Document:

Exhibit
A

    

    OPTION
AGREEMENT

    

    THIS
OPTION AGREEMENT (this “Agreement”), dated
July 20, 2010, is entered into by and among Baja Aqua-Farms, S.A. de C.V. (the
“Company”),
Lions Gate Lighting Corp., a Nevada corporation (the “Optionee” or “LGLC”),
Corposa, S.A. de C.V. (“Corposa”), Holshyrna,
ehf (“Holshyrna”).  This
Option Agreement is entered into pursuant to a Stock Purchase Agreement dated
July 20, 2010 (the “Purchase Agreement”)
among the parties hereto and certain other parties listed on the signature page
thereof.  Capitalized terms not otherwise defined herein shall have
the meaning ascribed thereto in the Purchase Agreement.

    

    RECITALS

    

    Optionee
owns 296,367 shares of Common Stock representing 33% of the issued and
outstanding shares of Common Stock of the Company (the “Baja
Stock”).

    

    Optionee
owns 3,300 shares of Common Stock representing 33% of the issued and outstanding
shares of Common Stock of Oceanic (the “Oceanic
Stock”).

    

    Holshyrna
owns 6,700 shares of Common Stock representing 67% of the issued and outstanding
shares of Common Stock of Oceanic Enterprises, Inc, a corporation organized
under the laws of California (the “Holshyrna Oceanic
Stock”)

    

    The
Company hereby wishes to grant to the Optionee the right to purchase and acquire
from the Company 24,500,000 Series “B” shares of Common Stock to be issued by
the Company on or before October 1, 2010 (the “Company Option
Shares”), thereby making Optionee the sole shareholder of the Company; it
being understood that a third unrelated party holds and upon completion of the
transaction contemplated hereunder will continue to hold 200 Series “A” of
Common Stock shares, 16 Series “B” shares of Common Stock and 3,734 Series “C”
shares of Preferred Stock of the Company, representing in the aggregate 0.016%
of the issued and outstanding capital of the Company.

    

    At the
time of exercise of the Call Right, Corposa, and Holshyrna will be the
registered and beneficial owners of 594,338 and 3,199 shares of Common Stock in
the Company, respectively, which they wish to transfer to the Optionee (the
“Transferred
Shares”) simultaneously with the exercise of the Call Right (as
hereinafter defined) pursuant to the terms of one or more Ancillary Purchase
Agreements.

    

    Holshyrna
hereby wishes to grant to the Optionee the right to purchase from Holshyrna the
Holshyrna Oceanic Stock (the “Oceanic Option
Shares”, and together with the Company Options Shares, the “Option
Shares”).

     

    
      
         

      

      
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    WITNESSETH

    

    NOW,
THEREFORE, in consideration of the premises set forth above, the mutual promises
and covenants set forth herein and other good and valuable consideration, the
Parties agree as follows:

    

    1.           Option Exercise; Funding;
Consent.

    

    (a)         Commencing
on the date hereof and ending on September 15, 2010 at 5.00 p.m. PDT, subject to
the terms and conditions set forth in this Agreement, the Optionee shall have
the right (the “Call
Right”), but not the obligation, upon written notice to the Company and
Holshyrna (the “Call
Right Notice”), to cause the Company and Holshyrna to sell and/or issue
to Optionee the Option Shares for the aggregate Option Price
therefor.  As used in this Agreement, the term “Option Price” means
an amount equal to US$9,333,000.00 Dollars for the Company Option Shares and
US$667,000.00 Dollars for the Oceanic Option Shares.  The Option Price
shall be payable by the issuance to the Company of 10,000,000 (Ten Million)
shares of common stock of LGLC  (“Company-LGLC Common
Stock”) within fifteen days after the issuance of the Call Right
Notice.

    

    (b)         Each
of Corposa and Holshyrna in its capacity of principal shareholder of the Company
and Oceanic Enterprises, Inc. hereby consents to the transactions contemplated
under this Agreement and undertakes to take all necessary action and execute and
deliver all documents to enable LGLC to acquire the Option Shares upon the
exercise of the Call Right.

    

    2.           Transfer of
Transferred  Shares.   Simultaneously with the
exercise of the Call Right and as a condition to the payment of the Option
Price, each of Corposa and Holshyrna will transfer to LGLC all Transferred
Shares at a price of US$0.01 per share.

    

    3.           Representations and
Warranties of the Company.

    

    (a)         Corporate Organization,
Qualification and Power of the Company.  The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization.  The Company has all requisite
corporate power and authority to own, lease and use its assets and properties
and to conduct the business in which it is engaged and holds all authorizations,
licenses and permits necessary and required therefor.

    

    (b)         Corporate Power and
Authority.  The Company has full corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby.  The execution, delivery and performance of this Agreement,
including without limitation the issuance of the Option Shares, by the Company
has been duly authorized by all requisite corporate action, and all required
approvals of its stockholders in connection therewith have been
received.  This Agreement constitutes the valid and binding obligation
of each the Company, enforceable against it in accordance with its
terms.

     

    
      
         

      

      
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    (c)         No Conflict.  The
Company is not a party to, subject to or bound by any note, bond, mortgage,
indenture, deed of trust, agreement, lien, contract or other instrument or
obligation or any statute, law, rule, regulation, judgment, order, writ,
injunction, or decree of any court, administrative or regulatory body,
governmental agency, arbitrator, mediator or similar body, franchise or license,
which would (i) conflict with or be breached or violated or the obligations
thereunder accelerated or increased (whether or not with notice or lapse of time
or both) by the execution, delivery or performance by it of this Agreement or
(ii) prevent the carrying out of the transactions contemplated
hereby.  No waiver or consent of any third person or governmental
authority is required for the execution of this Agreement or the consummation of
the transactions contemplated hereby.  The execution of this Agreement
and the consummation of the transactions contemplated hereby will not result in
the creation of any lien, claim, encumbrance, security interest, charge, pledge,
or other restriction or adverse claim of whatever nature against the Company or
any of its properties or assets.

    

    (d)         Investment Representations.
The Company makes the following representations and warranties which shall be
true as of the date hereof and as of the date of the date Optionee delivers the
Company-LGLC Common Stock to the Company (the “Closing
Date”):

    

    (i)          
 The Company recognizes that the purchase of the Company-LGLC Common Stock
involves a high degree of risk.  The Company represents that it has
carefully reviewed LGLC’s documents filed with the Securities and Exchange
Commission (the “SEC”).

    

    (ii)           The
Company represents that it is an “accredited investor” as such term is defined
in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as
amended (the “Securities Act”) (as
set forth on Schedule A), and that it is able to bear the economic risk of an
investment in LGLC Common Stock.  To evidence its status as an accredited
investor, the Company agrees to deliver to LGLC (i) a fully completed and
executed Accredited Investor Questionnaire (“Questionnaire”) in
the form attached hereto as Schedule A and agrees that the representations and
warranties set out in each of the Questionnaire, as executed by the Company,
will be true and complete on the Closing Date.

    

    (iii)          The
Company hereby acknowledges and represents that (a) it has knowledge and
experience in business and financial matters, prior investment experience, or it
has employed the services of a “purchaser representative” (as defined in Rule
501 of Regulation D), attorney and/or accountant to read all of the documents
furnished or made available by LGLC to the Company to evaluate the merits and
risks of such an investment on its behalf; (b) the Company recognizes the highly
speculative nature of this investment; and (c) the Company is able to bear the
economic risk that it hereby assumes.

    

    (iv)          The
Company hereby acknowledges it has received, carefully reviewed and understands
this Agreement, and any documents which may have been made available upon
request as reflected therein, (collectively referred to as the “Materials”), and
hereby represents that it has been furnished by LGLC with all information
regarding LGLC, and any additional information that the Company has requested or
desired to know, and has been afforded the opportunity to ask questions of and
receive answers from duly authorized officers or other representatives of LGLC
concerning LGLC.

     

    
      
         

      

      
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    (v)           In
making the decision to invest in Company-LGLC Common Stock, the Company has
relied solely upon the information provided by LGLC.  To the extent
necessary, the Company has retained, at its own expense, and relied upon
appropriate professional advice regarding the investment, tax and legal merits
and consequences of this Agreement and the purchase of Company-LGLC Common Stock
hereunder.  The Company disclaims reliance on any statements made or
information provided by any person or entity in the course of its consideration
of an investment in Company-LGLC Common Stock other than the
Materials.

    

    (vi)          The
Company represents that no Company-LGLC Common Stock was offered or sold to
it by means of any form of general solicitation or general advertising, and in
connection therewith, the Company did not (A) receive or review any
advertisement, article, notice or other communication published in a newspaper
or magazine or similar media or broadcast over television or radio, whether
closed circuit, or generally available; or (B) attend any seminar meeting or
industry investor conference whose attendees were invited by any general
solicitation or general advertising.

    

    (vii)         The
Company hereby represents that it, either by reason of its business or financial
experience or the business or financial experience of its professional advisors
(who are unaffiliated with and not compensated by LGLC or any affiliate or
selling agent of LGLC, directly or indirectly), has the capacity to protect its
own interests in connection with the transaction contemplated
hereby.

    

    (viii)        The
Company acknowledges that the transactions contemplated hereunder are intended
to be exempt from the registration requirements of Section 5 of the Securities
Act pursuant to Regulation D promulgated thereunder.  The Company
understands that none of Company-LGLC Common Stock have been registered under
the Securities Act or under any state or foreign securities or “blue sky” laws
and agrees not to sell, pledge, assign or otherwise transfer or dispose of the
shares of Company-LGLC Common Stock unless they are registered under the
Securities Act and under any applicable state or foreign securities or “blue
sky” laws or unless an exemption from such registration is
available.

    

    (ix)           The
Company understands that the Company-LGLC Common Stock has not been registered
under the Securities Act by reason of a claimed exemption under the provisions
of the Securities Act that depends, in part, upon the Company’s investment
intention.  In connection therewith, the Company hereby represents
that it is purchasing the Company-LGLC Common Stock for its own account for
investment and not with a view toward the resale or distribution to
others.  The Company further represents that it was not formed for the
purpose of purchasing the Company-LGLC Common Stock.

    

    (x)           The
Company understands that although the Company-LGLC Common Stock is included for
quotation in the Pink Sheets, there is no current trading market for the Common
Stock and no assurances can be given when, if ever, an active market will
develop for the Company-LGLC Common Stock.  .

     

    
      
         

      

      
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    (xi)           The
Company agrees that if and to the extent required by an underwriter of
Company-LGLC Common Stock in a public offering, the Company will execute a
“lock-up” agreement regarding some or all of its Company-LGLC Common Stock
thereby agreeing not to sell such securities for a period of time after
completion of the public offering whether or not such securities are included in
the public offering.

    

    (xii)          The
Company consents to the placement of a legend on any certificate or other
document evidencing Company-LGLC Common Stock that such securities have not been
registered under the Securities Act or any state or foreign securities or “blue
sky” laws and setting forth or referring to the restrictions on transferability
and sale thereof contained in this Agreement.  The Company is aware
that LGLC will make a notation in its appropriate records with respect to the
restrictions on the transferability of such securities. The legend to be placed
on each certificate shall be in form substantially similar to the
following:

     

    “THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR “BLUE
SKY LAWS,” AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS LGLC HAS RECEIVED
AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO LGLC AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.”

      

    4.           Representations of Corposa
and Holshyrna.

    

    (a)         Corporate Organization,
Qualification and Power of Corposa and Holshyrna. Each of Corposa and
Holshyrna is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization.  Each of Corposa
and Holshyrna has all requisite corporate power and authority to own, lease and
use its assets and properties and to conduct the business in which it is engaged
and holds all authorizations, licenses and permits necessary and required
therefor.

    

    (b)         Corporate Power and
Authority.  Each of Corposa and Holshyrna has full corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby.  The execution, delivery and
performance of this Agreement by each of Corposa and Holshyrna have been duly
authorized by all requisite corporate action, and all required approvals of its
stockholders in connection therewith have been received.  This
Agreement constitutes the valid and binding obligation of Corposa and Holshyrna,
enforceable against it in accordance with its terms.

     

    
      
         

      

      
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    (c)         No Conflict.  None
of Corposa or Holshyrna is a party to, subject to or bound by any note, bond,
mortgage, indenture, deed of trust, agreement, lien, contract or other
instrument or obligation or any statute, law, rule, regulation, judgment, order,
writ, injunction, or decree of any court, administrative or regulatory body,
governmental agency, arbitrator, mediator or similar body, franchise or license,
which would (i) conflict with or be breached or violated or the obligations
thereunder accelerated or increased (whether or not with notice or lapse of time
or both) by the execution, delivery or performance by it of this Agreement or
(ii) prevent the carrying out of the transactions contemplated
hereby.  No waiver or consent of any third person or governmental
authority is required for the execution of this Agreement or the consummation of
the transactions contemplated hereby.  The execution of this Agreement
and the consummation of the transactions contemplated hereby will not result in
the creation of any lien, claim, encumbrance, security interest, charge, pledge,
or other restriction or adverse claim of whatever nature against Corposa or
Holshyrna or any of their properties or assets.

    

    (d)         Transferred Shares. Each of Corposa,
Marpesca and Holshyrna owns of record that number of the shares of Common Stock
in the Company set forth on Exhibit A.  Each of Corposa, Marpesca and
Holshyrna has full power, right and authority to transfer the Transferred Shares
owned by them to LGLC.  Each of Corposa and Holshyrna owns and is
conveying to the Company the Transferred Shares owned by it free and clear of
all encumbrances and no other person has any legal or beneficial interests in
any such Transferred Shares, and there are no restrictions on Corposa’s, and
Holshyrna ́s right to transfer the Transferred Shares.  Except for this
Agreement, there are no other options, warrants, equity securities, calls,
rights, commitments or agreements of any character to which Corposa or Holshyrna
are a party or by which Corposa or Holshyrna are bound obligating it to issue,
exchange, transfer, deliver or sell, or cause to be issued, exchanged,
transferred, delivered or sold, additional shares of capital stock or other
equity interests of the Company.  There are no irrevocable proxies, voting
trusts and no agreements or understandings to which Corposa or Holshyrna are a
party with respect to the voting of any of the Transferred Shares or which
restrict the transfer of any such shares or securities.

    

    (e)         Investment Representations.
Holshyrna makes the following representations and warranties which shall be true
as of the date hereof and as of the date of the date Optionee delivers the
Holshyrna-LGLC Common Stock to the Company (the “Closing
Date”):

    

    (i)           The
Company recognizes that the purchase of the Holshyrna-LGLC Common Stock involves
a high degree of risk.  The Company represents that it has carefully
reviewed LGLC’s documents filed with the Securities and Exchange Commission (the
“SEC”).

    

    (ii)           The
Company represents that it is an “accredited investor” as such term is defined
in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as
amended (the “Securities Act”) (as
set forth on Schedule A), and that it is able to bear the economic risk of an
investment in Holshyrna-LGLC Common Stock.  To evidence its status as an
accredited investor, the Company agrees to deliver to LGLC (i) a fully completed
and executed Accredited Investor Questionnaire (“Questionnaire”) in
the form attached hereto as Schedule A and agrees that the representations and
warranties set out in each of the Questionnaire, as executed by the Company,
will be true and complete on the Closing Date.

     

    
      
         

      

      
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    (iii)          The
Company hereby acknowledges and represents that (a) it has knowledge and
experience in business and financial matters, prior investment experience, or it
has employed the services of a “purchaser representative” (as defined in Rule
501 of Regulation D), attorney and/or accountant to read all of the documents
furnished or made available by LGLC to the Company to evaluate the merits and
risks of such an investment on its behalf; (b) the Company recognizes the highly
speculative nature of this investment; and (c) the Company is able to bear the
economic risk that it hereby assumes.

    

    (iv)          The
Company hereby acknowledges it has received, carefully reviewed and understands
this Agreement, and any documents which may have been made available upon
request as reflected therein, (collectively referred to as the “Materials”), and
hereby represents that it has been furnished by LGLC with all information
regarding LGLC, and any additional information that the Company has requested or
desired to know, and has been afforded the opportunity to ask questions of and
receive answers from duly authorized officers or other representatives of LGLC
concerning LGLC.

    

    (v)           In
making the decision to invest in Holshyrna-LGLC Common Stock, the Company has
relied solely upon the information provided by LGLC.  To the extent
necessary, the Company has retained, at its own expense, and relied upon
appropriate professional advice regarding the investment, tax and legal merits
and consequences of this Agreement and the purchase of Holshyrna-LGLC Common
Stock hereunder.  The Company disclaims reliance on any statements
made or information provided by any person or entity in the course of its
consideration of an investment in Holshyrna-LGLC Common Stock other than the
Materials.

    

    (vi)          The
Company represents that no Holshyrna-LGLC Common Stock was offered or sold
to it by means of any form of general solicitation or general advertising, and
in connection therewith, the Company did not (A) receive or review any
advertisement, article, notice or other communication published in a newspaper
or magazine or similar media or broadcast over television or radio, whether
closed circuit, or generally available; or (B) attend any seminar meeting or
industry investor conference whose attendees were invited by any general
solicitation or general advertising.

    

    (vii)         The
Company hereby represents that it, either by reason of its business or financial
experience or the business or financial experience of its professional advisors
(who are unaffiliated with and not compensated by LGLC or any affiliate or
selling agent of LGLC, directly or indirectly), has the capacity to protect its
own interests in connection with the transaction contemplated
hereby.

     

    
      
         

      

      
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    (viii)        The
Company acknowledges that the transactions contemplated hereunder are intended
to be exempt from the registration requirements of Section 5 of the Securities
Act pursuant to Regulation D promulgated thereunder.  The Company
understands that none of Holshyrna-LGLC Common Stock have been registered under
the Securities Act or under any state or foreign securities or “blue sky” laws
and agrees not to sell, pledge, assign or otherwise transfer or dispose of the
shares of Holshyrna-LGLC Common Stock unless they are registered under the
Securities Act and under any applicable state or foreign securities or “blue
sky” laws or unless an exemption from such registration is
available.

    

    (ix)           The
Company understands that the Holshyrna-LGLC Common Stock has not been registered
under the Securities Act by reason of a claimed exemption under the provisions
of the Securities Act that depends, in part, upon the Company’s investment
intention.  In connection therewith, the Company hereby represents
that it is purchasing the Holshyrna-LGLC Common Stock for its own account for
investment and not with a view toward the resale or distribution to
others.  The Company further represents that it was not formed for the
purpose of purchasing the Holshyrna-LGLC Common Stock.

    

    (x)           The
Company understands that although the Holshyrna-LGLC Common Stock is included
for quotation in the Pink Sheets, there is no current trading market for the
Common Stock and no assurances can be given when, if ever, an active market will
develop for the Holshyrna-LGLC Common Stock.  

    (xi)           The
Company agrees that if and to the extent required by an underwriter of
Holshyrna-LGLC Common Stock in a public offering, the Company will execute a
“lock-up” agreement regarding some or all of its Holshyrna-LGLC Common Stock
thereby agreeing not to sell such securities for a period of time after
completion of the public offering whether or not such securities are included in
the public offering.

    

    (xii)          The
Company consents to the placement of a legend on any certificate or other
document evidencing Holshyrna-LGLC Common Stock that such securities have not
been registered under the Securities Act or any state or foreign securities or
“blue sky” laws and setting forth or referring to the restrictions on
transferability and sale thereof contained in this Agreement.  The
Company is aware that LGLC will make a notation in its appropriate records with
respect to the restrictions on the transferability of such securities. The
legend to be placed on each certificate shall be in form substantially similar
to the following:

     

    “THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR “BLUE
SKY LAWS,” AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS LGLC HAS RECEIVED
AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO LGLC AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.”

    
      
         

      

      
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    (5)           Representations and
Warranties of LGLC.

    

    (a)           Organization. LGLC is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of Nevada.  Buyer has all requisite corporate and other
power and authority to enter into this Agreement and the other documents and
instruments to be executed and delivered by Buyer and to carry out the
transactions contemplated hereby and thereby.

     

    (b)           No Violation. The execution
and delivery of this Agreement by LGLC and the consummation by LGLC of the
transactions contemplated hereby will not cause a breach or violation of or
default or result, with or without the giving of notice or the lapse of time or
both, in a default or violation of, any provision of (a) the Certificate of
Incorporation or Bylaws of LGLC; (b) any material mortgage, lien, lease,
agreement, license, instrument, judgment or decree to which LGLC or any of its
properties or assets (real, personal or mixed, tangible or intangible) are
bound; or (c) any Law.

     

    (c)           Authority; Validity. The
execution and delivery of this Agreement and the other documents and instruments
to be executed and delivered by LGLC pursuant hereto and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary actions or proceedings of LGLC.  No other corporate act or
proceeding on the part of LGLC is necessary to authorize this Agreement or the
other documents and instruments to be executed and delivered by LGLC pursuant
hereto or the consummation by LGLC of the transactions contemplated hereby and
thereby. This Agreement constitutes, and when executed and delivered, the other
documents and instruments to be executed and delivered by LGLC pursuant hereto
will constitute, valid and binding agreements of LGLC, enforceable against LGLC
in accordance with their respective terms, except as such may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights
generally, and by general equitable principles.

     

    (d)           Third Party Consents. No
approval, authorization, notice, consent or other action by or filing with any
person is required for LGLC’s execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby.

    

    (6)           Registration
Rights.

    

    (a)           Definitions.  As
used in this Agreement, the following terms shall have the following
meanings.

     

    (i)      
The term “Holder” shall mean
any person owning or having the right to acquire Registrable Securities (as
defined below) or any permitted transferee of a Holder.

    

    (ii)      
The terms “register,” “registered” and “registration” refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or order of
effectiveness of such registration statement or document. 

     

    
      
         

      

      
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    (iii)   
The term “Registrable
Securities” shall mean: (i) LGLC Common Stock issued under this
Agreement, provided, however, that
securities shall only be treated as Registrable Securities if and only for so
long as they (A) have not been disposed of pursuant to a registration statement
declared effective by the SEC; (B) have not been sold in a transaction exempt
from the registration and prospectus delivery requirements of the Securities Act
so that all transfer restrictions and restrictive legends with respect thereto
are removed upon the consummation of such sale; (C) are held by a Holder or a
permitted transferee of a Holder pursuant to this Section 6; and (D)
may not be disposed of under Rule 144 without restriction.

    

    (iv)     The
term “SEC
Guidance” means (i) any publicly-available written or oral guidance,
requirements or notice of the staff of the SEC, and (ii) the Securities
Act.  

    

    (v)      The
term “Rule 415”
means Rule 415 promulgated by the SEC pursuant to the Securities Act, as such
Rule may be amended or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the SEC having substantially the same purpose
and effect as such Rule.

    

    (b)           Shelf
Registration.  If LGLC exercises the Call Right by issuing LGLC
Common Stock as provided herein, LGLC will use its commercially reasonable
efforts to file a registration statement (the “Registration
Statement”), on or before November 15, 2010, covering the resale of all
or such portion of the Registrable Securities as permitted by SEC Guidance, for
an offering to be made on a continuous basis pursuant to Rule
415.  The Registration Statement shall also include other equity
securities of LGLC as LGLC may determine in its sole discretion.  The
Registration Statement filed pursuant to this Section 4 shall be on
Form S-1, except if LGLC is not then eligible to register for resale the
Registrable Securities on Form S-1, in which case such registration shall be on
another appropriate form.

    

    (c)           Registration
Procedures.  Whenever required under this Article 6 to include
Registrable Securities in an LGLC registration statement, LGLC shall, as
expeditiously as reasonably possible:

    

    (i) Use
its commercially reasonable efforts to (i) cause such registration statement to
become effective, and (ii) cause such registration statement to remain effective
until the earliest to occur of (A) such date as the sellers of Registrable
Securities (the “Selling Holders”)
have completed the distribution described in the registration statement and (B)
such time that all of such Registrable Securities are no longer, by reason of
Rule 144, required to be registered for the sale thereof by such
Holders.  LGLC will also use its commercially reasonable efforts to,
during the period that such registration statement is required to be maintained
hereunder, file such post-effective amendments and supplements thereto as may be
required by the Securities Act and the rules and regulations thereunder or
otherwise to ensure that the registration statement does not contain any untrue
statement of material fact or omit to state a fact required to be stated therein
or necessary to make the statements contained therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
if applicable rules under the Securities Act governing the obligation to file a
post-effective amendment permits, in lieu of filing a post-effective amendment
that (i) includes any prospectus required by Section 10(a)(3) of the Securities
Act or (ii) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, LGLC may
incorporate by reference information required to be included in (i) and (ii)
above to the extent such information is contained in periodic reports filed
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, in the registration statement.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    (ii)          
Prepare and file with the SEC such amendments and supplements to such
registration statement, and the prospectus used in connection with such
registration statement, as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.

    

    (iii)         
Furnish to the Selling Holders such numbers of copies of a prospectus, including
a preliminary prospectus as amended or supplemented from time to time, in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.

    

    (iv)          Use
commercially reasonable efforts to register and qualify the securities covered
by such registration statement under such other federal or state securities laws
of such jurisdictions as shall be reasonably requested by the Selling Holders;
provided, however, that LGLC
shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions, unless LGLC is already subject to service in such
jurisdiction and except as may be required by the Securities Act.

    

    (v)           In
the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering.  Each Selling Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

    

    (vi)          Notify
each Holder of Registrable Securities covered by such registration statement, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, (i) when the registration statement or any post-effective
amendment and supplement thereto has become effective; (ii) of the issuance by
the SEC of any stop order or the initiation of proceedings for that purpose (in
which event LGLC shall make every effort to obtain the withdrawal of any order
suspending effectiveness of the registration statement at the earliest possible
time or prevent the entry thereof); (iii) of the receipt by LGLC of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose; and (iv) of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (v)           Cause
all such Registrable Securities registered hereunder to be listed on each
securities exchange or quotation service on which similar securities issued by
LGLC are then listed or quoted.

    

    (vi)          Cooperate
with the Selling Holders and the managing underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing the Registrable
Securities to be sold, which certificates will not bear any restrictive legends;
and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters, if any, shall request at
least two business days prior to any sale of the Registrable Securities to the
underwriters.

    

    (vii)         Comply
with all applicable rules and regulations of the SEC.

    

    (viii)        If
the offering is underwritten and at the request of any Selling Holder, use its
best reasonable efforts to furnish on the date that Registrable Securities are
delivered to the underwriters for sale pursuant to such registration: (i)
opinions dated such date of counsel representing LGLC for the purposes of such
registration, addressed to the underwriters and the transfer agent for the
Registrable Securities so delivered, respectively, to the effect that such
registration statement has become effective under the Securities Act and such
Registrable Securities are freely tradable, and covering such other matters as
are customarily covered in opinions of issuer’s counsel delivered to
underwriters and transfer agents in underwritten public offerings and (ii) a
letter dated such date from the independent public accountants who have
certified the financial statements of LGLC included in the registration
statement or the prospectus, covering such matters as are customarily covered in
accountants’ letters delivered to underwriters in underwritten public
offerings.

     

    (d)           Furnish
Information.  It shall be a condition precedent to the
obligation of LGLC to take any action pursuant to this Article 6 with
respect to the Registrable Securities of any Selling Holder that such Holder
shall furnish to LGLC such information regarding the Holder, the Registrable
Securities held by the Holder, and the intended method of disposition of such
securities as shall be reasonably required by LGLC to effect the registration of
such Holder’s Registrable Securities.

    

    (e)           Registration
Expenses.  LGLC shall bear and pay all registration expenses
incurred in connection with any registration, filing or qualification of
Registrable Securities with respect to registration pursuant to this Section 4 for each
Holder, but excluding (i) legal expenses of the Holders and (ii) underwriting
discounts and commissions relating to Registrable Securities.

    

    (f)           Delay of
Registration.  No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section
4.

    

    (7)       
   Conditions Precedent to
LGLC’s
Obligations.

     

    Each and
every obligation of LGLC to be performed hereunder shall be subject to the
satisfaction prior to or at the Closing of each of the following
conditions:

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    (i)  Representations and Warranties True
on the Closing Date. Each of the representations and warranties made by
each of the Company, Corposa and Holshyrna in this Agreement shall be true and
correct in all respects at and as of the time of the Closing.

     

    (ii)  Compliance With
Agreement.  The Company, Corposa and Holshyrna shall each have
in all respects performed and complied with all of the agreements and
obligations under this Agreement which are to be performed or complied with by
them prior to or on the Closing Date.

     

    (iii)  Consents and Approvals. All
approvals, consents and waivers necessary for the performance of each of the
Company’s, Corposa’s and Holshyrna ́s obligations hereunder shall have been
received, and executed counterparts thereof shall have been delivered to LGLC at
or prior to the Closing.

     

    (iv)  Documents to be Delivered by
the
Company.  At the Closing, the Company shall have delivered to
LGLC the following documents, in each case duly executed or otherwise in proper
form:

     

    (A)  Certificate(s).
Certificates representing the Option Shares.

     

    (B) Other Documents. Such
other documents or instruments as LGLC reasonably requests and are reasonably
necessary to consummate the transactions contemplated by this
Agreement.

     

    (v)  Documents to be Delivered by
Corposa.  At the
Closing, Corposa shall have delivered to LGLC such documents or instruments as
LGLC reasonably requests and are reasonably necessary to consummate the
transactions contemplated by this Agreement.

     

    (vi)
Legal Restraints;
Proceedings. No law, injunction, judgment or ruling, enacted,
promulgated, issued, entered, amended or enforced by any governmental authority
shall be in effect enjoining, restraining, preventing or prohibiting the
consummation of the transactions contemplated hereby or the documents or
instruments delivered pursuant hereto or making such transactions
illegal.

    

    (6)           Conditions Precedent to
the Company’s
Obligations.

    

    Each and
every obligation of the Company to be performed hereunder shall be subject to
the satisfaction prior to or at the Closing of the following
conditions:

    

    (i)        Representations and Warranties True
on the Closing Date.  Each of the representations and
warranties made by LGLC in this Agreement shall be true and correct in at and as
of the time of the Closing.

    

    (ii)       Compliance With
Agreement.  Optionee shall have performed and complied in all
respects with its obligations under this Agreement which are to be performed or
complied with by it prior to or on the Closing Date.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    (iii)      Absence of Litigation. No action, suit or
proceeding shall have been instituted by any person which seeks to prohibit,
restrict or delay consummation of the transaction contemplated herein or any of
the conditions to the transactions contemplated herein, or seeks damages as a
result of the consummation of the transactions contemplated herein or speaks to
the conduct of the business of LGLC after the Closing Date.

    

    (iv)     Consents and Approvals. All
approvals, consents and waivers required for Optionee’s performance of its
obligations hereunder shall have been received, and executed counterparts
thereof shall have been delivered to the Company at or prior to the
Closing.

    

    (v)      Documents to be Delivered by
LGLC. At the Closing, LGLC shall
have delivered to the Company such documents or instruments as the Company may
reasonably request and are reasonably necessary to consummate the transactions
contemplated by this Agreement.

    

    (7)           Notices.  

    

    Except as
otherwise specified herein to the contrary, all notices, requests, demands and
other communications required or desired to be given hereunder shall only be
effective if given in writing by certified or registered U.S. mail with return
receipt requested and postage prepaid; by private overnight delivery service
(e.g. Federal Express, UPS); by facsimile transmission (if no original documents
or instruments must accompany the notice); or by personal
delivery.  Any such notice shall be deemed to have been given (a) on
the business day immediately following the mailing thereof, if mailed by
certified or registered mail as specified above; (b) on the business day
immediately following deposit with a private overnight delivery service if sent
by said service; (c) upon receipt of confirmation of transmission if sent by
facsimile transmission; or (d) upon personal delivery of the
notice.  All such notices shall be sent to the following addresses (or
to such other address or addresses as a party may have advised the other in the
manner provided in this Section 9):

     

    If to the
Company:

     

    Baja
Aqua-Farms, S.A. de C.V.

    Calle 12,
No. 211, Parque Industrial Fondeport,

    El
Sauzal, Ensenada, Baja California, Mexico

    Attention:
Vilhelm M. Gudmundsson

    Telephone:

    Facsimile:

    

    If to
Holshyrna:

    

    Holshyrna,
ehf

    1230
Columbia St, Suite 1100

    San
Diego, California, 92101

    Attention:
Vilhelm M. Gudmundsson

    Telephone:
619-544-9177

    Facsimile:
619-544-9178

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    If to
Optionee:

      

    

      
        
          
            	
                    Lions
      Gate Lighting Corp.

                  
	
                    405
      Lexington Avenue

                  
	
                    26th
      Floor, Suite 2640

                  
	
                    New
      York, NY 10174

                  
	
                    Attention:

                  	
                    Oli
      Valur Steindorsson

                  
	
                    Telephone:

                  	
                    (212)
      907-6492

                  
	
                    Facsimile:

                  	
                    (917)
      368-8005

                  

          

        

      

    

     

    With a
copy to:

    

    Louis A.
Brilleman, Esq.

    110 Wall
Street, 11th
Floor

    New York,
NY 10005

    Facsimile: (212) 943-2300

    

    (8)         Governing
Law.

    

    This
Agreement shall be governed by and construed solely and exclusively in
accordance with and pursuant to the internal laws of California without regard
to the conflicts of laws principles thereof. The parties hereto hereby expressly
and irrevocably agree that any suit or proceeding arising directly and/or
indirectly pursuant to or under this Agreement shall be brought solely in a
court located in San Diego, California,.  By its execution hereof, the
parties hereby covenant and irrevocably submit to the in personam
jurisdiction of the courts located in San Diego, California, and expressly and
irrevocably waive any claim that any such jurisdiction is not a convenient forum
for any such suit or proceeding and any defense or lack of in personam
jurisdiction with respect thereto. In the event of any such action or
proceeding, the party prevailing therein shall be entitled to payment from the
other party hereto of all of its reasonable counsel fees and
disbursements.

    

    (9)         Assignment.

     

    Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned (including by merger or operation of law) by any of the parties
hereto without the prior written consent of the other parties; provided, however, that the
Company may assign to Corposa and Holshyrna, or any other legal entity
designated by Corposa and Holshyrna, its right to receive the LGLC Common Stock
upon exercise of the Call Right; provided, further, that Corposa
shall make the representations and warranties in Section 3(d) hereof as a
condition to the issuance of the LGLC Common Stock as set forth in Annex A
attached hereto.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    (10)       Severability.

    

    If any
provision of this Agreement is held to be unenforceable under applicable law,
such provision shall be excluded from this Agreement, and the balance hereof
shall be interpreted as if such provision were so excluded.

     

    (11)       Modification and
Waiver.  

    

    This
Agreement and any provision hereof may be amended, waived, discharged or
terminated only by an instrument in writing signed by each party
hereto.

    

    (12)       Specific
Enforcement.  

    

    The
Company, LGLC and Corposa and agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.  It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which either of them may be entitled by law or
equity.

    

    (Signature
Page Immediately Follows)

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    

    IN WITNESS WHEREOF, the
parties have caused this Agreement to be duly executed, manually or by
facsimile, by one of its officers thereunto duly authorized.

    

    
      
        
          
            
              
                
                  	
                          BAJA
      AQUA-FARMS S.A. DE C.V.

                        	 
      
	 
      	 
      
	
                          By:

                        	 
      	 
      
	 
      	 
      
	
                          LIONS
      GATE LIGHTING CORP.

                        	 
      
	 
      	 
      
	
                          By:

                        	 
      	 
      
	 
      	 
      
	
                          CORPOSA
      S.A. DE C.V.

                        	 
      
	 
      	 
      
	
                          By:

                        	 
      	 
      
	 
      	 
      
	
                          HOLSHYRNA
      ehf

                        	 
      
	 
      	 
      
	
                          By:

                        	 
      	 
      

                

              

            

          

        

      

    

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    EXHIBIT
A

    

    COMMON
STOCK OF COMPANY OWNED BY CORPOSA AND HOLSHYRNA

    

    
      
        
          
            	
                    Shareholder

                  	 	
                    Shares Series

                    “A”

                    Fixed

                    Capital Stock

                  	 	 	
                    Shares Series

                    “B”

                    Variable

                    Capital Stock

                  	 	 	
                    Shares Series

                    “C”

                    Variable

                    Capital Stock

                  	 	 	
                    Total

                    Shares

                  	 
	
                    Corposa,
      S.A. de C.V.

                  	 	 	-0-	 	 	 	594,338	 	 	 	133,131,887	 	 	 	133,726,225	 
	
                    Holshyrna
      ehf

                  	 	 	3,199	 	 	 	254,966	 	 	 	57,312,559	 	 	 	57,570,724	 

          

        

      

    

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    

    ANNEX
B

    

    FORM
OF ASSIGNMENT

    

    (To be
signed only on transfer of right to receive shares of common stock of Lions Gate
Lighting 

    Corp.
under Call Option Agreement)

     

    For value
received, the undersigned hereby sells, assigns, and transfers unto Corposa S.A.
de C.V. and Holshyrna, ehf, or any other legal entity designated by Corposa and
Holshyrna, the right to receive shares of Lions Gate Lighting Corp. (“LGLC”)
upon exercise of the Call Right by LGLC.

    

    As a
condition to LGLC’s obligation to issue to Corposa and Holshyrna, Corposa and
Holshyrna make the representations and warranties set forth on Attachment A
hereof and if Corposa and Holshyrna designate any other legal entity to hold the
LGLC stock such legal entity shall make the representations and warranties set
forth on Attachment A.

    

    
      
        
          	
                  Dated:

                	
                  By:

                	 
      
	 
      	
                  Name:

                
	 
      	
                   Title:

                
	 
      	
                  (signature
      must conform to name

                
	 
      	
                  of
      holder as specified on the fact of the Warrant)

                
	 
      	 
      
	 
      	
                  Address:

                

        

      

    

    

    Signed in
the presence of:

    

    Dated:

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    ATTACHMENT
A

    

    (i)        Corposa
and Holshyrna recognize that the purchase of the LGLC Common Stock involves a
high degree of risk.  Corposa and Holshyrna represent that they have
carefully reviewed LGLC’s documents filed with the Securities and Exchange
Commission (the “SEC”).

    

    (ii)       Corposa
and Holshyrna represent that it is an “accredited investor” as such term is
defined in Rule 501 of Regulation D promulgated under the Securities Act of
1933, as amended (the “Securities Act”) (as
set forth on Schedule A), and that it is able to bear the economic risk of an
investment in LGLC Common Stock.  To evidence its status as an accredited
investor, Corposa and Holshyrna agree to deliver to LGLC (i) a fully completed
and executed Accredited Investor Questionnaire (“Questionnaire”) in
the form attached hereto as Schedule A and agrees that the representations and
warranties set out in each of the Questionnaire, as executed by Corposa and
Holshyrna, will be true and complete on the Closing Date.

    

    (iii)      Corposa
and Holshyrna hereby acknowledge and represent that (a) they have knowledge and
experience in business and financial matters, prior investment experience, or it
has employed the services of a “purchaser representative” (as defined in Rule
501 of Regulation D), attorney and/or accountant to read all of the documents
furnished or made available by LGLC to Corposa and Holshyrna to evaluate the
merits and risks of such an investment on its behalf; (b) Corposa and Holshyrna
recognize the highly speculative nature of this investment; and (c) Corposa and
Holshyrna are able to bear the economic risk that it hereby
assumes.

    

    (iv)     Corposa
and Holshyrna hereby acknowledge it has received, carefully reviewed and
understands this Agreement, and any documents which may have been made available
upon request as reflected therein, (collectively referred to as the “Materials”), and
hereby represents that it has been furnished by LGLC with all information
regarding LGLC, and any additional information that Corposa and Holshyrna have
requested or desired to know, and has been afforded the opportunity to ask
questions of and receive answers from duly authorized officers or other
representatives of LGLC concerning LGLC.

    

    (v)      In
making the decision to invest in LGLC Common Stock, Corposa and Holshyrna have
relied solely upon the information provided by LGLC.  To the extent
necessary, Corposa and Holshyrna have retained, at its own expense, and relied
upon appropriate professional advice regarding the investment, tax and legal
merits and consequences of this Agreement and the purchase of LGLC Common Stock
hereunder.  Corposa and Holshyrna disclaim reliance on any statements
made or information provided by any person or entity in the course of its
consideration of an investment in LGLC Common Stock other than the
Materials.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    (vi)     Corposa
and Holshyrna represents that no LGLC Common Stock was offered or sold to it by
means of any form of general solicitation or general advertising, and in
connection therewith, Corposa and Holshyrna did not (A) receive or review any
advertisement, article, notice or other communication published in a newspaper
or magazine or similar media or broadcast over television or radio, whether
closed circuit, or generally available; or (B) attend any seminar meeting or
industry investor conference whose attendees were invited by any general
solicitation or general advertising.

    

    (vii)    Corposa
and Holshyrna hereby represent that it, either by reason of its business or
financial experience or the business or financial experience of its professional
advisors (who are unaffiliated with and not compensated by LGLC or any affiliate
or selling agent of LGLC, directly or indirectly), has the capacity to protect
its own interests in connection with the transaction contemplated
hereby.

    

    (viii)   Corposa
and Holshyrna acknowledge that the transactions contemplated hereunder are
intended to be exempt from the registration requirements of Section 5 of the
Securities Act pursuant to Regulation D promulgated
thereunder.  Corposa and Holshyrna understands that none of LGLC
Common Stock have been registered under the Securities Act or under any state or
foreign securities or “blue sky” laws and agrees not to sell, pledge, assign or
otherwise transfer or dispose of the shares of LGLC Common Stock unless they are
registered under the Securities Act and under any applicable state or foreign
securities or “blue sky” laws or unless an exemption from such registration is
available.

    

    (ix)      Corposa
and Holshyrna understand that the LGLC Common Stock has not been registered
under the Securities Act by reason of a claimed exemption under the provisions
of the Securities Act that depends, in part, upon Corposa’s and Holshyrna ́s
investment intention.  In connection therewith, Corposa and Holshyrna
hereby represent that it is purchasing the LGLC Common Stock for its own account
for investment and not with a view toward the resale or distribution to
others.  Corposa and Holshyrna further represent that it was not
formed for the purpose of purchasing the LGLC Common Stock.

    

    (x)       Corposa
and Holshyrna understand that although the LGLC Common Stock is included for
quotation in the Pink Sheets, there is no current trading market for the Common
Stock and no assurances can be given when, if ever, an active market will
develop for the LGLC Common Stock.  

    

    (xi)      Corposa
and Holshyrna agree that if and to the extent required by an underwriter of LGLC
Common Stock in a public offering, Corposa and Holshyrna will execute a
“lock-up” agreement regarding some or all of its LGLC Common Stock thereby
agreeing not to sell such securities for a period of time after completion of
the public offering whether or not such securities are included in the public
offering.

    

    (xii)     Corposa
and Holshyrna consent to the placement of a legend on any certificate or other
document evidencing LGLC Common Stock that such securities have not been
registered under the Securities Act or any state or foreign securities or “blue
sky” laws and setting forth or referring to the restrictions on transferability
and sale thereof contained in this Agreement.  Corposa and Holshyrna
are aware that LGLC will make a notation in its appropriate records with respect
to the restrictions on the transferability of such securities. The legend to be
placed on each certificate shall be in form substantially similar to the
following:

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    “THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR “BLUE
SKY LAWS,” AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS LGLC HAS RECEIVED
AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO LGLC AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.”

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

    Schedule
A

     

    U.S.
ACCREDITED INVESTOR QUESTIONNAIRE

    

    The
undersigned covenants, represents and warrants to the Lions Gate Lighting Corp.
that it satisfies one or more of the categories of “Accredited Investors”, as
defined by Regulation D promulgated under the 1933 Act, as indicated
below:  (Please initial in the space provide those categories, if any,
of an “Accredited Investor” which the Shareholder satisfies.)

     

    
      	______	
              Category
      1

            	
              An
      organization described in Section 501(c)(3) of the United States Internal
      Revenue Code, a corporation, a Massachusetts or similar business trust or
      partnership, not formed for the specific purpose of acquiring the Shares,
      with total assets in excess of US $5,000,000.

            
	 
      	 
      	 
      
	______ 
      	
              Category
      2

            	
              A
      natural person whose individual net worth, or joint net worth with that
      person’s spouse, on the date of purchase exceeds US
      $1,000,000.

            
	 
      	 
      	 
      
	______	
              Category
      3

            	
              A
      natural person who had an individual income in excess of US $200,000 in
      each of the two most recent years or joint income with that person’s
      spouse in excess of US $300,000 in each of those years and has a
      reasonable expectation of reaching the same income level in the current
      year.

            
	 
      	 
      	 
      
	______	
              Category
      4

            	
              A
      “bank” as defined under Section (3)(a)(2) of the 1933 Act or savings and
      loan association or other institution as defined in Section 3(a)(5)(A) of
      the 1933 Act acting in its individual or fiduciary capacity; a broker
      dealer registered pursuant to Section 15 of the Securities Exchange Act of
      1934 (United States); an insurance Corporation as defined in
      Section 2(13) of the 1933 Act; an investment Corporation registered under
      the Investment
      Corporation Act of 1940 (United States) or a business development
      Corporation as defined in Section 2(a)(48) of such Act; a Small Business
      Investment Corporation licensed by the U.S. Small Business Administration
      under Section 301(c) or (d) of the Small Business Investment Act
      of 1958 (United States); a plan with total assets in excess of
      $5,000,000 established and maintained by a state, a political subdivision
      thereof, or an agency or instrumentality of a state or a political
      subdivision thereof, for the benefit of its employees; an employee benefit
      plan within the meaning of the Employee Retirement Income
      Security Act of 1974 (United States) whose investment decisions are
      made by a plan fiduciary, as defined in Section 3(21) of such Act, which
      is either a bank, savings and loan association, insurance corporation or
      registered investment adviser, or if the employee benefit plan has total
      assets in excess of $5,000,000, or, if a self-directed plan, whose
      investment decisions are made solely by persons that are accredited
      investors.

            
	 
      	 
      	 
      
	______	
              Category
      5

            	
              A
      private business development corporation as defined in Section 202(a)(22)
      of the Investment
      Advisers Act of 1940 (United States).

            
	 
      	 
      	 
      
	______	
              Category
      6

            	
              A
      director or executive officer of the Company.

            
	 
      	 
      	 
      
	______	
              Category
      7

            	
              A
      trust with total assets in excess of $5,000,000, not formed for the
      specific purpose of acquiring the Shares, whose purchase is directed by a
      sophisticated person as described in Rule 506(b)(2)(ii) under the 1933
      Act.

            
	 
      	 
      	 
      
	______	
              Category
      8

            	
              An
      entity in which all of the equity owners satisfy the requirements of one
      or more of the foregoing
categories.

            

    

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    Note that
the undersigned may be required to supply Lions Gate Lighting Corp. Company with
a balance sheet, prior years’ federal income tax returns or other appropriate
documentation to verify and substantiate the undersigned’s status as an
Accredited Investor.

     

    The
undersigned hereby certifies that the information contained in this
Questionnaire is
complete and accurate and it will notify Lions Gate Lighting Corp. promptly of
any change in any such information. The undersigned acknowledges and agrees that
the undersigned may be required by Lions Gate Lighting Corp. to provide such
additional documentation as may be reasonably required by Lions Gate Lighting
Corp. and its legal counsel in determining the undersigned’s eligibility to
acquire the shares under relevant legislation.

     

    IN
WITNESS WHEREOF, the undersigned has executed this Questionnaire as of the ___ day of
___________, 2010.

     

    
      
        
          
            	 
      	 
      
	
                    Print
      of Type Name of Entity

                  	 
      
	 
      	 
      
	 
      	 
      
	
                    Signature
      of Authorized Signatory

                  	 
      
	 
      	 
      
	 
      	 
      
	
                    Type
      of Entity

                  	 
      

          

        

      

    

     

    
      
         

      

      
        24NEITHER
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 TO
THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR
ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF
THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF.  THE
PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES
ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE
FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

       

      NACEL
Energy Corporation

       

      Senior
Secured Convertible Note

       

      
        
          	
                  Original
      Issuance Date:  November 24, 2009

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

                  Second
      3(a)(9) Exchange Date: July 27, 2010

                	
                  Original
      Principal Amount: U.S.
$935,000

                

        

      

      

      FOR VALUE RECEIVED, NACEL
Energy Corporation, a Wyoming corporation (the “Company”), hereby promises to
pay to the order of IROQUOIS MASTER FUND LTD. or its registered assigns (“Holder”) the amount set out
above as the Original Principal Amount (as reduced pursuant to the terms hereof
pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether
upon the Maturity Date, on any Installment Date with respect to the Installment
Amount due on such Installment Date (each 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 (as defined below) at the applicable Interest Rate (as defined below)
from the date set out above as the Original Issuance Date (the “Issuance Date”) until the same becomes
due and payable, whether upon any Installment Date or the Maturity Date or
acceleration, conversion, redemption or otherwise (in each case in accordance
with the terms hereof). This Senior Secured Convertible Note (including all
Senior Secured Convertible Notes issued in exchange, transfer or replacement
hereof, this “Note”) is
one of an issue of Senior Secured Convertible Notes issued pursuant to the
Securities Purchase Agreement (as defined below) on the Closing Date (as defined
below) (collectively, the “Notes” and such other Senior
Secured Convertible Notes, the “Other Notes”). Certain capitalized
terms used herein are defined in Section 28.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      1.           PAYMENTS OF
PRINCIPAL. On each Installment Date (which includes the Maturity Date),
the Company shall pay to the Holder an amount equal to the Installment Amount
due on such Installment Date in accordance with Section 8. Other than as
specifically permitted by this Note, the Company may not prepay any portion of
the outstanding Principal, accrued and unpaid Interest or accrued and unpaid
Late Charges on Principal and Interest, if any.

       

      2.           INTEREST; INTEREST
RATE.  No Interest shall accrue on this Note prior to the
occurrence of an Event of Default, in which case Interest on this Note shall
commence accruing on the occurrence of such Event of Default, shall accrue daily
at the Interest Rate on the outstanding Principal amount from time to time,
shall be computed on the basis of a 360-day year comprised of twelve (12) thirty
(30) day months, shall compound each Quarter and shall be payable in accordance
with the terms of this Note. From and after the occurrence and during the
continuance of any Event of Default, the Interest Rate shall automatically be
increased to eighteen percent (18%). In the event that such Event of Default is
subsequently cured, the adjustment referred to in the preceding sentence shall
cease to be effective as of the date of such cure, provided that the Interest as
calculated and unpaid at such increased rate during the continuance of such
Event of Default shall continue to apply to the extent relating to the days
after the occurrence of such Event of Default through and including the date of
such cure of such Event of Default.

       

      3.           CONVERSION OF NOTES.
This Note shall be convertible into shares of Common Stock (as defined below),
on the terms and conditions set forth in this Section 3.

       

      (a)           Conversion Right.
Subject to the provisions of Section 3(d), at any time or times on or after the
Issuance Date, the Holder shall be entitled to convert any portion of the
outstanding and unpaid Conversion Amount (as defined below) into fully paid and
nonassessable shares of Common Stock in accordance with Section 3(c), at the
Conversion Rate (as defined below).  The Company shall not issue any
fraction of a share of Common Stock upon any conversion.  If the
issuance would result in the issuance of a fraction of a share of Common Stock,
the Company shall round such fraction of a share of Common Stock up to the
nearest whole share. The Company shall pay any and all transfer, stamp, issuance
and similar taxes that may be payable with respect to the issuance and delivery
of Common Stock upon conversion of any Conversion Amount.

       

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

       

      (i)           “Conversion Amount” means the
portion of the Principal to be converted, redeemed or otherwise with respect to
which this determination is being made, plus all accrued and unpaid Interest
with respect to such portion of the Principal amount and accrued and unpaid Late
Charges with respect to such portion of such Principal and such
Interest.

       

      (ii)           “Conversion Price” means, as of
any Conversion Date or other date of determination, $0.30, subject to adjustment
as provided herein.

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      (c)           Mechanics of
Conversion.

       

      (i)           Optional Conversion.
To convert any Conversion Amount into shares of Common Stock on any date (a
“Conversion Date”), the
Holder shall deliver (whether via facsimile or otherwise), 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. If required by Section 3(c)(iii), within three (3) Trading Days
following a conversion of this Note as aforesaid, the Holder shall surrender
this Note to a nationally recognized overnight delivery service for delivery to
the Company (or an indemnification undertaking with respect to this Note in the
case of its loss, theft or destruction as contemplated by Section 18(b)). On or
before the second (2nd)
Trading Day following the date of receipt of a Conversion Notice, the Company
shall transmit by facsimile an acknowledgment of confirmation of receipt of such
Conversion Notice to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before
the third (3rd)
Trading Day following the date of receipt of a Conversion Notice (the “Share Delivery Date”), the Company shall (1)
provided that the Transfer Agent is participating in The Depository Trust
Company’s (“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 at Custodian
system or (2) if the Transfer Agent is not participating in the DTC Fast
Automated Securities Transfer Program, issue and deliver (via reputable
overnight courier) to the address as specified in the Conversion Notice, a
certificate, registered in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder shall be entitled. If this
Note is physically surrendered for conversion as required by Section 3(c)(iii)
and the outstanding Principal of this Note is greater than the Principal portion
of the Conversion Amount being converted, then the Company shall as soon as
practicable and in no event later than five (5) Business Days after receipt of
this Note and at its own expense, issue and deliver to the Holder (or its
designee) a new Note (in accordance with Section 18(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. In the event of a partial conversion of
this Note pursuant hereto, the Principal amount converted shall be deducted from
the Installment Amount(s) relating to the Installment Date(s) as set forth in
the applicable Conversion Notice.

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      (ii)           Company’s Failure to Timely
Convert. If the Company shall fail, for any reason or for no reason, to
issue to the Holder within five (5) Trading Days after the Company’s receipt of
a Conversion Notice (whether via facsimile or otherwise), a certificate for the
number of shares of Common Stock to which the Holder is entitled and register
such shares of Common Stock on the Company’s share register or to credit the
Holder’s or its designee’s balance account with DTC for such number of shares of
Common Stock to which the Holder is entitled upon the Holder’s conversion of any
Conversion Amount (as the case may be) (a “Conversion Failure”), then, in
addition to all other remedies available to the Holder, (1) the Company shall
pay in cash to the Holder on each day after such fifth (5th)
Trading Day that the issuance of such shares of Common Stock is not timely
effected an amount equal to 2% of the product of (A) the sum of the number of
shares of Common Stock not issued to the Holder on a timely basis and to which
the Holder is entitled multiplied by (B) the Closing Sale Price of the Common
Stock on the Trading Day immediately preceding the last possible date which the
Company could have issued such shares of Common Stock to the Holder without
violating Section 3(c)(i) and (2) the Holder, upon written notice to the
Company, may void its Conversion Notice with respect to, and retain or have
returned (as the case may be) any portion of this Note that has not been
converted pursuant to such Conversion Notice, provided that the voiding of a
Conversion Notice shall not affect the Company’s obligations to make any
payments which have accrued prior to the date of such notice pursuant to this
Section 3(c)(ii) or otherwise. In addition to the foregoing, if within three (3)
Trading Days after the Company’s receipt of a Conversion Notice (whether via
facsimile or otherwise), the Company shall fail to issue and deliver a
certificate to the Holder and register such shares of Common Stock on the
Company’s share register or credit the Holder’s or its designee’s balance
account with DTC for the number of shares of Common Stock to which the Holder is
entitled upon the Holder’s conversion hereunder (as the case may be), and if on
or after such third (3rd)
Trading Day the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of
shares of Common Stock issuable upon such conversion that the Holder anticipated
receiving from the Company, then, in addition to all other remedies available to
the Holder, the Company shall, within three (3) Business Days after the Holder’s
request and in the Holder’s discretion, either (i) pay cash to the Holder in an
amount equal to the Holder’s total purchase price (including brokerage
commissions 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 shares of Common Stock) shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such shares of Common Stock or credit the Holder’s
balance account with DTC for the number of shares of Common Stock to which the
Holder is entitled upon the Holder’s conversion hereunder (as the case may be)
and pay cash to the Holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock
multiplied by (B) the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the Conversion Date.

       

      (iii)           Book-Entry.
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 (in which
event this Note shall be delivered to the Company as contemplated by Section
3(c)(i)) 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 converted
and/or paid (as the case may be) and the dates of such conversions and/or
payments (as the case may be) 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. It is expressly understood and agreed
that due to conversions hereunder that have occurred prior to July 27, 2010, the
outstanding Principal amount of this Note on July 27, 2010 is
$667,857.14.

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

      (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, subject to Section 3(d), 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 23.

       

      (d)           Limitations on
Conversions. Notwithstanding anything to the contrary contained in this
Note, this Note shall not be convertible by the Holder hereof, and the Company
shall not effect any conversion of this Note or otherwise issue any shares of
Common Stock pursuant to Section 8 hereof, to the extent (but only to the
extent) that the Holder or any of its affiliates would beneficially own in
excess of 9.9% (the “Maximum
Percentage”) of the Common Stock. To the extent the above limitation
applies, the determination of whether this Note shall be convertible (vis-à-vis
other convertible, exercisable or exchangeable securities owned by the Holder or
any of its affiliates) shall, subject to such Maximum Percentage limitation, be
determined on the basis of the first submission to the Company for conversion,
exercise or exchange (as the case may be). No prior inability to convert this
Note, or to issue shares of Common Stock, pursuant to this paragraph shall have
any effect on the applicability of the provisions of this paragraph with
respect to any subsequent determination of convertibility. For purposes of this
paragraph, beneficial ownership and all determinations and calculations
(including, without limitation, with respect to calculations of percentage
ownership) shall be determined in accordance with Section 13(d) of the 1934 Act
(as defined in the Securities Purchase Agreement) and the rules and regulations
promulgated thereunder. The provisions of this paragraph shall be implemented in
a manner otherwise than in strict conformity with the terms of this paragraph to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Maximum Percentage beneficial ownership
limitation herein contained or to make changes or supplements necessary or
desirable to properly give effect to such Maximum Percentage limitation. The
limitations contained in this paragraph shall apply to a successor Holder of
this Note. The holders of Common Stock shall be third party beneficiaries of
this paragraph and the Company may not waive this paragraph without the consent
of holders of a majority of its Common Stock. For any reason at any time, upon
the written or oral request of the Holder, the Company shall within one (1)
Business Day confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding, including by virtue of any prior conversion or
exercise of convertible or exercisable securities into Common Stock, including,
without limitation, pursuant to this Note or securities issued pursuant to the
Securities Purchase Agreement.

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      4.           RIGHTS UPON EVENT OF
DEFAULT.

       

      (a)           Event of
Default.  Each of the following events shall constitute an
“Event of
Default”:

       

      (i)           the
failure of the applicable Registration Statement (as defined in the Registration
Rights Agreement) to be filed with the SEC on or prior to the date that is ten
(10) days after the applicable Filing Deadline (as defined in the Registration
Rights Agreement) or the failure of the applicable Registration Statement to be
declared effective by the SEC on or prior to the date that is ten (10) days
after the applicable Effectiveness Deadline (as defined in the Registration
Rights Agreement);

       

      (ii)          while
the applicable Registration Statement is required to be maintained effective
pursuant to the terms of the Registration Rights Agreement, the effectiveness of
the applicable Registration Statement lapses for any reason (including, without
limitation, the issuance of a stop order) or such Registration Statement (or the
prospectus contained therein) is unavailable to any holder of Registrable
Securities (as defined in the Registration Rights Agreement) for sale of all of
such holder’s Registrable Securities in accordance with the terms of the
Registration Rights Agreement, and such lapse or unavailability continues for a
period of five (5) consecutive days or for more than an aggregate of ten (10)
days in any 365-day period (excluding days during an Allowable Grace Period (as
defined in the Registration Rights Agreement));

       

      (iii)         the
suspension (or threatened suspension) from trading or the failure (or threatened
failure) of the Common Stock to be trading or listed (as applicable) on an
Eligible Market for a period of five (5) consecutive days or for more than an
aggregate of ten (10) days in any 365-day period;

       

      (iv)         the
Company’s (A) failure to cure a Conversion Failure or a Delivery Failure (as
defined in the Warrants) by delivery of the required number of shares of Common
Stock within five (5) Trading Days after the applicable Conversion Date or
exercise date (as the case may be) or (B) notice, written or oral, to any holder
of the Notes or Warrants, including, without limitation, by way of public
announcement or through any of its agents, at any time, of its intention not to
comply, as required, with a request for conversion of any Notes into shares of
Common Stock that is requested in accordance with the provisions of the Notes,
other than pursuant to Section 3(d), or a request for exercise of any Warrants
for Warrant Shares in accordance with the provisions of the
Warrants;

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      (v)         at
any time following the tenth (10th)
consecutive day that the Holder’s Authorized Share Allocation is less than the
number of shares of Common Stock that the Holder would be entitled to receive
upon a conversion of the full Conversion Amount of this Note (without regard to
any limitations on conversion set forth in Section 3(d) or
otherwise);

       

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

       

      (vii)        the
Company fails to remove any restrictive legend on any certificate or any shares
of Common Stock issued to the Holder upon conversion or exercise (as the case
may be) of any Securities acquired by the Holder under the Securities Purchase
Agreement (including this Note) as and when required by such Securities or the
Securities Purchase Agreement, unless otherwise then prohibited by applicable
federal securities laws, and any such failure remains uncured for at least five
(5) days;

       

      (viii)       the
occurrence of any default under, redemption of or acceleration prior to maturity
of any Indebtedness (as defined in the Securities Purchase Agreement) of the
Company or any of its Subsidiaries, other than with respect to (A) Permitted
Senior Indebtedness and (B) any Other Notes;

       

      (ix)         bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings for
the relief of debtors shall be instituted by or against the Company or any
Subsidiary and, if instituted against the Company or any Subsidiary by a third
party, shall not be dismissed within thirty (30) days of their
initiation;

       

      (x)          the
commencement by the Company or any Subsidiary of a voluntary case or proceeding
under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry of a
decree, order, judgment or other similar document in respect of the Company or
any Subsidiary in an involuntary case or proceeding under any applicable
federal, state or foreign bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under any applicable federal, state or foreign
law, or the consent by it to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Subsidiary or of
any substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the execution of a composition of debts, or the
occurrence of any other similar federal, state or foreign proceeding, or the
admission by it in writing of its inability to pay its debts generally as they
become due, the taking of corporate action by the Company or any Subsidiary in
furtherance of any such action or the taking of any action by any Person to
commence a UCC foreclosure sale or any other similar action under federal, state
or foreign law;

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      (xi)         the
entry by a court of (i) a decree, order, judgment or other similar document in
respect of the Company or any Subsidiary of a voluntary or involuntary case or
proceeding under any applicable federal, state or foreign bankruptcy,
insolvency, reorganization or other similar law or (ii) a decree, order,
judgment or other similar document adjudging the Company or any Subsidiary as
bankrupt or insolvent, or approving as properly filed a petition seeking
liquidation, reorganization, arrangement, adjustment or composition of or in
respect of the Company or any Subsidiary under any applicable federal, state or
foreign law or (iii) a decree, order, judgment or other similar document
appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or any Subsidiary or of any substantial
part of its property, or ordering the winding up or liquidation of its affairs,
and the continuance of any such decree, order, judgment or other similar
document or any such other decree, order, judgment or other similar document
unstayed and in effect for a period of thirty (30) consecutive
days;

       

      (xii)        a
final judgment or judgments for the payment of money aggregating in excess of
$250,000 are rendered against the Company and/or any of its Subsidiaries and
which judgments are not, within thirty (30) days after the entry thereof,
bonded, discharged or stayed pending appeal, or are not discharged within thirty
(30) days after the expiration of such stay; provided, however, 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 or such Subsidiary (as the case may be) will receive
the proceeds of such insurance or indemnity within thirty (30) days of the
issuance of such judgment;

       

      (xiii)       the
Company and/or any Subsidiary, individually or in the aggregate, either (i)
fails to pay, when due, or within any applicable grace period, any payment with
respect to any Indebtedness in excess of $100,000 due to any third party (other
than, with respect to unsecured Indebtedness only, payments contested by the
Company and/or such Subsidiary (as the case may be) in good faith by proper
proceedings and with respect to which adequate reserves have been set aside for
the payment thereof in accordance with GAAP) or is otherwise in breach or
violation of any agreement for monies owed or owing in an amount in excess of
$200,000, which breach or violation permits the other party thereto to declare a
default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist
any other circumstance or event that would, with or without the passage of time
or the giving of notice, result in a default or event of default under any
agreement binding the Company or any Subsidiary, which default or event of
default would or is likely to have a material adverse effect on the business,
assets, operations (including results thereof), liabilities, properties,
condition (including financial condition) or prospects of the Company or any of
its Subsidiaries, individually or in the aggregate;

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

      (xiv)       other
than as specifically set forth in another clause of this Section 4(a), the Company or any
Subsidiary breaches any representation, warranty, covenant or other term or
condition of any Transaction Document (including, without limitation, the
Security Documents and the Guaranties), except, in the case of a breach of a
covenant or other term or condition that is curable, only if such breach remains
uncured for a period of three (3) days following notice from the
Holder;

       

      (xv)        any
breach or failure in any respect by the Company or any Subsidiary to comply with
any provision of either of Sections 8 or 13 of this Note;

       

      (xvi)       a
false or inaccurate certification (including a false or inaccurate deemed
certification) by the Company that the Equity Conditions are satisfied, that
there has been no Equity Conditions Failure, Dollar Failure or Volume Failure or
as to whether any Event of Default has occurred;

       

      (xvii)      any
Material Adverse Effect (as defined in the Securities Purchase Agreement)
occurs;

       

      (xviii)     any
provision of any Transaction Document (including, without limitation, the
Security Documents and the Guaranties) shall at any time for any reason (other
than pursuant to the express terms thereof) cease to be valid and binding on or
enforceable against the parties thereto, or the validity or enforceability
thereof shall be contested by any party thereto, or a proceeding shall be
commenced by the Company or any Subsidiary or any governmental authority having
jurisdiction over any of them, seeking to establish the invalidity or
unenforceability thereof, or the Company or any Subsidiary shall deny in writing
that it has any liability or obligation purported to be created under any
Transaction Document (including, without limitation, the Security Documents and
the Guaranties);

       

      (xix)        the
Security Documents shall for any reason fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority Lien on the Collateral (as defined in the Security Agreement) in
favor of each of the Secured Parties (as defined in the Security Agreement);
or

       

      (xx)         any
Event of Default (as defined in the Other Notes) occurs with respect to any
Other Notes.

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      (b)           Notice of an Event of
Default; Redemption Right. Upon the occurrence of an Event of Default
with respect to this Note or any Other Note, the Company shall within one (1)
Business Day deliver written notice thereof via facsimile and overnight courier
(with next day delivery specified) (an “Event of Default Notice”) to
the Holder. At any time after the earlier of the Holder’s receipt of an Event of
Default Notice and the Holder becoming aware of an Event of Default, the Holder
may require the Company to redeem (regardless of whether such Event of Default
has been cured) all or any portion of this Note by delivering written notice
thereof (the “Event of Default
Redemption Notice”) to the Company, which Event of Default Redemption
Notice shall indicate the portion of this Note the Holder is electing to redeem.
Each portion of this Note subject to redemption by the Company pursuant to this
Section 4(b) shall be redeemed by the Company at a price equal to the greater of
(i) the product of (A) the Conversion Amount to be redeemed multiplied by (B)
the Redemption Premium and (ii) the product of (X) the Conversion Rate with
respect to the Conversion Amount in effect at such time as the Holder delivers
an Event of Default Redemption Notice multiplied by (Y) the product of (1) the
Equity Value Redemption Premium multiplied by (2) the greatest of (I) the
Closing Sale Price of the Common Stock on the date immediately preceding such
Event of Default, (II) the Closing Sale Price of the Common Stock on the date
immediately after such Event of Default and (III) the Closing Sale Price of the
Common Stock on the date the Holder delivers an Event of Default Redemption
Notice with respect to such Event of Default (the “Event of Default Redemption Price”).
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 this Note by the Company, such redemptions shall be deemed to be
voluntary prepayments. Notwithstanding anything to the contrary in this Section
4, but subject to Section 3(d), until the Event of Default Redemption Price
(together with any Late Charges thereon) is paid in full, the Conversion Amount
submitted for redemption under this Section 4(b) (together with any Late Charges
thereon) may be converted, in whole or in part, by the Holder into Common Stock
pursuant to Section 3. In the event of a partial redemption of this Note
pursuant hereto, the Principal amount redeemed shall be deducted from the
Installment Amount(s) relating to the applicable Installment Date(s) as set
forth in the Event of Default Redemption Notice. In the event of the Company’s
redemption of any portion of this Note under this Section 4(b), the Holder’s
damages would be uncertain and difficult to estimate because of the parties’
inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for the Holder.
Accordingly, any redemption premium due under this Section 4(b) is intended by
the parties to be, and shall be deemed, a reasonable estimate of the Holder’s
actual loss of its investment opportunity and not as a penalty.

      
        
           

        

        
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      5.           RIGHTS UPON FUNDAMENTAL
TRANSACTION.

       

      (a)           Assumption. The
Company shall not enter into or be party to a Fundamental Transaction unless
(i) the Successor Entity assumes in writing all of the obligations of the
Company under this Note and the other Transaction Documents in accordance with
the provisions of this Section 5(a) pursuant to written agreements in form and
substance satisfactory to the Holder and approved by the Holder prior to such
Fundamental Transaction, including agreements to deliver to each holder of Notes
in exchange for such Notes a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to the Notes,
including, without limitation, having a principal amount and interest rate equal
to the principal amounts then outstanding and the interest rates of the Notes
held by such holder, having similar conversion rights as the Notes and having
similar ranking to the Notes, and satisfactory to the 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.
Upon the occurrence of any Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Note and the other Transaction
Documents referring to the “Company” shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume
all of the obligations of the Company under this Note and the other Transaction
Documents with the same effect as if such Successor Entity had been named as the
Company herein. Upon consummation of a Fundamental Transaction, the Successor
Entity shall deliver to the Holder confirmation that there shall be issued upon
conversion or redemption of this Note at any time after the consummation of such
Fundamental Transaction, in lieu of the shares of the Company’s Common Stock (or
other securities, cash, assets or other property (except such items still
issuable under Sections 6 and 15, which shall continue to be receivable
thereafter) 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)
which the Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had this Note been converted immediately prior to such
Fundamental Transaction (without regard to any limitations on the conversion of
this Note), as adjusted in accordance with the provisions of this Note. The
provisions of this Section 5 shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
on the conversion of this Note.

       

      (b)           Redemption Right. No
sooner than twenty (20) Trading Days nor later than ten (10) Trading Days prior
to the consummation of a Fundamental Transaction, but not prior to the public
announcement of such Fundamental Transaction, the Company shall deliver written
notice thereof via facsimile and overnight courier to the Holder (a “Fundamental Transaction Notice”). At any time during
the period beginning after the Holder’s receipt of a Fundamental Transaction
Notice and ending on the later of twenty (20) Trading Days after (A)
consummation of such Fundamental Transaction or (B) the date of receipt of such
Fundamental Transaction Notice, the Holder may require the Company to redeem all
or any portion of this Note by delivering written notice thereof (“Fundamental Transaction Redemption
Notice”) to the Company, which Fundamental Transaction Redemption Notice
shall indicate the Conversion Amount the Holder is electing to
redeem.  The portion of this Note subject to redemption pursuant to
this Section 5 shall be redeemed by the Company in cash at a price equal to the
greater of (i) the product of (w) the Fundamental Transaction Redemption Premium
multiplied by (x) the Conversion Amount being redeemed and (ii) the product of
(y) the Equity Value Redemption Premium multiplied by (z) the product of (1) the
Conversion Amount being redeemed multiplied by (2) the quotient of (A) the
aggregate cash consideration and the aggregate cash value of any non-cash
consideration per share of Common Stock to be paid to the holders of the shares
of Common Stock upon consummation of such Fundamental Transaction (any such
non-cash consideration constituting publicly-traded securities shall be valued
at the highest of the Closing Sale Price of such securities as of the Trading
Day immediately prior to the consummation of such Fundamental Transaction, the
Closing Sale Price of such securities on the Trading Day immediately following
the public announcement of such proposed Fundamental Transaction and the Closing
Sale Price of such securities on the Trading Day immediately prior to the public
announcement of such proposed Fundamental Transaction) divided by (B) the
Conversion Price then in effect (the “Fundamental Transaction 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 such Fundamental Transaction. To the extent
redemptions required by this Section 5(b) are deemed or determined by a court of
competent jurisdiction to be prepayments of this Note by the Company, such
redemptions shall be deemed to be voluntary prepayments. Notwithstanding
anything to the contrary in this Section 5, but subject to Section 3(d), until
the Fundamental Transaction Redemption Price (together with any Late Charges
thereon) is paid in full, the Conversion Amount submitted for redemption under
this Section 5(b) (together with any Late Charges thereon) may be converted, in
whole or in part, by the Holder into Common Stock pursuant to Section 3. In the
event of a partial redemption of this Note pursuant hereto, the Principal amount
redeemed shall be deducted from the Installment Amount(s) relating to the
applicable Installment Date(s) as set forth in the Fundamental Transaction
Redemption Notice. In the event of the Company’s redemption of any portion of
this 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.

       

      
        
           

        

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

       

      (a)           Purchase Rights. In
addition to any adjustments pursuant to Section 7 below, 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 (provided, however, to the extent that the Holder’s right to participate
in any such Purchase Right would result in the Holder exceeding the Maximum
Percentage, then the Holder shall not be entitled to participate in such
Purchase Right to such extent (or beneficial ownership of such shares of Common
Stock as a result of such Purchase Right to such extent) and such Purchase Right
to such extent shall be held in abeyance for the Holder until such time, if
ever, as its right thereto would not result in the Holder exceeding the Maximum
Percentage).

      
        
           

        

        
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      (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. The provisions of this Section 6 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.           RIGHTS UPON ISSUANCE OF
OTHER SECURITIES.

       

      (a)           Adjustment of Conversion
Price upon Issuance of Common Stock.  If and whenever on or
after the Subscription Date the Company issues or sells, or in accordance with
this Section 7(a) is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by or
for the account of the Company, but excluding any Excluded Securities (as
defined in the Securities Purchase Agreement) issued or sold or deemed to have
been issued or sold) for a consideration per share (the “New Issuance Price”) less than
a price equal to the Conversion Price in effect immediately prior to such issue
or sale or deemed issuance or sale (such Conversion Price then in effect is
referred to herein as the “Applicable Price”) (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. For purposes of determining the adjusted Conversion Price under
this Section 7(a), the following shall be applicable:

       

      (i)           Issuance of
Options.  If the Company in any manner grants or sells any
Options and the lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any such Option
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 7(a)(i), the “lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such Options or upon
conversion, exercise or exchange of any Convertible Securities issuable upon
exercise of any such Option” shall be equal to (1) the lower of (x) the sum of
the lowest amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the granting or sale
of such Option, upon exercise of such Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such Option and
(y) the lowest exercise price set forth in such Option for which one share of
Common Stock is issuable upon the exercise of any such Options or upon
conversion, exercise or exchange of any Convertible Securities issuable upon
exercise of any such Option minus (2) the sum of all amounts paid or payable to
the holder of such Option (or any other Person) upon the granting or sale of
such Option, upon exercise of such Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such Option plus
the value of any other consideration received or receivable by, or benefit
conferred on, the holder of such Option (or any other Person). Except as
contemplated below, no further adjustment of the Conversion Price shall be made
upon the actual issuance of such share of Common Stock or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of such
share of Common Stock upon conversion, exercise or exchange of such Convertible
Securities.

      
        
           

        

        
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      (ii)           Issuance of Convertible
Securities.  If the Company in any manner issues or sells any
Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion, exercise or exchange thereof is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
the issuance or sale of such Convertible Securities for such price per share.
For the purposes of this Section 7(a)(ii), the “lowest price per share for which
one share of Common Stock is issuable upon the conversion, exercise or exchange
thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the Convertible Security and
upon conversion, exercise or exchange of such Convertible Security and (y) the
lowest conversion price set forth in such Convertible Security for which one
share of Common Stock is issuable upon conversion, exercise or exchange thereof
minus (2) the sum of all amounts paid or payable to the holder of such
Convertible Security (or any other Person) upon the issuance or sale of such
Convertible Security plus the value of any other consideration received or
receivable by, or benefit conferred on, the holder of such Convertible Security
(or any other Person). Except as contemplated below, no further adjustment of
the Conversion Price shall be made upon the actual issuance of such share 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 the Conversion Price has
been or is to be made pursuant to other provisions of this Section 7(a), except
as contemplated below, no further adjustment of the Conversion Price shall be
made by reason of such issue or sale.

      
        
           

        

        
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      (iii)           Change in Option Price or
Rate of Conversion. If the purchase or exercise price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at any time, the
Conversion Price in effect at the time of such increase or decrease shall be
adjusted to the Conversion Price which would have been in effect at such time
had such Options or Convertible Securities provided for such increased or
decreased purchase price, additional consideration or increased or decreased
conversion rate (as the case may be) at the time initially granted, issued or
sold. For purposes of this Section 7(a)(iii), if the terms of any Option or
Convertible Security that was outstanding as of the Subscription Date 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 7(a) shall be made if such adjustment would
result in an increase of the Conversion Price then in effect.

       

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

      
        
           

        

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

       

      (b)           Adjustment of Conversion
Price upon Subdivision or Combination of Common Stock.  If the
Company at any time on or after the Subscription Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time on or after the Subscription
Date combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased. Any adjustment pursuant to this Section 7(b)
shall become effective immediately after the effective date of such subdivision
or combination. If any event requiring an adjustment under this Section 7(b)
occurs during the period that a Conversion Price is calculated hereunder, then
the calculation of such Conversion Price shall be adjusted appropriately to
reflect such event.

       

      (c)           Other Events. In the
event that the Company (or any direct or indirect Subsidiary thereof) shall
take any action to which the provisions hereof are not strictly applicable, or,
if applicable, would not operate to protect the Holder from dilution or if any
event occurs of the type contemplated by the provisions of this Section 7 but
not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company’s board of directors shall in good faith
determine and implement an appropriate adjustment in the Conversion Price so as
to protect the rights of the Holder, provided that no such adjustment pursuant
to this Section 7(c) will increase the Conversion Price as otherwise determined
pursuant to this Section 7, provided further that if the Holder does not accept
such adjustments as appropriately protecting its interests hereunder against
such dilution, then the Company’s board of directors and the Holder shall agree,
in good faith, upon an independent investment bank of nationally recognized
standing to make such appropriate adjustments, whose determination shall be
final and binding and whose fees and expenses shall be borne by the
Company.

      
        
           

        

        
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      8.           COMPANY INSTALLMENT
CONVERSION OR REDEMPTION.

       

      (a)           General. On each
applicable Installment Date, the Company shall pay to the Holder of this Note
the applicable Installment Amount due on such date by converting such
Installment Amount in accordance with this Section 8 (a “Company Conversion”);
provided, however, the Company may, at its option as described below, pay all or
any part of such Installment Amount by redeeming such Installment Amount in cash
(a “Company Redemption”)
or by any combination of a Company Conversion and a Company Redemption so long
as the entire amount of such Installment Amount due shall be converted and/or
redeemed by the Company on the applicable Installment Date, subject to the
provisions of this Section 8, provided further that the Company shall not be
entitled to elect a Company Conversion with respect to any portion of such
Installment Amount and shall be required to elect and to pay the entire amount
of such Installment Amount in cash pursuant to a Company Redemption if on the
applicable Installment Notice Due Date or on the applicable Installment Date (as
the case may be) there is an Equity Conditions Failure, a Dollar Failure or a
Volume Failure. On or prior to the date which is the twenty-first (21st)
Trading Day prior to each Installment Date (each, an “Installment Notice Due Date”),
the Company shall deliver written notice (each, a “Company Installment Notice”
and the date all of the holders receive such notice is referred to as to the
“Company Installment Notice
Date”), to each holder of Notes and such Company Installment Notice shall
(i) either (A) confirm that the applicable Installment Amount of such holder’s
Note shall be converted in whole pursuant to a Company Conversion or (B) (1)
state that the Company elects to redeem, or is required to elect and redeem in
accordance with the provisions of the Notes, in whole or in part, the applicable
Installment Amount pursuant to a Company Redemption and (2) specify the portion
of the applicable Installment Amount which the Company elects, or is required to
elect and redeem, pursuant to a Company Redemption (such amount to be redeemed
in cash, the “Company
Redemption Amount”) and the portion of the applicable Installment Amount,
if any, that the Company elects, and is permitted, to convert pursuant to a
Company Conversion (such amount of the applicable Installment Amount so elected
to be so converted pursuant to this Section 8 is referred to herein as the
“Company Conversion
Amount”), which amounts when added together, must equal the entire
applicable Installment Amount and (ii) if the applicable Installment Amount is
to be paid, in whole or in part, pursuant to a Company Conversion, certify that
there is not then an Equity Conditions Failure, a Dollar Failure or a Volume
Failure, in each case, as of the date of the Company Installment Notice. Each
Company Installment Notice shall be irrevocable and may not be revoked by the
Company. If the Company does not timely deliver a Company Installment Notice in
accordance with this Section 8, then the Company shall be deemed to have
delivered an irrevocable Company Installment Notice confirming a Company
Conversion and shall be deemed to have certified that there is not then an
Equity Conditions Failure, a Dollar Failure or a Volume Failure, in each case,
in connection with such Company Conversion. No later than two (2) Trading Days
after delivery of the applicable Company Installment Notice setting forth a
Company Conversion Amount, the Company shall deliver to the Holder’s account
with DTC such number of shares of Common Stock (the “Pre-Installment Conversion
Shares”) equal to the quotient of (x) such Company Conversion Amount
divided by (y) the Pre-Installment Conversion Price, and as to which the Holder
shall be the owner thereof as of such time of delivery or deemed delivery (as
the case may be) of such Company Installment Notice. Except as expressly
provided in this Section 8(a), the Company shall convert and/or redeem the
applicable Installment Amount of this Note pursuant to this Section 8 and the
corresponding Installment Amounts of the Other Notes pursuant to the
corresponding provisions of the Other Notes in the same ratio of the applicable
Installment Amount being converted and/or redeemed hereunder. The applicable
Company Conversion Amount (whether set forth in the applicable Company
Installment Notice or by operation of this Section 8) shall be converted in
accordance with Section 8(b) and the applicable Company Redemption Amount shall
be redeemed in accordance with Section 8(c). It is expressly understood and
agreed that the remaining Installment Dates are August 23, 2010, September 23,
2010, October 23, 2010, November 23, 2010 and the Maturity
Date.

      
        
           

        

        
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      (b)           Mechanics of Company
Conversion. Subject to Section 3(d), if the Company delivers a Company
Installment Notice and elects, or is deemed to have delivered a Company
Installment Notice and deemed to have elected, in whole or in part, a Company
Conversion in accordance with Section 8(a), then the remainder of this Section
8(b) shall apply. The applicable Company Conversion Amount, if any, which
remains outstanding as of the applicable Installment Date shall be converted as
of the applicable Installment Date by converting on such Installment Date such
Company Conversion Amount at the Company Conversion Price and the Company shall,
on the applicable Installment Date, deliver to the Holder’s account with DTC
such shares of Common Stock issued upon such conversion (subject to the
reduction contemplated by the immediately following sentence and, if applicable,
the last sentence of this Section 8(b)), provided that the Equity Conditions are
then satisfied (or waived in writing by the Holder) on such Installment Date and
a Company Conversion is not otherwise prohibited under any other provision of
this Note (including, without limitation, as a result of the occurrence of a
Dollar Failure or a Volume Failure (each determined as of the applicable
Installment Date)). The number of shares of Common Stock to be delivered upon
such Company Conversion shall be reduced by the number of any Pre-Installment
Conversion Shares delivered in connection with such Installment Date. If an
Event of Default occurs during any applicable Company Conversion Measuring
Period, then either (i) the Holder shall return any Pre-Installment Conversion
Shares delivered in connection with the applicable Installment Date or (ii) the
Conversion Amount used to calculate the Event of Default Redemption Price shall
be reduced by the product of (x) the Company Conversion Amount applicable to
such Installment Date multiplied by (y) the Conversion Share Ratio (as defined
below). If any of the Equity Conditions are not satisfied (or waived in writing
by the Holder) on such Installment Date or a Company Conversion is not otherwise
permitted under any other provision of this Note (including, without limitation,
as a result of the occurrence of a Dollar Failure or a Volume Failure (each
determined as of the applicable Installment Date)), then, at the option of the
Holder designated in writing to the Company, the Holder may require the Company
to do any one or more of the following: (i) the Company shall redeem all or any
part designated by the Holder of the unconverted Company Conversion Amount (such
designated amount is referred to as the “Designated Redemption Amount”)
and the Company shall pay to the Holder within three (3) days of such
Installment Date, by wire transfer of immediately available funds, an amount in
cash equal to 135% of such Designated Redemption Amount, and/or (ii) the Company
Conversion shall be null and void with respect to all or any part designated by
the Holder of the unconverted Company Conversion Amount and the Holder shall be
entitled to all the rights of a holder of this Note with respect to such
designated part of the Company Conversion Amount; provided, however, the
Conversion Price for such designated part of such unconverted Company Conversion
Amount shall thereafter be adjusted to equal the lesser of (A) the Company
Conversion Price as in effect on the date on which the Holder voided the Company
Conversion and (B) the Company Conversion Price that would be in effect on the
date on which the Holder delivers a Conversion Notice relating thereto as if
such date was an Installment Date. In addition, if any of the Equity Conditions
are not satisfied (or waived in writing by the Holder) on such Installment Date
or a Company Conversion is not otherwise permitted under any other provision of
this Note (including, without limitation, as a result of the occurrence of a
Dollar Failure or a Volume Failure (each determined as of the applicable
Installment Date)), then, at the Holder’s option, either (I) the Holder shall
return any Pre-Installment Conversion Shares delivered in connection with the
applicable Installment Date or (II) the applicable Designated Redemption Amount
shall be reduced by the product of (X) the Company Conversion Amount applicable
to such Installment Date multiplied by (Y) the Conversion Share Ratio. If the
Company fails to redeem any Designated Redemption Amount by the third (3rd) day
following the applicable Installment Date by payment of such amount on the
applicable Installment Date, then the Holder shall have the rights set forth in
Section 11(a) as if the Company failed to pay the applicable Company Installment
Redemption Price (as defined below) and all other rights under this Note
(including, without limitation, such failure constituting an Event of Default
described in Section 4(a)(xv)). Notwithstanding anything to the contrary in this
Section 8(b), but subject to 3(d), until the Company delivers Common Stock
representing the Company Conversion Amount to the Holder, the Company Conversion
Amount may be converted by the Holder into Common Stock pursuant to Section 3.
In the event that the Holder elects to convert the Company Conversion Amount
prior to the applicable Installment Date as set forth in the immediately
preceding sentence, the Company Conversion Amount so converted shall be deducted
from the Installment Amount(s) relating to the applicable Installment Date(s) as
set forth in the applicable Conversion Notice. If, with respect to an
Installment Date, the number of Pre-Installment Conversion Shares delivered to
the Holder exceeds the number of Post-Installment Conversion Shares with respect
to such Installment Date, then the number of shares of Common Stock equal to
such excess shall constitute a credit against the number of shares of Common
Stock to be issued to such Holder pursuant to Sections 3 and 8(a) hereof and
shall reduce the number of shares of Common Stock required to be actually issued
by the Company to the Holder under such sections on a share-for-share basis
until such time as the number of shares that would have been issued by the
Company to such Holder (not taking account of such credit) equals the amount of
such excess.

       

      
        
           

        

        
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      (c)           Mechanics of Company
Redemption. If the Company elects, or is required to elect, a Company
Redemption, in whole or in part, in accordance with Section 8(a), then the
Company Redemption Amount, if any, which is to be paid to the Holder on the
applicable Installment Date shall be redeemed by the Company on such Installment
Date, and the Company shall pay to the Holder on such Installment Date, by wire
transfer of immediately available funds, in an amount in cash (the “Company Installment Redemption
Price”) equal to the applicable Company Redemption Amount. If the Company
fails to redeem the applicable Company Redemption Amount on the applicable
Installment Date by payment of the Company Installment Redemption Price on such
date, then, at the option of the Holder designated in writing to the Company
(any such designation shall be a “Conversion Notice” for purposes of this Note),
the Holder may require the Company to convert all or any part of the Company
Redemption Amount at the Company Conversion Price (determined as of the date of
such designation). Conversions required by this Section 8(c) shall be made in
accordance with the provisions of Section 3(c). Notwithstanding anything to the
contrary in this Section 8(c), but subject to Section 3(d), until the Company
Installment Redemption Price (together with any Late Charges thereon) is paid in
full, the Company Redemption Amount (together with any Late Charges thereon) may
be converted, in whole or in part, by the Holder into Common Stock pursuant to
Section 3. In the event the Holder elects to convert all or any portion of the
Company Redemption Amount prior to the applicable Installment Date as set forth
in the immediately preceding sentence, the Company Redemption Amount so
converted shall be deducted from the Installment Amounts relating to the
applicable Installment Date(s) as set forth in the applicable Conversion
Notice.

      
        
           

        

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

       

      10.           RESERVATION OF AUTHORIZED
SHARES.

       

      (a)           Reservation. The
Company shall initially reserve out of its authorized and unissued Common Stock
a number of shares of Common Stock for each of the Notes equal to 133% of the
entire Conversion Rate with respect to the entire Conversion Amount of each such
Note as of the Issuance Date.  So long
as any of the Notes are outstanding, the Company shall take all action necessary
to reserve and keep available out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Notes, 133% of the
number of shares of Common Stock as shall from time to time be necessary to
effect the conversion of all of the Notes then outstanding, provided that at no
time shall the number of shares of Common Stock so reserved be less than the
number of shares required to be reserved by the previous sentence (without
regard to any limitations on conversions) (the “Required Reserve
Amount”).  The initial number of shares of Common Stock
reserved for conversions of the Notes and each increase in the number of shares
so reserved shall be allocated pro rata among the holders of the Notes based on
the original principal amount of the Notes held by each holder on the Closing
Date or increase in the number of reserved shares (as the case may be) (the
“Authorized Share
Allocation”). In the event that a holder shall sell or otherwise transfer
any of such holder’s Notes, each transferee shall be allocated a pro rata
portion of such holder’s Authorized Share Allocation. Any shares of Common Stock
reserved and allocated to any Person which ceases to hold any Notes shall be
allocated to the remaining holders of Notes, pro rata based on the principal
amount of the Notes then held by such holders.

      
        
           

        

        
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      (b)           Insufficient Authorized
Shares. If, notwithstanding Section 10(a), and not in limitation thereof,
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 Event of Default Redemption Price to the
Holder in cash within five (5) Business Days after the Company’s receipt of the
Holder’s Event of Default Redemption Notice. If the Holder has submitted a
Fundamental Transaction Redemption Notice in accordance with Section 5(b), the
Company shall deliver the applicable Fundamental Transaction Redemption Price to
the Holder in cash concurrently with the consummation of such Fundamental
Transaction if such notice is received prior to the consummation of such
Fundamental Transaction and within five (5) Business Days after the Company’s
receipt of such notice otherwise. The Company shall deliver the applicable
Company Installment Redemption Price to the Holder in cash on the applicable
Installment Date. 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 18(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 applicable 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 18(d)), to the Holder, and
in each case the principal amount of this Note or such new Note (as the
case may be) shall be increased by an amount equal to the difference between (1)
the applicable Event of Default Redemption Price or Fundamental Transaction
Redemption Price (as the case may be) minus (2) the Conversion Amount submitted
for redemption and (z) the Conversion Price of this Note or such new Notes (as
the case may be) shall be adjusted to the lesser of (A) the Conversion Price as
in effect on the date on which the applicable 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 applicable Redemption Notice is delivered
to the Company and ending on and including the date on which the applicable
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.

      
        
           

        

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

       

      12.           VOTING RIGHTS. The
Holder shall have no voting rights as the holder of this Note, except as
required by law (including, without limitation, the Wyoming Business Corporation
Act) and as expressly provided in this Note.

       

      13.           COVENANTS. Until all
of the Notes have been converted, redeemed or otherwise satisfied in accordance
with their terms:

       

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

       

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

      
        
           

        

        
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      (c)           Existence of Liens.
The Company shall not, and the Company shall cause each of its Subsidiaries to
not, directly or indirectly, allow or suffer to exist any mortgage, lien,
pledge, charge, security interest or other encumbrance upon or in any property
or assets (including accounts and contract rights) owned by the Company or any
of its Subsidiaries (collectively, “Liens”) other than Permitted
Liens.

       

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

       

      (e)           Restriction on Redemption
and Cash Dividends. The Company shall not, and the Company shall cause
each of its Subsidiaries to not, directly or indirectly, redeem, repurchase or
declare or pay any cash dividend or distribution on any of its capital stock
without the prior express written consent of the Holder.

       

      (f)           Restriction on Transfer of
Assets. The Company shall not, and the Company shall cause each of its
Subsidiaries to not, directly or indirectly, sell, lease, license, assign,
transfer, convey or otherwise dispose of any assets or rights of the Company or
any Subsidiary owned or hereafter acquired whether in a single transaction or a
series of related transactions, other than (i) sales, leases, licenses,
assignments, transfers, conveyances and other dispositions of such assets or
rights by the Company and its Subsidiaries that, in the aggregate, do not have a
fair market value in excess of $250,000 in any twelve (12) month period and (ii)
sales of inventory in the ordinary course of business.

       

      (g)           Maturity of
Indebtedness. The Company shall not, and the Company shall cause each of
its Subsidiaries to not, directly or indirectly, permit any Indebtedness of the
Company or any of the Subsidiaries to mature or accelerate prior to the Maturity
Date, other than Permitted Senior Indebtedness.

       

      (h)           New Subsidiaries.
Simultaneously with the acquisition or formation of each New Subsidiary, the
Company shall cause such New Subsidiary to execute, and deliver to each holder
of Notes, all Security Documents (as defined in the Securities Purchase
Agreement) and Guaranties (as defined in the Securities Purchase Agreement) that
the Current Subsidiaries are required to execute in connection with the
transactions contemplated by the Securities Purchase Agreement.

      
        
           

        

        
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      (i)           Change in Nature of
Business. The Company shall not, and the Company shall cause each of
its Subsidiaries to not, directly or indirectly, engage in any material line of
business substantially different from those lines of business conducted by the
Company and each of its Subsidiaries on the Issuance Date or any business
substantially related or incidental thereto.  The Company shall not,
and the Company shall cause each of its Subsidiaries to not, directly or
indirectly, modify its or their corporate structure or purpose.

       

      14.           SECURITY. This Note
and the Other Notes are secured to the extent and in the manner set forth in the
Transaction Documents (including, without limitation, the Security Agreement,
the other Security Documents and the Guaranties).

       

      15.           PARTICIPATION. In
addition to any adjustments pursuant to Section 7, 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 (provided, however, to the extent that the Holder’s
right to participate in any such dividend or distribution would result in the
Holder exceeding the Maximum Percentage, then the Holder shall not be entitled
to participate in such dividend or distribution to such extent (or the
beneficial ownership of any such shares of Common Stock as a result of such
dividend or distribution to such extent) and such dividend or distribution to
such extent shall be held in abeyance for the benefit of the Holder until such
time, if ever, as its right thereto would not result in the Holder exceeding the
Maximum Percentage).

       

      16.           AMENDING THE TERMS OF THIS
NOTE. The prior written consent of the Holder shall be required for any
change or amendment to this Note. No consideration shall be offered or paid to
the Holder to amend or consent to a waiver or modification of any provision of
this Note unless the same consideration is also offered to all of the holders of
the Other Notes. The Holder shall be entitled, at its option, to the benefit of
any amendment to any of the Other Notes.

       

      17.           TRANSFER. This Note
and any shares of Common Stock issued upon conversion of this Note may be
offered, sold, assigned or transferred by the Holder without the consent of the
Company, subject only to the provisions of Section 2(g) of the Securities
Purchase Agreement.

       

      18.           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 18(d)), registered as the Holder
may request, representing the outstanding Principal being transferred by the
Holder and, if less than the entire outstanding Principal is being transferred,
a new Note (in accordance with Section 18(d)) to the Holder representing the
outstanding Principal not being transferred. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that, by reason of the provisions
of Section 3(c)(iii) following conversion or redemption of any portion of this
Note, the outstanding Principal represented by this Note may be less than the
Principal stated on the face of this Note.

      
        
           

        

        
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      (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 (as to
which a written certification and the indemnification contemplated below shall
suffice as such evidence), and, in the case of loss, theft or destruction, of
any indemnification undertaking by the Holder to the Company in customary and
reasonable form and, in the case of mutilation, upon surrender and cancellation
of this Note, the Company shall execute and deliver to the Holder a new Note (in
accordance with Section 18(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 18(d) and in principal amounts of at least
$1,000) representing in the aggregate the outstanding Principal of this Note,
and each such new Note will represent such portion of such outstanding Principal
as is designated by the Holder at the time of such surrender.

       

      (d)           Issuance of New
Notes. Whenever the Company is required to issue a new Note pursuant to
the terms of this Note, such new Note (i) shall be of like tenor with this Note,
(ii) shall represent, as indicated on the face of such new Note, the Principal
remaining outstanding (or in the case of a new Note being issued pursuant to
Section 18(a) or Section 18(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, from the
Issuance Date.

       

      19.           REMEDIES, CHARACTERIZATIONS,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided
in this Note shall be cumulative and in addition to all other remedies available
under this Note and any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the Holder’s right to pursue actual and consequential
damages for any failure by the Company to comply with the terms of this
Note.  The Company covenants to the Holder that there shall be no
characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments,
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. The Company shall provide all information and documentation to the
Holder that is requested by the Holder to enable the Holder to confirm the
Company’s compliance with the terms and conditions of this Note (including,
without limitation, compliance with Section 7).

      
        
           

        

        
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      20.           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, without limitation,
attorneys’ fees and disbursements. The Company expressly acknowledges and agrees
that no amounts due under this Note shall be affected, or limited, by the fact
that the Purchase Price paid for this Note was less than the original Principal
amount hereof.

       

      21.           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. Terms used
in this Note but defined in the other Transaction Documents shall have the
meanings ascribed to such terms on the Closing Date in such other Transaction
Documents unless otherwise consented to in writing by the Holder.

       

      22.           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. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party.

       

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

      
        
           

        

        
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      24.          NOTICES;
PAYMENTS.

       

      (a)           Notices. Whenever
notice is required to be given under this Note, unless otherwise provided
herein, such notice shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement. The Company shall provide the Holder with prompt
written notice of all actions taken pursuant to this Note, including in
reasonable detail a description of such action and the reason therefore. Without
limiting the generality of the foregoing, the Company will give written notice
to the Holder (i) immediately upon any adjustment of the Conversion Price,
setting forth in reasonable detail, and certifying, the calculation of such
adjustment and (ii) at least fifteen (15) days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any grant, issuances, or
sales of any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of shares of Common Stock or
(C) for determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be
made known to the public prior to or in conjunction with such notice being
provided to the Holder.

       

      (b)           Payments. Whenever
any payment of cash is to be made by the Company to any Person pursuant to this
Note, unless otherwise expressly set forth herein, such payment shall be made in
lawful money of the United States of America by a certified check drawn on the
account of the Company and sent via overnight courier service to such Person at
such address as previously provided to the Company in writing (which address, in
the case of each of the Buyers, shall initially be as set forth on the Schedule
of Buyers attached to the Securities Purchase Agreement), provided that the
Holder may elect to receive a payment of cash via wire transfer of immediately
available funds by providing the Company with prior written notice setting out
such request and the Holder’s wire transfer instructions. Whenever any amount
expressed to be due by the terms of this Note is due on any day which is not a
Business Day, the same shall instead be due on the next succeeding day which is
a Business Day. Any amount of Principal or other amounts due under the
Transaction Documents which is not paid when due shall result in a late charge
being incurred and payable by the Company in an amount equal to interest on such
amount at the rate of eighteen percent (18%) per annum from the date such amount
was due until the same is paid in full (“Late Charge”).

       

      25.          CANCELLATION. After
all Principal, accrued Interest, Late Charges 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.

      
        
           

        

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

       

      27.           GOVERNING LAW. 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 Illinois, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Illinois or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of Illinois.
The Company hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of Chicago, State of Illinois, 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 TO, 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.

       

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

       

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

      
        
           

        

        
          28

          
            

          

        

        
           

        

      

       

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

       

      (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)           “Closing Bid Price” and “Closing Sale Price” means, for
any security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price
(as the case may be) then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the “pink sheets” by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price (as the case may be) of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved in accordance with the
procedures in Section 23. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar
transaction during such period.

       

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

       

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

       

      (g)           “Company Conversion Price”
means, with respect to a particular date of determination, the lower of (i) the
Conversion Price then in effect and (ii) the price which shall be computed as
90% of the quotient of (I) the sum of each of the VWAPs of the Common Stock for
each of the twenty (20) consecutive Trading Days immediately preceding the
applicable Installment Date (each such period, a “Company Conversion Measuring
Period”) divided by (II) twenty (20). All such determinations to be
appropriately adjusted for any stock split, stock dividend, stock combination or
other similar transaction during any such Company Conversion Measuring
Period.

      
        
           

        

        
          29

          
            

          

        

        
           

        

      

       

      (h)           “Conversion Share Ratio” means
as to any applicable Installment Date, the quotient of (i) the number of
Pre-Installment Conversion Shares delivered in connection with such Installment
Date divided by (ii) the number of Post-Installment Conversion Shares applicable
to such Installment Date.

       

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

       

      (j)           “Current Subsidiary” means any
Person in which the Company on the Subscription Date, directly or indirectly,
(i) owns any of the outstanding capital stock or holds any equity or similar
interest of such Person or (ii) controls or operates all or any part of the
business, operations or administration of such Person, and all of the foregoing,
collectively, “Current
Subsidiaries.”

       

      (k)           “Dollar Failure” means, with
respect to a particular date of determination, that the aggregate dollar trading
volume (as reported on Bloomberg) of the Common Stock on the Eligible Market on
which the Common Stock is listed or designated for quotation as of such date of
determination over the twenty (20) consecutive Trading Day period ending on the
Trading Day immediately preceding such date of determination is less than
$637,500.

       

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

      
        
           

        

        
          30

          
            

          

        

        
           

        

      

      (m)           “Equity Conditions” means: (i)
on each day during the period beginning one month prior to the applicable date
of determination and ending on and including the applicable date of
determination either (x) the applicable Registration Statement filed pursuant to
the Registration Rights Agreement shall be effective and the prospectus
contained therein shall be available for the resale by the Holder of all of the
Registrable Securities (which, solely for clarification purposes, includes all
shares of Common Stock issuable upon conversion of this Note, including, without
limitation, under Sections 3 and 8) in accordance with the terms of the
Registration Rights Agreement and there shall not have been during such period
any Grace Periods (as defined in the Registration Rights Agreement) or (y)
all Registrable Securities shall be eligible for sale without restriction under
Rule 144 (as defined in the Securities Purchase Agreement) (including, without
limitation, volume restrictions) and without the need for current public
information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) and
without the need for registration under any applicable federal or state
securities laws (in each case, disregarding any limitation on conversion of the
Notes and exercise of the Warrants); (ii) on each day during the period
beginning three months prior to the applicable date of determination and ending
on and including the applicable date of determination (the “Equity Conditions Measuring
Period”), the Common Stock (including all Registrable Securities) is
listed or designated for quotation (as applicable) on an Eligible Market and
shall not have been suspended from trading on an Eligible Market (other than
suspensions of not more than two (2) days and occurring prior to the applicable
date of determination due to business announcements by the Company) nor shall
delisting or suspension by an Eligible Market have been threatened (with a
reasonable prospect of delisting occurring) or pending either (A) in writing by
such Eligible Market or (B) by falling below the minimum listing maintenance
requirements of the Eligible Market on which the Common Stock is then listed or
designated for quotation (as applicable); (iii) on each day during the Equity
Conditions Measuring Period, the Company shall have delivered all shares of
Common Stock issuable upon conversion of this Note on a timely basis as set
forth in Section 3 hereof and all other shares of capital stock required to be
delivered by the Company on a timely basis as set forth in the other Transaction
Documents; (iv) any shares of Common Stock to be issued in connection with the
event requiring determination may be issued in full without violating Section
3(d) hereof; (v) any shares of Common Stock to be issued in connection with the
event requiring determination may be issued in full without violating the rules
or regulations of the Eligible Market on which the Common Stock is then listed
or designated for quotation (as applicable); (vi) on each day during the Equity
Conditions Measuring Period, no public announcement of a pending, proposed or
intended Fundamental Transaction shall have occurred which has not been
abandoned, terminated or consummated; (vii) the Company shall have no knowledge
of any fact that would reasonably be expected to cause (1) the applicable
Registration Statement required to be filed pursuant to the Registration Rights
Agreement to not be effective or the prospectus contained therein to not be
available for the resale of all of the Registrable Securities in accordance with
the terms of the Registration Rights Agreement or (2) any Registrable Securities
to not be eligible for sale without restriction pursuant to Rule 144 (including,
without limitation, volume restrictions) and without the need for current public
information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or any
applicable state securities laws (in each case, disregarding any limitation on
conversion of the Notes and exercise of the Warrants); (viii) the Holder shall
not be in (and no other Buyer shall be in) possession of any material,
non-public information provided to any of them by the Company, any of its
affiliates or any of their respective employees, officers, representatives,
agents or the like; (ix) on each day during the Equity Conditions Measuring
Period, the Company otherwise shall have been in compliance with and shall not
have breached any provision, covenant, representation or warranty of any
Transaction Document; and (x) on each day during the Equity Conditions Measuring
Period, there shall not have occurred an Event of Default or an event that with
the passage of time or giving of notice would constitute an Event of
Default.

       

      (n)           “Equity Conditions Failure”
means that on any day during the period commencing twenty (20) Trading Days
prior to the applicable Company Installment Notice Date through the later of the
applicable Installment Date and the date on which the applicable shares of
Common Stock are actually delivered to the Holder, the Equity Conditions have
not been satisfied (or waived in writing by the Holder).

      
        
           

        

        
          31

          
            

          

        

        
           

        

      

       

      (o)           “Equity Value Redemption
Premium” means 135%.

       

      (p)           “First Installment Date” means
June 23, 2010.

       

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

       

      (r)           “Fundamental Transaction Redemption
Premium” means 135%.

       

      (s)           
“GAAP” means United
States generally accepted accounting principles, consistently
applied.

       

      (t)           “Holder Pro Rata Amount” means
a fraction (i) the numerator of which is the original Principal amount of this
Note on the Closing Date and (ii) the denominator of which is the aggregate
original principal amount of all Notes issued to the initial purchasers pursuant
to the Securities Purchase Agreement on the Closing Date.

       

      (u)           “Installment Amount” means (i)
with respect to any Installment Date other than the Maturity Date, the lesser of
(A) the product of (I) $133,571.43 multiplied by (II) Holder Pro Rata Amount and
(B) the Principal amount under this Note as of such Installment Date, and (ii)
with respect to the Installment Date that is the Maturity Date, the Principal
amount under this Note as of such Installment Date, in each case, as any such
Installment Amount may be reduced pursuant to the terms of this Note, whether
upon conversion, redemption or otherwise, together with, in each case of clauses
(i) and (ii), the sum of any accrued and unpaid Interest as of such Installment
Date under this Note and accrued and unpaid Late Charges, if any, under this
Note as of such Installment Date. In the event the Holder shall sell or
otherwise transfer any portion of this Note, the transferee shall be allocated a
pro rata portion of the each unpaid Installment Amount hereunder.

       

      
        
           

        

        
          32

          
            

          

        

        
           

        

      

       

      (v)           “Installment Date” means each
of the following dates: the First Installment Date; each monthly anniversary of
the First Installment Date that occurs prior to the Maturity Date; and the
Maturity Date.

       

      (w)           “Interest Rate” means zero percent (0%)
per annum.

       

      (x)           “Maturity Date” shall mean December 23,
2010; provided, however, the Maturity Date may be extended at the option of the
Holder (i) in the event that, and for so long as, an Event of Default shall have
occurred and be continuing or any event shall have occurred and be continuing
that with the passage of time and the failure to cure would result in an Event
of Default or (ii) through the date that is twenty (20) Business Days after the
consummation of a Fundamental Transaction in the event that a Fundamental
Transaction is publicly announced or a Fundamental Transaction Notice is
delivered prior to the Maturity Date, provided further that if a Holder elects
to convert some or all of this Note pursuant to Section 3 hereof, and the
Conversion Amount would be limited pursuant to Section 3(d) hereunder, the
Maturity Date shall automatically be extended until such time as such provision
shall not limit the conversion of this Note.

       

      (y)           “New Subsidiary” means, as of
any date of determination, any Person in which the Company after the
Subscription Date, directly or indirectly, (i) owns or acquires any of the
outstanding capital stock or holds any equity or similar interest of such Person
or (ii) controls or operates all or any part of the business, operations or
administration of such Person, and all of the foregoing, collectively “New
Subsidiaries.”

       

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

       

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

       

      (bb)         “Permitted Indebtedness” means
(i) total Indebtedness of the Company and the Subsidiaries (other than as
expressly specified in, and permitted by, clauses (ii) through (v) below) not to
exceed $250,000 in the aggregate outstanding at any time; provided, however,
such Indebtedness shall be made expressly subordinate in right of payment to the
Indebtedness evidenced by the Notes, as reflected in a written agreement
acceptable to the Required Holders and approved by the Required Holders in
writing, and which Indebtedness does not provide at any time for (A) the
payment, prepayment, repayment, repurchase or defeasance, directly or
indirectly, of any principal or premium, if any, thereon until ninety-one (91)
days after the Maturity Date or later and (B) total interest and fees at a rate
in excess of the Interest Rate; (ii) equipment leases and purchase money
obligations of the Company not to exceed $150,000 in the aggregate outstanding
at any time; (iii) Indebtedness evidenced by this Note and the Other Notes; (iv)
the unsecured Indebtedness expressly set forth on Schedule 3(s) to the
Securities Purchase Agreement; provided, however, such Indebtedness shall be
made expressly subordinate in right of payment to the Indebtedness evidenced by
the Notes, as reflected in a written agreement acceptable to the Required
Holders and approved by the Required Holders in writing, and which Indebtedness
does not provide at any time for (A) the payment, prepayment, repayment,
repurchase or defeasance, directly or indirectly, of any principal or premium,
if any, thereon until ninety-one (91) days after the Maturity Date or later and
(B) total interest and fees at a rate in excess of 10%; and (v) Permitted
Project Indebtedness.

      
        
           

        

        
          33

          
            

          

        

        
           

        

      

       

      (cc)          “Permitted Liens” means (i) any
Lien for taxes not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of
business by operation of law with respect to a liability that is not yet due or
delinquent, (iii) any Lien created by operation of law, such as materialmen’s
liens, mechanics’ liens and other similar liens, arising in the ordinary course
of business with respect to a liability that is not yet due or delinquent or
that are being contested in good faith by appropriate proceedings, (iv) Liens
securing the Company’s obligations under the Notes; (v) any Lien securing
Permitted Senior Indebtedness and (vi) any Permitted Project Indebtedness
Lien.

       

      (dd)         “Permitted Project
Indebtedness” means Project
Indebtedness consented to, and approved, in advance by the Holder, which consent
and approval shall not be unreasonably withheld by the Holder.

       

      (ee)          “Permitted Project Indebtedness
Lien” means
any Lien granted by a Project Subsidiary to secure specific Permitted Project
Indebtedness of such Project Subsidiary, provided that such Lien is consented
to, and approved, in advance by the Holder, which consent and approval shall not
be unreasonably withheld by the Holder.

       

      (ff)           “Permitted Senior
Indebtedness” means the Indebtedness
described in, and permitted by, clause (ii) of Permitted
Indebtedness.

       

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

       

      (hh)         “Pre-Installment Conversion
Price” means, with respect to a particular date of determination, the
lower of (i) the Conversion Price then in effect and (ii) the price which shall
be computed as 90% of the quotient of (I) the sum of each of the VWAPs of the
Common Stock for each of the twenty (20) consecutive Trading Days immediately
preceding the delivery or deemed delivery of the applicable Company Installment
Notice divided by (II) twenty (20). All such determinations to be appropriately
adjusted for any stock split, stock dividend, stock combination or other similar
transaction during any such measuring period.

       

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

      
        
           

        

        
          34

          
            

          

        

        
           

        

      

       

      (jj)           “Project Indebtedness” means
secured Indebtedness incurred solely by a Project Subsidiary for the specific
purpose of development, construction and/or commission of the specific wind
energy power project of such Project Subsidiary, which secured Indebtedness is
secured solely by, and lent solely against, such specific project and as to
which neither the Company nor any other Subsidiary is a guarantor or is
otherwise responsible or obligated.

       

      (kk)          “Project Subsidiary” means a
Subsidiary whose sole purpose is to develop, construct and commission a specific
wind energy power project.

       

      (ll)           “Post-Installment Conversion
Shares” means that number of shares of Common Stock that would be
required to be delivered pursuant to Section 8 on an applicable Installment Date
without taking into account the delivery of any Pre-Installment Conversion
Shares.

       

      (mm)       “Quarter” means each of: (i)
the period beginning on and including January 1 and ending on and including
March 31; (ii) the period beginning on and including April 1 and ending on and
including June 30; (iii) the period beginning on and including July 1 and ending
on and including September 30; and (iv) the period beginning on and including
October 1 and ending on and including December 31.

       

      (nn)         “Redemption Notices” means,
collectively, the Event of Default Redemption Notice and the Fundamental
Transaction Redemption Notice, and each of the foregoing, individually, a “Redemption
Notice.”

       

      (oo)         “Redemption Premium” means (i)
in the case of the Events of Default described in Section 4(a) (other than
Sections 4(a)(ix) through 4(a)(xi)), 135% or (ii) in the case of the Events of
Default described in Sections 4(a)(ix) through 4(a)(xi), 100%.

       

      (pp)         “Redemption Prices” means,
collectively, the Event of Default Redemption Price, the Fundamental Transaction
Redemption Price and the Company Installment Redemption Price, and each of the
foregoing, individually, a “Redemption
Price.”

       

      (qq)         “Registration Rights Agreement”
means that certain registration rights agreement, dated as of the Closing Date,
by and among the Company and the initial holders of the Notes relating to, among
other things, the registration of the resale of the Common Stock issuable upon
conversion of the Notes and exercise of the Warrants, as may be amended from
time to time.

       

      (rr)           “Required Holders” means the
holders of Notes representing at least a majority of the aggregate principal
amount of the Notes then outstanding.

       

      (ss)          “SEC” means the United States
Securities and Exchange Commission or the successor thereto.

       

      (tt)           “Securities Purchase Agreement”
means that certain securities purchase agreement, dated as of the Subscription
Date, by and among the Company and the initial holders of the Notes pursuant to
which the Company issued the Notes and Warrants, as may be amended from time to
time.

      
        
           

        

        
          35

          
            

          

        

        
           

        

      

      (uu)          “Security Agreement” means that
certain security agreement, dated as of the Closing Date, by and among the
Company, the Subsidiaries and the initial holders of the Notes, as may be
amended from time to time.

       

      (vv)          “Subscription Date” means
November 23, 2009.

       

      (ww)        “Subsidiaries” means, as of any
date of determination, collectively, all Current Subsidiaries and all New
Subsidiaries, and each of the foregoing, individually, a “Subsidiary.”

       

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

       

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

       

      (zz)           “VWAP” means, for any security
as of any date, the dollar volume-weighted average price for such security on
the Principal Market (or, if the Principal Market is not the principal trading
market for such security, then on the principal securities exchange or
securities market on which such security is then traded) during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.). If the VWAP cannot be calculated for such security on such date on any of
the foregoing bases, the VWAP of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved in accordance with the procedures
in Section 23. All such determinations shall be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction
during such period.

      
        
           

        

        
          36

          
            

          

        

        
           

        

      

       

      (aaa)       “Volume Failure” means, with
respect to a particular date of determination, the average daily volume (as
reported on Bloomberg) of the Common Stock on the Eligible Market on which the
Common Stock is listed or designated for quotation as of such date of
determination over the twenty (20) consecutive Trading Day period ending on the
Trading Day immediately preceding such date of determination is less than 40,500
shares per day (adjusted for any stock dividend, stock split, stock combination
or other similar transaction during such period).

       

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

       

      29.           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, non-public information
relating to the Company or any of its Subsidiaries, the Company shall within one
(1) Business Day after any such receipt or delivery publicly disclose such
material, non-public information on a Current Report on Form 8-K or otherwise.
In the event that the Company believes that a notice contains material,
non-public information relating to the Company or any of its Subsidiaries, the
Company so shall indicate to such 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,
non-public information relating to the Company or its Subsidiaries. Nothing
contained in this Section 29 shall limit any obligations of the Company, or any
rights of the Holder, under Section 4(i) of the Securities Purchase
Agreement.

       

      30.           MAXIMUM PAYMENTS.
Without limiting Section 9(d) of the Securities Purchase Agreement, nothing
contained in this Note shall, or shall be deemed to, establish or require the
payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest required to
be paid or other charges under this Note exceeds the maximum permitted by such
law, any payments in excess of such maximum shall be credited against amounts
owed by the Company to the Holder and thus refunded to the Company.

       

      [signature page
follows]

      
        
           

        

        
          37

          
            

          

        

        
           

        

      

       

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

       

      
        
          
            
              	
                      NACEL
      Energy Corporation

                    
	 	 
	
                      By:

                    	
                         /s/ Mark
      Schaftlein

                    
	 
      	
                      Name:
      Mark Schaftlein

                    
	 
      	
                      Title:
      Chief Executive
Officer

                    

            

          

        

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
I

       

      NACEL
ENERGY CORPORATION

      CONVERSION
NOTICE

       

      Reference
is made to the Senior Secured Convertible Note (the “Note”) issued to the
undersigned by NACEL Energy Corporation (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, $0.001 par value 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)

                                                                                    	 
      
	
                                                                                      Installment
      Amount(s) to be reduced (and corresponding Installment Date(s)) and amount
      of reduction:

                                                                                    	
                                                                                       

                                                                                    

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      ACKNOWLEDGMENT

       

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

      

      
        
          
            
              
                	
                        NACEL
      Energy Corporation

                      
	 	 
	
                        By:

                      	 
      
	 
      	
                        Name:

                      
	 
      	
                        Title:

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