Exhibit 10.2
 
REGISTRATION RIGHTS AGREEMENT
 
REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of November 3, 2006,
by and among Orion Ethanol, Inc. (formerly, RTO Holdings, Inc.), a Nevada
corporation, with headquarters located at 307 South Main, Pratt, Kansas 67124
(the “Company”), and the undersigned buyers (each, a “Buyer”, and collectively,
the “Buyers”).
 
WHEREAS:
 
A.     In connection with the Subscription Agreement, by and among the Company
and the Buyers (the “Subscription Agreement”), the Company has agreed, upon the
terms and subject to the conditions set forth in the Subscription Agreement, to
issue and sell to each Buyer (i) senior convertible notes of the Company (the
“Notes”), which will, among other things, be convertible into shares of the
Company’s common stock, $0.001 par value per share (the “Common Stock”, as
converted, the “Conversion Shares”) in accordance with the terms of the Notes.
 
B.     In accordance with the terms of the Subscription Agreement, the Company
has agreed to provide certain registration rights under the Securities Act of
1933, as amended, and the rules and regulations thereunder, or any similar
successor statute (collectively, the “1933 Act”), and applicable state
securities laws.
 
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the Buyers
hereby agree as follows:
 

 
1.
Definitions.

 
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Subscription Agreement. As used in this
Agreement, the following terms shall have the following meanings:
 
a.     “Business Day” means any day other than Saturday, Sunday or any other day
on which commercial banks in The City of New York are authorized or required by
law to remain closed.
 
b.     “Closing Date” shall have the meaning set forth in the Subscription
Agreement.
 
c.     “Effective Date” means the date the Registration Statement has been
declared effective by the SEC.
 
d.     “Effectiveness Deadline” means the date which is (i) in the event that
the Registration Statement is not subject to a review by the SEC, 180 calendar
days after the Closing Date or (ii) in the event that the Registration Statement
is subject to a review by the SEC,
 
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240 calendar days after the Closing Date; provided, however, that if the Company
effects a Qualified Financing on or before a date that is 150 calendar days
after the Closing Date, then the Effectiveness Deadline shall be extended to
such date as the Company is required to cause any resale registration statement
relating to securities issued in a Qualified Financing to go effective.
 
e.     “Filing Deadline” means 150 calendar days after the Closing Date;
provided, however, that if the Company effects a Qualified Financing on or
before the end of such 150 day period, then the Filing Deadline shall be
extended to such date as the Company is required to cause any resale
registration statement relating to securities issued in a Qualified Financing to
be filed.
 
f.     “Investor” means a Buyer or any transferee or assignee thereof to whom a
Buyer assigns its rights under this Agreement in accordance with the
requirements of the Transaction Documents and who agrees to become bound by the
provisions of this Agreement in accordance with Section 9 and any transferee or
assignee thereof to whom a transferee or assignee assigns its rights under this
Agreement in accordance with the requirements of the Transaction Documents and
who agrees to become bound by the provisions of this Agreement in accordance
with Section 9.
 
g.     “Person” means an individual, a limited liability company, a partnership,
a joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
 
h.     “register,” “registered,” and “registration” refer to a registration
effected by preparing and filing one or more Registration Statements (as defined
below) in compliance with the 1933 Act and pursuant to Rule 415 and the
declaration or ordering of effectiveness of such Registration Statement(s) by
the SEC.
 
i.     “Registrable Securities” means (i) the Conversion Shares issued or
issuable upon conversion or redemption of the Notes and (ii) any capital stock
of the Company issued or issuable with respect to the Conversion Shares, as a
result of any stock split, stock dividend, recapitalization, exchange or similar
event or otherwise, without regard to any limitations on conversions of the
Notes.
 
j.     “Registration Statement” means a registration statement or registration
statements of the Company filed under the 1933 Act covering the Registrable
Securities.
 
k.     “Required Holders” means the holders of at least a majority of the
Registrable Securities.
 
l.     “Required Registration Amount” means 130% (or such lesser amount as the
SEC may permit as evidenced in comments received to a filed Registration
Statement) of the number of Conversion Shares issued and issuable pursuant to
the Notes as of the trading day immediately preceding the applicable date of
determination.
 
m.     “Rule 415” means Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a continuous or delayed basis.
 
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n.     “SEC” means the United States Securities and Exchange Commission.
 

 
2.
Registration.

 
a.     Mandatory Registration. On or before the Filing Deadline, the Company
shall prepare and file with the SEC the Registration Statement on Form S-3
covering the resale of all of the Registrable Securities issuable upon then
outstanding Securities. In the event that Form S-3 is unavailable for such a
registration, the Company shall use such other form as is available for such a
registration on another appropriate form reasonably acceptable to the Required
Holders, subject to the provisions of Section 2(d). The Registration Statement
prepared pursuant hereto shall register for resale at least the number of shares
of Common Stock equal to the Required Registration Amount as of date the
Registration Statement is initially filed with the SEC. The Registration
Statement shall contain “Selling Stockholders” and “Plan of Distribution”
sections that are reasonably satisfactory to the Legal Counsel. The Company
shall use its best efforts to have the Registration Statement declared effective
by the SEC as soon as practicable, but in no event later than the Effectiveness
Deadline. By 9:30 am on the date following the Effective Date, the Company shall
file with the SEC in accordance with Rule 424 under the 1933 Act the final
prospectus to be used in connection with sales pursuant to such Registration
Statement.
 
b.     Allocation of Registrable Securities. The initial number of Registrable
Securities included in any Registration Statement and any increase in the number
of Registrable Securities included therein shall be allocated pro rata among the
Investors based on the number of Registrable Securities held by each Investor at
the time the Registration Statement covering such initial number of Registrable
Securities or increase thereof is declared effective by the SEC. In the event
that an Investor sells or otherwise transfers any of such Investor’s Registrable
Securities, each transferee shall be allocated a pro rata portion of the then
remaining number of Registrable Securities included in such Registration
Statement for such transferor. Any shares of Common Stock included in a
Registration Statement and which remain allocated to any Person which ceases to
hold any Registrable Securities covered by such Registration Statement shall be
allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement. Other than securities issued in a Qualified Financing
and the securities set forth in Schedule 2(b), in no event shall the Company
include any securities other than Registrable Securities on any Registration
Statement without the prior written consent of the Required Holders.
 
c.     Legal Counsel. Subject to Section 5 hereof, the Required Holders shall
have the right to select one legal counsel to review and oversee any
registration pursuant to this Section 2 (“Legal Counsel”), as designated by the
Required Holders. The Company and Legal Counsel shall reasonably cooperate with
each other in performing the Company’s obligations under this Agreement.
 
d.     Ineligibility for Form S-3. In the event that Form S-3 is not available
for the registration of the resale of Registrable Securities hereunder, the
Company shall (i) register the resale of the Registrable Securities on another
appropriate form reasonably
 
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acceptable to the Legal Counsel and (ii) undertake to register the Registrable
Securities on Form S-3 as soon as such form is available, provided that the
Company shall maintain the effectiveness of the Registration Statement then in
effect until such time as a Registration Statement on Form S-3 covering the
Registrable Securities has been declared effective by the SEC.
 
e.     Sufficient Number of Shares Registered. In the event the number of shares
available under a Registration Statement filed pursuant to Section 2(a) is
insufficient to cover all of the Registrable Securities required to be covered
by such Registration Statement or an Investor’s allocated portion of the
Registrable Securities pursuant to Section 2(b), the Company shall amend the
applicable Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover at least
the Required Registration Amount as of the trading day immediately preceding the
date of the filing of such amendment or new Registration Statement, in each
case, as soon as practicable, but in any event not later than thirty (30) days
after the necessity therefor arises. The Company shall use its best efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. For purposes of the foregoing
provision, the number of shares available under a Registration Statement shall
be deemed “insufficient to cover all of the Registrable Securities” if at any
time the number of shares of Common Stock available for resale under the
Registration Statement is less than the product determined by multiplying (i)
the Required Registration Amount as of such time by (ii) 0.90. The calculation
set forth in the foregoing sentence shall be made without regard to any
limitations on the conversion of the Notes such calculation shall assume that
the Notes are then convertible into shares of Common Stock at the then
prevailing Conversion Rate (as defined in the Notes).
 
f.     Effect of Failure to File and Obtain and Maintain Effectiveness of
Registration Statement. Subject to Section 4(a), if (i) a Registration Statement
covering all of the Registrable Securities required to be covered thereby and
required to be filed by the Company pursuant to this Agreement is (A) not filed
with the SEC on or before the respective Filing Deadline (a “Filing Failure”) or
(B) not declared effective by the SEC on or before the respective Effectiveness
Deadline (an “Effectiveness Failure”) or (ii) on any day after the Effective
Date sales of all of the Registrable Securities required to be included on such
Registration Statement cannot be made (other than during an Allowable Grace
Period (as defined in Section 3(r)) pursuant to such Registration Statement or
otherwise (including, without limitation, because of a failure to keep such
Registration Statement effective, to disclose such information as is necessary
for sales to be made pursuant to such Registration Statement, to register a
sufficient number of shares of Common Stock or to maintain the listing of the
Common Stock) (a “Maintenance Failure”) then, as partial relief for the damages
to any holder by reason of any such delay in or reduction of its ability to sell
the underlying Shares of Common Stock (which remedy shall not be exclusive of
any other remedies available at law or in equity), the Company shall pay to each
holder of Registrable Securities relating to such Registration Statement an
amount in cash equal to one and one-half percent (1.5%) of the aggregate
Purchase Price (as such term is defined in the Subscription Agreement) of such
Investor’s Notes relating to the Registrable Securities included in such
Registration Statement on each of the following dates: (i) the day of a Filing
Failure and on every thirtieth day (pro rated for periods totaling less than
thirty days) after a Filing Failure until such Filing Failure is cured; (ii) the
day of an Effectiveness Failure and on every thirtieth day (pro rated for
periods totaling
 
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less than thirty days) after an Effectiveness Failure until such Effectiveness
Failure is cured; and (iii) the initial day of a Maintenance Failure and on
every thirtieth day (pro rated for periods totaling less than thirty days) after
a Maintenance Failure until such Maintenance Failure is cured; provided,
however, that in no event shall the Company be liable for more than one and
one-half percent (1.5%) of penalties during any thirty day period or for
multiple events during any thirty day period. The payments to which a holder
shall be entitled pursuant to this Section 2(g) are referred to herein as
“Registration Delay Payments.” Registration Delay Payments shall accrue on the
day of the Filing Failure, Effectiveness Failure and the initial day of a
Maintenance Failure, as applicable, and thereafter shall accrue and be paid on
the earlier of (I) the thirtieth day after the event or failure giving rise to
the Registration Delay Payments has occurred and (II) the Business Day after the
event or failure giving rise to the Registration Delay Payments is cured.
Notwithstanding anything herein to the contrary, in no event shall the
Registration Delay Payments exceed twelve and one-half percent (12.5%) of the
aggregate Purchase Price for all Investors (the “Registration Delay Payments
Cap”).
 

 
3.
Related Obligations.

 
At such time as the Company is obligated to file a Registration Statement with
the SEC pursuant to Section 2(a), 2(d) or 2(e), the Company will use its best
efforts to effect the registration of the Registrable Securities in accordance
with the intended method of disposition thereof and, pursuant thereto, the
Company shall have the following obligations:
 
a.     The Company shall promptly prepare and file with the SEC a Registration
Statement with respect to the Registrable Securities and use its reasonable best
efforts to cause such Registration Statement relating to the Registrable
Securities to become effective as soon as practicable after such filing (but in
no event later than the Effectiveness Deadline). Subject to Allowable Grace
Periods, the Company shall keep each Registration Statement effective pursuant
to Rule 415 at all times until the earlier of (i) the date as of which the
Investors may sell all of the Registrable Securities covered by such
Registration Statement without restriction pursuant to Rule 144(k) (or any
successor thereto) promulgated under the 1933 Act or (ii) the date on which the
Investors shall have sold all of the Registrable Securities covered by such
Registration Statement (the “Registration Period”). The Company shall ensure
that each Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein (in the case of
prospectuses, in the light of the circumstances in which they were made) not
misleading other than such information as provided in writing by Investors for
use in such Registration Statement or prospectus. The term “best efforts” shall
mean, among other things, that the Company shall submit to the SEC, within two
(2) Business Days after the later of the date that (i) the Company learns that
no review of a particular Registration Statement will be made by the staff of
the SEC or that the staff has no further comments on a particular Registration
Statement, as the case may be, and (ii) the approval of Legal Counsel (which
shall not be unreasonably withheld or delayed) pursuant to Section 3(c) (which
approval is immediately sought), a request for acceleration of effectiveness of
such Registration Statement to a time and date not later than two (2) Business
Days after the submission of such request.
 
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b.     The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company filing a report on Form 10-QSB, Form
10-KSB or any analogous report under the Securities Exchange Act of 1934, as
amended (the “1934 Act”), the Company shall have incorporated such report by
reference into such Registration Statement, if applicable, or shall file such
amendments or supplements with the SEC on the same day on which the 1934 Act
report is filed which created the requirement for the Company to amend or
supplement such Registration Statement.
 
c.     The Company shall (A) permit Legal Counsel and the Investors to review
and comment upon (i) a Registration Statement at least three (3) Business Days
prior to its filing with the SEC and (ii) all amendments and supplements to all
Registration Statements (except for Annual Reports on Form 10-KSB, and Reports
on Form 10-QSB and any similar or successor reports) within a reasonable number
of days prior to their filing with the SEC, and (B) not file any Registration
Statement or amendment or supplement thereto in a form to which Legal Counsel or
any Investor reasonably objects; provided, however, that no liquidated damages
under Section 2 shall be due to any Investor if Legal Counsel or any Investor
shall have unnecessarily objected to the filing or effectiveness of any
Registration Statement such as to delay its filing or effectiveness. The Company
shall furnish to Legal Counsel and the Investors, without charge, (i) copies of
any correspondence from the SEC or the staff of the SEC to the Company or its
representatives relating to any Registration Statement, to the extent containing
information which the Company believes does not constitute material, nonpublic
information concerning the Company and (ii) promptly after the same is prepared
and filed with the SEC, one copy of any Registration Statement and any
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, if requested by an Investor (if not
available pursuant to Rule 424(b)). The Company shall reasonably cooperate with
Legal Counsel and the Investors in performing the Company’s obligations pursuant
to this Section 3.
 
d.     The Company shall furnish to each Investor whose Registrable Securities
are included in any Registration Statement, without charge, (i) promptly after
the same is prepared and filed with the SEC, at least one copy of such
Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, if
requested by an Investor, all exhibits and each preliminary prospectus, (ii)
upon the effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including copies of any
preliminary or final prospectus, as such Investor may reasonably request from
time to time in order to facilitate the disposition of the Registrable
Securities owned by such Investor.
 
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e.     The Company shall use its best efforts to (i) register and qualify,
unless an exemption from registration and qualification applies, the resale by
Investors of the Registrable Securities covered by a Registration Statement
under such other securities or “blue sky” laws of all applicable jurisdictions
in the United States, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(e), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify Legal Counsel and each Investor
who holds Registrable Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or “blue sky”
laws of any jurisdiction in the United States or its receipt of notice of the
initiation or threatening of any proceeding for such purpose.
 
f.     The Company shall notify Legal Counsel and each Investor in writing of
the happening of any event, as promptly as practicable after becoming aware of
such event, as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading (provided that in no event shall such notice contain
any material, nonpublic information), and, subject to Section 3(r), promptly
prepare a supplement or amendment to such Registration Statement to correct such
untrue statement or omission, and deliver ten (10) copies of such supplement or
amendment to Legal Counsel and each Investor (or such other number of copies as
Legal Counsel or such Investor may reasonably request). The Company shall also
promptly notify Legal Counsel and each Investor in writing (i) when a prospectus
or any prospectus supplement or post-effective amendment has been filed, and
when a Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to Legal
Counsel and each Investor by facsimile or e-mail on the same day of such
effectiveness), (ii) of any request by the SEC for amendments or supplements to
a Registration Statement or related prospectus or related information, and (iii)
of the Company’s determination that a post-effective amendment to a Registration
Statement would be appropriate.
 
g.     The Company shall use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement, or
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify Legal Counsel and each Investor who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of notice of the initiation or threat of any proceeding for such
purpose.
 
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h.     The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities laws
or the rules and regulations of any applicable trading market, (ii) the
disclosure of such information is necessary to avoid or correct a misstatement
or omission in any Registration Statement, (iii) the release of such information
is ordered pursuant to a subpoena or other final order from a court or
governmental body of competent jurisdiction, or (iv) such information has been
made generally available to the public other than by disclosure in violation of
this Agreement or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt written notice to such Investor and allow such Investor, at
the Investor’s expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, such information.
 
i.     The Company shall use its best efforts either to (i) cause all of the
Registrable Securities covered by a Registration Statement to be listed on each
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or (ii) secure the
inclusion for quotation of all of the Registrable Securities on the Nasdaq
National Market or (iii) if, despite the Company’s best efforts, the Company is
unsuccessful in satisfying the preceding clauses (i) and (ii), to secure the
inclusion for quotation of all of the Registrable Securities on the American
Stock Exchange for such Registrable Securities and, without limiting the
generality of the foregoing, to use its best efforts to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. (“NASD”) as such with respect to such Registrable Securities or (iv) if,
despite the Company’s best efforts, the Company is unsuccessful in satisfying
the preceding clauses (i)-(iii), to secure the inclusion for quotation of all of
the Registrable Securities on the NASD’s OTC Bulletin Board. The Company shall
pay all fees and expenses in connection with satisfying its obligation under
this Section 3(k).
 
j.     The Company shall cooperate with the Investors who hold Registrable
Securities being offered and, to the extent applicable, facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the Investors may reasonably request and registered in
such names as the Investors may request.
 
k.     If requested by an Investor, the Company shall (i) as soon as practicable
incorporate in a prospectus supplement or post-effective amendment such
information as an Investor reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering;
(ii) as soon as practicable make all required filings of such prospectus
supplement or post-effective amendment after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) as soon as practicable, supplement or make amendments
 
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to any Registration Statement if reasonably requested by an Investor holding any
Registrable Securities.
 
l.     The Company shall use its best efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to
consummate the disposition of such Registrable Securities.
 
m.     The Company shall make generally available to its security holders as
soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with, and in
the manner provided by, the provisions of Rule 158 under the 1933 Act) covering
a twelve-month period beginning not later than the first day of the Company’s
fiscal quarter next following the effective date of a Registration Statement.
 
n.     The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
 
o.     Within two (2) Business Days after a Registration Statement which covers
Registrable Securities is declared effective by the SEC, the Company shall
deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the
SEC in a form that is reasonably satisfactory to the Legal Counsel.
 
p.     Notwithstanding anything to the contrary herein, at any time after the
Effective Date, the Company may delay the disclosure of material, non-public
information concerning the Company the disclosure of which at the time is not,
in the good faith opinion of the Board of Directors of the Company (following
consultation with its counsel), in the best interest of the Company (a “Grace
Period”); provided, that the Company shall promptly (i) notify the Investors in
writing that such determination has been made (provided that in each notice the
Company will not disclose the content of such material, non-public information
to the Investors) and the date on which the Grace Period will begin, and (ii)
notify the Investors in writing of the date on which the Grace Period ends; and,
provided further, that during any three hundred sixty five (365) day period such
Grace Periods shall not exceed an aggregate of thirty (30) days and the first
day of any Grace Period must be at least two (2) trading days after the last day
of any prior Grace Period (each, an “Allowable Grace Period”). For purposes of
determining the length of a Grace Period above, the Grace Period shall begin on
and include the date the Investors receive the notice referred to in clause (i)
and shall end on and include the later of the date the Investors receive the
notice referred to in clause (ii) and the date referred to in such notice. The
provisions of Section 3(g) hereof shall not be applicable during the period of
any Allowable Grace Period. Upon expiration of the Grace Period, the Company
shall again be bound by the first sentence of Section 3(f) with respect to the
information giving rise thereto unless such material, non-public information is
no longer applicable. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of an Investor in accordance with the terms of the Subscription
Agreement in connection with any sale of Registrable Securities with respect to
which an
 
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Investor has entered into a contract for sale and delivered a copy of the
prospectus included as part of the applicable Registration Statement (unless an
exemption from such prospectus delivery requirement exists) prior to the
Investor’s receipt of the notice of a Grace Period and for which the Investor
has not yet settled.
 

 
4.
Obligations of the Investors.

 
a.     At least five (5) Business Days prior to the first anticipated filing
date of a Registration Statement, the Company shall notify each Investor in
writing of the information the Company requires from each such Investor if such
Investor elects to have any of such Investor’s Registrable Securities included
in such Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
(and to the Company’s liability for damages under Section 2(f) to such Investor)
that such Investor shall furnish to the Company a completed and updated “Selling
Stockholder Questionnaire,” in a form reasonably satisfactory to Legal Counsel,
and such other information regarding itself, the Registrable Securities held by
it and the intended method of disposition of the Registrable Securities held by
it as shall be reasonably required to effect the effectiveness of the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.
 
b.     Each Investor, by such Investor’s acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor’s election to exclude all of such Investor’s Registrable
Securities from such Registration Statement.
 
c.     Each Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3(g) or the first
sentence of 3(f), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Investor’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(g) or the first
sentence of 3(f) or receipt of notice that no supplement or amendment is
required. Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Subscription Agreement in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor’s receipt of
a notice from the Company of the happening of any event of the kind described in
Section 3(g) or the first sentence of 3(f) and for which the Investor has not
yet settled.
 
d.     Each Investor covenants and agrees that it will comply with the
prospectus delivery requirements of the 1933 Act as applicable to it or an
exemption therefrom in connection with sales of Registrable Securities pursuant
to the Registration Statement.
 

 
5.
Expenses of Registration.

 
10

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All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company shall be paid by the Company.
 

 
6.
Indemnification.

 
In the event any Registrable Securities are included in a Registration Statement
under this Agreement:
 
a.     To the fullest extent permitted by law, the Company will, and hereby
does, indemnify, hold harmless and defend each Investor, the directors,
officers, members, partners, employees, agents, representatives of, and each
Person, if any, who controls any Investor within the meaning of the 1933 Act or
the 1934 Act (each, an “Indemnified Person”), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, reasonable
attorneys’ fees, amounts paid in settlement or expenses, joint or several,
(collectively, “Claims”) incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the SEC, whether pending or threatened, whether or
not an indemnified party is or may be a party thereto (“Indemnified Damages”),
to which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other “blue sky” laws of any jurisdiction in
which Registrable Securities are offered (“Blue Sky Filing”), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in the light of the circumstances under which
the statements therein were made, not misleading, (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any violation of this
Agreement by the Company (the matters in the foregoing clauses (i) through (iv)
being, collectively, “Violations”). Subject to Section 6(c), the Company shall
reimburse the Indemnified Persons, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim by an
Indemnified Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto,
 
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if such prospectus was timely made available by the Company pursuant to Section
3(d) and (ii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld or delayed. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
 
b.     In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement and each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each, an
“Indemnified Party”), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(c), such Investor will
reimburse any legal or other expenses reasonably incurred by an Indemnified
Party in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) and the
agreement with respect to contribution contained in Section 7 shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that the Investor
shall be liable under this Section 6(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
 
c.     Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be
 
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selected by the Investors holding at least a majority in interest of the
Registrable Securities included in the Registration Statement to which the Claim
relates. The Indemnified Party or Indemnified Person shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or Claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the Indemnified Party or
Indemnified Person which relates to such action or Claim. The indemnifying party
shall keep the Indemnified Party or Indemnified Person reasonably apprised at
all times as to the status of the defense or any settlement negotiations with
respect thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its prior written consent,
provided, however, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall, without the prior
written consent of the Indemnified Party or Indemnified Person, consent to entry
of any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such Claim or litigation, and such settlement shall not include
any admission as to fault on the part of the Indemnified Party. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter for
which indemnification has been made. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.
 
d.     The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or Indemnified Damages are incurred.
 
e.     The indemnity agreements contained herein shall be in addition to (i) any
cause of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
 

 
7.
Contribution.

 
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that: (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section 6
of this Agreement, (ii) no Person involved in the sale of Registrable
Securities, which Person is guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) in connection with such sale, shall be
entitled to contribution from any Person involved in such sale of Registrable
Securities who was not guilty of fraudulent misrepresentation; and (iii)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities pursuant to such Registration Statement.
 
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8.
Reports Under the 1934 Act.

 
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the Company
to the public without registration (“Rule 144”), the Company agrees to:
 
a.     make and keep public information available, as those terms are understood
and defined in Rule 144;
 
b.     file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and
 
c.     furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company, if
true, that it has complied with the reporting requirements of Rule 144, the 1933
Act and the 1934 Act, (ii) a copy of the most recent annual report of the
Company and such other reports and documents so filed by the Company (but only
if such reports are not publicly available on the EDGAR system), and (iii) such
other information as may be reasonably requested to permit the Investors to sell
such securities pursuant to Rule 144 without registration.
 

 
9.
Assignment of Registration Rights.

 
The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of such Investor’s Registrable
Securities if: (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment; (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned; (iii) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act or applicable state securities laws; (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein; and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Subscription Agreement.
 

 
10.
Amendment of Registration Rights; Automatic Termination of Agreement.

 
a.     Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Required Holders. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the Registrable Securities. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of
 
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this Agreement unless the same consideration also is offered to all of the
parties to this Agreement.
 
b.     If a Qualified Financing occurs on or before the 150th day after the
Closing Date and in connection with such Qualified Financing the Investors enter
into a separate agreement relating to the registration of the Registrable
Securities, then this Agreement shall automatically terminate and the
obligations of the parties hereunder shall automatically cease and such other
agreement shall supersede this Agreement.
 

 
11.
Miscellaneous.

 
a.    A Person is deemed to be a holder of Registrable Securities whenever such
Person owns or is deemed to own of record such Registrable Securities. If the
Company receives conflicting instructions, notices or elections from two or more
Persons with respect to the same Registrable Securities, the Company shall act
upon the basis of instructions, notice or election received from the such record
owner of such Registrable Securities.
 
b.    Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
 
If to the Company:
 
Orion Ethanol, Inc.
307 South Main
Pratt, Kansas 67124
Telephone: (620) 672-2814
Facsimile: (620) 672-3142
Attention: Chief Financial Officer
 
With a copy (which shall not constitute notice) to:
 
Thelen Reid & Priest LLP
701 Eighth Street, NW
Washington, DC 20001
Telephone: (202) 508-4281
Facsimile: (202) 654-1804
Attention: Louis A. Bevilacqua, Esq.
 
If to a Buyer, to its address and facsimile number set forth on the signature
page of the Subscription Agreement, or to such other address and/or facsimile
number and/or to the attention of such other Person as the recipient party has
specified by written notice given to each other
 
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party five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by a
courier or overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
 
c.    Failure of any party to exercise any right or remedy under this Agreement
or otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.
 
d.    All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
 
e.    This Agreement, the other Transaction Documents (as defined in the
Securities Purchase Agreement) and the instruments referenced herein and therein
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the other Transaction Documents and the instruments
referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
 
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f.    Subject to the requirements of Section 9, this Agreement shall inure to
the benefit of and be binding upon the permitted successors and assigns of each
of the parties hereto.
 
g.    The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
 
h.    This Agreement may be executed in identical counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
 
i.    Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
 
j.    All consents and other determinations required to be made by the Investors
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by the Required Holders.
 
k.    The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent and no rules of strict
construction will be applied against any party.
 
l.    This Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person.
 
m.    The obligations of each Buyer hereunder are several and not joint with the
obligations of any other Buyer, and no provision of this Agreement is intended
to confer any obligations on any Buyer vis-à-vis any other Buyer. Nothing
contained herein, and no action taken by any Buyer pursuant hereto, shall be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers are
in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated herein.
 
[Signature Page Follows]
 
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IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.
 

 
COMPANY:

ORION ETHANOL, INC.
 
 
 
By:
/s/Timothy C. Barker
   
Name: Timothy C. Barker
Title: EVP-Devlopment

 
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IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.
 

   
BUYERS:
 
/s/Chet Morrison
   
 
/s/Edwin B. Young

   
 
/s/ Gary C. Evans
   
 
/s/ David S. Krueger

   
 
/s/ Joseph L. Meibergen
   
 
/s/ David and Stephanie Kenkel
   
 
/s/ Hugh C. Uhalt
   
 
/s/ Wayne C. Ducote
   
 
/s/ David L. Ducote

   
 
/s/ Paxton White
   
 
/s/ Evans White
   
 
/s/ Joel A. Dondis

   
 
DOC Investments, LLC
 
 
By:
/s/ Danny Conwill
   
President/Managing Member
   
 
DOC Investment No. 2, LLC
 
 
By:
/s/ Danny Conwill
   
President/Managing Member

   
 
HB Partners, L.L.C.
 
 
By:
/s/ Timothy W. Buyce
   
Vice President

   
 
West Coast Opportunity Fund, LLC
 
 
By:
/s/ Atticus Lowe
   
Vice President
   
 
Iwanta Oil, LLC
 
 
By:
/s/ Michael B. White
   
Managing Partner

   
 
R.E. Trust
 
 
 
/s/ 
   
 

   
 
E.I.G. LLC
 
 
By:
/s/ Jerry Rafferty
   
Authorized Agent

 
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