Document:

ex4_2.htm

    
      

    

    EXHIBIT NO. 4.2

    
 

    THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).  THE SECURITIES MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM,
SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE
144 OR REGULATION S UNDER SAID ACT.

     

    SENIOR
SECURED SUPERPRIORITY DEBTOR-IN-POSSESSION

    CALLABLE
SECURED CONVERTIBLE NOTE

     

    
      	
              Las
      Vegas, Nevada

            	 
      
	
              August  ___,
      2008

            	
              $-------

            

    

     

    FOR VALUE
RECEIVED, SHEARSON FINANCIAL NETWORK, INC., a Nevada Corporation (hereinafter
called the “Borrower”),
hereby promises to pay to the order of ____________________ or registered
assigns (the “Lender”)
the sum of _______________ ($_______), on or before the Termination Date and to
pay interest on the unpaid principal balance hereof at the rate of eight percent
(8%) (the “Interest
Rate”) per annum from August ___, 2008 (the “Issue Date”) until the same
becomes due and payable, whether at maturity or upon acceleration or by
prepayment or otherwise.  Any amount of principal or interest on this
Senior Secured Superpriority Debtor-in-Possession Callable Secured Convertible
Note (“Superpriority
Note”) which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date thereof until the same is paid
(“Default
Interest”).  This Superpriority Note is issued in connection
with and as a series of Superpriority Notes dated as of even date herewith, in
the aggregate principal amount of Five Hundred Thousand Dollars ($500,000)
(collectively the “Superpriority
Notes”).  Interest shall commence accruing on the Issue Date,
shall be computed on the basis of a 365-day year and the actual number of days
elapsed and shall be payable quarterly provided that no interest shall be due
and payable for any month in which the Trading Price (as such term is defined
below) is greater than $.025 for each Trading Day (as such term is defined
below) of the month.  All payments due hereunder (to the extent not
converted into common stock, $.001 par value per share (the “Common Stock”) in accordance
with the terms hereof) shall be made in lawful money of the United States of
America.  All payments shall be made at such address as the Lender
shall hereafter give to the Borrower by written notice made in accordance with
the provisions of this Superpriority Note.  Whenever any amount
expressed to be due by the terms of this Superpriority 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 payment
date which is not the date on which this Superpriority 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.  As used in
this Superpriority Note, the term “business day” shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in the city of New York, New
York are authorized or required by law or executive order to remain
closed.  Each capitalized term used herein, and not otherwise defined,
shall have the meaning ascribed thereto in Exhibit A attached
hereto.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    This
Superpriority Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Borrower and will not impose
personal liability upon the holder thereof.  The obligations of the
Borrower under this Superpriority Note are secured, among other things, the
Security Documents, the Final Order and each of the Loan Documents, and may now
or hereafter be secured by one or more other security agreements, mortgages,
deeds of trust, assignments or other instruments or agreements.

     

    All
Secured Obligations under this Superpriority Note and any of the Loan Documents
shall constitute allowed claims against Borrower in the Chapter 11 Case with
priority under Section 364(c)(1) of the Bankruptcy Code over any and all
administrative expenses, diminution claims and all other claims against the
Borrower, now existing or hereafter arising, of any kind whatsoever, including,
without limitation, all administrative expenses of the kind specified in
sections 503(b) and 507(b) of the Bankruptcy Code, and over any and all
administrative expenses or other claims arising under sections 105, 326, 328,
330, 331, 503(b), 506(c), 507(a), 507(b), 726, 1113 or 1114 of the Bankruptcy
Code, subject only to the payment of the Carve Out Expenses to the extent
specifically provided for in the Final Order and herein.  For purposes
hereof, the “Carve Out
Expenses” mean, collectively (i) all fees required to be paid to the
Clerk of the Bankruptcy Court and to the Office of the United States Trustee
under section 1930(a) of title 28 of the United States Code, and (ii) an
aggregate amount not exceeding $150,000 for unpaid professional fees to the
extent such unpaid fees and expenses are subsequently allowed by the Court,
which amount may be used after the occurrence and during the continuance of an
Event of Default subject to the terms of the Final Order to pay any fees or
expenses incurred by the Borrower and any statutory committees appointed in the
Chapter 11 Case (each, a “Committee”) that remain unpaid
subsequent to the payment, pro rata with other non-priority administrative
creditors, of such fees and expenses from available funds remaining in the
Borrower’s estates for such creditors, in respect of (A) allowances of
compensation for services rendered or reimbursement of expenses awarded by the
Court to the Borrower’s or any Committee’s professionals and (B) the
reimbursement of expenses allowed by the Court incurred by Committee members in
the performance of their duties (but excluding fees and expenses of third party
professionals employed by such members); provided, however, that the dollar
limitation in this clause 1.2(ii) on fees and disbursements shall neither be
reduced nor increased by the amount of any compensation or reimbursement of
expenses paid prior to the occurrence of an Event of Default in respect of which
the Carve Out Expenses are invoked or by any fees, expenses, indemnities or
other amounts paid to any Lender or their respective attorneys and agents under
this Superpriority Note or otherwise, and provided, further, that nothing herein
shall be construed to impair the ability of any party to object to any of the
fees, expenses, reimbursement or compensation described in clauses (A) and (B)
above.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    The
following terms shall apply to this Superpriority Note:

     

    ARTICLE
I

    CONVERSION
RIGHTS

     

    1.1           Conversion
Right.  The Lender shall have the right from time to time, and
at any time on or prior to the earlier of (i) the Termination Date and (ii) the
date of payment of the Default Amount (as defined in Article III) pursuant to
Section 1.6(a) or Article III, the Optional Prepayment Amount (as defined in
Section 6.1) in respect of the remaining outstanding principal amount of this
Superpriority Note to convert all or any part of the outstanding and unpaid
principal amount of this Superpriority Note into fully paid and non-assessable
shares of Common Stock, as such Common Stock exists on the Issue Date, or any
shares of capital stock or other securities of the Borrower into which such
Common Stock shall hereafter be changed or reclassified at the conversion price
(the “Conversion Price”)
determined as provided herein (a “Conversion”); provided, however, that in no event
shall the Lender be entitled to convert any portion of this Superpriority Note
in excess of that portion of this Superpriority Note upon conversion of which
the sum of (1) the number of shares of Common Stock beneficially owned by the
Lender and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Superpriority Note or the unexercised or unconverted portion of any other
security of the Borrower subject to a limitation on conversion or exercise
analogous to the limitations contained herein) and (2) the number of shares of
Common Stock issuable upon the conversion of the portion of this Superpriority
Note with respect to which the determination of this proviso is being made,
would result in beneficial ownership by the Lender and its affiliates of more
than 4.99% of the outstanding shares of Common Stock and provided further that the
Lender shall not be entitled to convert any portion of this Superpriority Note
during any month immediately succeeding a Determination Date on which the
Borrower exercises its prepayment option pursuant to Section 5.2 of this
Superpriority Note.  For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such
proviso.  The number of shares of Common Stock to be issued upon each
conversion of this Superpriority Note shall be determined by dividing the
Conversion Amount (as defined below) by the applicable Conversion Price then in
effect on the date specified in the notice of conversion, in the form attached
hereto as Exhibit
B (the “Notice of
Conversion”), delivered to the Borrower by the Lender in accordance with
Section 1.4 below; provided that the Notice of Conversion is submitted by
facsimile (or by other means resulting in, or reasonably expected to result in,
notice) to the Borrower before 6:00 p.m., New York, New York time on such
conversion date (the “Conversion
Date”).  The term “Conversion Amount” means, with
respect to any conversion of this Superpriority Note, the sum of (1) the
principal amount of this Superpriority Note to be converted in such conversion
plus (2) accrued and unpaid interest, if any, on such principal amount at the
interest rates provided in this Superpriority Note to the Conversion Date, provided, however, that the Borrower
shall have the right to pay any or all interest in cash plus (3) Default
Interest, if any, on the amounts referred to in the immediately preceding
clauses (1) and/or (2) plus (4) at the
Lender’s option, any amounts owed to the Lender pursuant to Sections 1.3 and
1.4(g) hereof.  The term “Determination Date” means the
last business day of each month after the Issue Date.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    1.2           Conversion
Price.

     

    (a)           Calculation
of Conversion Price.  The Conversion Price shall be the
Variable Conversion Price (as defined herein) (subject, in each case, to
equitable adjustments for stock splits, stock dividends or rights offerings by
the Borrower relating to the Borrower’s securities or the securities of any
subsidiary of the Borrower, combinations, recapitalization, reclassifications,
extraordinary distributions and similar events).  The “Variable Conversion Price”
shall mean the Applicable Percentage (as defined herein) multiplied by the
Market Price (as defined herein).  “Market Price” means the
average of the lowest three (3) Trading Prices (as defined below) for the Common
Stock during the twenty (20) Trading Day period ending one Trading Day prior to
the date the Conversion Notice is sent by the Lender to the Borrower via
facsimile (the “Conversion
Date”).  “Trading Price” means, for any
security as of any date, the intraday trading price on the Over-the-Counter
Bulletin Board (the “OTCBB”) as reported by a
reliable reporting service (“Reporting Service”) mutually
acceptable to Borrower and Lender and hereafter designated by Lenders of a
majority in interest Superpriority Notes and the Borrower or, if the OTCBB is
not the principal trading market for such security, the intraday trading price
of such security on the principal securities exchange or trading market where
such security is listed or traded or, if no intraday trading price of such
security is available in any of the foregoing manners, the average of the
intraday trading prices of any market makers for such security that are listed
in the “pink sheets” by the National Quotation Bureau, Inc.  If the
Trading Price cannot be calculated for such security on such date in the manner
provided above, the Trading Price shall be the fair market value as mutually
determined by the Borrower and the holders of a majority in interest of the
Superpriority Notes being converted for which the calculation of the Trading
Price is required in order to determine the Conversion Price of such
Superpriority Note.  “Trading Day” shall mean any
day on which the Common Stock is traded for any period on the OTCBB, or on the
principal securities exchange or other securities market on which the Common
Stock is then being traded.  “Applicable Percentage” shall
mean 50%.

     

    (b)           Conversion
Price During Major Announcements.  Notwithstanding anything
contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes
a public announcement that it intends to consolidate or merge with any other
corporation (other than a merger in which the Borrower is the surviving or
continuing corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Borrower or (ii) any person, group
or entity (including the Borrower) publicly announces a tender offer to purchase
50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the
date of the announcement referred to in clause (i) or (ii) is hereinafter
referred to as the “Announcement Date”), then the
Conversion Price shall, effective upon the Announcement Date and continuing
through the Adjusted Conversion Price Termination Date (as defined below), be
equal to the lower of (x) the Conversion Price which would have been applicable
for a Conversion occurring on the Announcement Date and (y) the Conversion Price
that would otherwise be in effect.  From and after the Adjusted
Conversion Price Termination Date, the Conversion Price shall be determined as
set forth in this Section 1.2(a).  For purposes hereof, “Adjusted Conversion Price Termination
Date” shall mean, with respect to any proposed transaction or tender
offer (or takeover scheme) for which a public announcement as contemplated by
this Section 1.2(b) has been made, the date upon which the Borrower (in the case
of clause (i) above) or the person, group or entity (in the case of clause (ii)
above) consummates or publicly announces the termination or abandonment of the
proposed transaction or tender offer (or takeover scheme) which caused this
Section 1.2(b) to become operative.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    1.3           Authorized
Shares.  The Borrower covenants that during the period the
conversion right exists, the Borrower will reserve from its authorized and
unissued Common Stock a sufficient number of shares, free from preemptive
rights, to provide for the issuance of Common Stock upon the full conversion of
this Superpriority Note.   The Borrower is required at all times
to have authorized and reserved two times the number of shares that is actually
issuable upon full conversion of the Superpriority Notes (based on the
Conversion Price of the Superpriority Notes) (the “Reserved
Amount”).  The Borrower represents that upon issuance, such
shares will be duly and validly issued, fully paid and
non-assessable.  In addition, if the Borrower shall issue any
securities or make any change to its capital structure which would change the
number of shares of Common Stock into which the Superpriority Notes shall be
convertible at the then current Conversion Price, the Borrower shall at the same
time make proper provision so that thereafter there shall be a sufficient number
of shares of Common Stock authorized and reserved, free from preemptive rights,
for conversion of the outstanding Superpriority Notes.  The Borrower
(i) acknowledges that it has irrevocably instructed its transfer agent to issue
certificates for the Common Stock issuable upon conversion of this Superpriority
Note, and (ii) agrees that its issuance of this Superpriority Note shall
constitute full authority to its officers and agents who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock in accordance with the terms and
conditions of this Superpriority Note.

     

    If, at
any time a Lender of this Superpriority Note submits a Notice of Conversion, and
the Borrower does not have sufficient authorized but unissued shares of Common
Stock available to effect such conversion in accordance with the provisions of
this Article I (a “Conversion
Default”), subject to Section 5.8, the Borrower shall issue to the Lender
all of the shares of Common Stock which are then available to effect such
conversion.  The portion of this Superpriority Note which the Lender
included in its Conversion Notice and which exceeds the amount which is then
convertible into available shares of Common Stock (the “Excess Amount”) shall,
notwithstanding anything to the contrary contained herein, not be convertible
into Common Stock in accordance with the terms hereof until (and at the Lender’s
option at any time after) the date additional shares of Common Stock are
authorized by the Borrower to permit such conversion, at which time the
Conversion Price in respect thereof shall be the lesser of (i) the Conversion
Price on the Conversion Default Date (as defined below) and (ii) the Conversion
Price on the Conversion Date thereafter elected by the Lender in respect
thereof.  In addition, the Borrower shall pay to the Lender payments
(“Conversion Default
Payments”) for a Conversion Default in the amount of (x) the sum of (1) the then
outstanding principal amount of this Superpriority Note plus (2) accrued and
unpaid interest on the unpaid principal amount of this Superpriority Note
through the Authorization Date (as defined below) plus (3) Default
Interest, if any, on the amounts referred to in clauses (1) and/or (2), multiplied by (y)
..24, multiplied
by (z) (N/365), where N = the number of days from the day the holder
submits a Notice of Conversion giving rise to a Conversion Default (the “Conversion Default Date”) to
the date (the “Authorization
Date”) that the Borrower authorizes a sufficient number of shares of
Common Stock to effect conversion of the full outstanding principal balance of
this Superpriority Note.  The Borrower shall use its best efforts to
authorize a sufficient number of shares of Common Stock as soon as practicable
following the earlier of (i) such time that the Lender notifies the Borrower or
that the Borrower otherwise becomes aware that there are or likely will be
insufficient authorized and unissued shares to allow full conversion thereof and
(ii) a Conversion Default.  The Borrower shall send notice to the
Lender of the authorization of additional shares of Common Stock, the
Authorization Date and the amount of Lender’s accrued Conversion Default
Payments.  The accrued Conversion Default Payments for each calendar
month shall be paid in cash or shall be convertible into Common Stock (at such
time as there are sufficient authorized shares of Common Stock) at the
applicable Conversion Price, at the Borrower’s option, as
follows:

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (a)           In
the event Lender elects to take such payment in cash, cash payment shall be made
to Lender by the fifth (5th) day of the month following the month in which it
has accrued; and

     

    (b)           In
the event Lender elects to take such payment in Common Stock, the Lender may
convert such payment amount into Common Stock at the Conversion Price (as in
effect at the time of conversion) at any time after the fifth day of the month
following the month in which it has accrued in accordance with the terms of this
Article I (so long as there is then a sufficient number of authorized shares of
Common Stock).

     

    The
Lender’s election shall be made in writing to the Borrower at any time prior to
6:00 p.m., New York, New York time, on the third day of the month following the
month in which Conversion Default payments have accrued.  If no
election is made, the Lender shall be deemed to have elected to receive
cash.  Nothing herein shall limit the Lender’s right to pursue actual
damages (to the extent in excess of the Conversion Default Payments) for the
Borrower’s failure to maintain a sufficient number of authorized shares of
Common Stock, and each holder shall have the right to pursue all remedies
available at law or in equity (including degree of specific performance and/or
injunctive relief).

     

    1.4           Method of
Conversion.

     

    (a)           Mechanics
of Conversion.  Subject to Section 1.1, this Superpriority Note
may be converted by the Lender in whole or in part at any time from time to time
after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion
(by facsimile or other reasonable means of communication dispatched on the
Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to
Section 1.4(b), surrendering this Superpriority Note at the principal office of
the Borrower.

     

    (b)           Surrender
of Superpriority Note Upon Conversion.  Notwithstanding
anything to the contrary set forth herein, upon conversion of this Superpriority
Note in accordance with the terms hereof, the Lender shall not be required to
physically surrender this Superpriority Note to the Borrower unless the entire
unpaid principal amount of this Superpriority Note is so
converted.  The Lender and the Borrower shall maintain records showing
the principal amount so converted and the dates of such conversions or shall use
such other method, reasonably satisfactory to the Lender and the Borrower, so as
not to require physical surrender of this Superpriority Note upon each such
conversion.  In the event of any dispute or discrepancy, such records
of the Borrower shall be controlling and determinative in the absence of
manifest error.  Notwithstanding the foregoing, if any portion of this
Superpriority Note is converted as aforesaid, the Lender may not transfer this
Superpriority Note unless the Lender first physically surrenders this
Superpriority Note to the Borrower, whereupon the Borrower will forthwith issue
and deliver upon the order of the Lender a new Superpriority Note of like tenor,
registered as the Lender (upon payment by the Lender of any applicable transfer
taxes) may request, representing in the aggregate the remaining unpaid principal
amount of this Superpriority Note.  The Lender and any assignee, by
acceptance of this Superpriority Note, acknowledge and agree that, by reason of
the provisions of this paragraph, following conversion of a portion of this
Superpriority Note, the unpaid and unconverted principal amount of this
Superpriority Note represented by this Superpriority Note may be less than the
amount stated on the face hereof.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    (c)           Payment
of Taxes.  The Borrower shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock or other securities or property on conversion
of this Superpriority Note in a name other than that of the Lender (or in street
name), and the Borrower shall not be required to issue or deliver any such
shares or other securities or property unless and until the person or persons
(other than the Lender or the custodian in whose street name such shares are to
be held for the Lender’s account) requesting the issuance thereof shall have
paid to the Borrower the amount of any such tax or shall have established to the
satisfaction of the Borrower that such tax has been paid.

     

    (d)           Delivery
of Common Stock Upon Conversion.  Upon receipt by the Borrower
from the Lender of a facsimile transmission (or other reasonable means of
communication) of a Notice of Conversion meeting the requirements for conversion
as provided in this Section 1.4, the Borrower shall issue and deliver or cause
to be issued and delivered to or upon the order of the Lender certificates for
the Common Stock issuable upon such conversion within three (3) business days
after such receipt (and, solely in the case of conversion of the entire unpaid
principal amount hereof, surrender of this Superpriority Note) (such third
business day being hereinafter referred to as the “Deadline”).

     

    (e)           Obligation
of Borrower to Deliver Common Stock.  Upon receipt by the
Borrower of a Notice of Conversion, the Lender shall be deemed to be the holder
of record of the Common Stock issuable upon such conversion, the outstanding
principal amount and the amount of accrued and unpaid interest on this
Superpriority Note shall be reduced to reflect such conversion, and, unless the
Borrower defaults on its obligations under this Article I, all rights with
respect to the portion of this Superpriority Note being so converted shall
forthwith terminate except the right to receive the Common Stock or other
securities, cash or other assets, as herein provided, on such
conversion.  If the Lender shall have given a Notice of Conversion as
provided herein, the Borrower’s obligation to issue and deliver the certificates
for Common Stock shall be absolute and unconditional, irrespective of the
absence of any action by the Lender to enforce the same, any waiver or consent
with respect to any provision thereof, the recovery of any judgment against any
person or any action to enforce the same, any failure or delay in the
enforcement of any other obligation of the Borrower to the holder of record, or
any setoff, counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by the Lender of any obligation to the Borrower, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Borrower to the Lender in connection with such
conversion.  The Conversion Date specified in the Notice of Conversion
shall be the Conversion Date so long as the Notice of Conversion is received by
the Borrower before 6:00 p.m., New York, New York time, on such
date.

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    (f)           Delivery
of Common Stock by Electronic Transfer.  In lieu of delivering
physical certificates representing the Common Stock issuable upon conversion,
provided the Borrower’s transfer agent is participating in the Depository Trust
Company (“DTC”) Fast
Automated Securities Transfer (“FAST”) program, upon request
of the Lender and its compliance with the provisions contained in Section 1.1
and in this Section 1.4, the Borrower shall use its best efforts to cause its
transfer agent to electronically transmit the Common Stock issuable upon
conversion to the Lender by crediting the account of Lender’s Prime Broker with
DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

     

    (g)           Failure
to Deliver Common Stock Prior to Deadline.  Without in any way
limiting the Lender’s right to pursue other remedies, including actual damages
and/or equitable relief, the parties agree that if delivery of the Common Stock
issuable upon conversion of this Superpriority Note is more than three (3)
business days after the Deadline (other than a failure due to the circumstances
described in Section 1.3 above, which failure shall be governed by such Section)
the Borrower shall pay to the Lender $1,000 per day in cash, for each day beyond
the Deadline that the Borrower fails to deliver such Common
Stock.  Such cash amount shall be paid to Lender by the fifth day of
the month following the month in which it has accrued or, at the option of the
Lender (by written notice to the Borrower by the first day of the month
following the month in which it has accrued), shall be added to the principal
amount of this Superpriority Note, in which event interest shall accrue thereon
in accordance with the terms of this Superpriority Note and such additional
principal amount shall be convertible into Common Stock in accordance with the
terms of this Superpriority Note.

     

    1.5           Concerning
the Shares.  Except as otherwise provided herein (and subject
to the removal provisions set forth below), until such time as the shares of
Common Stock issuable upon conversion of this Superpriority Note have been
registered under the Act or otherwise may be sold pursuant to Rule 144 without
any restriction as to the number of securities as of a particular date that can
then be immediately sold, each certificate for shares of Common Stock issuable
upon conversion of this Superpriority Note that has not been so included in an
effective registration statement or that has not been sold pursuant to an
effective registration statement or an exemption that permits removal of the
legend, shall bear a legend substantially in the following form, as
appropriate:

     

    “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.  THE SECURITIES MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT UNLESS SOLD PURSUANT TO RULE 144 OR
REGULATION S UNDER SAID ACT.”

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    The
legend set forth above shall be removed and the Borrower shall issue to the
Lender a new certificate therefor free of any transfer legend if (i) the
Borrower or its transfer agent shall have received an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Common Stock
may be made without registration under the Act and the shares are so sold or
transferred, (ii) such Lender provides the Borrower or its transfer agent with
reasonable assurances that the Common Stock issuable upon conversion of this
Superpriority Note (to the extent such securities are deemed to have been
acquired on the same date) can be sold pursuant to Rule 144 or (iii) in the case
of the Common Stock issuable upon conversion of this Superpriority Note, such
security is registered for sale by the Lender under an effective registration
statement filed under the Act or otherwise may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular date
that can then be immediately sold.  Nothing in this Superpriority Note
shall affect in any way the Lender’s obligations to comply with applicable
prospectus delivery requirements upon the resale of the securities referred to
herein.

     

    1.6           Effect of
Certain Events.

     

    (a)           Effect of
Merger, Consolidation, Etc.  At the option of the Lender, the
sale, conveyance or disposition of all or substantially all of the assets of the
Borrower, the effectuation by the Borrower of a transaction or series of related
transactions in which more than 50% of the voting power of the Borrower is
disposed of, or the consolidation, merger or other business combination of the
Borrower with or into any other Person or Persons when the Borrower is not the
survivor shall either: (i) be deemed to be an Event of Default (as defined in
Article III) pursuant to which the Borrower shall be required to pay to the
Lender upon the consummation of and as a condition to such transaction an amount
equal to the Default Amount (as defined in Article III) or (ii) be treated
pursuant to Section 1.6(b) hereof.

     

    (b)           Adjustment
Due to Merger, Consolidation, Etc.  If, at any time when this
Superpriority Note is issued and outstanding and prior to conversion of all of
the Superpriority Notes, there shall be any merger, consolidation, exchange of
shares, recapitalization, reorganization, or other similar event, as a result of
which shares of Common Stock of the Borrower shall be changed into the same or a
different number of shares of another class or classes of stock or securities of
the Borrower or another entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in connection with a
plan of complete liquidation of the Borrower, then the Lender of this
Superpriority Note shall thereafter have the right to receive upon conversion of
this Superpriority Note, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore issuable upon conversion, such stock, securities or assets which the
Lender would have been entitled to receive in such transaction had this
Superpriority Note been converted in full immediately prior to such transaction
(without regard to any limitations on conversion set forth herein), and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the Lender of this Superpriority Note to the end that the
provisions hereof (including, without limitation, provisions for adjustment of
the Conversion Price and of the number of shares issuable upon conversion of the
Superpriority Note) shall thereafter be applicable, as nearly as may be
practicable in relation to any securities or assets thereafter deliverable upon
the conversion hereof.  The Borrower shall not effect any transaction
described in this Section 1.6(b) unless (a) it first gives, to the extent
practicable, thirty (30) days prior written notice (but in any event at least
fifteen (15) days prior written notice) of the record date of the special
meeting of shareholders to approve, or if there is no such record date, the
consummation of, such merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event or sale of assets
(during which time the Lender shall be entitled to convert this Superpriority
Note) and (b) the resulting successor or acquiring entity (if not the Borrower)
assumes by written instrument the obligations of this Section
1.6(b).  The above provisions shall similarly apply to successive
consolidations, mergers, sales, transfers or share exchanges.

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (c)           Adjustment
Due to Distribution.  If the Borrower shall declare or make any
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to the Borrower’s shareholders
in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a “Distribution”), then the
Lender of this Superpriority Note shall be entitled, upon any conversion of this
Superpriority Note after the date of record for determining shareholders
entitled to such Distribution, to receive the amount of such assets which would
have been payable to the Lender with respect to the shares of Common Stock
issuable upon such conversion had such Lender been the holder of such shares of
Common Stock on the record date for the determination of shareholders entitled
to such Distribution.

     

    (d)           Adjustment
Due to Dilutive Issuance.  If, at any time when any
Superpriority Notes are issued and outstanding, the Borrower issues or sells, or
in accordance with this Section 1.6(d) hereof is deemed to have issued or sold,
any shares of Common Stock for no consideration or for a consideration per share
(before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Variable
Conversion Price in effect on the date of such issuance (or deemed issuance) of
such shares of Common Stock (a “Dilutive Issuance”), then
immediately upon the Dilutive Issuance, the Variable Conversion Price will be
reduced to the amount of the consideration per share received by the Borrower in
such Dilutive Issuance; provided that only
one adjustment will be made for each Dilutive Issuance.

     

    The
Borrower shall be deemed to have issued or sold shares of Common Stock if the
Borrower in any manner issues or grants any warrants, rights or options (not
including employee stock option plans), whether or not immediately exercisable,
to subscribe for or to purchase Common Stock or other securities convertible
into or exchangeable for Common Stock (“Convertible Securities”) (such
warrants, rights and options to purchase Common Stock or Convertible Securities
are hereinafter referred to as “Options”) and the price per
share for which Common Stock is issuable upon the exercise of such Options is
less than the Variable Conversion Price then in effect, then the Variable
Conversion Price shall be equal to such price per share.  For purposes
of the preceding sentence, the “price per share for which Common Stock is
issuable upon the exercise of such Options” is determined by dividing (i) the
total amount, if any, received or receivable by the Borrower as consideration
for the issuance or granting of all such Options, plus the minimum aggregate
amount of additional consideration, if any, payable to the Borrower upon the
exercise of all such Options, plus, in the case of Convertible Securities
issuable upon the exercise of such Options, the minimum aggregate amount of
additional consideration payable upon the conversion or exchange thereof at the
time such Convertible Securities first become convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options (assuming full conversion of Convertible
Securities, if applicable).  No further adjustment to the Conversion
Price will be made upon the actual issuance of such Common Stock upon the
exercise of such Options or upon the conversion or exchange of Convertible
Securities issuable upon exercise of such Options.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    Additionally,
the Borrower shall be deemed to have issued or sold shares of Common Stock if
the Borrower in any manner issues or sells any Convertible Securities, whether
or not immediately convertible (other than where the same are issuable upon the
exercise of Options), and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the Variable Conversion Price then
in effect, then the Variable Conversion Price shall be equal to such price per
share.  For the purposes of the preceding sentence, the “price per
share for which Common Stock is issuable upon such conversion or exchange” is
determined by dividing (i) the total amount, if any, received or receivable by
the Borrower as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Borrower upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable, by (ii)
the maximum total number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities.  No further adjustment
to the Variable Conversion Price will be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible
Securities.

     

    (e)           Purchase
Rights.  If, at any time when this Superpriority Note is issued
and outstanding, the Borrower issues any convertible securities or rights to
purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to
the record holders of any class of Common Stock, then the Lender of this
Superpriority Note will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such Lender could have
acquired if such Lender had held the number of shares of Common Stock acquirable
upon complete conversion of this Superpriority Note (without regard to any
limitations on conversion contained herein) 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.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (f)         
  Notice of
Adjustments.  Upon the occurrence of each adjustment or
readjustment of the Conversion Price as a result of the events described in this
Section 1.6, the Borrower, at its expense, shall promptly compute such
adjustment or readjustment and prepare and furnish to the Lender of a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based.  The
Borrower shall, upon the written request at any time of the Lender, furnish to
such Lender a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other securities or
property which at the time would be received upon conversion of the
Superpriority Note.

     

    1.7           Reserved.

     

    1.8           Status as
Shareholder.  Upon submission of a Notice of Conversion by a
Lender, (i) the shares covered thereby (other than the shares, if any, which
cannot be issued because their issuance would exceed such Lender’s allocated
portion of the Reserved Amount or Maximum Share Amount) shall be deemed
converted into shares of Common Stock and (ii) the Lender’s rights as a Lender
of such converted portion of this Superpriority Note shall cease and terminate,
excepting only the right to receive certificates for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in equity
to such Lender because of a failure by the Borrower to comply with the terms of
this Superpriority Note.  Notwithstanding the foregoing, if a Lender
has not received certificates for all shares of Common Stock prior to the tenth
(10th) business day after the expiration of the Deadline with respect to a
conversion of any portion of this Superpriority Note for any reason, then
(unless the Lender otherwise elects to retain its status as a holder of Common
Stock by so notifying the Borrower) the Lender shall regain the rights of a
Lender of this Superpriority Note with respect to such unconverted portions of
this Superpriority Note and the Borrower shall, as soon as practicable, return
such unconverted Superpriority Note to the Lender or, if the Superpriority Note
has not been surrendered, adjust its records to reflect that such portion of
this Superpriority Note has not been converted.  In all cases, the
Lender shall retain all of its rights and remedies (including, without
limitation, (i) the right to receive Conversion Default Payments pursuant to
Section 1.3 to the extent required thereby for such Conversion Default and any
subsequent Conversion Default and (ii) the right to have the Conversion Price
with respect to subsequent conversions determined in accordance with Section
1.3) for the Borrower’s failure to convert this Superpriority Note.

     

    ARTICLE
II

    CERTAIN
COVENANTS; REPRESENTATIONS AND WARRANTIES.

     

    2.1           Distributions
on Capital Stock.  So long as the Borrower shall have any
obligation under this Superpriority Note, the Borrower shall not without the
Lender’s written consent (a) pay, declare or set apart for such payment, any
dividend or other distribution (whether in cash, property or other securities)
on shares of capital stock other than dividends on shares of Common Stock solely
in the form of additional shares of Common Stock or (b) directly or indirectly
or through any subsidiary make any other payment or distribution in respect of
its capital stock except for distributions pursuant to any shareholders’ rights
plan which is approved by a majority of the Borrower’s disinterested
directors.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    2.2           Borrowings.  So
long as the Borrower shall have any obligation under this Superpriority Note,
the Borrower shall not, without the Lender’s written consent, create, incur,
assume or suffer to exist any liability for borrowed money, except (a) any
liability under any  indebtedness or borrowing in existence or
committed as of the date hereof as set forth on Schedule A attached hereto, (b)
indebtedness to trade creditors or financial institutions incurred in the
ordinary course of business or (c) borrowings, the proceeds of which shall be
used to repay this Superpriority Note.

     

    2.3           Contingent
Liabilities.  So long as the Borrower shall have any obligation
under this Superpriority Note, the Borrower shall not, without the Lender’s
written consent, which shall not be unreasonably withheld, assume, guarantee,
endorse, contingently agree to purchase or otherwise become liable upon the
obligation of any Person, except by the endorsement of negotiable instruments
for deposit or collection and except assumptions, guarantees, endorsements and
contingencies (a) in existence or committed as of the date hereof and which the
Borrower has informed Lender in writing prior to the date hereof, and (b)
similar transactions in the ordinary course of business.

     

    2.4           Rights to
Monitor Collateral.  Lender shall be permitted to retain expert
consultants and financial advisors at the expense of the Lender shall be given
reasonable access for purposes of monitoring the Collateral.

     

    2.5           Permitted
Liens.  The Borrower will not create, incur or suffer to exist
any Lien upon or of any of its assets, now owned or hereafter acquired, to
secure any indebtedness, except for the Permitted Liens and any Liens granted by
the Company prior to the Effective Date.

     

    2.6           Final
Order; Administrative Expense Claim Priority; Lien Priority;
Payments.

     

    (i)           The
Borrower shall not at any time seek, consent to or suffer to exist any
modification, stay, vacation or amendment of the Final Order except for
modifications and amendments mutually agreed to by the Lender and the
Borrower.

     

    (ii)          Prior
to date on which the Secured Obligations have been paid in full in cash or
otherwise satisfied on terms acceptable to Lender, Borrower shall not pay any
administrative expense claims except (i) Carve Out Expenses, and (ii)
administrative expense claims incurred in the ordinary course of the business of
the Borrower, and (iii) the fees and expenses of attorneys accountants,
financial advisors and consultants retained by Lender, to the extent included in
the Budget.

     

    (iii)         Notwithstanding
subparagraph (iii), above, the Borrower shall be permitted, except after the
occurrence and during the continuance of an Event of Default, to pay as the same
may become due and payable (i) administrative expenses of the kind specified in
Section 503(b) of the Bankruptcy Code incurred in the ordinary course of
business and (ii) compensation and reimbursement of expenses to professionals
allowed and payable under Sections 330 and 331 of the Bankruptcy Code, to the
extent included in the Budget.

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    (iv)           Except
with the written consent of Lender or upon an Order of the Court, prior to the
date on which the Secured Obligations have been paid in full in cash or
otherwise satisfied on terms acceptable to Lender, the Borrower shall not pay
any indebtedness which existed prior to the Petition Date.

     

    2.7           Compliance
with Budget.  Attached hereto as Schedule 2.7 is a cash flow
forecast in form and substance acceptable to Lenders projecting Borrower’s cash
receipts and disbursements (including costs of the Chapter 11 Case) on a weekly
basis from the Petition Date through the Termination Date (the “Budget”).  The
Budget has been prepared by the senior management of Borrower and were at the
time furnished (i) believed to be reasonable, (ii) prepared on a reasonable
basis and in good faith based or assumptions believed to be reasonable, (iii)
made and based upon the information then available, (iv) consistent with the
orderly liquidation of the businesses of Borrower and (v) acceptable to Lenders
in their discretion.  Borrower will comply with the Budget at all
times.  Such Budget may be updated and revised by Borrower from time
to time subject to any such update or revision being first approved in writing
by Lender or an order of the Bankruptcy Court.  Notwithstanding the
above, Borrower is entitled to make expenditures outside of the Budget within a
variance of 5% for line items related to expenses.

     

    2.8           Plans in
the Chapter 11 Cases.  Borrower shall not bring a motion, or
file a plan or disclosure statement attendant thereto or other motion in the
Chapter 11 Case seeking: (i) to obtain additional financing under Section 364(c)
or (d) of the Bankruptcy Code; (ii) to grant any Lien upon or affecting any
Collateral; (iii) to use cash collateral of Lenders under Section 363(c) of the
Bankruptcy Code without Lenders’ consent; or (iv) any other action or actions
adverse to Lenders or their rights and remedies hereunder or their interest in
the Collateral that would, individually or in the aggregate, have a materially
adverse effect.

     

    2.9           Allowance
of Claims.  Borrower shall not at any time seek, consent to or
suffer to exist the allowance of any claim or claims under Section 506(c) of the
Bankruptcy Code against or with respect to any of the Collateral in excess of
$50,000 in the aggregate.

     

    2.10         Post-Petition
Date Judgments.  Borrower shall not at any time seek, consent
to or suffer to exist: (i) a post-petition judgment, liability or event in
excess of $50,000; (ii) general liability and workers compensation costs
(inclusive of insurance premiums with respect thereto) during any six (6) month
period occurring after the Effective Date, which in the aggregate exceed such
costs for the preceding six (6) month period by more than $25,000; or (iii) any
post-petition judgments, liabilities or events, including but not limited to any
occurrences specified in subparts (i) and (ii) of this subsection, that would
individually or in the aggregate have a materially adverse effect.

     

    2.11         Certain
Actions.  Borrower shall not at any time seek, consent to or
suffer to exist a suit or action against Lender and, as to any suit or action
brought by any Person other than a Borrower or an officer or employee of
Borrower, the continuation thereof without dismissal for thirty (30) days after
service thereof on Lender, that asserts, by or on behalf of any Borrower, the
Environmental Protection Agency, any State environmental protection or health
and safety agency or any creditor(s) or official committee in the Chapter 11
Case, any claim or legal or equitable remedy for the avoidance or recovery of
any pre-Petition Date transfer to Lender by Borrower (including without
limitation the transfer of any Lien) or which seeks the equitable subordination
or avoidance of any pre-Petition Date indebtedness of Borrower to, or any Lien
of, Lender.

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    2.12         Filing of
Plan by Persons other than Borrower.  Borrower shall not at any
time seek, consent to or suffer to exist the filing or any plan or disclosure
statement attendant thereto by any Person that does not require repayment in
full of all of the Secured Obligations under the Loan Documents.

     

    2.13         Other
Obligations of Borrower.  Borrower shall not at any time suffer
to exist any event of default under any other agreement with Lender and shall
not default in the performance or observance of any material term, covenant,
condition or agreement contained in, or the payment of any other sum covenanted
to be paid by Borrower under, any such agreement.

     

    2.14         Judgment.  Borrower
shall not at any time suffer to exist (i) an uninsured judgment or order for the
payment of money warrant, writ of attachment, execution or similar process which
exceeds in amount or value $50,000 individually or $100,000 in the aggregate, or
(ii) any non-monetary judgment or order which could reasonably be expected to
have a materially adverse effect, shall be entered against Borrower by any court
and such judgment, order, warrant, writ of attachment, execution or similar
process as set forth in clause (i) or (ii) shall continue undischarged or
unstayed for thirty (30) days.

     

    2.15         Limitation
on Use of Proceeds.  No borrowings, Cash Collateral (as defined
in the Final Order), Collateral or the Carve Out Expenses may be used to 1)
object, contest or raise any defense to, the validity, perfection, priority,
extent or enforceability of any amount due under the Loan Documents or the
Existing Agreements, or the liens or claims granted under the Final Order, the
Loan Documents or the Existing Agreements, 2) assert any claims or defenses or
causes of action against the Lenders or their respective agents, affiliates,
representatives, attorneys, advisors or managers, 3) prevent, hinder or
otherwise delay the Pre-Petition Secured Lenders’ (as defined in the Final
Order) assertion, enforcement or realization on the Cash Collateral or the
Collateral in accordance with the Existing Agreements, the Final Order, 4) seek
to modify any of the rights granted to the Lenders or the Pre-Petition Secured
Lenders hereunder or under the Loan Documents or the Existing Agreements, in
each of the foregoing cases without such parties’ prior written consent, or 5)
pay any amount on account of any claims arising prior to the Petition Date
unless such payments are (a) approved by an order of the Court and (b) in
accordance with the Budget.

     

    2.16         Listing.  So
long as any Lender owns any of the Securities, the Company shall maintain the
list and so long as any other shares of Common Stock shall be so listed, such
listing of all Common Stock from time to time issuable upon conversion of the
Superpriority Notes.  The Company will obtain and, so long as any
Lender owns any of the Securities, maintain the listing and trading of its
Common Stock on the “Pink Sheets” or other markets such as the OTCBB or any
equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the Nasdaq Small Cap
Market (“Nasdaq
SmallCap”), the New York Stock Exchange (“NYSE”), or the American Stock
Exchange (“AMEX”) and
will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers (“NASD”) and
such exchanges, as applicable.  The Company shall promptly provide to
Lender copies of any notices it receives from the OTCBB and any other exchanges
or quotation systems on which the Common Stock is then listed regarding the
continued eligibility of the Common Stock for listing on such exchanges and
quotation systems.

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    2.17         Compliance
with Other Agreements.  Borrower shall not breach any covenant
or other material term or condition contained in the Loan
Documents.  Borrower represents and warrants that each and every
representation and warranty set forth in all the Loan Documents (other than
those representations or warranty relating to bankruptcy), are true and correct
as of the date hereof.

     

    ARTICLE
III

    EVENTS
OF DEFAULT.

     

    If any of
the following events of default (each, an “Event of Default”) shall
occur:

     

    3.1           Failure
to Pay Principal or Interest.  The Borrower fails to pay the
principal hereof or interest thereon when due on this Superpriority Note,
whether on the Termination Date, at maturity, upon acceleration or
otherwise.

     

    3.2           Conversion
and the Shares.  The Borrower fails to issue shares of Common
Stock to the Lender (or announces or threatens that it will not honor its
obligation to do so) upon exercise by the Lender of the conversion rights of the
Lender in accordance with the terms of this Superpriority Note, fails to
transfer or cause its transfer agent to transfer (electronically or in
certificated form) any certificate for shares of Common Stock issued to the
Lender upon conversion of or otherwise pursuant to this Superpriority Note as
and when required by this Superpriority Note, or fails to remove any restrictive
legend (or to withdraw any stop transfer instructions in respect thereof) on any
certificate for any shares of Common Stock issued to the Lender upon conversion
of or otherwise pursuant to this Superpriority Note as and when required by this
Superpriority Note (or makes any announcement, statement or threat that it does
not intend to honor the obligations described in this paragraph) and any such
failure shall continue uncured (or any announcement, statement or threat not to
honor its obligations shall not be rescinded in writing) for three (3) business
days after the Borrower shall have received a conversion request by the
Lender.

     

    3.3           Breach of
Covenants.  The Borrower breaches any covenant or other
material term or condition contained in this Superpriority Note or the Loan
Documents.

     

    3.4           Breach of
Representations and Warranties.  Any representation or warranty
of the Borrower made herein or in any Loan Document, agreement, statement or
certificate given in writing pursuant hereto or in connection herewith, shall be
false or misleading in any material respect at any time.

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    3.5           Misrepresentation.  Any
representation or warranty made or deemed to be made by Borrower under any Loan
Document, or any amendment hereto or thereto, shall at any time prove to have
been incorrect or misleading in any material respect when made or deemed
made.

     

    3.6           Default
in Performance.  Borrower shall default in the performance or
observance of any material term, covenant, condition or agreement to be
performed by Borrower under the Loan Documents.

     

    3.7           Failure
to Comply.  The Borrower fails to comply or shall default in
the performance of any term of the Final Order.

     

    3.8           Changes
in Orders.  The Borrower (except following the Lender’s prior
written request or consent) shall not file a motion with the Court or any other
court with jurisdiction in the matter seeking an order, or an order is otherwise
entered, modifying, reversing, revoking, staying, rescinding, vacating, or
amending the Final Order or any of the other Loan documents, without the
Lender’s express prior written consent (and no such consent shall be implied
from any other action, inaction, or acquiescence of the Lender).

     

    3.9           Approval
of Senior Claims of Liens.  The Borrower files any motion or
application, or the Court allows the motion or application of any Person, which
seeks approval for or allowance of any claim or Lien ranking equal or senior in
priority to the claims, Liens and Security Interest granted to the Lender under
the Final Order, Security Agreement, or the other Loan Documents or any such
equal or prior claim, Lien, or Security Interest shall be established in any
manner, except, in any case, for any Permitted Lien, or as otherwise expressly
permitted under the Final Order.

     

    3.10         Termination
of Lender’s Security Interests.  Except for expiration or
termination in accordance with the Final Order, the terms of the Loan Documents,
or the sale of Inventory in the ordinary course of business, any of the Loan
Documents or any Lien or Security Interest of the Lender created thereunder
ceases for any reason to be in full force and effect or to have the priority
provided in the Final Order, or the Borrower files any motion or application or
adversary proceeding to challenge the validity, enforceability, perfection or
priority of any of the Loan Documents or any of such liens and security
interests.

     

    3.11         Final
Order.  The Court has not entered a Final Order satisfactory in
all respects to the Lender on or before July 20, 2008 or the Final Order ceases
to be in full force and effect from and after the date of entry thereof by the
Court.

     

    3.12         Appointment
of Trustee or Examiner.  The appointment in any Chapter 11 Case
or any subsequent proceedings of a trustee, or any other fiduciary for the
Borrower or any property of any Borrower’s estate, or of any
examiner.

     

    3.13         Dismissal
or Conversion of Case.  The entry of an order dismissing the
Chapter 11 Case or converting any Borrower’s to the case under Chapter 7 of the
Bankruptcy Code.

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    3.14         Relief
from Stay.  The entry of an order which provides relief from
the automatic stay otherwise imposed pursuant to section 362 of the Bankruptcy
Code, which order permits any creditor, other than the Lender to realize upon,
or to exercise any right or remedy with respect to, any asset of the Borrower or
to terminate any license, franchise, or similar agreement, where such
termination could have a Material Adverse Effect.

     

    3.15         Cash
Collateral.  The Borrower (or any other Person in the case of
clause (ii)) shall file a motion in the Chapter 11 Case (i) to use cash
collateral of the Lender under Section 363(c) of the Bankruptcy Code without the
Lender’s consent, (ii) to recover from any portions of the Collateral any costs
or expenses of preserving or disposing of such Collateral under Section 506(c)
of the Bankruptcy Code (except as provided for the Carve Out Expenses), or (iii)
to take any other action or actions adverse to the Lenders or their rights and
remedies hereunder or under any of the other Loan Documents or the Lender’s
interest in any of the Collateral.

     

    3.16         Adequate
Protection.  Any adequate protection is granted by the Borrower
or is ordered by the Bankruptcy Court in the Chapter 11 Case in favor of the
Borrower’s pre-petition creditors without the consent of the Lender, or any such
adequate protection is modified or expanded without the consent of the
Lender.

     

    3.17         Change of
Control.  There occurs any change of control of Borrower or
without the express prior written consent of the Lender.

     

    ARTICLE
IV

    REMEDIES

     

    4.1           Remedies.

     

    (a)           Automatic
Acceleration and Termination of Facilities.  Upon the
occurrence of an Event of Default specified in Section 3.14 or 3.15, the
principal of and the interest on the Loans and the Superpriority Note at the
time outstanding, and all other amounts owed to the Lender under this
Superpriority Note or any of the Loan Documents, shall thereupon become due and
payable without presentment, demand, protest, or other notice of any kind, all
of which are expressly waived, anything in this Agreement or any of the Loan
Documents to the contrary notwithstanding.

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    (b)           Default
Under Loan Documents.  The Lender in its sole and absolute
discretion shall, upon and after giving notice in accordance with the applicable
notice provision of the Final Order, without necessity for application or motion
to, or any order from the Court, and notwithstanding provisions of Section 362
of the Bankruptcy Code, may, if an Event of Default has occurred and is
continuing under this Superpriority Note or any of the Loan Documents, then,
upon the occurrence and during the continuation of any Event of Default
specified in Article III, at the option of the Lender of the outstanding
Superpriority Note, through the delivery of written notice to the Borrower by
Lender (the “Default
Notice”), the Superpriority Note shall become immediately due and payable
and the Borrower shall pay to the Lender, in full satisfaction of its
obligations hereunder, an amount equal to (i) (x) the then outstanding principal
amount of this Superpriority Note plus (y) accrued and
unpaid interest on the unpaid principal amount of this Superpriority Note to the
date of payment (the “Mandatory
Prepayment Date”) plus Default
Interest, if any, on the amounts referred to in clauses (x) and/or (y) plus (z) any amounts
owed to the Lender pursuant to Sections 1.3 and 1.4(g) hereof (the then
outstanding principal amount of this Superpriority Note to the date of payment
plus the
amounts referred to in clauses (x), (y) and (z) shall collectively be known as
the “Default Sum”) or
(ii) the “parity value” of the Default Sum to be prepaid, where parity value
means (a) the highest number of shares of Common Stock issuable upon conversion
of or otherwise pursuant to such Default Sum in accordance with Article I,
treating the Trading Day immediately preceding the Mandatory Prepayment Date as
the “Conversion Date” for purposes of determining the lowest applicable
Conversion Price, unless the Default Event arises as a result of a breach in
respect of a specific Conversion Date in which case such Conversion Date shall
be the Conversion Date), multiplied by (b) the
highest Closing Price for the Common Stock during the period beginning on the
date of first occurrence of the Event of Default and ending one day prior to the
Mandatory Prepayment Date (the “Default Amount”) and all other
amounts payable hereunder shall immediately become due and payable, all without
demand, presentment or notice, all of which hereby are expressly waived,
together with all costs, including, without limitation, legal fees and expenses,
of collection, and the Lender shall be entitled to exercise all other rights and
remedies available at law or in equity.  If the Borrower fails to pay
the Default Amount within five (5) business days of written notice that such
amount is due and payable, then the Lender shall have the right at any time, so
long as the Borrower remains in default (and so long and to the extent that
there are sufficient authorized shares), to require the Borrower, upon written
notice, to immediately issue, in lieu of the Default Amount, the number of
shares of Common Stock of the Borrower equal to the Default Amount divided by
the Conversion Price then in effect.

     

    (c)           Other
Remedies.  In addition to the remedies set forth in Section
4.1(b) and (c) hereof, if any Event of Default shall have occurred, and during
the continuance of any such Event of Default, the Lender in its sole and
absolute discretion shall, upon and after giving notice in accordance with the
applicable notice provision of the Final Order, without necessity for
application or motion to, or any order from the Court, to the extent permitted
under the Bankruptcy Code, do any of the following:

     

    (i)           unless
already automatically accelerated pursuant to Section 4.1(a) or (b) above,
declare the principal of and interest on the Loans and the Superpriority Note at
the time outstanding and all other Secured Obligations, to be forthwith due and
payable, whereupon the same shall immediately become due and payable without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything in this Superpriority Note or the Loan Documents to
the contrary notwithstanding;

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    (ii)         notify
or request Borrower to notify, in writing or otherwise, any account debtor or
obligor with respect to any one or more of the Receivables to make payment to
the Lender, or any agent or designee of the Lender, at such address as may be
specified by the Lender and if, notwithstanding the giving of any notice, any
Account Debtor or other such obligor shall make payments to such Borrower, such
Borrower shall hold all such payments it receives in trust for the Lender,
without commingling the same with other funds or property of, or held by, such
Borrower, and shall deliver the same to the Lender or any such agent or designee
of the Lender immediately upon receipt by such Borrower in the identical form
received, together with any necessary endorsements;

     

    (iii)        after
obtaining authority from the Bankruptcy Court which request will not be
contested by the Borrower, take physical possession of any or all thereof and
maintain such possession on such premises or move the same or any part thereof
to such other place or places as the Lender shall choose, without being liable
to Borrower on account of any loss, damage or depreciation that may occur as a
result thereof, so long as the Lender shall act reasonably;

     

    (iv)        require
Borrower to and Borrower shall, without charge to the Lender, assemble the
Collateral and maintain or deliver it into the possession of the Lender or any
agent or representative of the Lender at such place or places as the Lender may
designate and as are reasonably convenient to both the Lender and such
Borrower;

     

    (v)         at
the expense of Borrower, cause any of the Collateral to be placed in a public or
field warehouse, and the Lender shall not be liable to any Borrower on account
of any loss, damage or depreciation that may occur as a result thereof, so long
as the Lender shall act reasonably and in its reasonable credit
judgment;

     

    (vi)        after
obtaining authority from the Bankruptcy Court which request will not be
contested by the Borrower, take possession of such premises or place custodians
in exclusive control thereof, remain on such premises and use the same and any
of any Borrower’s Collateral, for the purpose of (A) completing any work in
process, and (B) collecting any Receivable, and the Lender is hereby granted a
license or sublicense and all other rights as may be necessary, appropriate or
desirable to use the intellectual property in connection with the foregoing, and
the rights of Borrower under all licenses, sublicenses and franchise agreements
shall inure to the Lender (provided, however, that any
use of any federally registered trademarks as to any goods shall be subject to
the control as to the quality of such goods of the owner of such trademarks and
the goodwill of the business symbolized thereby);

     

    (vii)       exercise
any and all of its rights under any and all of the Security Documents, the Final
Order;

     

    (viii)      apply
any Collateral consisting of cash to the payment of the Secured Obligations in
any order in which the Lender, may elect or use such cash in connection with the
exercise of any of its other rights hereunder or under any of the Security
Documents;

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    (ix)         establish
or cause to be established one or more lockboxes or other arrangement for the
deposit of proceeds of Receivables, and, in such case, Borrower shall cause to
be forwarded to the Lender at the Lender’s office, on a daily basis, copies of
all checks and other items of payment and deposit slips related thereto
deposited in such lockboxes, together with collection reports in form and
substance satisfactory to the Lender; and

     

    (x)          exercise
all of the rights and remedies of a secured party under the Uniform Commercial
Code and under any other applicable law, including, without limitation, the
right, without notice except as specified below and with or without taking the
possession thereof, to sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any location chosen by the Lender, for
cash, on credit or for future delivery, and at such price or prices and upon
such other terms as are commercially reasonable.  Borrower agrees
that, to the extent notice of sale shall be required by law, at least ten (10)
days notice to such Borrower of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification, but notice given in any other reasonable manner or at any other
reasonable time shall constitute reasonable notification.  The Lender
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given.  The Lender may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned.

     

    4.2           Application
of Proceeds.  All proceeds from each sale of, or other
realization upon, all or any part of the Collateral following an Event of
Default shall be applied or paid over as follows:

     

    (a)           First:  to
the payment of all costs and expenses incurred in connection with such sale or
other realization, including attorneys’ fees and expenses actually incurred by
Lender;

     

    (b)           Second:  to
the payment of the principal and interest with respect to the Loans and other
Secured Obligations; and

     

    (c)           Third:  the
balance (if any) of such proceeds shall be paid to the Borrower, subject to any
duty imposed by law, or otherwise to whomsoever shall be entitled
thereto.

     

    The
Borrower shall remain liable and will pay, on demand, any deficiency remaining
in respect of the Secured Obligations, together with interest thereon at a rate
per annum equal to the highest rate then payable hereunder on such Secured
Obligations, which interest shall constitute part of the Secured
Obligations.

     

    4.3           Miscellaneous
Provision Concerning Remedies.

     

    (a)           Rights
Cumulative.  The rights and remedies of the Lender under this
Superpriority Note and each of the Loan Documents shall be cumulative and not
exclusive of any rights or remedies which it or they would otherwise
have.  In exercising such rights and remedies the Lender may be
selective and no failure or delay by the Lender in exercising any right shall
operate as a waiver of it, nor shall any single or partial exercise of any power
or right preclude its other or further exercise or the exercise of any other
power or right.

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    (b)           Waiver of
Marshaling.  Borrower hereby waives any right to require any
marshaling of assets and any similar right.

     

    4.4           Limitation
of Liability.  Nothing contained in this Article IV or
elsewhere in this Superpriority Note or in any of the Loan Documents shall be
construed as requiring or obligating the Lender or any agent or designee of the
Lender to make any demand, or to make any inquiry as to the nature or
sufficiency of any payment received by it, or to present or file any claim or
notice or take any action, with respect to any Receivable or any other
Collateral or the monies due or to become due thereunder or in connection
therewith, or to take any steps necessary to preserve any rights against prior
parties, and the Lender and its agents or designees shall have no liability to
any Borrower for actions taken pursuant to this Article IV, any other provision
of this Superpriority Note or any of the Loan Documents so long as the Lender
shall act reasonably and in its reasonable credit judgment.

     

    4.5           Equity.  The
Borrower acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Lender, by vitiating the intent and purpose of the
transaction contemplated hereby.  Accordingly, the Borrower
acknowledges that the remedy at law for a breach of its obligations under this
Superpriority Note will be inadequate and agrees, in the event of a breach or
threatened breach by the Borrower of the provisions of this Superpriority Note,
that the Lender shall be entitled, in addition to all other available remedies
at law or in equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any breach of this
Superpriority Note and to enforce specifically the terms and provisions thereof,
without the necessity of showing economic loss and without any bond or other
security being required.

     

    ARTICLE
V

    MISCELLANEOUS

     

    5.1           Intentionally
Omitted.

     

    5.2           Failure
or Indulgence Not Waiver.  No failure or delay on the part of
the Lender 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 privileges.  All rights and remedies
existing hereunder are cumulative to, and not exclusive of, any rights or
remedies otherwise available.

     

    5.3           Notices.  Any
notice herein required or permitted to be given shall be in writing and may be
personally served or delivered by courier or sent by United States mail and
shall be deemed to have been given upon receipt if personally served (which
shall include telephone line facsimile transmission) or sent by courier or three
(3) days after being deposited in the United States mail, certified, with
postage pre-paid and properly addressed, if sent by mail.  For the
purposes hereof, the address of the Lender shall be as shown on the records of
the Borrower; and the address of the Borrower shall be 921 Front Street, San
Francisco, California 94111, Attention: Harry Kraatz, facsimile number: (415)
634-1306.  Both the Lender and the Borrower may change the address for
service by service of written notice to the other as herein
provided.

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    5.4           Amendments.  This
Superpriority Note and any provision hereof may only be amended by an instrument
in writing signed by the Borrower and the Lender.  The term
“Superpriority Note” and all reference thereto, as used throughout this
instrument, shall mean this instrument (and the other Superpriority Notes) as
originally executed, or if later amended or supplemented, then as so amended or
supplemented.

     

    5.5           Assignability.  This
Superpriority Note shall be binding upon the Borrower and its successors and
assigns, and shall inure to be the benefit of the Lender and its successors and
assigns.  Each transferee of this Superpriority Note must be an
“accredited investor” (as defined in Rule 501(a) of the 1933
Act).  Notwithstanding anything in this Superpriority Note to the
contrary, this Superpriority Note may be pledged as collateral in connection
with a bona fide margin account or other lending arrangement.

     

    5.6           Cost of
Collection.  If default is made in the payment of this
Superpriority Note, the Borrower shall pay the Lender hereof reasonable costs of
collection, including reasonable attorneys’ fees.

     

    5.7           Governing
Law.  THIS SUPERPRIORITY NOTE SHALL BE ENFORCED, GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS.  THE BORROWER HEREBY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF EITHER THE UNITED STATES BANKRUPTCY COURT FOR THE
DISTRICT OF NEVADA OR THE UNITED STATES FEDERAL COURTS LOCATED IN MANHATTAN
COUNTY, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS SUPERPRIORITY
NOTE, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.  BOTH PARTIES IRREVOCABLY WAIVE THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
PROCEEDING.  BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A
PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES AGREE THAT
A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
OR IN ANY OTHER LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN
ANY DISPUTE ARISING UNDER THIS SUPERPRIORITY NOTE SHALL BE RESPONSIBLE FOR ALL
FEES AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY
IN CONNECTION WITH SUCH DISPUTE.

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    5.8           Certain
Amounts.  Whenever pursuant to this Superpriority Note the
Borrower is required to pay an amount in excess of the outstanding principal
amount (or the portion thereof required to be paid at that time) plus accrued
and unpaid interest plus Default Interest on such interest, the Borrower and the
Lender agree that the actual damages to the Lender from the receipt of cash
payment on this Superpriority Note may be difficult to determine and the amount
to be so paid by the Borrower represents stipulated damages and not a penalty
and is intended to compensate the Lender in part for loss of the opportunity to
convert this Superpriority Note and to earn a return from the sale of shares of
Common Stock acquired upon conversion of this Superpriority Note at a price in
excess of the price paid for such shares pursuant to this Superpriority
Note.  The Borrower and the Lender hereby agree that such amount of
stipulated damages is not plainly disproportionate to the possible loss to the
Lender from the receipt of a cash payment without the opportunity to convert
this Superpriority Note into shares of Common Stock.

     

    5.9           Allocations
of Reserved Amount.   The Reserved Amount shall be
allocated pro rata among the Lenders of Superpriority Notes based on the
principal amount of such Superpriority Notes issued to each
Lender.   Each increase to the Reserved Amount shall be allocated
pro rata among the Lenders of Superpriority Notes based on the principal amount
of such Superpriority Notes held by each Lender at the time of the increase in
the Reserved Amount.   In the event a Lender shall sell or
otherwise transfer any of such Lender’s Notes, each transferee shall be
allocated a pro rata portion of such transferor’s Reserved
Amount.   Any portion of the Reserved Amount which remains
allocated to any person or entity which does not hold any Superpriority Notes
shall be allocated to the remaining Lenders of Superpriority Notes, pro rata
based on the principal amount of such Superpriority Notes then held by such
Lenders.

     

    5.10         Damages
Shares.  The shares of Common Stock that may be issuable to the
Lender pursuant to Sections 1.3 and 1.4(g) hereof (“Damages Shares”) shall be
treated as Common Stock issuable upon conversion of this Superpriority Note for
all purposes hereof and shall be subject to all of the limitations and afforded
all of the rights of the other shares of Common Stock issuable
hereunder.  For purposes of calculating interest payable on the
outstanding principal amount hereof, except as otherwise provided herein,
amounts convertible into Damages Shares (“Damages Amounts”) shall not
bear interest but must be converted prior to the conversion of any outstanding
principal amount hereof, until the outstanding Damages Amounts is
zero.

     

    5.11         Denominations.  At
the request of the Lender, upon surrender of this Superpriority Note, the
Borrower shall promptly issue new Superpriority Notes in the aggregate
outstanding principal amount hereof, in the form hereof, in such denominations
of at least $50,000 as the Lender shall request.

     

    5.12         Notice of
Corporate Events.  Except as otherwise provided below, the
Lender of this Superpriority Note shall have no rights as a Lender of Common
Stock unless and only to the extent that it converts this Superpriority Note
into Common Stock.  The Borrower shall provide the Lender with prior
notification of any meeting of the Borrower’s shareholders (and copies of proxy
materials and other information sent to shareholders).  In the event
of any taking by the Borrower of a record of its shareholders for the purpose of
determining shareholders who are entitled to receive payment of any dividend or
other distribution, any right to subscribe for, purchase or otherwise acquire
(including by way of merger, consolidation, reclassification or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed sale, lease or conveyance
of all or substantially all of the assets of the Borrower or any proposed
liquidation, dissolution or winding up of the Borrower, the Borrower shall mail
a notice to the Lender, at least twenty (20) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the
transaction or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such
time.  The Borrower shall make a public announcement of any event
requiring notification to the Lender hereunder substantially simultaneously with
the notification to the Lender in accordance with the terms of this Section
5.12.

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    ARTICLE
VI

    CALL
OPTION

     

    6.1           Call
Option.  Notwithstanding anything to the contrary contained in
this Article V, so long as (i) no Event of Default or Trading Market Prepayment
Event shall have occurred and be continuing, (ii) the Borrower has a sufficient
number of authorized shares of Common Stock reserved for issuance upon full
conversion of the Superpriority Note, then at any time after the Issue Date, and
(iii) the Common Stock is trading at or below $.05 per share, the Borrower shall
have the right, exercisable on not less than ten (10) Trading Days prior written
notice to the Lender of the Superpriority Note (which notice may not be sent to
the Lender of the Superpriority Note until the Borrower is permitted to prepay
the Superpriority Note pursuant to this Section 6.1), to prepay all of the
outstanding Superpriority Note in accordance with this Section
6.1.  Any notice of prepayment hereunder (an “Optional Prepayment”) shall be
delivered to the Lender of the Superpriority Note at their registered addresses
appearing on the books and records of the Borrower and shall state (1) that the
Borrower is exercising its right to prepay all of the Superpriority Note issued
on the Issue Date and (2) the date of prepayment (the “Optional Prepayment
Notice”).  On the date fixed for prepayment (the “Optional Prepayment Date”),
the Borrower shall make payment of the Optional Prepayment Amount (as defined
below) to or upon the order of the Lender as specified by the Lender in writing
to the Borrower at least one (1) business day prior to the Optional Prepayment
Date.  If the Borrower exercises its right to prepay the Superpriority
Note, the Borrower shall make payment to the holders of an amount in cash (the
“Optional Prepayment
Amount”) equal to either (i) 120% (for prepayments occurring within one
hundred and eighty (180) days of the Issue Date), (ii) 130% for prepayments
occurring between one hundred and eighty-one (181) and three hundred and sixty
(360) days of the Issue Date, or (iii) 140% (for prepayments occurring after the
three hundred and sixtieth (360th) day following the Issue Date), multiplied by
the sum of (w) the then outstanding principal amount of this Superpriority Note
plus (x)
accrued and unpaid interest on the unpaid principal amount of this Superpriority
Note to the Optional Prepayment Date plus (y) Default
Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts
owed to the Lender pursuant to Sections 1.3 and 1.4(g) hereof (the then
outstanding principal amount of this Superpriority Note to the date of payment
plus the amounts referred to in clauses (x), (y) and (z) shall collectively be
known as the “Optional
Prepayment Sum”).  Notwithstanding notice of an Optional
Prepayment, the Lender shall at all times prior to the Optional Prepayment Date
maintain the right to convert all or any portion of the Superpriority Note in
accordance with Article I and any portion of Superpriority Note so converted
after receipt of an Optional Prepayment Notice and prior to the Optional
Prepayment Date set forth in such notice and payment of the aggregate Optional
Prepayment Amount shall be deducted from the principal amount of the
Superpriority Note which is otherwise subject to prepayment pursuant to such
notice.  If the Borrower delivers an Optional Prepayment Notice and
fails to pay the Optional Prepayment Amount due to the Lender of the
Superpriority Note within two (2) business days following the Optional
Prepayment Date, the Borrower shall forever forfeit its right to redeem the
Superpriority Note pursuant to this Section 6.1.

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    6.2           Partial
Call Option.  Notwithstanding anything to the contrary
contained in this Article V, in the event that the Average Daily Price of the
Common Stock, as reported by the Reporting Service, for each day of the month
ending on any Determination Date is below the Initial Market Price, the Borrower
may, at its option, prepay a portion of the outstanding principal amount of the
Superpriority Note equal to 101% of the principal amount hereof divided by
thirty-six (36) plus one month’s interest and will stay all conversions for that
month.  The term “Initial Market Price” shall
mean the volume weighted average price of the Common Stock for the five (5)
Trading Days immediately preceding the Closing which is $.05.

     

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

    
      
        
           

        

        
          26

          
            

          

        

        
           

        

      

    

    

    IN WITNESS WHEREOF, Borrower
has caused this Superpriority Note to be signed in its name by its duly
authorized officer this ____th day of
_________, 2008.

     

    
      	 
      	
              SHEARSON
      FINANCIAL NETWORK,

            
	 
      	
              INC., a Nevada
      Corporation

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	 
      
	 
      	
              Name:

            	
               

            
	 
      	
              Its:

            	
               

            

    

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    DEFINITIONS

     

    “Account Debtor” means a Person
who is obligated on a Receivable.

     

    “Bankruptcy Code” means the
provisions of the Title 11, United States Code, as amended from time to time or
any successor statute.

     

    “Collateral” has the meaning
given to it in the Security Agreement.

     

    “Court” shall have the meaning
assigned in the recitals hereto.

     

    “Default” means an event that,
with giving of notice or passage of time or both, would constitute an Event of
Default.

     

    “Effective Date” means the date
that the Final Order is approved and the date that this Superpriority Note is
executed by Borrower.

     

    “Final Order” means an order of
the Court entered by the Court after opportunity for a final hearing in
accordance with Fed. R. Bankr. Pro. 4001(c)(2) which (a) fully and finally
approves all of the Loan Documents, (b) is in form and substance satisfactory to
Lender in its sole discretion, and (c) reflects the consent of counsel to
Lenders to the entry thereof.

     

    “Financing Statements” means
all Uniform Commercial Code financing statements required by the Lenders, in
form and substance satisfactory to the Lenders.

     

    “Lien” as applied to the
property of any Person means: (a) any mortgage, deed to secure debt, deed of
trust, lien, pledge, charge, lease constituting a capitalized lease obligation,
conditional sale or other title retention agreement, or other security interest,
security title or encumbrance of any kind in respect of any property of such
Person or upon the income and profits therefrom, (b) any arrangement, express or
implied, under which any property of such Person is transferred, sequestered or
otherwise identified for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to the payment
of the general, unsecured creditors of such Person, and (c) the filing of, or
any agreement to give, any financing statement under the UCC or its equivalent
in any jurisdiction.

     

    “Loan Documents” means
collectively this Superpriority Note, the Security Agreement, the Financing
Statements, the Final Order and each other instrument, agreement or document
executed by the Borrower, or any affiliate or subsidiary of the Borrower in
connection with this Superpriority Note whether prior to, on or after the
Effective Date and each other instrument, agreement or document referred to
herein or contemplated hereby, all in form and substance acceptable to each
Lender.

     

    “Loans” means all loans from
Lenders to Borrower under this Superpriority Note and the Loan
Documents.

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    “Other Agreements” means every
agreement, note, document, contract or instrument executed by the Borrower, or
any affiliate or subsidiary of the Borrower, in favor of Lender, including but
not limited to that certain Securities Purchase Agreement dated June 30, 2006,
that certain Callable Secured Convertible Note dated June 30, 2006, that certain
Security Agreement dated June 30, 2006 among Borrower, Lender and certain other
parties.

     

    “Permitted Liens” means such of
the following as to which no enforcement, collection, execution, levy or
foreclosure proceeding shall have been commenced (unless stayed): (a) Liens
securing taxes, assessments and other governmental charges or levies (excluding
any Lien imposed pursuant to any of the provisions of ERISA) or the claims of
materialmen, mechanics, carriers, warehousemen or landlords for labor,
materials, supplies or rentals incurred in the ordinary course of business, (b)
Liens consisting of deposits or pledges made in the ordinary course of business
in connection with, or to secure payment of, obligations under workers’
compensation, unemployment insurance or similar legislation or under surety or
performance bonds, in each case arising in the ordinary course of business; (c)
Liens constituting encumbrances in the nature of zoning restrictions, easements
and rights or restrictions of record on the use of the Real Estate, which in the
reasonable credit judgment of the Lender do not materially detract from the
value of such Real Estate or impair the use thereof in such business of such
Borrower; (d) Liens securing the Secured Obligations; (e) Liens of the Lenders,
arising under the Loan Documents, Other Agreements and related documents; (f)
Liens, if any, which by virtue of the entry of, and pursuant to the express
terms of, the Final Order, as the case may be, are subordinate and inferior to
the Liens of the Lender; and (g) Liens arising out of or resulting from any
judgment or award, or in respect of which a Borrower is fully protected by
insurance.

     

    “Person” means an individual,
corporation, partnership, association, trust or unincorporated organization, or
a government or any agency or political subdivision thereof.

     

    “Real Estate” means all of
Borrower’s now or hereafter owned or leased estates in real property, including,
without limitation, all fees, leaseholds and future interests, together with all
of Borrower’s now or hereafter owned or leased interests in the improvements and
emblements thereon, the fixtures attached thereto and the easements appurtenant
thereto.

     

    “Receivables” means and
includes, as to any Person, all of such Person’s then owned or existing and
future acquired or arising (a) rights to the payment of money or other forms of
consideration of any kind (whether classified under the UCC as accounts,
contract rights, chattel paper, General Intangibles (as defined in the UCC) or
otherwise), including, but not limited to, letters of credit and the right to
receive payment thereunder, chattel paper, tax refunds, insurance proceeds,
contracts and contract rights, notes, drafts, instruments, documents,
acceptances and all other debts, obligations and liabilities in whatever form
from any Person and guaranties, security and Liens securing payment thereof and
(b) cash and non-cash proceeds of any of the foregoing.

     

    “Secured Obligations” means, in
each case whether now in existence or hereafter arising, (a) the principal of,
and interest and premium, if any, on, the Superpriority Note including, without
limitation, present and future advances and present and future obligations,
whether optional or obligatory, in connection with the indebtedness created
thereby and (b) all indebtedness, liabilities, obligations, covenants and duties
of Borrower to the Lender of every kind, nature and description arising under or
in respect of this Superpriority Note or any of the other Loan Documents,
whether direct or indirect, absolute or contingent, due or not due, contractual
or tortious, liquidated or unliquidated, and whether or not evidenced by any
note, and whether or not for the payment of money, including, without
limitation, fees required to be paid and expenses required to be paid or
reimbursed relating thereto.

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

    “Security Agreement” means the
Security Agreement, dated as of the Effective Date, by Borrower to Lender, as
the same may be amended, modified or supplemented from time to
time.

     

    “Security Documents” means each
of the following:

     

    (a)           the
Security Agreement;

     

    (b)       
   the Financing Statements; and

     

    (c)           each
other writing executed and delivered by Borrower or any other Person securing
the Secured Obligations.

     

    “Security Interest” means the
valid and perfected first priority Liens of the Lender, on and in the
Unencumbered Property and the valid and perfected Liens of the Lender, on and in
the Collateral, excluding the Unencumbered Property, affected hereby, by the
Final Order or by any of the Security Documents or pursuant to the terms hereof
or thereof.

     

    “Termination Date” shall mean
the earliest of: (i) November 15, 2008; (ii) the date of prepayment in full by
Borrower of the Superpriority Note; (iii) July 20, 2008, if the Final Order has
not been entered by the Court on or before such date; (iv) the date a plan of
reorganization in the Chapter 11 Case of Borrower becomes effective; or (v) the
date set forth as the Termination Date in any notice required to be delivered on
account of the occurrence of an Event of Default.

     

    “UCC” means the Uniform
Commercial Code, as currently in effect in the State of New York.

     

    “Unencumbered Property” has the
meaning set forth in the Security Agreement.

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    EXHIBIT
B

     

    NOTICE
OF CONVERSION

     

     

    (To be
executed by the Registered Lender in order to Convert the Superpriority
Notes)

     

    The
undersigned hereby irrevocably elects to convert $___________ principal amount
of the Superpriority Notes (defined below) into shares of common stock, par
value $.001 per share (“Common
Stock”), of Shearson Financial Network, Inc., a Nevada corporation (the
“Borrower”) according to
the conditions of the convertible Superpriority Notes of the Borrower dated as
of ________________ (the “Superpriority Notes”), as of
the date written below.  If securities are to be issued in the name of
a person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such
certificates.  No fee will be charged to the Lender for any
conversion, except for transfer taxes, if any.  A copy of each
Superpriority Note is attached hereto (or evidence of loss, theft or destruction
thereof).

     

    The
Borrower shall electronically transmit the Common Stock issuable pursuant to
this Notice of Conversion to the account of the undersigned or its nominee with
DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

     

    Name of
DTC Prime Broker:
______________________________________________________________

    Account
Number:
_____________________________________________________________________

     

    In lieu
of receiving shares of Common Stock issuable pursuant to this Notice of
Conversion by way of a DWAC Transfer, the undersigned hereby requests that the
Borrower issue a certificate or certificates for the number of shares of Common
Stock set forth below (which numbers are based on the Lender’s calculation
attached hereto) in the name(s) specified immediately below or, if additional
space is necessary, on an attachment hereto:

     

    Name:
______________________________________________________________________________

    Address:
____________________________________________________________________________

     

    The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable to the undersigned upon conversion of the
Superpriority Note shall be made pursuant to registration or the securities
under the Securities Act of 1933, as amended (the “Act”), or pursuant to an
exemption from registration under the Act.

     

    Date of
Conversion:
____________________________________________________________

    Applicable
Conversion Price:
_____________________________________________________

    Number of
Shares of Common Stock to be Issued Pursuant to

    Conversion
of the Superpriority Notes:
______________________________________________

    Signature:
____________________________________________________________________

    Name:
_______________________________________________________________________

    Address:
_____________________________________________________________________

     

    The
Borrower shall issue and deliver shares of Common Stock to an overnight courier
not later than three business days following receipt of the original
Superpriority Note(s) to be converted, and shall make payments pursuant to the
Superpriority Notes for the number of business days such issuance and delivery
is late.

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

     

    
      	
              Shearson
      Financial Network

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              DIP
      Callable Note Schedule 2-7

            	 	 	
              Schedule
      2.7

            	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              HRK
      6-20-2008

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
              1St
      Draw

            	 
	 
      	 	
              1/2
      month

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	
              June

            	 	 	
              July

            	 	 	
              August

            	 	 	
              September

            	 	 	
              Total

            	 	 	 	 	 	 	 
	
              INCOME:

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Cash:
      (1)

            	 	$	0	 	 	$	-71,150	 	 	$	1,250	 	 	$	36,150	 	 	$	0	 	 	 	 	 	 	 
	
              DIP
      Draw

            	 	$	0	 	 	$	200,000	 	 	$	150,000	 	 	$	150,000	 	 	$	500,000	 	 	 	 	 	 	 
	
              Equipment
      sales

            	 	$	0	 	 	$	0	 	 	$	10,000	 	 	$	10,000	 	 	$	20,000	 	 	 	 	 	 	 
	
              Other

            	 	$	0	 	 	$	0	 	 	$	10,000	 	 	$	10,000	 	 	$	20,000	 	 	 	 	 	 	 
	
              Revenue
      (Mortgage pmts)

            	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	 	 	 	 
	
              Total
      Cash Income

            	 	$	0	 	 	$	128,850	 	 	$	171,250	 	 	$	206,150	 	 	$	506,250	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              EXPENSES:

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Salary
      and Payroll Expense

            	 	
              June

            	 	 	
              July

            	 	 	
              August

            	 	 	
              September

            	 	 	
              Total

            	 	 	 	 	 	
              1st
      draw

            	 
	
              Management

            	 	$	12,500	 	 	$	25,000	 	 	$	40,000	 	 	$	50,000	 	 	$	127,500	 	 	 	 	 	 	$	62,500	 
	
              Accounting

            	 	$	0	 	 	$	7,500	 	 	$	7,500	 	 	$	10,000	 	 	$	25,000	 	 	 	 	 	 	$	7,500	 
	
              Broker
      of Record

            	 	$	0	 	 	$	2,500	 	 	$	2,500	 	 	$	2,500	 	 	$	7,500	 	 	 	 	 	 	$	5,000	 
	
              Other

            	 	$	1,500	 	 	$	5,000	 	 	$	5,000	 	 	$	5,000	 	 	$	16,500	 	 	 	 	 	 	$	9,750	 
	
              Total
      Salaries and benefits

            	 	$	14,000	 	 	$	40,000	 	 	$	55,000	 	 	$	67,500	 	 	$	176,500	 	 	 	 	 	 	$	84,750	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Bankruptcy
      Expenses:

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Administrative
      Professionals

            	 	$	45,000	 	 	$	45,000	 	 	$	30,000	 	 	$	30,000	 	 	$	150,000	 	 	 	 	 	 	$	30,000	 
	
              (SEC)
      counsel  Fleming

            	 	$	3,000	 	 	$	3,000	 	 	$	3,000	 	 	$	3,000	 	 	$	12,000	 	 	 	 	 	 	$	6,000	 
	
              Audit

            	 	$	0	 	 	$	15,000	 	 	$	20,000	 	 	$	20,000	 	 	$	55,000	 	 	 	 	 	 	$	20,000	 
	
              ADP
      and Transfer Agent

            	 	$	0	 	 	$	3,000	 	 	$	3,000	 	 	$	5,000	 	 	$	11,000	 	 	 	 	 	 	$	6,000	 
	
              Total
      Bankruptcy Expense

            	 	$	48,000	 	 	$	66,000	 	 	$	56,000	 	 	$	58,000	 	 	$	228,000	 	 	 	 	 	 	$	62,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Administrative
      Expenses:

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Rent

            	 	$	500	 	 	$	2,000	 	 	$	3,000	 	 	$	3,000	 	 	$	8,500	 	 	 	 	 	 	$	3,160	 
	
              Mortgage
      Broker Operations

            	 	$	0	 	 	$	10,000	 	 	$	10,000	 	 	$	10,000	 	 	$	30,000	 	 	 	 	 	 	$	5,000	 
	
              Travel

            	 	$	3,000	 	 	$	3,000	 	 	$	5,000	 	 	$	5,000	 	 	$	16,000	 	 	 	 	 	 	$	11,000	 
	
              Phone

            	 	$	100	 	 	$	100	 	 	$	100	 	 	$	100	 	 	$	400	 	 	 	 	 	 	$	300	 
	
              Move

            	 	$	1,500	 	 	$	2,000	 	 	$	1,000	 	 	$	0	 	 	$	4,500	 	 	 	 	 	 	$	1,000	 
	
              Storage

            	 	$	2,000	 	 	$	2,000	 	 	$	2,000	 	 	$	2,000	 	 	$	8,000	 	 	 	 	 	 	$	5,000	 
	
              Postage

            	 	$	50	 	 	$	500	 	 	$	1,000	 	 	$	3,000	 	 	$	4,550	 	 	 	 	 	 	$	500	 
	
              Miscelaneous

            	 	$	2,000	 	 	$	2,000	 	 	$	2,000	 	 	$	2,000	 	 	$	8,000	 	 	 	 	 	 	$	2,000	 
	
              Total
      Administrative Fees

            	 	$	9,150	 	 	$	21,600	 	 	$	24,100	 	 	$	25,100	 	 	$	79,950	 	 	 	 	 	 	$	27,960	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Total
      expenses

            	 	$	71,150	 	 	$	127,600	 	 	$	135,100	 	 	$	150,600	 	 	$	484,450	 	 	 	 	 	 	$	174,710	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	-	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Cash
      Balance

            	 	$	71,150	 	 	$	1,250	 	 	$	36,150	 	 	$	55,550	 	 	$	21,800	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Footnote  1

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

    

    

    
32Exhibit
        10.11

       

    

    
      EMPLOYMENT
        AGREEMENT

       

       

      THIS
        EMPLOYMENT AGREEMENT (“Agreement”)
        is
        effective as of April 1, 2008 (the “Effective
        Date”),
        by and
        between Samson Oil and Gas USA, Inc., a Colorado corporation (“Company”),
        and
        David Ninke (“Employee”).

       

      Recitals

       

      Company
        desires
        to retain the personal services of Employee as Vice President Exploration
        of
        Company and of Company’s parent, Samson Oil and Gas Limited (“Parent”) and
        Employee
        is
        willing to make his services available to Company and Parent,
        on the
        terms and conditions hereinafter set forth;

       

      Agreement

       

      NOW,
        THEREFORE, in consideration of the premises and mutual covenants set forth
        herein, the parties agree as follows:

       

      1. Employment.

       

      1.1 Employment
        and Term.
        Company
        hereby agrees to employ Employee and Employee hereby agrees to serve Company,
        on
        the terms and conditions set forth herein, for the period commencing on the
        Effective Date and continuing through March 31, 2011, unless sooner terminated
        in accordance with the terms and conditions hereof (the “Term”).
        

       

      1.2 Duties
        of Employee.
        Employee shall serve as the Vice President-Exploration of Company and Parent,
        and in such capacity shall have and exercise general responsibility for
        directing and implementing the exploration program of Company and
        Parent.
        Employee
        shall report to the Chief Executive Officer and Managing Director of Company
        and
        Parent (the “CEO”). Employee shall also have such other powers and duties as the
        CEO may from time to time delegate to him provided that such duties are
        consistent with his position. Employee shall devote substantially all his
        working time and attention to the business and affairs of Company and Parent
        (excluding any vacation and sick leave to which Employee is entitled), render
        such services to the best of his ability, and use his best efforts to promote
        the interests of Company and Parent. So long as such activities do not interfere
        with the performance of Employee’s responsibilities as an employee of Company in
        accordance with this Agreement, it shall not be a violation of this Agreement
        for Employee to (i) serve on corporate, civic or charitable boards or
        committees, (ii) deliver lectures or fulfill speaking engagements; (iii)
        manage
        personal investments; or (iv) participate in continuing education seminars
        or
        similar activities relevant to his duties and responsibilities for Company.
        

       

      1.3 Place
        of Performance.
        In
        connection with his employment by Company, Employee shall be based at Company’s
        offices in Colorado or another mutually agreed location, except for travel
        necessary in connection with Company’s business.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      2. Compensation.

       

      2.1 Base
        Salary.
        Employee shall receive a base salary in an amount set by the Board from time
        to
        time throughout the Term (the “Base
        Salary”)
        during
        the Term, payable in installments consistent with Company’s normal payroll
        schedule, subject to applicable withholding and other taxes. As of the Effective
        Date, Employee’s Base Salary is $200,000. Employee’s Base Salary may be
        increased, but shall not be decreased without Employee’s written
        consent.

       

      2.2 Incentive
        Compensation.
        Employee shall be entitled to a sign-on bonus payment of $16,700, minus
        applicable withholding taxes, payable on the Effective Date. Employee may
        also
        receive cash bonus payments from time to time or at any time if so determined
        by
        the CEO in his discretion. The annual target for such bonuses is between
        $35,000
        and $50,000, though the amounts actually paid may be higher or lower depending
        on Employee’s performance. 

       

      2.3 Overriding
        Royalty Interest.
        Company
        will pay Employee an
        Overriding Royalty Interest equal to 1% of all oil, gas and related hydrocarbons
        produced, saved and marketed from
        those
        Company properties (“Royalty Properties”) that are, during the term of this
        Agreement, either (a) acquired by Company primarily as a result of the
        identification and recommendation of such properties by Employee
        or
        (b)
        developed by Company primarily on the basis of Employee’s technical intellectual
        pursuit of the identification or selection of the geological prospect for
        drilling and development. In addition, Company will pay Employee an
        Overriding Royalty Interest equal to 0.1% of all oil, gas and related
        hydrocarbons produced, saved and marketed from
        Company
        properties for which, in Company’s judgment, Employee has been actively, but not
        primarily, involved in either (i) the identification and recommendation as
        an
        acquisition or (ii) the technical intellectual pursuit of identifying or
        selecting the geologic prospect for drilling and development (“Secondary Royalty
        Properties”). Payment of an Overriding
        Royalty
Interest
        to
        Employee on Royalty Properties or Secondary Royalty Properties (collectively,
        “Properties”) shall continue only so long as the Company or
        its
        Parent
        holds the Properties;
        provided, however, that Employee
        shall receive 1% of any
        cash
        proceeds from the sale, lease,
        or other
        disposition of Properties and,
        in
        exchange for such payment, Employee shall reassign the portion of the Overriding
        Royalty Interest attributable to the sold, leased or disposed of Properties;
        provided further that if any Properties are disposed of by a trade for other
        property, an Overriding Royalty Interest shall be assigned to Employee with
        respect to the property received in such trade. Employee can receive only
        one
        Overriding Royalty Interest on a single Property. Any Overriding Royalty
        Interest to which Employee is entitled under this Section 2.3 shall be assigned
        to the Employee in the form attached to this Agreement as Exhibit A.
        

      

      2.4
         Stock
        Options.
        Parent
        will grant Employee options to purchase 2,000,000 shares of its stock at
        an
        exercise price of A$0.25. Thirty percent (30%) of Employee’s options will be
        vested as of the Effective Date, thirty percent (30%) will be vested after
        twelve (12) months of service of employment and forty percent (40%) will
        be
        vested after twenty-four (24) months of service of employment. Employee’s
        options will remain exercisable until ninety (90) days after termination
        of
        Employee’s employment.

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      2.5 Relocation
        Expense.
        If
        Company’s offices to which Employee is assigned are relocated outside of the
        Denver, Colorado metropolitan area and Employee remains employed by Company
        pursuant to this Agreement, then Company shall pay all reasonable relocation
        expenses incurred by Employee in relocating to Company’s new location.

       

      3. Expense
        Reimbursement and Other Benefits.

       

      3.1 Expense
        Reimbursement.
        During
        the Term, Company shall reimburse Employee for all documented reasonable
        expenses actually paid or incurred by Employee in the course of and pursuant
        to
        the business of Company, subject to and in accordance with the expense
        reimbursement policies and procedures, including pre-approval for specified
        expenses, as may be in effect from time to time for Company’s employees
        generally. 

       

      3.2 Other
        Benefits.
        During
        the Term, Company shall make available to Employee such benefits and perquisites
        as are generally provided by Company to its senior management (subject to
        eligibility), including but not limited to vacation and sick leave,
        participation in any group life, medical, health, dental, disability or accident
        insurance, pension plan, 401(k) savings and investment plan, profit-sharing
        plan, employee stock purchase plan, incentive compensation plan or other
        such
        benefit plan or policy, if any, which may presently be in effect or which
        may
        hereafter be adopted by Company for the benefit of its senior management
        or its
        employees generally, in each case subject to and on a basis consistent with
        the
        terms, conditions and overall administration of such plan or arrangement.
        

       

      3.3 Automobile.
        Employee shall be entitled to the use of a motor vehicle chosen by Employee,
        subject to a maximum capital cost of $25,000, including lease payments,
        insurance, maintenance and fuel expenses, subject to Company’s general policies.
        Company will report any non-business use of such vehicle as taxable income
        of
        Employee. 

       

      4. Termination.

       

      4.1 Termination
        for Cause.
        Notwithstanding anything to the contrary in this Agreement, this Agreement
        and
        Employee’s employment hereunder may be immediately terminated by Company at any
        time for Cause. As used in this Agreement, “Cause”
shall
        mean (i) subject to the following sentences, any action or omission of Employee
        which constitutes (A) a breach of any of the provisions of Section 5 of this
        Agreement, (B) a breach by Employee of his fiduciary duties and obligations
        to
        Company, or (C) Employee’s failure or refusal to follow any lawful directive of
        the Board, in each case which act or omission is not cured (if capable of
        being
        cured) within ten (10) days after written notice of same from Company to
        Employee, or (ii) conduct constituting fraud, embezzlement, misappropriation
        or
        gross dishonesty by Employee in connection with the performance of his duties
        under this Agreement, or a conviction of Employee of, a felony (other than
        a
        traffic violation) or, if it shall damage or bring into disrepute the business,
        reputation or goodwill of Company or impair Employee's ability to perform
        his
        duties with Company, any crime involving moral turpitude. Employee shall
        be
        given a written notice of termination for Cause specifying the details thereof.
        Upon any termination pursuant to this Section 4.1, Employee shall only be
        entitled to his Base Salary as then in effect through the date of termination,
        reimbursement of expenses incurred prior to the date of termination in
        accordance with Section 3.1 hereof and, and any other compensation and benefits
        payable in accordance with Section 3.2 hereof. Upon making such payments,
        notwithstanding any other provision of this Agreement, Company shall have
        no
        further liability to Employee and Employee shall have no further rights or
        benefits hereunder.

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

       

      4.2 Disability.
        Notwithstanding anything contained in this Agreement to the contrary, Company,
        by written notice to Employee, shall at all times have the right to terminate
        this Agreement and Employee’s employment hereunder if Employee shall, as the
        result of mental or physical incapacity, illness or disability, fail or be
        unable to perform his duties and responsibilities provided for herein in
        all
        material respects for a period of more than sixty (60) consecutive days in
        any
        12-month period. Upon any termination pursuant to this Section 4.2, (i) within
        thirty (30) days after the date of termination, Company shall pay Employee
        any
        unpaid amounts of his Base Salary accrued prior to the date of termination
        and
        shall reimburse Employee for all expenses described in Section 3.1 of this
        Agreement and incurred prior to the date of termination, and (ii) Company
        shall
        have no obligation to pay any further Base Salary, incentive compensation,
        or
        other employee benefits or payments to Employee for periods subsequent to
        the
        date of termination; provided,
        however, that
        Employee shall be entitled to receive any amounts then payable pursuant to
        any
        employee benefit plan, disability insurance policy or other plan, program
        or
        policy then maintained or provided by Company to Employee under Section 3.2
        hereof or otherwise, but only if and to the extent that such amounts are
        payable
        pursuant to the terms of such plan, program or policy.

       

      4.3 Death.
        If
        Employee dies during the term of his employment hereunder, this Agreement
        shall
        terminate on the date of Employee’s death. Upon any such termination, (i) within
        thirty (30) days after the date of termination, Company shall pay to the
        estate
        of Employee any unpaid amounts of his Base Salary accrued prior to the date
        of
        termination and reimbursement for all expenses described in Section 3.1 of
        this
        Agreement and incurred by Employee prior to his death, and (ii) Company shall
        have no obligation to pay any further Base Salary, incentive compensation,
        or
        other employee benefits or payments to Employee or Employee’s estate for periods
        subsequent to the date of termination; provided,
        however, that
        Employee’s spouse, beneficiaries or estate, as the case may be, shall be
        entitled to receive any amounts then payable pursuant to any employee benefit
        plan, life insurance policy or other plan, program or policy then maintained
        or
        provided by Company to Employee under with Section 3.2 hereof or otherwise,
        but
        only if and to the extent that such amounts are payable pursuant to the terms
        of
        such plan, program or policy. Nothing herein is intended to give Employee’s
        spouse, beneficiaries or estate any rights to or interest in any key man
        life
        insurance policy on Employee maintained by Company for the benefit of Company.
        

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

      4.4  Termination
        Without Cause.
        Company
        shall have the right to terminate this Agreement and Employee’s employment
        hereunder without Cause by written notice to Employee. Upon any termination
        pursuant to this Section 4.4, Company shall
        pay
        Employee any unpaid amounts of his Base Salary accrued prior to the date
        of
        termination
        and
        shall reimburse Employee for all expenses described in Section 3.1 of this
        Agreement and incurred prior to the date of termination,
        provided,
        however, that if Company provided Employee with less than ninety (90) days
        prior
        written notice of the date of such termination, then in addition to his Base
        Salary and benefits through the date of such termination, Company shall also
        pay
        Employee, on the date of such termination, an amount equal to his Base Salary
        for the difference between the required ninety (90) days notice and the actual
        notice given by Company, subject to all appropriate withholdings and deductions.
        

       

      4.5 Voluntary
        Resignation.
        Employee may, upon not less than ninety (90) days prior written notice to
        Company, resign and terminate his employment hereunder. In the event Employee
        resigns as an employee of Company, he shall be entitled to receive only such
        payment(s) as he would have received had he been terminated pursuant to Section
        4.1 hereof. Employee
        shall not under any circumstances give Company less than ninety (90) days
        prior
        written notice of his resignation date. 

       

      4.6 Resignation
        for Good Reason.
        Employee
        may, by written notice to Company during the Term, elect to terminate his
        employment on the basis of “good reason” if there is (a) a material change of
        the principal location in which Employee is required to perform his duties
        hereunder without Employee’s prior consent (it being agreed that any location
        within the state of Colorado shall not be deemed a material change); or (b)
        a
        material reduction in (or a failure to pay or provide a material portion
        of)
        Employee’s Base Salary or other benefits payable under this Agreement. Any such
        notice of termination by Employee for “good reason” shall specify the
        circumstances constituting “good reason” and shall afford Company an opportunity
        to cure such circumstances at any time within the thirty (30) day period
        following the date of such notice. If Company does cure such circumstances
        within said thirty (30) day period, the notice of termination shall be withdrawn
        by Employee and of no further force and effect. If the circumstances cited
        in
        Employee’s notice qualify as “good reason” hereunder and are not cured within
        the thirty (30) days after the notice, this Agreement shall be terminated
        ninety
        (90) days after Employee’s original written notice and such termination shall be
        treated in all respects as if it had been a termination without cause under
        Section 4.4 of this Agreement. 

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      5. Restrictive
        Covenants.

       

      5.1 Nondisclosure.
        (a) Employee
        acknowledges
        that as part of the terms of his employment by Company, he will have access
        to
        and/or may develop
        or assemble confidential information owned by or related to Company, its
        customers or its business partners or Parent. Such confidential information
        (whether or not reduced to writing) shall include without limitation, plans
        designs, data, production reports, reserve estimates, acquisition plans,
        properties being evaluated for acquisition, marketing and development plans,
        business plans, strategies, methods of operation processes, know-how, research
        and development projects, manuals, techniques, software and hardware, customer
        lists and information, contracts, marketing strategies and literature, agency
        relationships and terms, financial information, pricing and compensation
        structures, business relations and negotiations, employee lists, vendors
        and
        suppliers, and any other information designated as “confidential” by Company or
        Parent (collectively, “Confidential
        Information”).
        Employee shall retain all Confidential Information in confidence in perpetuity,
        and shall not use or disclose Confidential Information for any purpose other
        than to the extent necessary to perform his duties as an employee of Company.
        This duty of confidentiality shall continue indefinitely notwithstanding
        any
        termination of Employee’s employment. 

       

      (b) Employee
        agrees to (i) return to Company upon request, and in any event, at the time
        of
        termination of employment for whatever reason, all documents, equipment,
        notes,
        records, computer disks and tapes and other tangible items in his possession
        or
        under his control which belong to Company or any of its affiliates or which
        contain or refer to any Confidential Information relating to Company or any
        of
        its affiliates and (ii) if so requested by Company, delete all Confidential
        Information relating to Company or any of its affiliates from any computer
        disks, tapes or other re-usable material in his possession or under his control
        which contain or refer to any Confidential Information relating to Company
        or
        any of its affiliates.

       

      5.2 Non-solicitation.
        During
        the Term and for a period of one (1) year thereafter, (the “Severance Period”),
        Employee (a) shall not solicit the business of any person, company or firm
        which
        is a former, current, or prospective customer, supplier, business associate,
        investor or business partner of Company or Parent (an “Associate”) for the
        benefit of anyone other than Company or Parent if the business solicited
        is of a
        type offered by Company or Parent during the Term, (b) shall not solicit
        or
        encourage any Associate to modify, diminish or eliminate its business
        relationship with Company or Parent or take any other action with respect
        to An
        Associate that could be detrimental to the interests of Company or Parent,
        and
        (c) shall not solicit for employment or for any other comparable service,
        such
        as consulting services, and shall not hire or engage as a consultant any
        employee or independent contractor employed or engaged by Company or Parent
        at
        any time during the Term. Employee acknowledges that violation of this covenant
        constitutes a misappropriation of Company’s or Parent’s trade secrets in
        violation of his duty of confidentiality owed to Company. 

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

       

      5.3 Non-competition.
        

       

      (a) During
        the Term, unless otherwise waived in writing by Company (such waiver to be
        in
        Company’s sole and absolute discretion), Employee shall not, directly or
        indirectly, engage in, operate, manage, have any investment or interest or
        otherwise participate in any manner (whether as employee, officer, director,
        partner, agent, security holder, creditor, consultant or otherwise) in any
        sole
        proprietorship, partnership, corporation or business or any other person
        or
        entity (each, a “Competitor”)
        that
        engages directly or indirectly, in a Competing Business; provided,
        that
        Employee may hold or acquire, solely as an investment, shares of capital
        stock
        or other equity securities of any Competitor, so long as the securities are
        publicly traded and Employee does not control, acquire a controlling interest
        in, or become a member of a group which exercises direct or indirect control
        of,
        more than five percent (5%) of any class of equity securities of such Competitor
        and may hold interest in oil and gas properties so long as such holdings
        are
        fully disclosed to Company. For purposes of this Agreement, the term
“Competing
        Business”
means
        any business
        that is engaged in a business similar to or competitive with the business
        of
        Company, including any business directly or indirectly engaged in exploration,
        development, production or management of oil or gas properties.

       

      (b) During
        the Term and during the Severance Period, Employee shall not, directly or
        indirectly, own, manage, operate, finance, join, control or participate in
        the
        ownership, management, operation, financing or control of, or be connected
        as an
        officer, consultant, partner, principal, agent, representative, employee
        or
        otherwise, with any person or business that acquires or seeks to acquire
        oil or
        gas properties that were known to Company and under active consideration
        for
        acquisition or participation by Company during the term of this Agreement,
        provided, however, that Employee
        may,
        after full, written disclosure to Company, purchase, participate in or otherwise
        acquire such properties that have been or are, after the receipt of such
        notice,
        declined by Company. 

       

      5.4 Non-disparagement.
        During
        the Term and the Severance Period, Employee
        will not distribute, cause a distribution of, or make any oral or written
        statement, which directly or by implication tarnishes, creates a negative
        impression of, or puts Company, its reputation and goodwill in a bad light,
        or
        disparages Company or Parent in any other way, including but not limited
        to: (a)
        the working conditions or employment practices of Company or Parent; (b)
        Company’s oil and gas properties, including unproved or proved undeveloped
        properties;
        or (c)
Company’s
        directors, officers and personnel. It will not be a violation of this section
        for
        Employee to make truthful statements, under oath, as required by law or formal
        legal process. 

       

      5.5 Intellectual
        Property Rights.
        Employee
        understands that as part of his Employment he may alone or together with
        others
        create, compile, or discover computer software, designs, literature, ideas,
        trade secrets, know-how, commercial information (including information
        concerning oil and gas properties, such as geological, engineering, seismic,
        geophysical, or other technical information relating to such properties),
        or any
        other valuable invention or copyrightable work (collectively, “Intellectual
        Property”).
        Employee acknowledges that Company shall own all right, title, and interest
        in
        all Intellectual Property created by him in whole or in part in the course
        of
        his employment by Company. Employee hereby assigns to Company all right,
        title,
        and interest in the copyrights or patents embodied in or represented by such
        Intellectual Property, including all rights of renewal and termination, and
        to
        any and all other intellectual property rights, including without limitation,
        trademarks, trade secrets, and know-how embodied in Intellectual Property
        or in
        any other idea or invention developed in whole or in part by Employee in
        the
        course of his Employment. Employee further agrees to take all actions and
        to
        execute all documents necessary in order to perfect and to vest such
        intellectual property rights in Company. 

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      5.6 Injunction.
        It is
        recognized and hereby acknowledged by the parties hereto that a breach by
        Employee of any of the covenants contained in Section 5 of this Agreement
        will
        cause irreparable harm and damage to Company, the monetary amount of which
        may
        be virtually impossible to ascertain. As a result, Employee recognizes and
        hereby acknowledges that Company shall be entitled to an injunction from
        any
        court of competent jurisdiction enjoining and restraining any violation of
        any
        or all of the covenants contained in Section 5 of this Agreement by Employee
        or
        any of his affiliates, associates, partners or agents, either directly or
        indirectly, and that such right to injunction shall be cumulative and in
        addition to whatever other remedies Company may possess.

       

      6. Entire
        Agreement; No Conflicts With Existing Arrangements.
        No
        agreements or representations, oral or otherwise, express or implied, with
        respect to the subject matter hereof have been made by either party which
        are
        not set forth expressly in this Agreement and this Agreement contains the
        entire
        agreement, and supersedes any other agreement or understanding, between Company
        and Employee relating to Employee’s employment and any compensation or benefits
        in respect thereof. Employee represents and warrants to Company that he has
        reviewed any existing employment or non-competition covenants with his prior
        employer, and that his employment by Company hereunder does not and will
        not
        conflict with or constitute a breach or default under any of the terms or
        provisions thereof.

       

      7. Notices:
        All
        notices and other communications required or permitted under this Agreement
        shall be in writing and will be either hand delivered in person, sent by
        facsimile, sent by certified or registered first class mail, postage pre-paid,
        or sent by nationally recognized express courier service. Such notices and
        other
        communications will be effective upon receipt if hand delivered or sent by
        facsimile, five (5) days after mailing if sent by mail, and one (l) day after
        dispatch if sent by express courier, to the following addresses, or such
        other
        addresses as any party may notify the other parties in accordance with this
        Section:

       

      
        	 	 	
                If
                  to Company:

                Suite
                  210

                1726
                  Cole Blvd

                Lakewood
                  CO 80401

                

                Attention:
                  Terence Barr

                Facsimile:
                  (303) 295-1961

                 

                If
                  to Employee:

                David
                  Ninke

                1219
                  Mesa Court

                Golden
                  CO 80403

              

      

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      

      8. Successors
        and Assigns.

       

      (a) This
        Agreement is personal to Employee and without the prior written consent of
        Company shall not be assignable by Employee otherwise than by will or the
        laws
        of descent and distribution. This Agreement shall inure to the benefit of
        and be
        enforceable by Employee’s legal representatives.

       

      (b) This
        Agreement shall inure to the benefit of and be binding upon Company and its
        successors and assigns.

       

      (c) Company
        will require any successor (whether direct or indirect, by purchase, merger,
        consolidation or otherwise) to all or substantially all of the business and/or
        assets of Company to expressly assume and agree to perform this Agreement
        in the
        same manner and to the same extent that Company would be required to perform
        it
        if no such succession had taken place. As used in this Agreement, “Company”
shall
        mean Company and any successor to its business and/or assets which assumes
        and
        agrees to perform this Agreement by operation of law or otherwise.

       

      9.
         Severability.
        The
        invalidity of any portion of this Agreement shall not affect the enforceability
        of the remaining portions of this Agreement. If any provision of this Agreement
        shall be declared invalid, this Agreement shall be construed as if such invalid
        word or words, phrase or phrases, sentence or sentences, clause or clauses,
        or
        section or sections had not been inserted. If such invalidity is caused by
        length of time or size of area, or both, the otherwise invalid provision
        will be
        considered to be reduced to a period or area that would cure such
        invalidity.

       

      10. Waivers.
        The
        waiver by either party hereto of a breach or violation of any term or provision
        of this Agreement shall not operate nor be construed as a waiver of any
        subsequent breach or violation.

       

      11. No
        Third Party Beneficiary.
        Nothing
        expressed or implied in this Agreement is intended, or shall be construed,
        to
        confer upon or give any person (other than the parties hereto and, in the
        case
        of Employee, his heirs, personal representative(s) and/or legal representative)
        any rights or remedies under or by reason of this Agreement.

       

      12. Governing
        Law.
        This
        Agreement shall be governed by and construed in accordance with the laws
        of the
        State of Colorado, without regard to principles of conflict of
        laws.

       

      13. Survival.
        Employee’s obligations under Section 5 hereof shall not terminate upon the
        termination of employment or the termination of this Agreement but shall
        continue in accordance with their terms set forth herein. 

       

      14. Counterparts
        and Facsimile Signatures.
        This
        Agreement may be executed in one or more counterparts and by the separate
        parties hereto in separate counterparts, each of which shall be deemed an
        original, but all of which together shall constitute one and the same document.
        Telecopies or other electronic facsimiles of original signatures shall be
        deemed
        to be the same as original signatures for all purposes. 

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

      IN
        WITNESS WHEREOF, the undersigned have executed this Agreement as of the
        Effective Date.

       

       

      
        	 	 	 
	 	
                COMPANY:

                

                SAMSON
                  OIL AND GAS USA, INC.

              
	 
 	 
 	 
 
	 	By:  	/s/ Terry
                Barr 
	 	 	    Terry Barr, CEO &
                Managing Director
	 	 	 
	 	 	 
	 	EMPLOYEE:
	 	 
	 	/s/ David
                Ninke 
	 	David
                Ninke

      

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      ASSIGNMENT
        OF OVERRIDING ROYALTY INTEREST

       

      THIS
        ASSIGNMENT OF OVERRIDING ROYALTY INTEREST
        (“Assignment”), dated effective __________ at 7:00 a.m. Mountain time (the
“Effective Time”), is from Samson
        Oil and Gas USA, Inc.,
        1726
        Cole Boulevard, Suite 210, Lakewood, Colorado 80401 (“Assignor”) to David
        Ninke, 1219
        Mesa
        Court, Golden
        CO
        80403
        (“Assignee”).

       

      For
        $100.00 and other good and valuable consideration, the receipt and sufficiency
        of which are hereby acknowledged, Assignor hereby sells, assigns, transfers,
        grants, bargains and conveys to Assignee an overriding royalty interest (“ORI”)
        equal to 1% of 8/8ths in the leases described in Exhibit A attached hereto
        and
        incorporated by reference (“Leases”); provided that, if any Lease covers less
        than the entire mineral estate in the lands covered by such Lease or if Assignor
        owns less than 100% of the leasehold interest under any Lease, then the ORI
        with
        respect to such Lease shall be reduced in the same proportion that the portion
        of the mineral estate covered thereby bears to the entire mineral estate.
        The
        ORI shall be calculated and paid at the wellhead. The ORI shall not bear
        any
        costs of development or operation. Assignee may, at Assignee’s sole cost, risk
        and expense, elect to take the ORI’s share of the oil, gas, casinghead gas and
        associated hydrocarbons in kind at the wellhead by providing appropriate
        written
        notice to Assignor of such election. It is understood that Assignee is not
        obligated to take in kind and the decision to take in kind shall be at the
        sole
        discretion of Assignee. If Assignee does not elect to take its share of oil,
        gas, casinghead gas and associated hydrocarbons in kind at the wellhead,
        then
        Assignee shall bear its aliquot portion of the costs incurred in gathering,
        transporting, compressing, treating, and processing such production.

       

      This
        Assignment and the ORI so assigned are made subject to the following terms
        and
        conditions:

       

      
        	
              	A.	
                This
                  Assignment is being made pursuant to the terms of the Leases and
                  any
                  assignments under which the Leases may have been acquired by Assignor.
                  All
                  capitalized terms used but not otherwise defined herein shall have
                  the
                  respective meanings ascribed to them in the Leases. If there is
                  a conflict
                  between the terms of this Assignment and the terms of the Leases
                  and any
                  assignments under which the Leases may have been acquired, the
                  terms of
                  the Leases and any assignments under with the Leases may have been
                  acquired shall control in all respects. The Assignor and Assignee
                  intend
                  that the terms of the Leases remain separate and distinct from
                  and not
                  merge into the terms of this
                  Assignment.

              

      

       

      
        	
              	B.	
                This
                  Assignment binds and inures to the benefit of Assignor and Assignee
                  and
                  their respective successors and assigns, and this ORI and all other
                  terms
                  and conditions of this Assignment shall apply to any and all extension,
                  renewal and substitute leases obtained by Assignor, its successors
                  or
                  assigns on the Leases described
                  herein.

              

      

       

      
        	
              	C.	
                The
                  ORI conveyed herein shall burden any extensions, renewals, substitutions
                  or new Lease taken by Assignor or its successors within one (1)
                  year after
                  expiration of Leases described on Exhibit
                  A.

              

      

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

       

       

      
        	
              	D.	
                It
                  is understood and agreed that Assignor shall have the right to
                  pool the
                  oil and gas Leases and lands covered hereby, or any portion thereof,
                  with
                  other lands and leases into voluntary units, or into units as established
                  by any governmental authority having jurisdiction, and if the Leases,
                  and
                  the lands covered thereby, or any part thereof are pooled accordingly,
                  then the ORI herein conveyed shall be reduced in the same proportion
                  that
                  the acreage burdened by the ORI bears to all the acreage included
                  in any
                  pooled unit.

              

      

       

      
        	
              	E.	
                This
                  Assignment is made pursuant to the terms and conditions of that
                  certain
                  Employment Agreement between the parties dated effective as of
                  October 1,
                  2007 and, in particular, to the Reassignment Provisions contained
                  in
                  Paragraph 2.3 of said Agreement in the event of sale or trade of
                  the
                  Leases which are the subject of this Assignment.
                  

              

      

       

      
        	
              	F.	
                This
                  Assignment of Overriding Royalty Interest is made without warranty
                  of
                  title, express or implied, except as to parties claiming by, through
                  or
                  under Assignor, but not otherwise.

              

      

       

      EXECUTED
        on the dates contained in the acknowledgements of this Assignment, to be
        effective for all purposes as of the Effective Time.

       

       

      ASSIGNOR:

       

      SAMSON
        OIL AND GAS USA, INC.

       

      By:____________________________

       

       

      ASSIGNEE:

       

      DAVID
        NINKE

       

      By:____________________________

       

      
        
           

        

        
          12

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}]]