deems necessary or desirable in connection
with the transactions contemplated by this Agreement and has had an opportunity
to ask questions of and receive answers from the Company, (v) has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of its investment in the Exchange Shares and the Exchange
Note and (vi) has owned the Original Note beneficially and of record since the
date of its original acquisition from the Company.  The Holder’s legal
residence is as specified in Section 5(b).

    

    (d)           
All representations, warranties
and agreements of each party hereto shall survive the
Closing.

    

    4.           Covenants

     

    (a)           Disclosure of Transactions
and Other Material Information.  The Company shall, on or
before 8:30 a.m., New York City Time, on the first Business Day after the
date of this Agreement, file a Current Report on form 8-K with the SEC
disclosing all material terms of the transactions contemplated
hereby.  Upon the filing of the Form 8-K, the Holder shall not be in
possession of any material, nonpublic information received from the Company, any
of its Subsidiaries or any of its respective officers, directors, employees or
agents, that is not disclosed in the Form 8-K.  The Company shall not,
and shall cause each of its Subsidiaries and each of their respective officers,
directors, employees and agents, not to, provide the Holder with any material,
nonpublic information regarding the Company or any of its Subsidiaries from and
after the filing of the Form 8-K without the express written consent of the
Holder.  The Company shall not disclose the name of the Holder in any
filing, announcement, release or otherwise, unless such disclosure is required
by law or regulation; provided, however, that Holder understands and consents to
the filing of this Agreement and the Exchange Note (and the disclosure of
Holder’s name in this Agreement and the Exchange Note) in the Company’s filing
on Form 8-K contemplated by this paragraph.

     

    (b)           Reverse Stock
Split.   The Company shall not effect a reverse stock
split of one or more classes of the Company's Common Stock for at least 90 days
following the date hereof.

     

    5.     
      Miscellaneous

     

    (a)           
Further
Assurances. Each party hereto shall promptly execute and deliver such
further agreements and instruments, and take such further actions, as the other
party may reasonably request in order to carry out the purpose and intent of
this Agreement.

     

    (b)           Notices. All notices,
requests, demands and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by facsimile transmission (with
subsequent letter confirmation by mail) or two days after being mailed by
certified or registered mail, postage prepaid, return receipt requested, to the
parties, their successors in interest or their assignees at the following
addresses, or at such other addresses as the parties may designate by written
notice in the manner aforesaid:

     

    
      
         

      

      
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    If to the
Holder:

    

    Capital
Ventures International

    c/o
Heights Capital Management, Inc.

    101
California Street, Suite 3250

    San
Francisco, CA 94111

    Attn:  Martin
Kobinger

    Fax:  415-403-6525

    

    If to the
Company:

    

    Solar
Enertech Corp.

    444
Castro St., Suite 707

    Mountain
View, CA94041

    Attention:
Leo Shi Young

    Fax:
(815-336-8068

    

    With a
copy to

    

    DLA Piper
LLP (US)

    2000
University Ave

    East Palo
Alto, CA  94303

    Attn:  Eric
Wang, Esq.

    Fax:  (650)
687-1205

    

    (c)           Most Favored
Nation.  In the event that the Company shall pay or issue to
any other former holder of any of the other Original Notes (or any of the Series
A Convertible Notes or Series C Convertible issued at or around the same time as
the Original Note (the “Other Securities”)) or any
of the Warrants issued in connection with the Original Notes or the Other
Securities (the “Original Warrants”)
in consideration of the exchange, amendment or redemption of any thereof on
superior terms as that offered to the Holder pursuant to this Agreement (“Alternative
Consideration”), the Company shall notify the Holder of such occurrence
and for a period of 30 days following receipt of such notice, the Holder shall
have the right to exchange the Original Note and its Warrants, as applicable,
for the Alternative Consideration.

    

    (d)           Securities Purchase
Agreement; Acknowledgment of Warrant Amendment; Warrant Limitations on
Exercise. The references to the “Series B Notes” and the covenants
contained in Section 4(c), (e), (f), (h), (k), (l), (m), (n) and (o) and Section
9(k), (n) and (o) of the Securities Purchase Agreement, dated March 7, 2007,
relating to the issuance of the Original Note shall be deemed to include the
Exchange Note. Holder hereby acknowledges and agrees to the effectiveness of the
amendment effected on January 7, 2010 of the Holder’s  Series B
Warrant to Purchase Common Stock dated March 7, 2007.  Notwithstanding
the foregoing, the Company and Holder hereby separately agree to be bound by
Section 1(f)(1) from the Original Warrant with respect to exercisability of
Holder’s  Series B Warrant to Purchase Common Stock.

    
      
         

      

      
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    (e)           Issuance of Common Stock
upon Exercise of Exchange Note or Original Warrant.  Assuming
that the Holder has been the sole record and beneficial owner of the Original
Note and Original Warrant from its issuance until the closing of the
transactions contemplated hereby on the Closing Date and is the sole record and
beneficial owner of the Exchange Note and Original Warrant until the applicable
date of exercise and there is no intervening change in applicable law, upon
conversion of the Exchange Note or cashless exercise of the Original Warrant,
the Company will cause the applicable shares of Common Stock to be issued to the
Holder without restrictive legend and will not implement any similar impediment
to immediate transfer.

    

    (f)           Governing Law; Jurisdiction;
Jury Trial.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.  Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper.  Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such 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 manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

    

    (g)           Counterparts. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, but all of which shall constitute one and the same
instrument.

    

    (h)           Complete Agreement.
This Agreement is an integrated agreement containing the entire agreement
between the parties hereto with respect to the subject matter hereof and shall
supersede all previous, and all contemporaneous oral or written negotiations,
commitments or understandings.

    
      
         

      

      
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    (i)           Expenses. Except as
specifically set forth herein, each party hereto shall bear its own costs and
expenses, including, without limitation, attorneys’ fees, incurred in connection
with this Agreement and the transactions contemplated hereby.

     

    
      
        
          
            
              
                
                  	
                          SOLAR
      ENERTECH CORP.

                        	 
	 
      	 
      	 
	
                          By:

                        	
                          /s/ Leo Young

                        	 
	
                          Name:  

                        	
                          Leo Young

                        	 
	
                          Title:

                        	
                          Chairman and Chief Executive
      Officer

                        	 
	 
      	 
      	 
	
                          CAPITAL
      VENTURES INTERNATIONAL

                        	 
	 
      	 
      	 
	
                          By:
      Heights Capital Management, Inc., its authorized signatory

                        	 
	 
      	 
	
                          /s/ Martin Kobinger

                        	 
	
                          By:
      Martin Kobinger, Investment Manager

                        	 

                

              

            

          

        

      

    

     

    
      
         

      

      
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    Schedule
A

    

    DTC
INSTRUCTIONS

    

    Address:
  Capital Ventures International c/o Heights Capital Management
Inc.

                   
101 California St.

               
    Suite 3250

               
    San Francisco, CA 94111

    Broker:
Merrill Lynch

    Broker
Account #: 2US01600

    DTC# 5198
(fop)

    

    Contact
at Merrill Lynch:

    Krista
Santangelo-Gough

    (212)
670-3447

    Krista_Santangelo@ml.com

    
      
         

      

      
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    Exhibit
A

    

    Exchange
Note

    
      
         

      

      
        9Exhibit
10.2

    

    SERIES
B-1 CONVERTIBLE NOTE

     

    NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.  ANY TRANSFEREE OF
THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS
3(d)(iii) AND 17(a) HEREOF.  THE PRINCIPAL AMOUNT REPRESENTED BY THIS
NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE
LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(d)(iii)
OF THIS NOTE.

     

    Solar
Enertech Corp.

     

    Series
B-1 Convertible Note

     

    
      
        	
                Issuance
      Date:  March 19, 2010

              	
                Original
      Principal Amount: U.S.
$1,815,261.00

              

      

    

    

    FOR VALUE RECEIVED, Solar
Enertech Corp., a Delaware corporation (the "Company"), hereby promises to
pay to Capital Ventures International or its registered assigns ("Holder") the amount set out
above as the Original Principal Amount (as reduced pursuant to the terms hereof
pursuant to conversion or otherwise, the "Principal") when due, whether
upon the Maturity Date (as defined below), acceleration, redemption or otherwise
(in each case in accordance with the terms hereof) and to pay interest ("Interest") on any outstanding
Principal at the Interest Rate as required by Section 2 hereof.  This
Series B-1 Convertible Note (including all Convertible Notes issued in exchange,
transfer or replacement hereof, this "Note") is issued pursuant to
the Exchange Agreement dated of even date herewith (the “Exchange
Agreement”  Certain capitalized terms used herein are defined
in Section 27.  Capitalized terms used but not defined herein shall
have the meanings set forth in the Exchange Agreement.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (1) 
PAYMENTS OF
PRINCIPAL.  On the Maturity Date, the Company shall pay to the
Holder an amount in cash representing all outstanding Principal, accrued and
unpaid Interest, if any, and accrued and unpaid Late Charges, if any, on such
Principal and Interest.  The "Maturity Date" shall be March 19, 2012,
as may be extended at the option of the Holder (i) in the event that, and for so
long as, a Trigger Event (as defined in Section 4(a)) shall have occurred and be
continuing on the Maturity Date (as may be extended pursuant to this Section 1)
or any event that shall have occurred and be continuing that with the passage of
time and the failure to cure would result in a Trigger Event, and (ii) through
the date that is ten (10) Business Days after the consummation of a Change of
Control in the event that a Change of Control is publicly announced or a Change
of Control Notice (as defined in Section 5(b)) is delivered prior to the
Maturity Date.  Other than as specifically permitted by the Note, the
Company may not prepay any portion of the outstanding Principal, accrued and
unpaid Interest or accrued and unpaid Late Charges, if any, on Principal and
Interest.

     

    (2) 
INTEREST; INTEREST
RATE.  During the term of this Note, Interest shall accrue on
outstanding Principal at an interest rate equal to six percent (6%) per annum
(the “Interest Rate”)
commencing on the Issuance Date.  Interest shall be calculated on the
basis of a 365-day year and the actual number of days elapsed, to the extent
permitted by applicable law.  Any Interest that shall accrue hereunder
shall be payable quarterly in arrears on each January 1, April 1, July 1 and
October 1 (each an “Interest
Payment Due Date”), beginning on the first such date after the Issuance
Date hereof, in cash or shares of Common Stock (“Interest Shares”) at the
option of the Company. If the Company elects to pay any Interest due in shares
of the Company’s common stock, par value $0.001 per share (the “Common Stock”): (i) the
issuance price of the Interest Shares will be 90% of the 5-day average Closing
Price of the Common Stock ending on the day prior to the Interest payment due
date, and (ii) a Trigger Event shall not
have occurred.  Interest hereunder will be paid to the Holder or its
assignee in whose name this Note is registered on the records of the Company
regarding registration and transfers of Notes.

     

    (3) 
CONVERSION OF
NOTES.  This Note shall be convertible by the Holder into
shares of the Company's Common Stock on the terms and conditions set forth in
this Section 3.

     

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

     

    (b)           [INTENTIONALLY
OMITTED].

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (c)          Conversion
Rate.  The number of shares of Common Stock issuable upon
conversion of any Conversion Amount shall be determined by dividing (x) such
Conversion Amount by (y) the then applicable Conversion Price (the "Conversion
Rate").

     

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

     

    (ii)                              "Conversion Price" means, as of
any Conversion Date (as defined below) or other date of determination, an amount
equal to $0.15, subject to adjustment as provided herein.

     

    (d)          Mechanics of
Conversion.

     

    (i)                              Optional
Conversion.  To convert any Conversion Amount into shares of
Common Stock on any date (a "Conversion Date"), the Holder
shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior
to 11:59 p.m., New York Time, on such date, a copy of an executed notice of
conversion in the form attached hereto as Exhibit I (the "Conversion Notice") to the
Company and (B) if required by Section 3(d)(iii), surrender this Note to a
common carrier for delivery to the Company as soon as practicable on or
following such date (or an indemnification undertaking with respect to this Note
in the case of its loss, theft or destruction).  On or before the
second (2nd)
Trading Day following the date of receipt of a Conversion Notice, the Company
shall transmit by facsimile a confirmation of receipt of such Conversion Notice
to the Holder and the Company's transfer agent (the "Transfer
Agent").  If this Note is physically surrendered for conversion
as required by Section 3(d)(iii) and the outstanding Principal of this Note is
greater than the Principal portion of the Conversion Amount being converted,
then the Company shall as soon as practicable and in no event later than three
(3) Business Days after receipt of this Note and at its own expense, issue and
deliver to the holder a new Note (in accordance with Section 17(d)) representing
the outstanding Principal not converted.  The Person or Persons
entitled to receive the shares of Common Stock issuable upon a conversion of
this Note shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on the Conversion Date.

     

    (ii)                              Delivery of
Certificates. On or before the third (3rd) Trading Day following the date
of receipt of a Conversion Notice (the "Share Delivery Date") or request for
removal of restrictive legends on the shares of Common Stock issuable in
connection therewith, the Company shall (X) provided that the Transfer Agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer Program, credit such aggregate number of shares of Common Stock to
which the Holder shall be entitled to the Holder's or its designee's balance
account with DTC through its Deposit Withdrawal Agent Commission system or (Y)
if the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver to the address as specified in the
Conversion Notice, a certificate, registered in the name of the Holder or its
designee, for the number of shares of Common Stock to which the Holder shall be
entitled.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (A)        If
such delivery is made more than two (2) additional Trading Days after conversion
or request for removal of legend (a “Conversion Failure”), as the
case may be, then the Company will compensate the Holder at a rate of $100 per
day for each of the first ten (10) Trading Days and $200 per day thereafter for
each $10,000 of securities.  In such event, after the first such ten
(10) Trading Days noted above, the Holder will also have the right to rescind
its Conversion Notice for the Notes.

     

    (B)        If
the certificates have not been delivered by the fifth (5th)
Trading Day after conversion or request for removal of legend, as the case may
be, and the Holder has purchased (in an open market transaction or otherwise)
Common Stock to deliver in satisfaction of a sale by the Holder of Common Stock
issuable upon such conversion that the Holder anticipated receiving from the
Company (a "Buy-In"),
then the Company shall, within three (3) Trading Days after the Holder's request
and in the Holder's discretion, either (i) pay cash to the Holder in an amount
equal to the Holder's total purchase price (including brokerage commissions and
other out-of-pocket expenses, if any) for the shares of Common Stock so
purchased (the "Buy-In
Price"), at which point the Company's obligation to deliver such
certificate (and to issue such Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates
representing such Common Stock and pay cash to the Holder in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Bid Price on the Conversion
Date.

     

    (iii)                              Registration;
Book-Entry.  The Company shall maintain a register (the "Register") for the recordation
of the name and address of the holder of the Note and the principal amount of
the Notes held by such holders (the "Registered
Notes").  The entries in the Register shall be conclusive and
binding for all purposes absent manifest error.  The Company and the
holders of the Notes shall treat each Person whose name is recorded in the
Register as the owner of a Note for all purposes, including, without limitation,
the right to receive payments of principal and interest hereunder,
notwithstanding notice to the contrary.  A Registered Note may be
assigned or sold in whole or in part only by registration of such assignment or
sale on the Register.  Upon its receipt of a request to assign or sell
all or part of any Registered Note by a Holder, the Company shall record the
information contained therein in the Register and issue one or more new
Registered Notes in the same aggregate principal amount as the principal amount
of the surrendered Registered Note to the designated assignee or transferee
pursuant to Section 17.  Notwithstanding anything to the contrary set
forth herein, upon conversion of any portion of this Note in accordance with the
terms hereof, the Holder shall not be required to physically surrender this Note
to the Company unless (A) the full Conversion Amount represented by this Note is
being converted or (B) the Holder has provided the Company with prior written
notice (which notice may be included in a Conversion Notice) requesting
reissuance of this Note upon physical surrender of this Note.  The
Holder and the Company shall maintain records showing the Principal, Interest
and Late Charges, if any, converted and the dates of such conversions or shall
use such other method, reasonably satisfactory to the Holder and the Company, so
as not to require physical surrender of this Note upon
conversion.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (iv)                              Pro Rata Conversion;
Disputes.  In the event that the Company receives a Conversion
Notice from more than one holder of Notes for the same Conversion Date and the
Company can convert some, but not all, of such portions of the Notes submitted
for conversion, the Company shall convert from each holder of Notes electing to
have Notes converted on such date a pro rata amount of such holder's portion of
its Notes submitted for conversion based on the principal amount of Notes
submitted for conversion on such date by such holder relative to the aggregate
principal amount of all Notes submitted for conversion on such
date.  In the event of a dispute as to the number of shares of Common
Stock issuable to the Holder in connection with a conversion of this Note, the
Company shall issue to the Holder the number of shares of Common Stock not in
dispute and resolve such dispute in accordance with Section 22.

     

    (e)           Limitations on Conversions.

     

    (1) Beneficial
Ownership.  The Company shall not effect the conversion of this
Note or issue Interest Shares, and the Holder shall not have the right to
convert this Note or receive Interest Shares, to the extent that after giving
effect to such conversion or issuance, such Person (together with such Person's
affiliates) would beneficially own in excess of 4.99% (the "Maximum Percentage I") of the
shares of Common Stock outstanding immediately after giving effect to such
conversion or issuance, as the case may be; provided, however, that to the
extent Interest Shares are restricted from being issued pursuant to the
foregoing, such Interest Shares shall be held by the Company on behalf of Holder
until such time as issuable without restriction and in no event shall the
Company be required to pay Interest in cash and in no event shall such failure
to issue Interest Shares constitute an Event of Default or other violation of
any of the provisions of this Note.  For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially owned by
such Person and its affiliates shall include the number of shares of Common
Stock issuable upon conversion of this Note with respect to which the
determination of such sentence is being made, but shall exclude shares of Common
Stock which would be issuable upon (i) conversion of the remaining, unconverted
portion of this Note beneficially owned by such Person and its affiliates and
(ii) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company beneficially owned by such Person and its
affiliates (including, without limitation, any convertible notes or convertible
preferred stock or warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein.  Except as set forth in
the preceding sentence, for purposes of this paragraph, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended.  For purposes of this Note, in determining
the number of outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares of Common Stock as reflected in (1) the Company's
most recent Form 10-K, Form 10-KSB, Form 10-Q, Form 10-QSB, Current Report on
Form 8-K or other public filing with the Securities and Exchange Commission, as
the case may be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding.  For any reason at any time, upon
the written or oral request of the Holder, the Company shall within one Business
Day confirm orally and in writing to the Holder the number of shares of Common
Stock then outstanding.  In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including the Note and the Warrants, by
the Holder and its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.  By written notice to
the Company, the Holder may from time to time increase or decrease the Maximum
Percentage I to any other percentage in excess of 4.99% specified in such
notice; provided that (i) any such increase will not be effective until the
sixty-first (61st) day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of
Warrants.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (2) Principal Market
Regulation.  The Company shall not be obligated to issue any
shares of Common Stock upon conversion of this Note or exercise of the Warrants
and no Buyer shall be entitled to receive any shares of Common Stock if the
issuance of such shares of Common Stock would exceed that number of shares of
Common Stock which the Company may issue upon exercise or conversion, as
applicable, of the Warrants and Notes or otherwise without breaching the
Company's obligations under the rules or regulations of any applicable Eligible
Market (the "Exchange
Cap"), except that such limitation shall not apply in the event that the
Company (A) obtains the approval of its stockholders as required by the
applicable rules of the Eligible Market for issuances of shares of Common Stock
in excess of such amount or (B) obtains a written opinion from outside counsel
to the Company that such approval is not required, which opinion shall be
reasonably satisfactory to the Holder.  In the event that the Company
is prohibited from issuing any Conversion Shares for which a Conversion Notice
has been received as a result of the operation of this Section 3(e)(2), the
Company shall pay cash in exchange for cancellation of such Conversion Shares,
at a price per Conversion Share equal to the difference between the Closing
Price and the Conversion Price as of the date of the attempted
conversion.

     

    (4) 
RIGHTS UPON TRIGGER
EVENT.

     

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

     

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

     

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

     

    (iii)                            the
Company's failure to pay to the Holder any amount of Principal (including,
without limitation, any redemption payments), Interest, Late Charges or other
amounts when and as due under this Note except, in the case of a failure to pay
any Interest and Late Charges when and as due, in which case only if such
failure continues for a period of at least five (5) Business
Days;

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (iv)                            A)
any payment default or other default occurs under any Indebtedness of the
Company or any of its Subsidiaries that results in a redemption of or
acceleration prior to maturity of $100,000 or more of such Indebtedness in the
aggregate, or (B) any material default occurs under any Indebtedness of the
Company or any of its Subsidiaries having an aggregate outstanding balance in
excess of $100,000 and such default continues uncured for more than ten (10)
Business Days, other than, in each case (A) or (B) above, or a default with
respect to any Other Notes;

     

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

     

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

     

    (vii)                           a
final judgment or judgments for the payment of money aggregating in excess of
$250,000 are rendered against the Company or any of its Subsidiaries and which
judgments are not, within sixty (60) days after the entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within sixty (60)
days after the expiration of such stay; provided, however, that any judgment
which is covered by insurance or an indemnity from a credit worthy party shall
not be included in calculating the $250,000 amount set forth above so long as
the Company provides the Holder a written statement from such insurer or
indemnity provider (which written statement shall be reasonably satisfactory to
the Holder) to the effect that such judgment is covered by insurance or an
indemnity and the Company will receive the proceeds of such insurance or
indemnity within thirty (30) days of the issuance of such judgment;
and

     

    (viii)                          the
Company breaches any representation, warranty, covenant or other term or
condition of this Note or the Exchange Agreement, except, in the case of a
breach of a covenant which is curable, only if such breach continues for a
period of at least ten (10) consecutive Business Days.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (b)           Redemption
Right.  Upon the occurrence of a Trigger Event with respect to
this Note, the Company shall within (1) Business Day deliver written notice
thereof via facsimile or e-mail and overnight courier (a "Trigger Event Notice") to the
Holder.  At any time after the earlier of the Holder's receipt of a
Trigger Event Notice and the Holder becoming aware of a Trigger Event, the
Holder may require the Company to redeem all or any portion of this Note by
delivering written notice thereof (the "Trigger Event Redemption
Notice") to the Company, which Trigger Event Redemption Notice shall
indicate the portion of this Note the Holder is electing to have
redeemed.  Each portion of this Note subject to redemption by the
Company pursuant to this Section 4(b) shall be redeemed by the Company at
an amount equal to any accrued and unpaid liquidated damages, plus
the greater of (A)
the Conversion Amount to be redeemed multiplied by the Redemption
Premium, or (B) the
Conversion Amount to be redeemed multiplied by the quotient of (i) the Closing
Sale Price at the time of the Triggering Event (or at the time of payment of the
redemption price, if greater) divided by (ii) the Conversion
Price (the "Trigger
Event Redemption
Price"), provided, however, (B) shall be applicable only in the event that a Trigger Event of the type specified in Section
4(a)(i), (ii) or (iii) hereof has occurred and remains uncured or the Conversion Shares otherwise could not
be received or sold by the Holder without
any resale restrictions.  Redemptions
required by this Section 4(b) shall be made in accordance with the provisions of
Section 11.  To the extent redemptions required by this Section 4(b)
are deemed or determined by a court of competent jurisdiction to be prepayments
of the Note by the Company, such redemptions shall be deemed to be voluntary
prepayments.  The parties hereto agree that in the event of the
Company's redemption of any portion of the Note under this Section 4(b), the
Holder's damages would be uncertain and difficult to estimate because of the
parties' inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for the
Holder.  Accordingly, any Triggering Event Redemption Price due under
this Section 4(b) is intended by the parties to be, and shall be deemed, a
reasonable estimate of the Holder's actual loss of its investment opportunity
and not as a penalty.

     

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

     

    (a)           Assumption.  The
Company shall not enter into or be party to a Fundamental Transaction unless (i)
the Successor Entity (to the extent such Successor Entity is not the Company)
assumes in writing all of the obligations of the Company under this Note in
accordance with the provisions of this Section 5(a) pursuant to written
agreements in form and substance satisfactory to the Holder and approved by the
Holder prior to such Fundamental Transaction, including agreements to deliver to
the Holder in exchange for such Note a security of the Successor Entity
evidenced by a written instrument substantially similar in form and substance to
the Note, including, without limitation, having a principal amount and interest
rate equal to the principal amounts then outstanding and the interest rates of
the Note held by the Holder, having similar conversion rights as the Notes and
having similar ranking to the Notes, and satisfactory to the Holder and (ii) the
Successor Entity (including its Parent Entity) is a publicly traded corporation
whose common stock is quoted on or listed for trading on an Eligible Market or
on the Principal Market.  Upon the occurrence of any Fundamental
Transaction, the Successor Entity (to the extent such Successor Entity is not
the Company)  shall succeed to, and be substituted for (so that from
and after the date of such Fundamental Transaction, the provisions of this Note
referring to the "Company" shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Note with the same effect as if such
Successor Entity had been named as the Company herein.  Upon
consummation of the Fundamental Transaction, the Successor Entity (to the extent
such Successor Entity is not the Company) shall deliver to the Holder
confirmation that there shall be issued upon conversion or redemption of this
Note at any time after the consummation of the Fundamental Transaction, in lieu
of the shares of the Company's Common Stock (or other securities, cash, assets
or other property) issuable upon the conversion or redemption of the Notes prior
to such Fundamental Transaction, such shares of the publicly traded common stock
(or their equivalent) of the Successor Entity (including its Parent Entity), as
adjusted in accordance with the provisions of this Note.  The
provisions of this Section shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
on the conversion or redemption of this Note.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)           Redemption Right on Change
of Control.  No sooner than fifteen (15) days nor later than
ten (10) days prior to the consummation of a Change of Control, but not prior to
the public announcement of such Change of Control, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a
"Change of
Control Notice").  At any
time during the period beginning on the date of the Holder's receipt of a Change
of Control Notice and ending twenty (20) Trading Days after the consummation of
such Change of Control, the Holder may require the Company to redeem all or any
portion of this Note by delivering written notice thereof ("Change of Control Redemption
Notice") to the Company, which Change of Control Redemption Notice shall
indicate the Conversion Amount the Holder is electing to have
redeemed.  The portion of this Note subject to redemption pursuant to
this Section 5 shall be redeemed by the Company in cash for an amount equal to
any accrued and unpaid liquidated damages, plus the greater of (i) the product
of (x) the Conversion Amount being redeemed and (y) the quotient determined by
dividing (A) the greater of the Closing Sale Price of the Common Stock
immediately prior to the consummation of the Change of Control, the Closing Sale
Price immediately following the public announcement of such proposed Change of
Control and the Closing Sale Price of the Common Stock immediately prior to the
public announcement of such proposed Change of Control by (B) the Conversion
Price and (ii) 125% of the Conversion Amount being redeemed (the "Change of Control Redemption
Price").  Redemptions required by this Section 5 shall be made
in accordance with the provisions of Section 11 and shall have priority to
payments to stockholders in connection with a Change of Control.  To
the extent redemptions required by this Section 5(b) are deemed or determined by
a court of competent jurisdiction to be prepayments of the Note by the Company,
such redemptions shall be deemed to be voluntary
prepayments.  Notwithstanding anything to the contrary in this Section
5, until the Change of Control Redemption Price is paid in full, the Conversion
Amount submitted for redemption under this Section 5(b) may be converted, in
whole or in part, by the Holder into Common Stock pursuant to Section
3.  The parties hereto agree that in the event of the Company's
redemption of any portion of the Note under this Section 5(b), the Holder's
damages would be uncertain and difficult to estimate because of the parties'
inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for the
Holder.  Accordingly, any redemption premium due under this Section
5(b) is intended by the parties to be, and shall be deemed, a reasonable
estimate of the Holder's actual loss of its investment opportunity and not as a
penalty.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (c)            Redemption Right on
Subsequent
Financing.  In
the event that the Company or any of its Subsidiaries shall issue any of its or
its Subsidiaries' equity or equity equivalent securities for purposes of raising
capital, or commit to issue or sell the same in one or more series of related
transactions or financings, including without limitation any debt, preferred
stock or other instrument or security that is, at any time during its life and
under any circumstances, convertible into or exchangeable or exercisable for
shares of Common Stock, Options or Convertible Securities (any such offer, sale,
grant, disposition or announcement of such current or future committed financing
being referred to as a "Subsequent Financing"), the
Company shall deliver written notice thereof via facsimile and overnight courier
to the Holder (a "Subsequent
Financing Notice") of the consummation of Subsequent Financing, but not
prior to the public announcement of such Subsequent Financing.  The
Subsequent Financing Notice shall (i) identify and describe the securities
issued in the Subsequent Financing, (ii) describe the price and other terms upon
which they are to be issued, sold or exchanged, and the number or amount of the
securities to be issued, sold or exchanged and (iii) identify the persons
or entities to which or with which the securities are to be offered, issued,
sold or exchanged.  In the event of a Subsequent Financing, at any
time during the period beginning on the date of the Holder's receipt of a
Subsequent Financing Notice and ending thirty (30) days after the receipt of the
Subsequent Financing Notice, the Holder, at its option, may require the Company
to redeem any amount of this Note up to the Redemption Amount (as defined
below), plus all accrued and unpaid interest, by delivering written notice
thereof ("Subsequent Financing
Redemption Notice") to the Company, which Subsequent Financing Redemption
Notice shall indicate the Conversion Amount the Holder is electing to have
redeemed (the “Subsequent
Financing Redemption Amount”).  The
issuance of Options or the exercise of any Options issued to commercial banks or
similar financial institutions (but specifically excluding hedge funds, private
equity funds or similar non-traditional lenders) in connection with commercial
credit agreements or similar non-convertible debt lines of credit shall not be
deemed to be a Subsequent Financing, provided such issuances are on customary
terms and not intended to circumvent the provisions of this Section
5(c).

     

    (A) 
In the event that the Gross Proceeds (as defined below) of the Subsequent
Financing equals or exceeds $15,000,000 (a “Qualified Financing”), the
“Redemption Amount” shall equal 100% of the Principal Amount then
outstanding.  For purposes hereof, “Gross Proceeds” shall mean the
aggregate cash proceeds received or receivable by the Company in respect of one
or more series of related future transactions or financings for which the
Company is committed in connection with such Qualified Financing.

     

    (B) 
In the event that the Gross Proceeds of the Subsequent Financing is less than
$15,000,000, the Redemption Amount shall equal a pro-rated portion of the
Principal Amount equaling a ratio, the numerator of which is the amount of
proceeds raised by the Company in the Subsequent Financing and the denominator
which is $15,000,000.

     

    All
payments of the Redemption Amount shall be paid in cash.  All payments
of accrued but unpaid interest may, at the Company’s option, be payable in cash
or shares of Common Stock in accordance with the provisions and conditions of
Section 2 hereof.  Redemptions required by this Section 5 shall be
made in accordance with the provisions of Section 11.  To the extent
redemptions required by this Section 5(c) are deemed or determined by a court of
competent jurisdiction to be prepayments of the Note by the Company, such
redemptions shall be deemed to be voluntary
prepayments.  Notwithstanding anything to the contrary in this Section
5, until the Subsequent Financing Redemption Amount is paid in full, the
Conversion Amount submitted for redemption under this Section 5(c) may be
converted, in whole or in part, by the Holder into Common Stock pursuant to
Section 3.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

     

    (a)           Purchase
Rights.  If at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase
Rights"), then the Holder will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the number of shares of Common
Stock acquirable upon complete conversion of this Note (without taking into
account any limitations or restrictions on the convertibility of this Note)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights.

     

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

     

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

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (8) 
ADJUSTMENT UPON
ISSUANCE OF SHARES OF COMMON
STOCK.    Until the consummation by the Company of a
Qualified Financing, if the Company issues or sells, or in accordance with this
Section 8 is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by or
for the account of the Company, but excluding shares of Common Stock deemed to
have been issued by the Company in connection with any Excluded Securities) for
a consideration per share (the "New Issuance Price") less than
a price (the "Applicable
Price") equal to the Conversion Price in effect immediately prior to such
issue or sale or deemed issuance or sale (the foregoing a "Dilutive Issuance"), then
immediately after such Dilutive Issuance, the Conversion Price then in effect
shall be reduced to an amount equal to the New Issuance Price.  Upon
each such adjustment of the Conversion Price hereunder, the number of Conversion
Shares shall be adjusted to the number of shares of Common Stock determined by
multiplying the Conversion Price in effect immediately prior to such adjustment
by the number of Conversion Shares acquirable upon conversion of this Note
immediately prior to such adjustment and dividing the product thereof by the
Conversion Price resulting from such adjustment.  For purposes of
determining the adjusted Conversion Price under this Section 8, the following
shall be applicable:

     

    (a)           Issuance of
Options.  If the Company in any manner grants any Options and
the lowest price per share for which one share of Common Stock is issuable upon
the exercise of any such Option or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option is less than
the Applicable Price, then such share of Common Stock shall be deemed to
be outstanding and to have been issued and sold by the Company at the time
of the granting or sale of such Option for such price per share.  For
purposes of this Section 8(a), the "lowest price per share for which one share
of Common Stock is issuable upon exercise of such Options or upon conversion,
exercise or exchange of such Convertible Securities" shall be equal to the sum
of the lowest amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the granting or sale
of the Option, upon exercise of the Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such
Option.  No further adjustment of the Conversion Price or number of
Conversion Shares shall be made upon the actual issuance of such shares of
Common Stock or of such Convertible Securities upon the exercise of such Options
or upon the actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities.

     

    (b)           Issuance of Convertible
Securities.  If the Company in any manner issues or sells any
Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion, exercise or exchange thereof is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
the issuance or sale of such Convertible Securities for such price per
share.  For the purposes of this Section 8(b), the "lowest price
per share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the Convertible Security and
upon conversion, exercise or exchange of such Convertible
Security.  No further adjustment of the Conversion Price or number of
Conversion Shares shall be made upon the actual issuance of such shares of
Common Stock upon conversion, exercise or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustment of this Note has been or is to
be made pursuant to other provisions of this Section 8, no further adjustment of
the Conversion Price or number of Conversion Shares shall be made by reason of
such issue or sale.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (c)           Change in Option Price or
Rate of Conversion.  If the purchase price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at any time, the
Conversion Price and the number of Conversion Shares in effect at the time of
such increase or decrease shall be adjusted to the Conversion Price and the
number of Conversion Shares which would have been in effect at such time had
such Options or Convertible Securities provided for such increased or decreased
purchase price, additional consideration or increased or decreased conversion
rate, as the case may be, at the time initially granted, issued or
sold.  For purposes of this Section 8(c), if the terms of any Option
or Convertible Security that was outstanding as of the date of issuance of this
Note are increased or decreased in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the shares of
Common Stock deemed issuable upon exercise, conversion or exchange thereof shall
be deemed to have been issued as of the date of such increase or
decrease.  No adjustment pursuant to this Section 8 shall be made
if such adjustment would result in an increase of the Conversion Price then in
effect or a decrease in the number of Conversion Shares.

     

    (d)           Calculation of Consideration
Received.  In case any Option is issued in connection with the
issue or sale of other securities of the Company, together comprising one
integrated transaction, the Options will be deemed to have been issued for the
difference of (i) the aggregate fair market value of such Options and other
securities issued or sold in such integrated transaction, less (ii) the fair
market value of the securities other than such Option, issued or sold in such
transaction and the other securities issued or sold in such integrated
transaction will be deemed to have been issued or sold for the balance of the
consideration received by the Company.  If any shares of Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the net amount received by the Company therefor.  If any shares of
Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of such consideration received by the
Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Closing Price of such security on the date
of receipt.  If any shares of Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such shares of Common Stock, Options or Convertible Securities, as the case may
be.  The fair value of any consideration other than cash or securities
will be determined jointly by the Company and the Holder.  If such
parties are unable to reach agreement within ten (10) days after the occurrence
of an event requiring valuation (the "Valuation Event"), the fair
value of such consideration will be determined within five (5) Business Days
after the tenth day following the Valuation Event by an independent, reputable
appraiser jointly selected by the Company and the Holder.  The
determination of such appraiser shall be final and binding upon all parties
absent manifest error and the fees and expenses of such appraiser shall be borne
by the Company.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

     

    (9) 
NONCIRCUMVENTION.  The
Company hereby covenants and agrees that the Company will not, by amendment of
its Articles of Incorporation, Bylaws or through any reorganization, transfer of
assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale
of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Note, and will at all
times in good faith carry out all of the provisions of this Note and take all
action as may be required to protect the rights of the Holder of this
Note.

     

    (10)        RESERVATION OF AUTHORIZED
SHARES.

     

    (a)           Reservation.  So
long as any of the Notes are outstanding, the Company shall take all action
necessary to reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the Notes,
120% of the number of shares of Common Stock as shall from time to time be
necessary to effect the conversion of all of the Notes then outstanding;
provided that at no time shall the number of shares of Common Stock so reserved
be less than the number of shares required to be reserved by the previous
sentence (without regard to any limitations on conversions) (the "Required Reserve
Amount").

     

    (b)           Insufficient Authorized
Shares.  If at any time while any of the Notes remain
outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve for
issuance upon conversion of the Notes at least a number of shares of Common
Stock equal to the Required Reserve Amount (an "Authorized Share Failure"), then the
Company shall immediately take all action necessary to increase the Company's
authorized shares of Common Stock to an amount sufficient to allow the Company
to reserve the Required Reserve Amount for the Notes then
outstanding.  Without limiting the generality of the foregoing
sentence, as soon as practicable after the date of the occurrence of an
Authorized Share Failure, but in no event later than sixty (60) days after the
occurrence of such Authorized Share Failure, the Company shall hold a meeting of
its stockholders for the approval of an increase in the number of authorized
shares of Common Stock.  In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its best
efforts to solicit its stockholders' approval of such increase in authorized
shares of Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (11)       HOLDER'S
REDEMPTIONS.

     

    (a)           Mechanics.  The
Company shall deliver the applicable Trigger Event Redemption Price to the
Holder within five (5) Business Days after the Company's receipt of the Holder's
Trigger Event Redemption Notice.  If the Holder has submitted a Change
of Control Redemption Notice in accordance with Section 5(b) or a Subsequent
Financing Redemption Notice in accordance with Section 5(c), the Company shall
deliver the applicable Change of Control Redemption Price or Subsequent
Financing Redemption Amount to the Holder concurrently with the
consummation of such Change of Control or Subsequent Financing if such notice is
received prior to the consummation of such Change of Control or Subsequent
Financing, and within five (5) Business Days after the Company's receipt of such
notice otherwise.  In the event of a redemption of less than all of
the Conversion Amount of this Note, the Company shall promptly cause to be
issued and delivered to the Holder a new Note (in accordance with Section 17(d))
representing the outstanding Principal which has not been
redeemed.  In the event that the Company does not pay the applicable
Redemption Price to the Holder within the time period required, at any time
thereafter and until the Company pays such unpaid Redemption Price in full,
the Holder shall have the option, in lieu of redemption, to require the Company
to promptly return to the Holder all or any portion of this Note representing
the Conversion Amount that was submitted for redemption and for which the
applicable Redemption Price (together with any Late Charges thereon) has not
been paid.  Upon the Company's receipt of such notice, (x) the
Redemption Notice shall be null and void with respect to such Conversion Amount,
(y) the Company shall immediately return this Note, or issue a new Note (in
accordance with Section 17(d)) to the Holder representing such Conversion Amount
and (z) the Conversion Price of this Note or such new Notes shall be adjusted to
the lesser of (A) the Conversion Price as in effect on the date on which the
Redemption Notice is voided and (B) the lowest Closing Bid Price of the Common
Stock during the period beginning on and including the date on which the
Redemption Notice is delivered to the Company and ending on and including
the date on which the Redemption Notice is voided.  The Holder's
delivery of a notice voiding a Redemption Notice and exercise of its rights
following such notice shall not affect the Company's obligations to make any
payments of Late Charges which have accrued prior to the date of such notice
with respect to the Conversion Amount subject to such notice.

     

    (b)           [INTENTIONALLY
OMITTED]

     

    (12)       VOTING
RIGHTS.  The Holder shall have no voting rights as the holder
of this Note, except as required by law, and as expressly provided in this
Note.

     

    (13)       COVENANTS.

     

    (a)           Rank.      All
payments due under this Note (A) shall rank junior to any Indebtedness of the
Company specifically identified as senior to this Note (“Senior Debt”) and (B)
shall be parri passu to
all other Indebtedness of the Company and its Subsidiaries.  Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, in an assignment for the benefit of creditors or any marshaling of the
Company’s assets and liabilities, the holders of Senior Debt shall be
entitled to be paid in full of all obligations due
in respect of such Senior Debt out of the assets of the Company available
for distribution to its creditors before any payment shall be made to the Holder
under this Note.

     

    (b)           [INTENTIONALLY
OMITTED]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (c)           [INTENTIONALLY
OMITTED]

     

    (d)           [INTENTIONALLY
OMITTED]

     

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

     

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

     

    (15)       [INTENTIONALLY
OMITTED].

     

    (16)       TRANSFER.  This
Note may be offered, sold, assigned or transferred by the Holder without the
consent of the Company, subject to applicable securities laws.

     

    (17)       REISSUANCE OF THIS
NOTE.

     

    (a)           Transfer.  If
this Note is to be transferred, the Holder shall surrender this Note to the
Company, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Note (in accordance with Section 17(d)), registered as the
Holder may request, representing the outstanding Principal being transferred by
the Holder and, if less then the entire outstanding Principal is being
transferred, a new Note (in accordance with Section 17(d)) to the Holder
representing the outstanding Principal not being transferred.  The
Holder and any assignee, by acceptance of this Note, acknowledge and agree that,
by reason of the provisions of Section 3(d)(iii) following conversion or
redemption of any portion of this Note, the outstanding Principal represented by
this Note may be less than the Principal stated on the face of this
Note.

     

    (b)           Lost, Stolen or Mutilated
Note.  Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note (in accordance
with Section 17(d)) representing the outstanding Principal.

     

    (c)           Note Exchangeable for
Different Denominations.  This Note is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new
Note or Notes (in accordance with Section 17(d)) representing in the aggregate
the outstanding Principal of this Note, and each such new Note will represent
such portion of such outstanding Principal as is designated by the Holder
at the time of such surrender.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (d)           Issuance of New
Notes.  Whenever the Company is required to issue a new Note
pursuant to the terms of this Note, such new Note (i) shall be of like tenor
with this Note, (ii) shall represent, as indicated on the face of such new Note,
the Principal remaining outstanding (or in the case of a new Note being issued
pursuant to Section 17(a) or Section 17(c), the Principal designated by the
Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining
outstanding under this Note immediately prior to such issuance of new Notes),
(iii) shall have an issuance date, as indicated on the face of such new Note,
which is the same as the Issuance Date of this Note, (iv) shall have the same
rights and conditions as this Note, and (v) shall represent accrued and unpaid
Interest and Late Charges on the Principal and Interest of this Note, if any,
from the Issuance Date.

     

    (18)       REMEDIES, CHARACTERIZATIONS, OTHER
OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The remedies
provided in this Note shall be cumulative and in addition to all other remedies
available under this Note and the Exchange Agreement at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the Holder's right to pursue actual and consequential
damages for any failure by the Company to comply with the terms of this
Note.  Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the Holder and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof).  The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate.  The Company
therefore agrees that, in the event of any such breach or threatened
breach, the Holder shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being
required.

     

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

     

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

     

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

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

     

    (23)       NOTICES;
PAYMENTS.

     

    (a)           Notices.  Whenever
notice is required to be given under this Note, unless otherwise provided
herein, such notice shall be given in accordance with Section 5(b) of the
Exchange Agreement.  The Company shall provide the Holder with prompt
written notice of all actions taken pursuant to this Note, including in
reasonable detail a description of such action and the reason
therefore.  Without limiting the generality of the foregoing, the
Company will give written notice to the Holder (i) immediately upon any
adjustment of the Conversion Price, setting forth in reasonable detail, and
certifying, the calculation of such adjustment and (ii) at least twenty
(20) days prior to the date on which the Company closes its books or takes a
record (A) with respect to any dividend or distribution upon the Common Stock,
(B) with respect to any pro rata subscription offer to holders of Common
Stock or (C) for determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation, provided in each case that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to the Holder.

     

    (b)           Payments.  Whenever
any payment of cash is to be made by the Company to any Person pursuant to this
Note, such payment shall be made in lawful money of the United States of America
by a check drawn on the account of the Company and sent via overnight courier
service to such Person at such address as previously provided to the Company in
writing; provided that the Holder may elect to receive a payment of cash via
wire transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder's wire transfer
instructions.  Whenever any amount expressed to be due by the terms of
this Note is due on any day which is not a Business Day, the same shall instead
be due on the next succeeding day which is a Business Day and, in the case of
any Interest Date which is not the date on which this Note is paid in full, the
extension of the due date thereof shall not be taken into account for purposes
of determining the amount of Interest due on such date.  Any amount of
Principal or other amounts due under this Note which is not paid when due shall
result in a late charge being incurred and payable by the Company in an amount
equal to interest on such amount at the rate of eighteen percent (18.0%) per
annum from the date such amount was due until the same is paid in full
("Late
Charge").

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

    (b)           "Bloomberg" means Bloomberg
Financial Markets.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

     

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

     

    (e)           "Closing Price" means, for any
security as of any date, the last closing sale price for such security on the
Principal Market or, if the Principal Market begins to operate on an extended
hours basis and does not designate the closing sale price, then the last sale
price of such security prior to 4:00:00 p.m., New York Time, as reported by
Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing sale price of such
security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing sale price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing sale price is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the "pink sheets" by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.).  If the
Closing Price cannot be calculated for a security on a particular date on any of
the foregoing bases, the Closing Price of such security on such date shall be
the fair market value as mutually determined by the Company and the
Holder.  If the Company and the Holder are unable to agree upon the
fair market value of such security, then such dispute shall be resolved pursuant
to Section 22.  All such determinations to be appropriately adjusted
for any stock dividend, stock split, stock combination or other similar
transaction during the applicable calculation period.

     

    (f)           [INTENTIONALLY
OMITTED]

     

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

     

    (h)           [INTENTIONALLY
OMITTED]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

     

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

     

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

     

    (l)           "Fundamental Transaction" means
that the Company shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person or Persons, or (ii) sell, assign,
transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (iii) allow another
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than the 50% of the outstanding shares of Voting Stock (not
including any shares of Voting Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a stock purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than the 50% of the
outstanding shares of Voting Stock (not including any shares of Voting Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock purchase
agreement or other business combination), (v) reorganize, recapitalize or
reclassify its Common Stock or (vi) any "person" or "group" (as these terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act) other than
The Quercus Trust and its affiliates is or shall become the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
50% of the aggregate ordinary voting power represented by issued and outstanding
Common Stock; provided, however, that the exception for The Quercus Trust and
its affiliates under this clause (vi) shall not be deemed to apply to any
of the transactions contemplated by clauses (i), (ii), (iii) or (iv) of this
paragraph (l) between the Company and any portfolio company owned or controlled
by The Quercus Trust or its affiliates.

     

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

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

     

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

     

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

     

    (q)           [INTENTIONALLY
OMITTED]

     

    (r)           [INTENTIONALLY
OMITTED]

     

    (s)           "Person" means an individual or
legal entity, including but not limited to a corporation, a limited liability
company, a partnership, a joint venture, a trust, an unincorporated organization
and a government or any department or agency thereof.

     

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

     

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

     

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

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

     

    (x)           [INTENTIONALLY
OMITTED]

     

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

     

    (z)           [INTENTIONALLY
OMITTED]

     

    (aa)         [INTENTIONALLY
OMITTED]

     

    (bb)        [INTENTIONALLY
OMITTED]

     

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

     

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

     

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

     

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

     

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

     

    (hh)        [INTENTIONALLY
OMITTED]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

     

    [Signature
Page Follows]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

     

    
      
        	 
      	
                SOLAR
      ENERTECH CORP.

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/ Leo Shi Young

              
	 
      	 
      	
                Name:
      Leo Shi Young

              
	 
      	 
      	
                Title:
      Chairman and CEO

              

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
I

     

    SOLAR
ENERTECH CORP.

     

    CONVERSION
NOTICE

     

    Reference
is made to the Series B-1 Convertible Note (the “Series B Note") issued to the undersigned
by Solar Enertech Corp. (the "Company").  In
accordance with and pursuant to the Note, the undersigned hereby elects to
convert the Conversion Amount (as defined in the Note) of the Note indicated
below into shares of Common Stock par value $0.001 per share (the "Common Stock") of the Company,
as of the date specified below.

     

    
      
        	
                Date
      of Conversion:  

              	 
      

      

      

      
        	
                Aggregate
      Conversion Amount to be converted: 

              	 
      

      

      

      
        
          	
                  Please
      confirm the following
information: 

                

        

      

      

      
        	
                Conversion
      Price: 

              	 
      

      

      

      
        	
                Number
      of shares of Common Stock to be issued:  

              	 
      

      

      

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

              

      

      

      
        
          
            
              
                	
                        Issue to:  

                      	 
      
	 	 
	 
      	 
      
	 	 
	 
      	 
      

              

            

          

        

      

      

      
        	
                Facsimile Number: 

              	 
      

      

      

      
        	
                Authorization:

              	 
      

      

      

      
        	
                By:

              	 
      

      

      

      
        	
                Title:

              	 
      

      

      

      
        	
                Dated: 

              	 
      

      

      

      
        	
                Account
      Number: 

              	 
      
	
                  (if
      electronic book entry transfer)

              	 
      

      

      

      
        	
                Transaction
      Code Number: 

              	 
      
	
                  (if
      electronic book entry transfer)

              	 
      

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ACKNOWLEDGMENT

     

    The
Company hereby acknowledges this Conversion Notice and hereby directs
Continental Stock Transfer & Trust Company to issue the above indicated
number of shares of Common Stock in accordance with the Transfer Agent
Instructions dated __________ ___, 201_ from the Company and acknowledged and
agreed to by Continental Stock Transfer & Trust Company.

     

    
      
        
          
            	 
      	
                    SOLAR
      ENERTECH CORP.

                  
	 	 
	 
      	
                    By:

                  	  
      
	 
      	 
      	
                    Name:

                  
	 
      	 
      	
                    Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00170-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00170-of-00352.parquet"}]]