Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - Solar Enertech Corp. - Exhibit 10.2

EXHIBIT A

 FORM OF SERIES A NOTE

FORM OF SERIES A CONVERTIBLE NOTE

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

SOLAR ENERTECH
CORP.

SERIES A CONVERTIBLE
NOTE

	Issuance Date: March 7, 2007 	Original Principal Amount: U.S. $_____________
    

     FOR VALUE RECEIVED, Solar
  Enertech Corp., a Nevada corporation (the "Company"), hereby promises
  to pay to [___________] or its registered assigns ("Holder") the amount
  set out above as the Original Principal Amount (as reduced pursuant to the terms
  hereof pursuant to conversion or otherwise, the "Principal") when due,
  whether upon the Maturity Date (as defined below), acceleration, redemption
  or otherwise (in each case in accordance with the terms hereof) and to pay interest
  ("Interest") on any outstanding Principal at the Interest Rate as required
  by Section 2 hereof. This Series A Convertible Note (including all Convertible
  Notes issued in exchange, transfer or replacement hereof, this "Note")
  is one of an issue of Convertible Notes issued pursuant to the Securities Purchase
  Agreement (as defined below) on the Closing Date (collectively, the "Notes"
  and such other Convertible Notes, the "Other Notes"). Certain capitalized
  terms used herein are defined in Section 27. Capitalized terms used but not
  defined herein shall have the meanings set forth in the Securities Purchase
  Agreement (as defined below). 

     (1) PAYMENTS OF PRINCIPAL.
On the Maturity Date, the Company shall pay to the Holder an amount in cash
representing all outstanding Principal, accrued and unpaid Interest, if any, and
accrued and unpaid Late Charges, if any, on such Principal and Interest. The

"Maturity Date" shall be March 7, 2010, as may be extended at the option of the Holder (i) in the event that, and for so long as, a Trigger Event (as defined in Section 4(a)) shall have occurred and be continuing on the Maturity Date (as may
be extended pursuant to this Section 1) or any event that shall have occurred and be continuing that with the passage of time and the failure to cure would result in a Trigger Event, and (ii) through the date that is ten (10) Business Days after the
consummation of a Change of Control in the event that a Change of Control is publicly announced or a Change of Control Notice (as defined in Section 5(b)) is delivered prior to the Maturity Date. Other than as specifically permitted by the Note, the
Company may not prepay any portion of the outstanding Principal, accrued and unpaid Interest or accrued and unpaid Late Charges, if any, on Principal and Interest.

     (2) INTEREST; INTEREST RATE. During the term of this Note, Interest shall accrue on outstanding Principal at an interest rate equal to six percent (6%) per annum (the “Interest Rate”) commencing
on the Issuance Date. Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed, to the extent permitted by applicable law. Any Interest that shall accrue hereunder shall be payable quarterly in arrears on
each January 1, April 1, July 1 and October 1 (each an “Interest Payment Due Date”), beginning on the first such date after the Issuance Date hereof, in cash or registered shares of Common Stock (“Interest Shares”)
at the option of the Company. If the Company elects to pay any Interest due in registered shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”): (i) the issuance price of the Interest Shares
will be 90% of the 5-day Weighted Average Price (as defined in Section 27(hh)) of the Common Stock ending on the day prior to the Interest payment due date, (ii) the Common Stock shall have traded an average of at least 500,000 shares per day for
each of the five trading days prior to the applicable Interest Payment Due Date, and (iii) a Trigger Event, as defined below, in accordance with Section 4(a)(v), shall not have occurred. Interest hereunder will be paid to the Holder or its assignee
in whose name this Note is registered on the records of the Company regarding registration and transfers of Notes.

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

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

           (b)
  Forced Conversion. Upon thirty (30) days prior written notice to all
  of the Holders, the Company shall have the right to call all, but not less than
  all, of the Notes for 

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Conversion at the Conversion Price (as defined below)(the call date specified in such notice is referred to herein as the “Forced Conversion Date”) provided that: (i) the Company’s Common Stock has closed at a price equal to or
greater than 300% of the then applicable Conversion Price for each of the twenty (20) trading days immediately preceding the Forced Conversion Date (“Measurement Period”); (ii) there is either an effective registration statement
providing for the resale of the shares of Common Stock underlying the Notes during each trading day of the Measurement Period or all of the shares of Common Stock underlying the Notes may be resold pursuant to Rule 144(k) of the Securities Act
without restriction during each trading day of the Measurement Period; and (iii) the Common Stock has traded an average of 500,000 shares per day during the Measurement Period.  Notwithstanding the foregoing, in no event shall the Company force the
conversion of a Holder of Notes if such forced conversion would result in such Holder beneficially owning more than Maximum Percentage I or Maximum Percentage II (each as defined below in Section 3(e)(1)(A) and Section 3(e)(1)(A), respectively).

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

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

                (ii)
  "Conversion Price" means, as of any Conversion Date (as defined below)
  or other date of determination, an amount equal to $0.69, subject to adjustment
  as provided herein.

           (d)
  Mechanics of Conversion.

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

 4

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

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

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

                (iii)
  Registration; Book-Entry. The Company shall maintain a register (the
  "Register") for the recordation of the names and addresses of the holders
  of each Note and the principal amount of the Notes held by such holders (the
  "Registered Notes"). The entries in the Register shall be conclusive
  and binding for all purposes absent manifest error. The Company and the holders
  of the Notes shall treat each Person whose name is recorded in the Register
  as the owner of a Note for all purposes, including, without limitation, the
  right to receive payments of principal and interest hereunder, notwithstanding
  notice to the contrary. A Registered Note may be assigned or sold in whole or
  in part only by registration of such assignment or sale on the Register. Upon
  its receipt of a request to assign or sell all or part of any Registered Note
  by a Holder, the Company shall record the information contained therein in the
  Register and issue one or more new Registered Notes in the same aggregate principal
  amount as the principal amount of the surrendered Registered Note to the designated
  assignee or transferee pursuant to Section 17. Notwithstanding anything to the
  contrary set forth herein, 

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upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or
(B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note.  The Holder and the Company shall maintain records
showing the Principal, Interest and Late Charges, if any, converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon
conversion.

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

      (e) Limitations on Conversions.

     (1)
  Beneficial Ownership. (A) The Company shall not effect the conversion of
  this Note or issue Interest Shares, and the Holder shall not have the right
  to convert this Note or receive Interest Shares, to the extent that after giving
  effect to such conversion or issuance, such Person (together with such Person's
  affiliates) would beneficially own in excess of 4.99% (the "Maximum Percentage
  I") of the shares of Common Stock outstanding immediately after giving effect
  to such conversion or issuance, as the case may be. For purposes of the foregoing
  sentence, the aggregate number of shares of Common Stock beneficially owned
  by such Person and its affiliates shall include the number of shares of Common
  Stock issuable upon conversion of this Note with respect to which the determination
  of such sentence is being made, but shall exclude shares of Common Stock which
  would be issuable upon (i) conversion of the remaining, unconverted portion
  of this Note beneficially owned by such Person and its affiliates and (ii) exercise
  or conversion of the unexercised or unconverted portion of any other securities
  of the Company beneficially owned by such Person and its affiliates (including,
  without limitation, any convertible notes or convertible preferred stock or
  warrants) subject to a limitation on conversion or exercise analogous to the
  limitation contained herein. Except as set forth in the preceding sentence,
  for purposes of this paragraph, beneficial ownership shall be calculated in
  accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended.
  For purposes of this Note, in determining the number of outstanding shares of
  Common Stock, the Holder may rely on the number of outstanding shares of Common
  Stock as reflected in (1) the Company's most recent Form 10-K, Form 10-KSB,
  Form 10-Q, Form 10-QSB, Current Report on Form 8-K or other public filing with
  the Securities and Exchange Commission, as the 

 6

case may be, (2) a more recent public
  announcement by the Company or (3) any other notice by the Company or the Transfer
  Agent setting forth the number of shares of Common Stock outstanding. For any
  reason at any time, upon the written or oral request of the Holder, the Company
  shall within one Business Day confirm orally and in writing to the Holder the
  number of shares of Common Stock then outstanding. In any case, the number of
  outstanding shares of Common Stock shall be determined after giving effect to
  the conversion or exercise of securities of the Company, including the Notes
  and the Warrants, by the Holder and its affiliates since the date as of which
  such number of outstanding shares of Common Stock was reported. By written notice
  to the Company, the Holder may from time to time increase or decrease the Maximum
  Percentage I to any other percentage in excess of 4.99% specified in such notice;
  provided that (i) any such increase will not be effective until the sixty-first
  (61st) day after such notice is delivered to the Company, and (ii)
  any such increase or decrease will apply only to the Holder and not to any other
  holder of Warrants.

     (B) The
  Company shall not effect the conversion of this Note or issue Interest Shares,
  and the Holder shall not have the right to convert this Note or receive Interest
  Shares, to the extent that after giving effect to such conversion or issuance,
  such Person (together with such Person's affiliates) would beneficially own
  in excess of 9.99% (the "Maximum Percentage II") of the shares of Common
  Stock outstanding immediately after giving effect to such conversion or issuance,
  as the case may be. For purposes of the foregoing sentence, the aggregate number
  of shares of Common Stock beneficially owned by such Person and its affiliates
  shall include the number of shares of Common Stock issuable upon conversion
  of this Note with respect to which the determination of such sentence is being
  made, but shall exclude shares of Common Stock which would be issuable upon
  (i) conversion of the remaining, unconverted portion of this Note beneficially
  owned by such Person and its affiliates and (ii) exercise or conversion of the
  unexercised or unconverted portion of any other securities of the Company beneficially
  owned by such Person and its affiliates (including, without limitation, any
  convertible notes or convertible preferred stock or warrants) subject to a limitation
  on conversion or exercise analogous to the limitation contained herein. Except
  as set forth in the preceding sentence, for purposes of this paragraph, beneficial
  ownership shall be calculated in accordance with Section 13(d) of the Securities
  Exchange Act of 1934, as amended. For purposes of this Note, in determining
  the number of outstanding shares of Common Stock, the Holder may rely on the
  number of outstanding shares of Common Stock as reflected in (1) the Company's
  most recent Form 10-K, Form 10-KSB, Form 10-Q, Form 10-QSB, Current Report on
  Form 8-K or other public filing with the Securities and Exchange Commission,
  as the case may be, (2) a more recent public announcement by the Company or
  (3) any other notice by the Company or the Transfer Agent setting forth the
  number of shares of Common Stock outstanding. For any reason at any time, upon
  the written or oral request of the Holder, the Company shall within one Business
  Day confirm orally and in writing to the Holder the number of shares of Common
  Stock then outstanding. In any case, the number of outstanding shares of Common
  Stock shall be determined after giving effect to the conversion or exercise
  of securities of the Company, including the Notes and the Warrants, by the Holder
  and its affiliates since the date as of which such number of outstanding shares
  of Common Stock was reported. By written notice to the Company, 

 7

the Holder may from time to time increase
  or decrease the Maximum Percentage II to any other percentage in excess of 9.99%
  specified in such notice; provided that (i) any such increase will not be effective
  until the sixty-first (61st) day after such notice is delivered to
  the Company, and (ii) any such increase or decrease will apply only to the Holder
  and not to any other holder of Warrants.

     (2)
  Principal Market Regulation. The Company shall not be obligated to issue
  any shares of Common Stock upon conversion of this Note or exercise of the Warrants
  and no Buyer shall be entitled to receive any shares of Common Stock if the
  issuance of such shares of Common Stock would exceed that number of shares of
  Common Stock which the Company may issue upon exercise or conversion, as applicable,
  of the Warrants and Notes or otherwise without breaching the Company's obligations
  under the rules or regulations of any applicable Eligible Market (the "Exchange
  Cap"), except that such limitation shall not apply in the event that the
  Company (A) obtains the approval of its stockholders as required by the applicable
  rules of the Eligible Market for issuances of shares of Common Stock in excess
  of such amount or (B) obtains a written opinion from outside counsel to the
  Company that such approval is not required, which opinion shall be reasonably
  satisfactory to the Required Holders. Until such approval or written opinion
  is obtained, no Buyer shall be issued in the aggregate, upon exercise or conversion,
  as applicable, of any Warrants or Notes, shares of Common Stock in an amount
  greater than the product of the Exchange Cap multiplied by a fraction, the numerator
  of which is the total number of shares of Common Stock underlying the Notes
  issued to such Buyer pursuant to the Securities Purchase Agreement on the Issuance
  Date and the denominator of which is the aggregate number of shares of Common
  Stock underlying the Series A Notes and Series B Notes issued to the Buyers
  pursuant to the Securities Purchase Agreement on the Issuance Date (with respect
  to each Buyer, the "Exchange Cap Allocation"). In the event that any
  Buyer shall sell or otherwise transfer any of such Buyer's Notes, the transferee
  shall be allocated a pro rata portion of such Buyer's Exchange Cap Allocation,
  and the restrictions of the prior sentence shall apply to such transferee with
  respect to the portion of the Exchange Cap Allocation allocated to such transferee.
  In the event that any holder of Notes shall convert all of such holder's Notes
  into a number of shares of Common Stock which, in the aggregate, is less than
  such holder's Exchange Cap Allocation, then the difference between such holder's
  Exchange Cap Allocation and the number of shares of Common Stock actually issued
  to such holder shall be allocated to the respective Exchange Cap Allocations
  of the remaining holders of Series A Notes and Series B Notes on a pro rata
  basis in proportion to the total number of shares of Common Stock underlying
  the Series A Notes and the Series B Notes then held by each such holder. In
  the event that the Company is prohibited from issuing any Conversion Shares
  for which a Conversion Notice has been received as a result of the operation
  of this Section 3(e)(2), the Company shall pay cash in exchange for cancellation
  of such Conversion Shares, at a price per Conversion Share equal to the difference
  between the Weighted Average Price and the Conversion Price as of the date of
  the attempted conversion.

 8

      (4) RIGHTS UPON TRIGGER EVENT.

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

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

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

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

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

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

                (vi)
  A) any payment default or other default occurs under any Indebtedness of the
  Company or any of its Subsidiaries (as defined in Section 3(a) of the 

 9

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

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

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

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

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

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

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

           (b)
  Redemption Right. Upon the occurrence of a Trigger Event with respect
  to this Note or any Other Note, the Company shall within (1) Business Day deliver
  written notice thereof via facsimile or e-mail and overnight courier (a "Trigger
  Event Notice") to the Holder. At any time after the earlier of the Holder's
  receipt of a Trigger Event Notice and 

 10

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

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

           (a)
  Assumption. The Company shall not enter into or be party to a Fundamental
  Transaction unless (i) the Successor Entity assumes in writing all of the obligations
  of the Company under this Note and the other Transaction Documents in accordance
  with the provisions of this Section 5(a) pursuant to written agreements in form
  and substance satisfactory to the Required Holders and approved by the Required
  Holders prior to such Fundamental Transaction, including agreements to deliver
  to each holder of Notes in exchange for such Notes a security of the Successor
  Entity evidenced by a written instrument substantially similar in form and substance
  to the Notes, including, without limitation, having a principal amount and interest
  rate equal to the principal amounts then outstanding and the interest rates
  of the Notes held by such holder, having similar conversion rights as the Notes
  and having similar ranking to the Notes, and satisfactory to the Required Holders
  and (ii) the Successor Entity (including its Parent Entity) is a publicly traded
  corporation whose common stock is quoted on or listed for trading on an Eligible
  Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity
  shall succeed to, and be substituted for (so that from and after the date of
  such Fundamental Transaction, the provisions of this Note referring to the "Company"
  shall refer instead to the Successor Entity), and may exercise every right and
  power of the Company and shall assume all of the obligations of the Company
  under this Note with the same effect as if such Successor Entity had been named
  as the Company herein. Upon consummation of the Fundamental Transaction, the
  Successor Entity shall deliver to the Holder confirmation that there shall be

 11

issued upon conversion or redemption of this Note at any time after the consummation of the Fundamental Transaction, in lieu of the shares of the Company's Common Stock (or other securities, cash, assets or other property) issuable upon the
conversion or redemption of the Notes prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity), as adjusted in accordance with the provisions
of this Note. The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion or redemption of this Note.

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

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

           (a)
  Purchase Rights. If at any time the Company grants, issues or sells any
  Options, Convertible Securities or rights to purchase stock, warrants, securities
  or other 

 12

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

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

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

     (8) ADJUSTMENT UPON ISSUANCE OF SHARES OF COMMON STOCK. If the Company issues or sells, or in accordance with this Section 8 is deemed to have issued or sold, any shares of Common Stock (including the issuance or
sale of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock deemed to have been issued by the Company in connection with any Excluded Securities for a consideration per share (the "New
Issuance Price") less than a price (the "Applicable Price") equal to the Conversion Price in effect immediately prior to such issue or sale or deemed issuance or sale (the foregoing a "Dilutive Issuance"), then immediately after
such Dilutive 

 13

Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price. Upon each such adjustment of the Conversion Price hereunder, the number of Conversion Shares shall be adjusted to the number of shares of
Common Stock determined by multiplying the Conversion Price in effect immediately prior to such adjustment by the number of Conversion Shares acquirable upon conversion of this Note immediately prior to such adjustment and dividing the product
thereof by the Conversion Price resulting from such adjustment. For purposes of determining the adjusted Conversion Price under this Section 8, the following shall be applicable:

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

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

           (c)
  Change in Option Price or Rate of Conversion. If the purchase price provided
  for in any Options, the additional consideration, if any, payable upon the issue,
  conversion, exercise or exchange of any Convertible Securities, or the rate
  at which any Convertible Securities are convertible into or exercisable or exchangeable
  for shares of Common Stock increases or 

 14

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

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

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

 15

sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

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

      (10) RESERVATION OF AUTHORIZED
  SHARES.

           (a)
  Reservation. So long as any of the Notes are outstanding, the Company
  shall take all action necessary to reserve and keep available out of its authorized
  and unissued Common Stock, solely for the purpose of effecting the conversion
  of the Notes, 120% of the number of shares of Common Stock as shall from time
  to time be necessary to effect the conversion of all of the Notes then outstanding;
  provided that at no time shall the number of shares of Common Stock so reserved
  be less than the number of shares required to be reserved by the previous sentence
  (without regard to any limitations on conversions) (the "Required Reserve
  Amount"). The number of shares of Common Stock reserved for conversions
  of the Notes and each increase in the number of shares so reserved shall be
  allocated pro rata among the holders of the Notes based on the principal amount
  of the Notes held by each holder at the Closing (as defined in the Securities
  Purchase Agreement) or increase in the number of reserved shares, as the case
  may be (the "Authorized Share Allocation"). In the event that a holder
  shall sell or otherwise transfer any of such holder's Notes, each transferee
  shall be allocated a pro rata portion of such holder's Authorized Share Allocation.
  Any shares of Common Stock reserved and allocated to any Person which ceases
  to hold any Notes shall be allocated to the remaining holders of Notes, pro
  rata based on the principal amount of the Notes then held by such holders.

           (b)
  Insufficient Authorized Shares. If at any time 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.

 16

      (11) HOLDER'S REDEMPTIONS.

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

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

 17

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

      (13) COVENANTS.

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

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

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

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

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

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

     (15) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES.  The affirmative vote of the Required Holders at a meeting duly called for such purpose or the written consent without a meeting of the Required Holders shall be
required for any change or 

 18

amendment to this Note or the Other Notes. No consideration shall be offered or paid to any holder of Notes to amend or consent to a waiver or modification of the Notes unless the same consideration also is offered to all of the holders of Notes.

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

      (17) REISSUANCE OF THIS NOTE.

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

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

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

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

 19

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

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

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

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

     (22) DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Closing Bid Price, the Closing Sale Price or the Weighted Average Price or the arithmetic calculation of the Conversion Rate or any
Redemption Price, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within one (1) Business Day of receipt, or deemed receipt, of the Conversion Notice or Redemption Notice or other event giving rise to
such dispute, as the case may be, to the Holder.  If the Holder and the Company are unable to agree upon such determination or calculation within one (1) Business Day of such disputed determination or arithmetic calculation being submitted to the
Holder, then the Company shall, within one (1) Business Day submit via facsimile (a) the disputed determination of the Closing Bid Price, the Closing Sale Price or the Weighted Average Price to an independent, reputable investment bank selected by
the Company and approved by the Holder or 

 20

(b) the disputed arithmetic calculation of the Conversion Rate or any Redemption Price to the Company's independent, outside accountant.  The Company, at the Company's expense, shall cause the investment bank or the accountant, as the case may be,
to perform the determinations or calculations and notify the Company and the Holder of the results no later than five (5) Business Days from the time it receives the disputed determinations or calculations.  Such investment bank's or accountant's
determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

      (23) NOTICES; PAYMENTS.

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

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

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

 21

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

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

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

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

           (b)
  "Bloomberg" means Bloomberg Financial Markets.

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

 22

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

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

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

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

           (h)
  “Convertible Notes” has the meaning ascribed to such term in
  the Securities Purchase Agreement, and shall include all notes issued in exchange
  thereof or replacement thereof.

 23

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

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

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

           (l)
  "Excluded Securities" means (A) any Common Stock issued or issuable:
  (i) in connection with any Approved Stock Plan; (ii) upon conversion of the
  Notes or the exercise of the Warrants; (iii) upon conversion of any Options
  or Convertible Securities which are outstanding on the day immediately preceding
  the Subscription Date, provided that the terms of such Options or Convertible
  Securities are not amended, modified or changed on or after the Subscription
  Date; (iv) in connection with mergers, acquisitions, strategic business partnerships
  or joint ventures, in each case with non-affiliated third parties and otherwise
  on an arm's-length basis, the primary purpose of which is not to raise additional
  capital; and (v) upon the issuance of Options or the exercise of any Options
  issued to financial institutions in connection with commercial credit agreements
  or issuance of non-convertible debt by the Company, (B) Series B Convertible
  Notes and Series B Warrants sold and issued pursuant to the terms of the Securities
  Purchase Agreement; provided, however, that each purchaser of such Series B
  Convertible Notes and Series B Warrants shall be a financially sophisticated
  business entity that participates in or deals with similar investments in the
  ordinary course of business, and that each such purchaser shall purchase a minimum
  of $1,000,000 in principal amount of such Series B Convertible Notes, and
  (C) any shares of Common Stock issued or issuable upon conversion or exercise
  of the Series B Convertible Notes and Series B Warrants described in the preceding
  clause (B).

           (m)"Fundamental
  Transaction" means that the Company shall, directly or indirectly, in one
  or more related transactions, (i) consolidate or merge with or into (whether
  or not the Company is the surviving corporation) another Person or Persons,
  or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially
  all of the properties or assets of the Company to another Person, or (iii) allow
  another Person to make a purchase, tender or exchange offer that is accepted
  by the holders of more than the 50% of the outstanding shares of Voting Stock
  (not including any shares of Voting Stock held by the Person or Persons making
  or party to, or associated or affiliated with the Persons making or party to,
  such purchase, tender or exchange offer), or (iv) consummate a stock purchase
  agreement or other business combination (including, without limitation, a reorganization,
  recapitalization, spin-off or scheme of arrangement) with another Person whereby
  such other Person acquires more than the 50% of the outstanding shares of Voting
  Stock (not including any shares of Voting Stock held by the other Person or
  other Persons making or party to, or associated or affiliated with the other
  Persons making or party to, such stock purchase agreement or other business
  combination), (v) reorganize, recapitalize or reclassify its Common Stock or
  (vi) any "person" or "group" (as these terms are used for purposes of Sections
  13(d) and 14(d) of the Exchange Act) is or shall become the "beneficial owner"
  (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, 

 24

of 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock.

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

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

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

           (q)
  "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.

           (r)
  "Permitted Indebtedness" means (i) the Indebtedness evidenced by this
  Note and the Other Notes; (ii) bonds required to be posted by the company to
  obtain regulatory permits, licenses or insurance as part of conducting its business;
  and (iii) indebtedness up to five million dollars ($5,000,000) per 25 mega
  watt of production capacity, so long as after entering into such arrangements
  or facilities, on a pro forma basis based on the financial statements of the
  Company for the quarter last ended before entering into the arrangements or
  facilities, and assuming full advance of all amounts available under the arrangements
  or facilities, neither the current ratio nor the ratio of total assets to total
  liabilities of the Company is less than 1:1.

 25

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

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

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

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

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

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

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

 26

           (z)
  "Required Holders" means, holders of Notes representing at least seventy
  five percent (75%) of the aggregate principal amount of the Notes then outstanding.

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

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

           (cc)
  "Subscription Date" means March 7, 2007.

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

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

           (ff)
  "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).

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

           (hh)
  "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.

           (ii)
  "Weighted Average Price" means, for any security as of any date, the
  dollar volume-weighted average price for such security on the Principal Market
  during the period beginning at 9:30:01 a.m., New York Time (or such other time
  as the Principal Market publicly announces is the official open of trading),
  and ending at 4:00:00 p.m., New York Time (or such other time as the Principal
  Market publicly announces is the official close of trading) as reported by Bloomberg
  through its "Volume at Price" functions, or, if the foregoing does not apply,
  the dollar volume-weighted average price of such security in the over-the-counter
  market on the 

 27

electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York Time (or such other time as such market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other
time as such market publicly announces is the official close of trading) as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price
and the lowest closing ask price of any of the market makers for such security as reported in the "pink sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the
fair market value of such security, then such dispute shall be resolved pursuant to Section 22.  All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the
applicable calculation period.

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

 [Signature Page Follows]

 28

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

	 	SOLAR ENERTECH CORP. 
	 	 	  
	 	 	  
	 	By: 	 
	 	 	Name: Leo Shi Young 
	 	 	Title: Chairman and CEO 

EXHIBIT I

SOLAR ENERTECH CORP.

CONVERSION NOTICE

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

	Date of Conversion:	 	 
	 	 	  
	Aggregate Conversion Amount to be converted: 	 	 
	 	 	  
	Please confirm the following information: 
	 	 	  
	Conversion Price:	 	 
	 	 	  
	Number of shares of Common Stock to be issued:	 	 
	 	 	  
	Please issue the Common Stock into which the Note is being
      converted in the following name and to the following address:
	 	 	  
	Issue to:	 	 
	 	 	 
	 	 	 
	 	 	  
	Facsimile Number: 	 	 
	 	 	  
	Authorization: 	 	 
	 	 	  
	By: 	 	 
	 	 	  
	Title: 	 	 
	 	 	  
	Dated:	 	 
	 	 	  
	Account Number:

      (if electronic book entry transfer)	 	 
	 	 	  
	Transaction Code Number: 

      (if electronic book entry transfer)	 	 

ACKNOWLEDGMENT

     The Company hereby acknowledges
this Conversion Notice and hereby directs Empire Stock Transfer Inc. to issue
the above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated March 7, 2007 from the Company and
acknowledged and agreed to by Empire Stock Transfer Inc.

	 	SOLAR ENERTECH CORP. 
	 	 	  
	 	 	  
	 	By: 	 
	 	 	Name: 
	 	 	Title: 

31Filed by Automated Filing Services Inc. (604) 609-0244 - Solar Enertech Corp- Exhibit 10.3

EXHIBIT B

FORM OF SERIES B NOTE

FORM OF SERIES B CONVERTIBLE NOTE

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

SOLAR ENERTECH
CORP.

SERIES B CONVERTIBLE
NOTE

	Issuance Date: March 7, 2007 	Original Principal Amount: U.S. $
      _____________ 

     FOR VALUE RECEIVED, Solar
Enertech Corp., a Nevada corporation (the "Company"), hereby promises to
pay to [_________] or its registered assigns ("Holder") the amount set
out above as the Original Principal Amount (as reduced pursuant to the terms
hereof pursuant to conversion or otherwise, the "Principal") when due,
whether upon the Maturity Date (as defined below), acceleration, redemption or
otherwise (in each case in accordance with the terms hereof) and to pay interest
("Interest") on any outstanding Principal at the Interest Rate as
required by Section 2 hereof. This Series B Convertible Note (including all
Convertible Notes issued in exchange, transfer or replacement hereof, this
"Note") is one of an issue of Convertible Notes issued pursuant to the
Securities Purchase Agreement (as defined below) on the Closing Date
(collectively, the "Notes" and such other Convertible Notes, the
"Other Notes"). Certain capitalized terms used herein are defined in
Section 27. Capitalized terms used but not defined herein shall have the
meanings set forth in the Securities Purchase Agreement (as defined below). 

     (1) PAYMENTS OF PRINCIPAL.
On the Maturity Date, the Company shall pay to the Holder an amount in cash
representing all outstanding Principal, accrued and unpaid Interest, if any, and
accrued and unpaid Late Charges, if any, on such Principal and Interest. The

"Maturity Date" shall be March 7, 2010, as may be
extended at the option of the Holder (i) in the event that, and for so long as,
a Trigger Event (as defined in Section 4(a)) shall have occurred and be
continuing on the Maturity Date (as may be extended pursuant to this Section 1)
or any event that shall have occurred and be continuing that with the passage of
time and the failure to cure would result in a Trigger Event, and (ii) through
the date that is ten (10) Business Days after the consummation of a Change of
Control in the event that a Change of Control is publicly announced or a Change
of Control Notice (as defined in Section 5(b)) is delivered prior to the
Maturity Date. Other than as specifically permitted by the Note, the Company may
not prepay any portion of the outstanding Principal, accrued and unpaid Interest
or accrued and unpaid Late Charges, if any, on Principal and Interest.

     (2) INTEREST; INTEREST
RATE. During the term of this Note, Interest shall accrue on outstanding
Principal at an interest rate equal to six percent (6%) per annum (the
“Interest Rate”) commencing on the Issuance Date. Interest shall be
calculated on the basis of a 365-day year and the actual number of days elapsed,
to the extent permitted by applicable law. Any Interest that shall accrue
hereunder shall be payable quarterly in arrears on each January 1, April 1, July
1 and October 1 (each an “Interest Payment Due Date”), beginning on the
first such date after the Issuance Date hereof, in cash or registered shares of
Common Stock (“Interest Shares”) at the option of the Company. If the
Company elects to pay any Interest due in registered shares of the Company’s
common stock, par value $0.001 per share (the “Common Stock”): (i) the
issuance price of the Interest Shares will be 90% of the 5-day Weighted Average
Price (as defined in Section 27(hh)) of the Common Stock ending on the day prior
to the Interest payment due date, (ii) the Common Stock shall have traded an
average of at least 500,000 shares per day for each of the five trading days
prior to the applicable Interest Payment Due Date, and (iii) a Trigger Event, as
defined below, in accordance with Section 4(a)(iv), shall not have occurred.
Interest hereunder will be paid to the Holder or its assignee in whose name this
Note is registered on the records of the Company regarding registration and
transfers of Notes.

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

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

          (b)
Forced Conversion. Upon thirty (30) days prior written notice to all of
the Holders, the Company shall have the right to call all, but not less than
all, of the Notes for

3

Conversion at the Conversion Price (as defined below)(the call
date specified in such notice is referred to herein as the “Forced Conversion
Date”) provided that: (i) the Company’s Common Stock has closed at a price
equal to or greater than 300% of the then applicable Series A Conversion Price
for each of the twenty (20) trading days immediately preceding the Forced
Conversion Date (“Measurement Period”); (ii) there is either an effective
registration statement providing for the resale of the shares of Common Stock
underlying the Notes during each trading day of the Measurement Period or all of
the shares of Common Stock underlying the Notes may be resold pursuant to Rule
144(k) of the Securities Act without restriction during each trading day of the
Measurement Period; and (iii) the Common Stock has traded an average of 500,000
shares per day during the Measurement Period. Notwithstanding the foregoing, in
no event shall the Company force the conversion of a Holder of Notes if such
forced conversion would result in such Holder beneficially owning more than
Maximum Percentage I or Maximum Percentage II (each as defined below in Section
3(e)(1)(A) and Section 3(e)(1)(A), respectively).

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

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

               (ii)
"Conversion Price" means, as of any Conversion Date (as defined below) or
other date of determination, an amount equal to $0.57, subject to adjustment as
provided herein.

          (d)
Mechanics of Conversion.

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

4

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

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

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

               (iii)
Registration; Book-Entry. The Company shall maintain a register (the
"Register") for the recordation of the names and addresses of the holders
of each Note and the principal amount of the Notes held by such holders (the
"Registered Notes"). The entries in the Register shall be conclusive and
binding for all purposes absent manifest error. The Company and the holders of
the Notes shall treat each Person whose name is recorded in the Register as the
owner of a Note for all purposes, including, without limitation, the right to
receive payments of principal and interest hereunder, notwithstanding notice to
the contrary. A Registered Note may be assigned or sold in whole or in part only
by registration of such assignment or sale on the Register. Upon its receipt of
a request to assign or sell all or part of any Registered Note by a Holder, the
Company shall record the information contained therein in the Register and issue
one or more new Registered Notes in the same aggregate principal amount as the
principal amount of the surrendered Registered Note to the designated assignee
or transferee pursuant to Section 17. Notwithstanding anything to the contrary
set forth herein,

5

upon conversion of any portion of this Note in accordance with
the terms hereof, the Holder shall not be required to physically surrender this
Note to the Company unless (A) the full Conversion Amount represented by this
Note is being converted or (B) the Holder has provided the Company with prior
written notice (which notice may be included in a Conversion Notice) requesting
reissuance of this Note upon physical surrender of this Note. The Holder and the
Company shall maintain records showing the Principal, Interest and Late Charges,
if any, converted and the dates of such conversions or shall use such other
method, reasonably satisfactory to the Holder and the Company, so as not to
require physical surrender of this Note upon conversion.

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

               (e)
  Limitations on Conversions.

                                   (1)
Beneficial Ownership. (A) The Company shall not effect the conversion of
this Note or issue Interest Shares, and the Holder shall not have the right to
convert this Note or receive Interest Shares, to the extent that after giving
effect to such conversion or issuance, such Person (together with such Person's
affiliates) would beneficially own in excess of 4.99% (the "Maximum
Percentage I") of the shares of Common Stock outstanding immediately after
giving effect to such conversion or issuance, as the case may be. For purposes
of the foregoing sentence, the aggregate number of shares of Common Stock
beneficially owned by such Person and its affiliates shall include the number of
shares of Common Stock issuable upon conversion of this Note with respect to
which the determination of such sentence is being made, but shall exclude shares
of Common Stock which would be issuable upon (i) conversion of the remaining,
unconverted portion of this Note beneficially owned by such Person and its
affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company beneficially owned by such Person
and its affiliates (including, without limitation, any convertible notes or
convertible preferred stock or warrants) subject to a limitation on conversion
or exercise analogous to the limitation contained herein. Except as set forth in
the preceding sentence, for purposes of this paragraph, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended. For purposes of this Note, in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (1) the Company's most recent
Form 10-K, Form 10-KSB, Form 10-Q, Form 10-QSB, Current Report on Form 8-K or
other public filing with the Securities and Exchange Commission, as the

6

case may be, (2) a more recent public announcement by the
Company or (3) any other notice by the Company or the Transfer Agent setting
forth the number of shares of Common Stock outstanding. For any reason at any
time, upon the written or oral request of the Holder, the Company shall within
one Business Day confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the conversion
or exercise of securities of the Company, including the Notes and the Warrants,
by the Holder and its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. By written notice to the
Company, the Holder may from time to time increase or decrease the Maximum
Percentage I to any other percentage in excess of 4.99% specified in such
notice; provided that (i) any such increase will not be effective until the
sixty-first (61st) day after such notice is delivered to the Company,
and (ii) any such increase or decrease will apply only to the Holder and not to
any other holder of Warrants.

     (B) The Company shall not effect
the conversion of this Note or issue Interest Shares, and the Holder shall not
have the right to convert this Note or receive Interest Shares, to the extent
that after giving effect to such conversion or issuance, such Person (together
with such Person's affiliates) would beneficially own in excess of 9.99% (the
"Maximum Percentage II") of the shares of Common Stock outstanding
immediately after giving effect to such conversion or issuance, as the case may
be. For purposes of the foregoing sentence, the aggregate number of shares of
Common Stock beneficially owned by such Person and its affiliates shall include
the number of shares of Common Stock issuable upon conversion of this Note with
respect to which the determination of such sentence is being made, but shall
exclude shares of Common Stock which would be issuable upon (i) conversion of
the remaining, unconverted portion of this Note beneficially owned by such
Person and its affiliates and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company beneficially owned by
such Person and its affiliates (including, without limitation, any convertible
notes or convertible preferred stock or warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein. Except as
set forth in the preceding sentence, for purposes of this paragraph, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended. For purposes of this Note, in determining the
number of outstanding shares of Common Stock, the Holder may rely on the number
of outstanding shares of Common Stock as reflected in (1) the Company's most
recent Form 10-K, Form 10-KSB, Form 10-Q, Form 10-QSB, Current Report on Form
8-K or other public filing with the Securities and Exchange Commission, as the
case may be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. For any reason at any time, upon the written
or oral request of the Holder, the Company shall within one Business Day confirm
orally and in writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of
the Company, including the Notes and the Warrants, by the Holder and its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. By written notice to the Company,

7

the Holder may from time to time increase or decrease the
Maximum Percentage II to any other percentage in excess of 9.99% specified in
such notice; provided that (i) any such increase will not be effective until the
sixty-first (61st) day after such notice is delivered to the Company,
and (ii) any such increase or decrease will apply only to the Holder and not to
any other holder of Warrants.

     (2) Principal Market
Regulation. The Company shall not be obligated to issue any shares of Common
Stock upon conversion of this Note or exercise of the Warrants and no Buyer
shall be entitled to receive any shares of Common Stock if the issuance of such
shares of Common Stock would exceed that number of shares of Common Stock which
the Company may issue upon exercise or conversion, as applicable, of the
Warrants and Notes or otherwise without breaching the Company's obligations
under the rules or regulations of any applicable Eligible Market (the
"Exchange Cap"), except that such limitation shall not apply in the event
that the Company (A) obtains the approval of its stockholders as required by the
applicable rules of the Eligible Market for issuances of shares of Common Stock
in excess of such amount or (B) obtains a written opinion from outside counsel
to the Company that such approval is not required, which opinion shall be
reasonably satisfactory to the Required Holders. Until such approval or written
opinion is obtained, no Buyer shall be issued in the aggregate, upon exercise or
conversion, as applicable, of any Warrants or Notes, shares of Common Stock in
an amount greater than the product of the Exchange Cap multiplied by a fraction,
the numerator of which is the total number of shares of Common Stock underlying
the Notes issued to such Buyer pursuant to the Securities Purchase Agreement on
the Issuance Date and the denominator of which is the aggregate number of shares
of Common Stock underlying the Series A Notes and the Series B Notes issued to
the Buyers pursuant to the Securities Purchase Agreement on the Issuance Date
(with respect to each Buyer, the "Exchange Cap Allocation"). In the event
that any Buyer shall sell or otherwise transfer any of such Buyer's Notes, the
transferee shall be allocated a pro rata portion of such Buyer's Exchange Cap
Allocation, and the restrictions of the prior sentence shall apply to such
transferee with respect to the portion of the Exchange Cap Allocation allocated
to such transferee. In the event that any holder of Notes shall convert all of
such holder's Notes into a number of shares of Common Stock which, in the
aggregate, is less than such holder's Exchange Cap Allocation, then the
difference between such holder's Exchange Cap Allocation and the number of
shares of Common Stock actually issued to such holder shall be allocated to the
respective Exchange Cap Allocations of the remaining holders of Series A Notes
and Series B Notes on a pro rata basis in proportion to the total number of
shares of Common Stock underlying the Series A Notes and the Series B Notes then
held by each such holder. In the event that the Company is prohibited from
issuing any Conversion Shares for which a Conversion Notice has been received as
a result of the operation of this Section 3(e)(2), the Company shall pay cash in
exchange for cancellation of such Conversion Shares, at a price per Conversion
Share equal to the difference between the Weighted Average Price and the
Conversion Price as of the date of the attempted conversion.

8

(4) RIGHTS UPON TRIGGER EVENT.

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

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

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

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

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

               (v)
A) any payment default or other default occurs under any Indebtedness of the
Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities
Purchase Agreement) that results in a redemption of or acceleration prior to
maturity of $100,000 or more of such Indebtedness in the aggregate, or (B) any
material default occurs under any Indebtedness of the Company or any of its
Subsidiaries having an aggregate outstanding balance in excess of $100,000 and
such default continues uncured for more than ten (10) Business Days, other than,
in each case (A) or (B) above, or a default with respect to any Other Notes;

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

9

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

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

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

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

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

     (b) Redemption Right. Upon
the occurrence of a Trigger Event with respect to this Note or any Other Note,
the Company shall within (1) Business Day deliver written notice thereof via
facsimile or e-mail and overnight courier (a "Trigger Event Notice") to
the Holder. At any time after the earlier of the Holder's receipt of a Trigger
Event Notice and the Holder becoming aware of a Trigger Event, the Holder may
require the Company to redeem all or any portion of this Note by delivering
written notice thereof (the "Trigger Event Redemption Notice") to the
Company, which Trigger Event Redemption Notice shall indicate the portion of
this Note the Holder is electing to have redeemed. Each portion of this Note
subject to redemption by the Company pursuant to this Section 4(b) shall be
redeemed by the Company at an amount equal to any accrued and unpaid liquidated
damages, plus the greater of (A) the Conversion Amount to be redeemed multiplied
by the Redemption Premium, or (B) the Conversion Amount to be redeemed
multiplied by the quotient of (i) the Closing Sale Price at the time of the
Triggering Event (or at the time of payment of the redemption price, if greater)
divided by (ii) the Conversion Price (the "Trigger Event Redemption
Price"), provided, however, (B) shall be applicable only in the event that a
Trigger Event of the type specified in Section 4(a)(i), (ii) or (iii) hereof has
occurred and remains uncured or the Conversion Shares otherwise could not be
received or sold by the Holder without any resale restrictions.
Redemptions required by this Section 4(b) shall be made in accordance with
the provisions of Section 11. To the extent redemptions required by this Section
4(b) are deemed or determined

10

by a court of competent jurisdiction to be prepayments of the
Note by the Company, such redemptions shall be deemed to be voluntary
prepayments. The parties hereto agree that in the event of the Company's
redemption of any portion of the Note under this Section 4(b), the Holder's
damages would be uncertain and difficult to estimate because of the parties'
inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for the Holder.
Accordingly, any Triggering Event Redemption Price due under this Section 4(b)
is intended by the parties to be, and shall be deemed, a reasonable estimate of
the Holder's actual loss of its investment opportunity and not as a penalty.

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

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

               (b)
Redemption Right. No sooner than fifteen (15) days nor later than ten
(10) days prior to the consummation of a Change of Control, but not prior to the
public announcement of such Change of Control, the Company shall deliver written
notice thereof via facsimile and overnight courier to the Holder (a "Change
of Control Notice"). At any time during the period beginning on the date of
the Holder's receipt of a Change of Control Notice and ending twenty (20)
Trading Days after the consummation of such Change of Control, the Holder may
require the Company to redeem all or any portion of this Note by delivering
written notice 

11

thereof ("Change of Control Redemption Notice") to the
Company, which Change of Control Redemption Notice shall indicate the Conversion
Amount the Holder is electing to have redeemed. The portion of this Note subject
to redemption pursuant to this Section 5 shall be redeemed by the Company in
cash for an amount equal to any accrued and unpaid liquidated damages, plus the
greater of (i) the product of (x) the Conversion Amount being redeemed and (y)
the quotient determined by dividing (A) the greater of the Closing Sale Price of
the Common Stock immediately prior to the consummation of the Change of Control,
the Closing Sale Price immediately following the public announcement of such
proposed Change of Control and the Closing Sale Price of the Common Stock
immediately prior to the public announcement of such proposed Change of Control
by (B) the Conversion Price and (ii) 125% of the Conversion Amount being
redeemed (the "Change of Control Redemption Price"). Redemptions required
by this Section 5 shall be made in accordance with the provisions of Section 11
and shall have priority to payments to stockholders in connection with a Change
of Control. To the extent redemptions required by this Section 5(b) are deemed
or determined by a court of competent jurisdiction to be prepayments of the Note
by the Company, such redemptions shall be deemed to be voluntary prepayments.
Notwithstanding anything to the contrary in this Section 5, until the Change of
Control Redemption Price is paid in full, the Conversion Amount submitted for
redemption under this Section 5(b) may be converted, in whole or in part, by the
Holder into Common Stock pursuant to Section 3. The parties hereto agree that in
the event of the Company's redemption of any portion of the Note under this
Section 5(b), the Holder's damages would be uncertain and difficult to estimate
because of the parties' inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute investment opportunity
for the Holder. Accordingly, any redemption premium due under this Section 5(b)
is intended by the parties to be, and shall be deemed, a reasonable estimate of
the Holder's actual loss of its investment opportunity and not as a penalty.

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

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

               (b)
Other Corporate Events. In addition to and not in substitution for any
other rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a "Corporate Event"), the Company shall make appropriate provision
to insure that the Holder will thereafter have the right to receive upon a
conversion of this Note, (i) in addition to the shares of Common Stock
receivable upon such conversion, such securities or other assets to which the
Holder would have been entitled

12

with respect to such shares of Common Stock had such shares of
Common Stock been held by the Holder upon the consummation of such Corporate
Event (without taking into account any limitations or restrictions on the
convertibility of this Note) or (ii) in lieu of the shares of Common Stock
otherwise receivable upon such conversion, such securities or other assets
received by the holders of shares of Common Stock in connection with the
consummation of such Corporate Event in such amounts as the Holder would have
been entitled to receive had this Note initially been issued with conversion
rights for the form of such consideration (as opposed to shares of Common Stock)
at a conversion rate for such consideration commensurate with the Conversion
Rate. Provision made pursuant to the preceding sentence shall be in a form and
substance satisfactory to the Required Holders. The provisions of this Section
shall apply similarly and equally to successive Corporate Events and shall be
applied without regard to any limitations on the conversion or redemption of
this Note.

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

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

               (a)
Issuance of Options. If the Company in any manner grants any Options and
the lowest price per share for which one share of Common Stock is issuable upon
the exercise of any such Option or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option is less than
the Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share. For purposes of this
Section 8(a), the "lowest price per share for which one share of Common
Stock

13

is issuable upon exercise of such Options or upon conversion,
exercise or exchange of such Convertible Securities" shall be equal to the sum
of the lowest amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the granting or sale
of the Option, upon exercise of the Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such Option. No
further adjustment of the Conversion Price or number of Conversion Shares shall
be made upon the actual issuance of such shares of Common Stock or of such
Convertible Securities upon the exercise of such Options or upon the actual
issuance of such shares of Common Stock upon conversion, exercise or exchange of
such Convertible Securities. 

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

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

               (d)
Calculation of Consideration Received. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one

14

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

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

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

     (10) RESERVATION OF AUTHORIZED
SHARES.

               (a)
Reservation. So long as any of the Notes are outstanding, the Company
shall take all action necessary to reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Notes, 120% of the number of shares of Common Stock as shall
from time to time be necessary to effect the 

15

conversion of all of the Notes then outstanding; provided that
at no time shall the number of shares of Common Stock so reserved be less than
the number of shares required to be reserved by the previous sentence (without
regard to any limitations on conversions) (the "Required Reserve
Amount"). The number of shares of Common Stock reserved for conversions of
the Notes and each increase in the number of shares so reserved shall be
allocated pro rata among the holders of the Notes based on the principal amount
of the Notes held by each holder at the Closing (as defined in the Securities
Purchase Agreement) or increase in the number of reserved shares, as the case
may be (the "Authorized Share Allocation"). In the event that a holder
shall sell or otherwise transfer any of such holder's Notes, each transferee
shall be allocated a pro rata portion of such holder's Authorized Share
Allocation. Any shares of Common Stock reserved and allocated to any Person
which ceases to hold any Notes shall be allocated to the remaining holders of
Notes, pro rata based on the principal amount of the Notes then held by such
holders.

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

     (11) HOLDER'S
REDEMPTIONS.

          (a)
Mechanics. The Company shall deliver the applicable Trigger Event
Redemption Price to the Holder within five (5) Business Days after the Company's
receipt of the Holder's Trigger Event Redemption Notice. If the Holder has
submitted a Change of Control Redemption Notice in accordance with Section 5(b),
the Company shall deliver the applicable Change of Control Redemption Price to
the Holder concurrently with the consummation of such Change of Control if such
notice is received prior to the consummation of such Change of Control and
within five (5) Business Days after the Company's receipt of such notice
otherwise. In the event of a redemption of less than all of the Conversion
Amount of this Note, the Company shall promptly cause to be issued and delivered
to the Holder a new Note (in accordance with Section 17(d)) representing the
outstanding Principal which has not been redeemed. In the event that the Company
does not pay the applicable Redemption Price to the Holder within the time
period required, at any time thereafter and until the Company pays such unpaid
Redemption Price in full, the Holder shall have the option, in lieu of
redemption, to require the Company to promptly return to the Holder all or any
portion of this Note representing the Conversion Amount that was submitted for
redemption and for which the applicable Redemption Price (together with any Late
Charges thereon) has not been paid. Upon the 

16

Company's receipt of such notice, (x) the Redemption Notice
shall be null and void with respect to such Conversion Amount, (y) the Company
shall immediately return this Note, or issue a new Note (in accordance with
Section 17(d)) to the Holder representing such Conversion Amount and (z) the
Conversion Price of this Note or such new Notes shall be adjusted to the lesser
of (A) the Conversion Price as in effect on the date on which the Redemption
Notice is voided and (B) the lowest Closing Bid Price of the Common Stock during
the period beginning on and including the date on which the Redemption Notice is
delivered to the Company and ending on and including the date on which the
Redemption Notice is voided. The Holder's delivery of a notice voiding a
Redemption Notice and exercise of its rights following such notice shall not
affect the Company's obligations to make any payments of Late Charges which have
accrued prior to the date of such notice with respect to the Conversion Amount
subject to such notice.

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

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

     (13) COVENANTS.

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

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

          (c)
Existence of Liens. So long as this Note is outstanding, the Company
shall not, and the Company shall not permit any of its Subsidiaries to, directly
or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge,
security interest or other encumbrance

17

upon or in any property or assets (including accounts and
contract rights) owned by the Company or any of its Subsidiaries (collectively,
"Liens") other than Permitted Liens.

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

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

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

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

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

     (17) REISSUANCE OF THIS
NOTE.

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

18

provisions of Section 3(d)(iii) following conversion or
redemption of any portion of this Note, the outstanding Principal represented by
this Note may be less than the Principal stated on the face of this Note.

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

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

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

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

     (19) PAYMENT OF COLLECTION,
ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an
attorney for collection or enforcement or is

19

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

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

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

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

     (23) NOTICES;
PAYMENTS.

          (a)
Notices. Whenever notice is required to be given under this Note, unless
otherwise provided herein, such notice shall be given in accordance with Section
9(f) of the Securities Purchase Agreement. The Company shall provide the Holder
with prompt written notice of all actions taken pursuant to this Note, including
in reasonable detail a description of such action and the reason therefore.
Without limiting the generality of the foregoing, the Company will give written
notice to the Holder (i) immediately upon any adjustment of the Conversion
Price, setting forth in reasonable detail, and certifying, the calculation of
such adjustment and (ii) at least twenty (20) days prior to the date on which
the Company closes its 

20

books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Fundamental Transaction, dissolution or liquidation,
provided in each case that such information shall be made known to the public
prior to or in conjunction with such notice being provided to the Holder.

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

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

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

     (26) GOVERNING LAW;
JURISDICTION; SEVERABILITY; JURY TRIAL. This Note shall be construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Note shall be governed by, the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. The Company hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law. In the event that
any provision of this Note is

21

invalid or unenforceable under any applicable statute or rule
of law, then such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with such statute
or rule of law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision of this Note. Nothing contained herein shall be deemed or operate to
preclude the Holder from bringing suit or taking other legal action against the
Company in any other jurisdiction to collect on the Company's obligations to the
Holder, to realize on any collateral or any other security for such obligations,
or to enforce a judgment or other court ruling in favor of the Holder. THE
COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED
HEREBY.

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

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

          (b)
"Bloomberg" means Bloomberg Financial Markets.

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

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

          (e)
"Closing 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

22

reported by Bloomberg, or, if no closing bid price or last
trade price, respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in the "pink sheets" by Pink Sheets LLC (formerly
the National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing
Sale Price cannot be calculated for a security on a particular date on any of
the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the
case may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 22. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during the applicable calculation period.

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

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

          (h)
“Convertible Notes” has the meaning ascribed to such term in the
Securities Purchase Agreement, and shall include all notes issued in exchange
thereof or replacement thereof.

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

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

          (k)
"Excluded Securities" means (A) any Common Stock issued or issuable: (i)
in connection with any Approved Stock Plan; (ii) upon conversion of the Notes or
the exercise of the Warrants; (iii) upon conversion of any Options or
Convertible Securities which are outstanding on the day immediately preceding
the Subscription Date, provided that the terms of such Options or Convertible
Securities are not amended, modified or changed on or after the Subscription
Date; (iv) in connection with mergers, acquisitions, strategic business
partnerships or joint ventures, in each case with non-affiliated third parties
and otherwise on an arm's-length basis, the primary purpose of which is not to
raise additional capital; and (v) upon the issuance of Options or the exercise
of any Options issued to financial institutions in connection with commercial
credit agreements or issuance of non-convertible debt by the Company, (B) Series
B Convertible Notes and Series B Warrants sold and issued within 7

23

calendar days after the Initial Closing Date pursuant to the
Securities Purchase Agreement; provided, however, that each purchaser of such
convertible notes and warrants shall be a financially sophisticated business
entity that participates in or deals with similar investments in the ordinary
course of business, and that each such purchaser shall purchase a minimum of
$1,000,000 in principal amount of such Series B Convertible Notes, and (C) any
shares of Common Stock issued or issuable upon conversion or exercise of the
Series B Convertible Notes and Series B Warrants described in the preceding
clause (B).

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

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

          (n)
"Indebtedness" of any Person means, without duplication (i) all
indebtedness for borrowed money, (ii) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services, including
(without limitation) "capital leases" in accordance with generally accepted
accounting principles (other than trade payables entered into in the ordinary
course of business), (iii) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (iv) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (v) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the Trigger Event are limited to
repossession or sale of such property), (vi) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (vii) all indebtedness referred to in clauses (i)
through (vi) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any

24

mortgage, lien, pledge, charge, security interest or other
encumbrance upon or in any property or assets (including accounts and contract
rights) owned by any Person, even though the Person which owns such assets or
property has not assumed or become liable for the payment of such indebtedness,
and (viii) all Contingent Obligations in respect of indebtedness or obligations
of others of the kinds referred to in clauses (i) through (vii) above.

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

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

          (q)
"Permitted Indebtedness" means (i) the Indebtedness evidenced by this
Note and the Other Notes; (ii) bonds required to be posted by the company to
obtain regulatory permits, licenses or insurance as part of conducting its
business; and (iii) indebtedness up to five million dollars ($5,000,000) per 25
mega watt of production capacity, so long as after entering into such
arrangements or facilities, on a pro forma basis based on the financial
statements of the Company for the quarter last ended before entering into the
arrangements or facilities, and assuming full advance of all amounts available
under the arrangements or facilities, neither the current ratio nor the ratio of
total assets to total liabilities of the Company is less than 1:1.

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

25

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

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

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

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

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

          (x)
"Required Holders" means, holders of Notes representing at least seventy
five percent (75%) of the aggregate principal amount of the Notes then
outstanding.

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

          (z)
"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
the Warrants.

          (aa)
“Series A Conversion Price” means $0.69, subject to adjustment in accordance
with the terms of the Series A Notes.

          (bb)
"Subscription Date" means March 7, 2007.

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

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

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

26

closing time of trading on such exchange or market, then during
the hour ending at 4:00:00 p.m., New York Time).

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

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

          (hh)
"Weighted Average Price" means, for any security as of any date, the
dollar volume-weighted average price for such security on the Principal Market
during the period beginning at 9:30:01 a.m., New York Time (or such other time
as the Principal Market publicly announces is the official open of trading), and
ending at 4:00:00 p.m., New York Time (or such other time as the Principal
Market publicly announces is the official close of trading) as reported by
Bloomberg through its "Volume at Price" functions, or, if the foregoing does not
apply, the dollar volume-weighted average price of such security in the
over-the-counter market on the electronic bulletin board for such security
during the period beginning at 9:30:01 a.m., New York Time (or such other time
as such market publicly announces is the official open of trading), and ending
at 4:00:00 p.m., New York Time (or such other time as such market publicly
announces is the official close of trading) as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported in
the "pink sheets" by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.). If the Weighted Average Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Weighted Average Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the Holder. If the Company and the Holder are unable to agree
upon the fair market value of such security, then such dispute shall be resolved
pursuant to Section 22. All such determinations to be appropriately adjusted for
any stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.

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

[Signature Page Follows]

27

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

	 	SOLAR ENERTECH CORP. 
	 	 	 
	 	By:	 
	 	Name: 	Leo Shi Young 
	 	Title: 	Chairman and CEO 

EXHIBIT I

SOLAR ENERTECH CORP.

CONVERSION NOTICE

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

	Date of Conversion:	 	 
	 	 	  
	Aggregate Conversion Amount to be converted: 	 	 
	 	 	  
	Please confirm the following information: 
	 	 	  
	Conversion Price:	 	 
	 	 	  
	Number of shares of Common Stock to be issued:	 	 
	 	 	  
	Please issue the Common Stock into which the Note is being
      converted in the following name and to the following address:
	 	 	  
	Issue to:	 	 
	 	 	 
	 	 	 
	 	 	  
	Facsimile Number: 	 	 
	 	 	  
	Authorization: 	 	 
	 	 	  
	By: 	 	 
	 	 	  
	Title: 	 	 
	 	 	  
	Dated:	 	 
	 	 	  
	Account Number:

      (if electronic book entry transfer)	 	 
	 	 	  
	Transaction Code Number: 

      (if electronic book entry transfer)	 	 

ACKNOWLEDGMENT

     The Company hereby acknowledges
  this Conversion Notice and hereby directs Empire Stock Transfer Inc. to issue
  the above indicated number of shares of Common Stock in accordance with the
  Transfer Agent Instructions dated March 7, 2007 from the Company and acknowledged
  and agreed to by Empire Stock Transfer Inc.

	 	SOLAR ENERTECH CORP.
	 	 	 
	 	By:	 
	 	Name: 	 
	 	Title: 	 

30

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