Document:

REGISTRATION
      RIGHTS AGREEMENT

    

    REGISTRATION
      RIGHTS AGREEMENT
      (this
      "Agreement"),
      dated
      as of December 21, 2006, by and among Rancher Energy Corp., a Nevada
      corporation,
      with
      headquarters located at 999-18th
      Street,
      Suite 1740, Denver, Colorado 80202
      (the "Company"),
      and
      the undersigned buyers (each, a "Buyer",
      and
      collectively, the "Buyers").

    

    WHEREAS:

    

    A. In
      connection with the Securities Purchase Agreement by and among the parties
      hereto of even date herewith (the "Securities
      Purchase Agreement"),
      the
      Company has agreed, upon the terms and subject to the conditions set forth
      in
      the Securities Purchase Agreement, to issue and sell to each Buyer (i)
      convertible notes of the Company (the "Notes")
      which
      will, among other things, be convertible into shares of the Company's common
      stock, par value $.00001 value per share (the "Common
      Stock")
      (as
      converted, the "Conversion
      Shares")
      in
      accordance with the terms of the Notes, (ii) shares (the "Common
      Shares")
      of
      Common Stock and (iii) warrants (the "Warrants")
      which
      will be exercisable to purchase shares of Common Stock (as exercised
      collectively, the "Warrant
      Shares").

    

    B. To
      induce
      the Buyers to execute and deliver the Securities Purchase 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 Securities Purchase Agreement. As used in this
      Agreement, the following terms shall have the following meanings:

    

    a. "Additional
      Effectiveness Date"
      means
      the date the Additional Registration Statement is declared effective by the
      SEC.

    

    b. "Additional
      Effectiveness Deadline"
      means
      the earlier to occur of (i) the date which is five (5) days after the Company
      learns that no review of the Additional Registration Statement will be made
      by
      the staff of the SEC or that the staff has no further comments on the Additional
      Registration Statement, and (ii) the date which is one hundred and twenty (120)
      days after the Additional Filing Date (as defined below), or if there is a
      full
      review of the Additional Registration Statement by the SEC, one hundred and
      fifty (150) days after the Additional Filing Date.

    

    c. "Additional
      Filing Date"
      means
      the date on which the Additional Registration Statement (as defined below)
      is
      filed with the SEC.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    d. "Additional
      Filing Deadline"
      means
      (i) if the Stockholder Approval (as defined in the Securities Purchase
      Agreement) is not obtained by the Initial Filing Deadline and no Cutback Shares
      are required to be included in the Additional Registration Statement, the date
      five (5) days after the Stockholder Approval is obtained or (ii) if Cutback
      Shares are required to be included in the Additional Registration Statement,
      the
      date six (6) months from the Initial Filing Date.

    

    e. "Additional
      Registrable Securities"
      means,
      (i) if the Stockholder Approval is not obtained by the Initial Filing Deadline,
      (x) the Conversion Shares issuable upon conversion or redemption of the Notes
      and (y) any Warrant Shares issued or issuable upon exercise of the Warrants
      not
      previously included on a Registration Statement, (ii) any Cutback Shares not
      previously included on a Registration Statement and (iii) any share capital
      of
      the Company issued or issuable with respect to the Notes, the Conversion Shares,
      the Warrants, the Warrant Shares or Cutback Shares, as applicable, as a result
      of any stock split, stock dividend, recapitalization, exchange or similar event
      or otherwise, without regard to any limitations on conversions of Notes or
      exercises of the Warrants.

    

    f. "Additional
      Registration Statement"
      means a
      registration statement or registration statements of the Company filed under
      the
      1933 Act covering any Additional Registrable Securities.

    

    g. "Additional
      Required Registration Amount"
      means
      the sum of 130% of (i) if the Stockholder Approval is not obtained by the
      Initial Filing Deadline, (x) the number of Conversion Shares issuable pursuant
      to the Notes as of the trading day immediately preceding the applicable date
      of
      determination, and (y) the number of Warrant Shares issued and issuable pursuant
      to the Warrants as of the trading day immediately preceding the applicable
      date
      of determination not previously included on a Registration Statement and (ii)
      any Cutback Shares not previously included on a Registration Statement, all
      subject to adjustment as provided in Section 2(e), without regard to any
      limitations on conversions of the Notes or exercises of the
      Warrants.

    

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

    

    i. "Closing
      Date"
      shall
      mean the initial Closing Date, as set forth in the Securities Purchase
      Agreement.

    

    j. "Effective
      Date"
      means
      the Initial Effective Date and the Additional Effective Date, as
      applicable.

    

    k. "Effectiveness
      Deadline"
      means
      the Initial Effectiveness Deadline (as defined below) and the Additional
      Effectiveness Deadline (as defined below), as applicable.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    l. "Equity
      Conditions"
      means
      each of the following conditions on each applicable date of determination:
      (i)
      the Common
      Stock
      is
      designated for quotation on the Principal Market or any applicable Eligible
      Market (each as defined in the Securities Purchase Agreement) and shall not
      have
      been suspended from trading on such exchange or market (other than suspensions
      of not more than two (2) days and occurring prior to the applicable date of
      determination due to business announcements by the Company) nor shall delisting
      or suspension by such exchange or market been threatened or pending either
      (A)
      in writing by such exchange or market or (B) by falling below the then effective
      minimum listing maintenance requirements of such exchange or market; (ii) the
      Company shall have delivered Conversion Shares upon conversion of the Notes
      and
      Warrant Shares upon exercise of the Warrants to the holders on a timely basis
      as
      set forth in Section 2(c)(ii) of the Notes and Sections 2(a) of the Warrants;
      (iii) any applicable shares of Common
      Stock to
      be
      issued in connection with the event requiring determination may be issued in
      full without violating the rules or regulations of the exchange or market upon
      which the Company's Common Stock is then listed or quoted; (iv) the Company
      shall not have failed to timely make any payments within five (5) Business
      Days
      of when such payment is due pursuant to any Transaction Document (as defined
      in
      the Securities Purchase Agreement; (v) there shall not have occurred either
      (A)
      the public announcement of a pending, proposed or intended Fundamental
      Transaction (as defined in the Notes) which has not been abandoned, terminated
      or consummated, or (B) an
      Event
      of Default (as defined in the Notes) or (C) an event that with the passage
      of
      time or giving of notice would constitute an Event of Default; and (vi)
the
      Company otherwise shall have been in material compliance with and shall not
      have
      materially breached any provision, covenant, representation or warranty of
      any
      Transaction Document.

    

    m. "Equity
      Conditions Failure"
      means
      that on any day during the period commencing ten (10) Trading Days prior to
      the
      applicable Registration Delay Payments Payment Date through the applicable
      Registration Delay Payments Payment Date, the Equity Conditions have not been
      satisfied (or waived in writing by the applicable holder of Registrable
      Securities). 

    

    n. "Filing
      Deadline"
      means
      the Initial Filing Deadline (as defined below) and the Additional Filing
      Deadline, as applicable.

    

    o. "Initial
      Effective Date"
      means
      the date the Initial Registration Statement is declared effective by the
      SEC.

    

    p. "Initial
      Effectiveness Deadline"
      means
      the earlier to occur of (i) the date which is five (5) days after the Company
      learns that no review of the Initial Registration Statement will be made by
      the
      staff of the SEC or that the staff has no further comments on the Initial
      Registration Statement, (ii) the date which is one hundred and twenty (120)
      days
      after the Closing Date, or if there is a full review of the Initial Registration
      Statement by the SEC, one hundred and fifty (150) days after the Closing
      Date.

    

    q. "Initial
      Filing Date"
      means
      the date on which the Initial Registration Statement (as defined below) is
      filed
      with the SEC.

    

    r. "Initial
      Filing Deadline"
      means
      the date seventy-five (75) days after the Closing Date.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    s. "Initial
      Registrable Securities"
      means
      (A) if the Stockholder Approval is obtained by the Initial Filing Deadline,
      (i)
      the Conversion Shares issued or issuable upon conversion or redemption of the
      Notes, (ii) the Common Shares, (iii) the Warrant Shares issued or issuable
      upon
      exercise of the Warrants and (iv) any share capital of the Company issued or
      issuable with respect to the Common Shares, the Warrant Shares or the Warrants,
      the Conversion Shares and the Notes, 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 or exercises of the
      Warrants and (B) if the Stockholder Approval is not obtained by the Initial
      Filing Deadline, the Common Shares.

    

    t. "Initial
      Required Registration Amount"
      means
      (I) (A) if the Stockholder Approval is obtained by the Initial Filing Deadline,
      130% of the sum of (i), the number of Conversion Shares issued or issuable
      pursuant to the Notes as of the trading day immediately preceding the applicable
      date of determination, (ii) the number of Common Shares issued and (iii) the
      number of Warrant Shares issued and issuable pursuant to the Warrants as of
      the
      trading day immediately preceding the applicable date of determination, all
      subject to adjustment as provided in Section 2(e), without regard to any
      limitations on conversions of the Notes or exercises of the Warrants, and (B)
      if
      the Stockholder Approval is not obtained by the Initial Filing Deadline, the
      number of Common Shares issued or (II) such other amount as may be required
      by
      the staff of the SEC. Any shares included under clause (I) of the immediately
      preceding sentence but excluded from the definition of Initial Required
      Registration Amount because of clause (II), are referred to herein as the
      "Cutback
      Shares".

    

    u. "Initial
      Registration Statement"
      means a
      registration statement or registration statements of the Company filed under
      the
      1933 Act covering the Initial Registrable Securities.

    

    v. "Investor"
      means a
      Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights
      under this Agreement 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 and who
      agrees to become bound by the provisions of this Agreement in accordance with
      Section 9.

    

    w. "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.

    

    x. "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.

    

    y. "Registrable
      Securities"
      means
      the Initial Registrable Securities and the Additional Registrable
      Securities.

    

    z. "Registration
      Delay Payments Conversion Price"
      means,
      with respect to any Registration Delay Payments Payment Date, that
      price which shall be the price
      computed as 90% of the arithmetic average of the Weighted Average Price (as
      defined in the Notes) of the Common Stock on each of the ten (10) consecutive
      Trading Days ending on the Trading Day immediately preceding the applicable
      Registration Delay Payments Payment Date (each, a "Registration
      Delay Payments Measuring Period").
      All
      such determinations to be appropriately adjusted for any stock split, stock
      dividend, stock combination or other similar transaction during such
      Registration Delay Payments Measuring Period.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    aa. "Registration
      Statement"
      means a
      registration statement or registration statements of the Company filed under
      the
      1933 Act covering the Registrable Securities.

    

    bb. "Required
      Holders"
      means
      the holders of at least a majority of the Registrable Securities.

    

    cc. "Rule
      415"
      means
      Rule 415 under the 1933 Act or any successor rule providing for offering
      securities on a continuous or delayed basis.

    

    dd. "SEC"
      means
      the United States Securities and Exchange Commission.

    

    2. Registration.

    

    a. Initial
      Mandatory Registration.
      The
      Company shall prepare, and, as soon as practicable, but in no event later than
      the Initial Filing Deadline, file with the SEC the Initial Registration
      Statement on Form S-3 covering the resale of all of the Initial Registrable
      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(e). The Initial Registration Statement prepared
      pursuant hereto shall register for resale at least the number of shares of
      Common Stock equal to the Initial Required Registration Amount determined as
      of
      date the Registration Statement is initially filed with the SEC. The Initial
      Registration Statement shall contain (except if otherwise directed by the
      Required Holders) the "Selling
      Stockholders"
      and
      "Plan
      of Distribution"
      sections in substantially the form attached hereto as Exhibit
      B.
      The
      Company shall use its best efforts to have the Initial Registration Statement
      declared effective by the SEC as soon as practicable, but in no event later
      than
      the Initial Effectiveness Deadline. By 9:30 am on the date following the Initial
      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. Additional
      Mandatory Registrations.
      The
      Company shall prepare, and, as soon as practicable but in no event later than
      the Additional Filing Deadline, file with the SEC an Additional Registration
      Statement on Form S-3 covering the resale of all of the Additional Registrable
      Securities not previously registered on an Additional Registration Statement
      hereunder. To the extent the staff of the SEC does not permit the Additional
      Required Registration Amount to be registered on the Additional Registration
      Statement, which are Cutback Shares hereunder, the Company shall file Additional
      Registration Statements successively trying to register on each such Additional
      Registration Statement the maximum number of remaining Additional Registrable
      Securities until the Additional Required Registration Amount has been registered
      with the SEC. 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(e). Each Additional Registration Statement
      prepared pursuant hereto shall register for resale at least that number of
      shares of Common Stock equal to the Additional Required Registration Amount
      as
      of date the Registration Statement is initially filed with the SEC. Each
      Additional Registration Statement shall contain (except if otherwise directed
      by
      the Required Holders) the "Selling
      Stockholders"
      and
      "Plan
      of Distribution"
      sections in substantially the form attached hereto as Exhibit
      B.
      The
      Company shall use its best efforts to have each Additional Registration
      Statement declared effective by the SEC as soon as practicable, but in no event
      later than the Additional Effectiveness Deadline. By 9:30 am on the date
      following the Additional 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.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    c. 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. In no event shall
      the Company include any securities other than Registrable Securities on any
      Registration Statement filed with the SEC during the 12-month period following
      the Closing Date without the prior written consent of the Required Holders
      except for those shares of Common Stock and warrants to purchase shares of
      Common Stock identified on Schedule
      2(c)(i)
      attached
      hereto (which shall exclude any securities for which the Company has obtained
      waivers pursuant to Section 7(xiv) of the Securities Purchase Agreement). In
      no
      event shall the Company include any securities other than Registrable Securities
      on any Registration Statement filed with the SEC after the 12-month period
      following the Closing Date without the prior written consent of the Required
      Holders except for up to 3,500,000 shares of Common Stock issuable by the
      Company upon exercise of warrants issued by the Company to Knight Capital
      Markets, LLC, and the Company's other placement agents on the Closing Date,
      no
      more than 5,000,000 shares of Common Stock issuable by the Company upon exercise
      of warrants to be issued by the Company to the Company's secured lenders and
      those shares of Common Stock and warrants to purchase shares of Common Stock
      identified on Schedule
      2(c)(ii)
      attached
      hereto. If the SEC requires that the Company register less than the amount
      of
      shares of Common Stock originally included on any Registration Statement at
      the
      time it was filed, the Registrable Securities on such registration statement
      and
      any other securities allowed to be registered on such Registration Statement
      (as
      set forth below) shall be decreased on a pro rata basis. 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    d. 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"),
      which
      shall be Schulte Roth & Zabel LLP or such other counsel as thereafter
      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.

    

    e. 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 acceptable
      to
      the Required Holders 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.

    

    f. 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 fifteen (15) 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
      or the exercise of the Warrants and 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) and that the Warrants are then
      exercisable for shares of Common Stock at the then prevailing Exercise Price
      (as
      defined in the Warrants).

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    g. Effect
      of Failure to File and Obtain and Maintain Effectiveness of Registration
      Statement.
      

    

    (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 shares of Common Stock) (a "Maintenance
      Failure")
      then,
      as liquidated damages and not as a penalty 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 be the exclusive economic remedy available with
      respect to Filing Failures, Effectiveness Failures and Maintenance Failures),
      the Company shall pay to each holder of Registrable Securities relating to
      such
      Registration Statement an amount equal to one percent (1.0%) of the aggregate
      Purchase Price (as such term is defined in the Securities Purchase Agreement)
      of
      such Investor's 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) thereafter
      until such Filing Failure is cured; (ii) the day of an Effectiveness Failure
      and
      on every thirtieth day (pro rated for periods totaling less than thirty days)
      thereafter until such Effectiveness Failure is cured; (iii) the initial day
      of a
      Maintenance Failure and on every thirtieth day (pro rated for periods totaling
      less than thirty days) thereafter until such Maintenance Failure is cured.
      If
      all of the Cutback Shares, if any, have not been registered on a Registration
      Statement which has been declared effective by the SEC on or before the six
      (6)
      month anniversary of the Closing Date (a "Cutback
      Failure")
      then,
      as liquidated damages and not as a penalty to any holder by reason of any such
      delay in or reduction of its ability to sell any Cutback Shares (which remedy
      shall be the exclusive economic remedy available with respect to Cutback
      Failures), the Company shall pay to each holder of Cutback Shares relating
      to
      such Registration Statement an amount equal to one half of a percent (0.5%)
      of
      the aggregate Purchase Price (as such term is defined in the Securities Purchase
      Agreement) of such Investor's Cutback Shares included in such Registration
      Statement on the day of a Cutback Failure and on every thirtieth day (pro rated
      for periods totaling less than thirty days) thereafter until such Cutback
      Failure is cured. 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 be paid on the day of the Filing Failure,
      Effectiveness Failure, Cutback Failure or the initial day of Maintenance
      Failure, as applicable, and thereafter on the earlier of (I) on the thirtieth
      day after the event or failure giving rise to the Registration Delay Payments
      are incurred and (II) the third Business Day after the event or failure giving
      rise to the Registration Delay Payments is cured. The date such Registration
      Delay Payments are due shall be referred to herein as a "Registration
      Delay Payments Payment Date."
      In the
      event the Company fails to make Registration Delay Payments in a timely manner,
      such Registration Delay Payments shall bear interest at the rate of one and
      one-half percent (1.5%) per month (prorated for partial months) until paid
      in
      full. Notwithstanding anything herein or in the Securities Purchase Agreement
      to
      the contrary, in no event shall the aggregate amount of Registration Delay
      Payments (other than Registration Delay Payments payable pursuant to events
      that
      are within the control of the Company) exceed, in the aggregate, 24% of the
      aggregate Purchase Price.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (b) Registration
      Delay Payments shall be payable on each Registration Delay Payments Payment
      Date, to each holder of Registrable Securities relating to such Registration
      Statement, in shares of Common Stock ("Registration
      Delay Payments Shares")
      so
      long as there is no Equity Conditions Failure; provided however, that the
      Company, at its option following notice to the holder of Registrable Securities,
      may pay Registration Delay Payments on any Registration Delay Payments Payment
      Date in cash ("Cash
      Registration Delay Payments")
      or in
      a combination of Cash Registration Delay Payments and Registration Delay
      Payments Shares. The Company shall deliver a written notice (each, an
      "Registration
      Delay Payments Election Notice")
      to
      each holder of Registrable Securities relating to such Registration Statement
      on
      or prior to the Registration Delay Payments Payment Date (the date such notice
      is delivered to all of the holders, the "Registration
      Delay Payments Notice Date")
      which
      notice (i) either (A) confirms that Registration Delay Payments to be paid
      on
      such Registration Delay Payments Payment Date shall be paid entirely in
      Registration Delay Payments Shares or (B) elects to pay Registration Delay
      Payments as Cash Registration Delay Payments or a combination of Cash
      Registration Delay Payments and Registration Delay Payments Shares and specifies
      the amount of Registration Delay Payments that shall be paid as Cash
      Registration Delay Payments and the amount of Registration Delay Payments,
      if
      any, that shall be paid in Registration Delay Payments Shares and (ii) certifies
      that there is no Equity Conditions Failure. If the Equity Conditions are not
      satisfied as of the Registration Delay Payments Notice Date, then unless the
      Company has elected to pay such Registration Delay Payments as Cash Registration
      Delay Payments, the Registration Delay Payments Election Notice shall indicate
      that unless the holder waives the Equity Conditions, the Registration Delay
      Payment shall be paid as Cash Registration Delay Payments. If the Equity
      Conditions were satisfied as of the Registration Delay Payments Notice Date
      but
      the Equity Conditions are no longer satisfied at any time prior to the
      Registration Delay Payments Payment Date, the Company shall provide the holder
      a
      subsequent notice to that effect indicating that unless the holder waives the
      Equity Conditions, the Registration Delay Payments shall be paid as Cash
      Registration Delay Payments. Registration Delay Payments to be paid on an
      Registration Delay Payments Payment Date in Registration Delay Payments Shares
      shall be paid in a number of fully paid and nonassessable shares (rounded to
      the
      nearest whole share in accordance) of Common Stock equal to the quotient of
      (1)
      the amount of Registration Delay Payments payable on such Registration Delay
      Payments Payment Date less any Cash Registration Delay Payments paid and (2)
      the
      Registration Delay Payments Conversion Price in effect on the applicable
      Registration Delay Payments Payment Date. Notwithstanding the foregoing, if
      the
      Company elects to pay any Registration Delay Payments in Registration Delay
      Payment Shares and the Stockholder Approval (as defined in the Securities
      Purchase Agreement) has not been obtained by the applicable Registration Delay
      Payments Payment Date, the Company may not pay such Registration Delay Payments
      in Registration Delay Payments Shares but instead shall issue to each holder
      of
      Registrable Securities relating to such Registration Statement a convertible
      note with an original principal amount equal to the amount of such Registration
      Delay Payments in the form attached hereto as Exhibit
      A
      to the
      Securities Purchase Agreement; provided however that the conversion price of
      such convertible note shall be equal to the applicable Registration Delay
      Payments Conversion Price.

    

    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 submit to the SEC, within two (2) Business Days after 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, a request for acceleration of
      effectiveness of such Registration Statement to a time and date not later than
      48 hours after the submission of such request. 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.

    

    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 until such time as all of such
      Registrable Securities shall have been disposed of in accordance with the
      intended methods of disposition by the seller or sellers thereof as set forth
      in
      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 to review and comment upon (i) a
      Registration Statement at least five (5) 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 reasonably objects. The
      Company shall not submit a request for acceleration of the effectiveness of
      a
      Registration Statement or any amendment or supplement thereto without the prior
      approval of Legal Counsel, which consent shall not be unreasonably withheld.
      The
      Company shall furnish to Legal Counsel, 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, (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, and
      all exhibits and (iii) upon the effectiveness of any Registration Statement,
      one
      copy of the prospectus included in such Registration Statement and all
      amendments and supplements thereto. The Company shall reasonably cooperate
      with
      Legal Counsel 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.

    

    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 actual 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 on the same day of such effectiveness
      and
      by overnight mail), (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 reasonable 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
      actual notice of the initiation or threat of any proceeding for such
      purpose.

    

    h. If
      any
      Investor is required under applicable securities laws to be described in the
      Registration Statement as an underwriter, at the reasonable request of such
      Investor, the Company shall furnish to such Investor, on the date of the
      effectiveness of the Registration Statement and thereafter from time to time
      on
      such dates as an Investor may reasonably request (i) a letter, dated such date,
      from the Company's independent certified public accountants in form and
      substance as is customarily given by independent certified public accountants
      to
      underwriters in an underwritten public offering, addressed to the Investors,
      and
      (ii) an opinion, dated as of such date, of counsel representing the Company
      for
      purposes of such Registration Statement, in form, scope and substance as is
      customarily given in an underwritten public offering, addressed to the
      Investors.

    

    i. Upon
      the
      request of any Investor in connection with such Investor's due diligence
      requirements, if any, the Company shall make available for inspection by (i)
      any
      Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents
      retained by the Investors (collectively, the "Inspectors"),
      all
      pertinent financial and other records, and pertinent corporate documents and
      properties of the Company (collectively, the "Records"),
      as
      shall be reasonably deemed necessary by each Inspector, and cause the Company's
      officers, directors and employees to supply all information which any Inspector
      may reasonably request; provided, however, that each Inspector shall agree
      to
      hold in strict confidence and shall not make any disclosure (except to an
      Investor) or use of any Record or other information which the Company determines
      in good faith to be confidential, and of which determination the Inspectors
      are
      so notified, unless (a) the disclosure of such Records is necessary to avoid
      or
      correct a misstatement or omission in any Registration Statement or is otherwise
      required under the 1933 Act, (b) the release of such Records is ordered pursuant
      to a final, non-appealable subpoena or order from a court or government body
      of
      competent jurisdiction, or (c) the information in such Records has been made
      generally available to the public other than by disclosure in violation of
      this
      or any other agreement of which the Inspector has knowledge. Each Investor
      agrees that it shall, upon learning that disclosure of such Records is sought
      in
      or by a court or governmental body of competent jurisdiction or through other
      means, give prompt notice to the Company and allow the Company, at its expense,
      to undertake appropriate action to prevent disclosure of, or to obtain a
      protective order for, the Records deemed confidential. Nothing herein (or in
      any
      other confidentiality agreement between the Company and any Investor) shall
      be
      deemed to limit the Investors' ability to sell Registrable Securities in a
      manner which is otherwise consistent with applicable laws and
      regulations.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    j. 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, (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,
      non-appealable 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.

    

    k. 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 the Principal
      Market or 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.
      The
      Company shall pay all fees and expenses in connection with satisfying its
      obligation under this Section 3(k).

    

    l. 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.

    

    m. 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 to any Registration
      Statement if reasonably requested by an Investor holding any Registrable
      Securities.

    

    n. 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.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    o. 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.

    

    p. 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.

    

    q. Within
      two (2) Business Days after a Registration Statement which covers Registrable
      Securities is ordered 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 the form
      attached hereto as Exhibit
      A.

    

    r. 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 and its counsel, in the best
      interest of the Company and, in the opinion of counsel to the Company, otherwise
      required (a "Grace
      Period");
      provided, that the Company shall promptly (i) notify the Investors in writing
      of
      the existence of material, non-public information giving rise to a Grace Period
      (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 no Grace Period shall
      exceed fifteen (15) consecutive days and during any three hundred sixty five
      (365) day period such Grace Periods shall not exceed an aggregate of forty
      (40)
      days and the first day of any Grace Period must be at least five (5) 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
      Securities Purchase Agreement in connection with any sale of Registrable
      Securities with respect to which an 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
      requirements exists), prior to the Investor's receipt of the notice of a Grace
      Period and for which the Investor has not yet settled. 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    s. The
      Company shall make any filing as may be required by NASD Rule 2710 in connection
      with the offering under any Registration Statement of the applicable Registrable
      Securities and shall make any such filing concurrently with its initial filing
      of such Registration Statement with the SEC. 

    

    t. Until
      the
      twelve month anniversary of the later to occur of (i) the Initial Effective
      Date
      and (ii) the Additional Effective Date, the Company shall not enter into any
      Subsequent Placement (as defined in the Securities Purchase Agreement) where
      such Subsequent Placement provides for registration rights (including piggy-back
      registration right) to any one or more of the investors in such Subsequent
      Placement, without the prior written consent of the Required
      Holders.

    

    u. From
      the
      date hereof until the date that is ninety (90) days following the later to
      occur
      of (i) the Initial Effective Date and (ii) the Additional Effective Date, the
      Company will not, directly or indirectly, file any registration statement (other
      than on Form S-8 or the filing of any post-effective amendments filed solely
      for
      the purpose of updating financial or other information in any registration
      statement of the Company that has been declared effective by the SEC prior
      to
      the date of this Agreement) with the SEC other than the Registration Statement.
      

    

    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 that such Investor shall
      furnish to the Company such 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 Securities Purchase 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.

    

    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. The Company shall also
      reimburse the Investors for the fees and disbursements of Legal Counsel in
      connection with registration, filing or qualification pursuant to Sections
      2 and
      3 of this Agreement which amount shall be limited to $20,000.

    

    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 (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, if such prospectus was timely made available by the Company pursuant
      to
      Section 3(d) and (ii) shall not be available to the extent such Claim is based
      on a failure of the Investor to deliver or to cause to be delivered the
      prospectus made available by the Company, including a corrected prospectus,
      if
      such prospectus or corrected prospectus was timely made available by the Company
      pursuant to Section 3(d); and (iii) 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 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 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 (ii) 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.

    

    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 or quarterly report of the Company
      and such other reports and documents so filed by the Company, 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 and 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 Securities Purchase Agreement.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    10. Amendment
      of Registration Rights.

    

    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
      this
      Agreement unless the same consideration also is offered to all of the parties
      to
      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: 

    

    Rancher
      Energy Corp.

    999-18th
      Street,
      Suite 1740

    Denver,
      Colorado 80202

    Telephone:
      (303) 629-1122

    Facsimile: (720)
      904-5698

    Attention:
      John
      Works, President and CEO

    

    With
      a
      copy to: 

    

    Patton
      Boggs LLP

    1660
      Lincoln Street

    Denver,
      Colorado 80264

    Telephone:
      (303) 830-1776

    Facsimile:
      (303) 894-9239

    Attention:
      Robert Bearman, Esq. and Mark Goldschmidt, Esq.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    If
      to
      Legal Counsel:

    

    
      	  	  	
              Schulte
                Roth & Zabel LLP

            

    

    
      	  	  	
              919
                Third Avenue

            

    

    
      	  	  	
              New
                York, New York 10022

            

    

    
      	  	  	
              Telephone:
                (212) 756-2000

            

    

    
      	  	  	
              Facsimile:
                (212) 593-5955

            

    

    
      	  	  	
              Attention:
                Eleazer N. Klein, Esq.

            

    

    

    If
      to a
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers
      attached hereto, with copies to such Buyer's representatives as set forth on
      the
      Schedule of Buyers, 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 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.

    

    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 Investor hereunder are several and not joint with the
      obligations of any other Investor, and no provision of this Agreement is
      intended to confer any obligations on any Investor vis-à-vis any other Investor.
      Nothing contained herein, and no action taken by any Investor pursuant hereto,
      shall be deemed to constitute the Investors as a partnership, an association,
      a
      joint venture or any other kind of entity, or create a presumption that the
      Investors are in any way acting in concert or as a group with respect to such
      obligations or the transactions contemplated herein.

    

    *
      * * * *
      *

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    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:

               

              
                RANCHER
                  ENERGY CORP.

              

            
	 
 	 
 	 
 
	 	By:  	/s/
              John
              Works
	 	
              
Name:  
John
              Works
	 	
              Title:    
                President and Chief Executive
                Officer

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    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:

            
	 
	
              _______________________

            
	 
	 
	
              By: 
                ______________________________

              Name:

              Title:

            
	 
	
              Address:

              ________________________________________

              ________________________________________

              ________________________________________

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      OF BUYERS

    

    
      	
              Buyer

            	
              Buyer’s
                Address and

              Facsimile
                Number

            	
              Buyer’s
                Legal Representative's Address and Facsimile
                Number

            
	
              LP
                Rancher Ltd

            	 	
              Schulte
                Roth & Zabel LLP

              919
                Third Avenue

              New
                York, New York 10022

              Attention:
                Eleazer Klein, Esq.

              Facsimile:
                (212) 593-5955

              Telephone:
                (212) 756-2376

            
	
              Latigo
                Fund L.P.

            	 	
              Schulte
                Roth & Zabel LLP

              919
                Third Avenue

              New
                York, New York 10022

              Attention:
                Eleazer Klein, Esq.

              Facsimile:
                (212) 593-5955

              Telephone:
                (212) 756-2376

            
	
              Old
                Westbury Real Return Fund

            	 	 
	
              Bank
                sal. Oppenheim

            	 	 
	
              Millennium
                Global Natural Resources Fund Limited

            	 	 
	
              Millennium
                Global Natural Resources Fund Limited

            	 	 
	
              Morgan
                Stanley Co. for a/c Persistency

            	 	 
	
              Tenor
                Opportunity Master Fund Ltd.

            	 	 
	
              VR
                Global Partners L.P.

            	 	 
	
              Affaires
                Financieres SA

            	 	 
	
              Spartan
                Arbitrage Fund LP

            	 	 
	
              MMCap
                International Inc.

            	 	 
	
              NBCN
                INC. ITF Jane Day

            	 	 
	
              NBCN
                INC. ITF Purling Holdings

            	 	 
	
              NBCN
                INC. ITF Scott Paterson

            	 	 
	
              NBCN
                INC. ITF Don Hovis

            	 	 
	
              NBCN
                INC. ITF Don McFarlane

            	 	 
	
              Jana
                Piranha Master Fund LTD

            	 	 
	
              Passport
                Global Master

            	 	 
	
              Hound
                Partners Offshore Fund

            	 	 
	
              Hound
                Partners, L.P.

            	 	 
	
              Jennifer
                Wisden

            	 	 
	
              Pierce
                A Buxton

            	 	 
	
              Bobby
                Powell

            	 	 
	
              Jonathan
                G Reed

            	 	 
	
              Patrick
                Roberts 25 Ambra

            	 	 
	
              Angus
                I McIntosh

            	 	 
	
              Harris
                N E

            	 	 
	
              Mr
                Frederick Mark Tughan

            	 	 
	
              Malcolm
                Plaister

            	 	 
	
              Mr.
                M.J. Knott

            	 	 
	
              Louvre
                RE Fitzwilliam

            	 	 
	
              Legent
                Clearing, LLC

            	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    
      	
              Buyer

            	
              Buyer’s
                Address and

              Facsimile
                Number

            	
              Buyer’s
                Legal Representative's Address and Facsimile
                Number

            
	
              Brewin
                Dolphin

            	 	 
	
              Abbey
                National

            	 	 
	
              Brian
                Withington

            	 	 
	
              Mrs.
                S M Wild

            	 	 
	
              Legent
                Clearing, LLC

            	 	 
	
              De
                Heer T. Haddad

            	 	 
	
              Hornbuckle
                Mtichell Tst

            	 	 
	
              Legent
                Clearing, LLC

            	 	 
	
              Adrian
                Cox

            	 	 
	
              Robert
                Hughes

            	 	 
	
              Direct
                Currency Exchange PLC

            	 	 
	
              John
                Howland Jackson, Esq.

            	 	 
	
              Legent
                Clearing, LLC

            	 	 
	
              Resolute
                Investment Holdings

            	 	 
	
              Angus
                I McIntosh

            	 	 
	
              Picon
                Consultants Ltd

            	 	 
	
              Thomas
                E Teunissen

            	 	 
	
              RBC
                Trust Company

            	 	 
	
              Mr
                A S Gould

            	 	 
	
              Legent
                Clearing, LLC

            	 	 
	
              Jonathan
                G Reed

            	 	 
	
              Mr
                Paul Francis Owen Hollowday

            	 	 
	
              Hornbuckle
                Mtichell Tst

            	 	 
	
              Richmond
                Restaurants Limited

            	 	 
	
              Rensburg
                Sheppards Investment Manag

            	 	 
	
              Pierce
                A Buxton

            	 	 
	
              Peter
                Jonathan Battle

            	 	 
	
              R
                T
                Rivett-Carnac

            	 	 
	
              MH
                Clarke

            	 	 
	
              Ian
                Bundock, Esq.

            	 	 
	
              Tyrolese
                Trust Co Ltd G R Bird as T Tees of the ABN

            	 	 
	
              Malcolm
                John Lanyon /or Elizabeth 

            	 	 
	
              Philip
                Martin Davis

            	 	 
	
              Stuart
                Canwell

            	 	 
	
              Legent
                Clearing, LLC

            	 	 
	
              Legent
                Clearing, LLC

            	 	 
	
              T
                G
                Graveney

            	 	 
	
              Legent
                Clearing, LLC

            	 	 
	
              Paul
                Gelinas

            	 	 
	
              Thomas
                P Gelinas

            	 	 
	
              Monsieur
                Paul Turner

            	 	 
	
              CSTDN
                for Julia Curtiss Porter Inc.

            	 	 
	
              PFP
                Group Limited

            	 	 
	
              Legent
                Clearing, LLC

            	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    
      	
              Buyer

            	
              Buyer’s
                Address and

              Facsimile
                Number

            	
              Buyer’s
                Legal Representative's Address and Facsimile
                Number

            
	
              Legent
                Clearing, LLC

            	 	 
	
              Griffin,
                Sean Timothy (Mr.)

            	 	 
	
              Miss
                K. R. Rankin

            	 	 
	
              Barclays
                Bank PLC

            	 	 
	
              Miss
                H Pearson

            	 	 
	
              De
                Heer T. Haddad

            	 	 
	
              Mr.
                M. Wilson

            	 	 
	
              Martin
                Evans

            	 	 
	
              Calum
                Cameron

            	 	 
	
              Mr.
                Simon Piper

            	 	 
	
              Van
                Moer Santerre ET BLD DU Souverain

            	 	 
	
              Legent
                Clearing, LLC

            	 	 
	
              M.
                Johannesson Johannes Ingi

            	 	 
	
              Marie
                Adelhag

            	 	 
	
              M.
                Et MME Whalley

            	 	 
	
              Mr.
                T.E.E. George

            	 	 
	
              Purbeck
                Pension 

            	 	 
	
              Direct
                Currency Exchange PLC

            	 	 
	
              P
                J
                Holland

            	 	 
	
              Monsieur
                Jean Pierre Van Den Broeck

            	 	 
	
              Thomas
                E Teunissen

            	 	 
	
              Pelttari
                Hannu

            	 	 
	
              Callow
                D J

            	 	 
	
              Mr.
                David Alan Streatfield

            	 	 
	
              De
                Heer A. Advaney

            	 	 
	
              John
                Garvey

            	 	 
	
              Mr.
                James W. E. Lewis

            	 	 
	
              IR
                Jessett

            	 	 
	
              De
                Heer M.D. Maclure

            	 	 
	
              Mrs.
                J.C. Maclure

            	 	 
	
              Cater
                Allen Bank Romford

            	 	 
	
              NJ
                & CJ Bratton

            	 	 
	
              HR
                M P Hayes

            	 	 
	
              Alliance
                Trust Pensions LTD

            	 	 
	
              The
                DirectorsMDL Manx Limited

            	 	 
	
              Gundersen
                M.

            	 	 
	
              Legent
                Clearing, LLC

            	 	 
	
              PPE
                LTD

            	 	 
	
              PPE
                LTD

            	 	 
	
              Phillip
                Patrick Macdonald

            	 	 
	
              Farrant

            	 	 
	
              Legent
                Clearing, LLC

            	 	 
	
              Ronald
                A. Alder

            	 	 
	
              Mark
                Douglas Blundell Charles Schwab

            	 	 
	
              Capelin
                Financial Management

            	 	 
	
              James
                Lawsonbrown

            	 	 
	
              Robert
                Hughes

            	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    
      	
              Buyer

            	
              Buyer’s
                Address and

              Facsimile
                Number

            	
              Buyer’s
                Legal Representative's Address and Facsimile
                Number

            
	
              Mr.
                Paul Francis Owen Hollowday

            	 	 
	
              Alliance
                Trust Pensions LTD

            	 	 
	
              Ms.
                Myra Tabor

            	 	 
	
              Mulhall
                A M

            	 	 
	
              Maypole
                Contracts LTD

            	 	 
	
              Mr.
                Rudolf Mueller

            	 	 
	
              Jennifer
                Wisden

            	 	 
	
              Resolute
                Investment Holdings

            	 	 
	
              Legent
                Clearing, LLC

            	 	 
	
              Pierce
                A Buxton

            	 	 
	
              S.
                R. Nelson

            	 	 
	
              Carol
                M. Gregory

            	 	 
	
              Collins
                Stewart

            	 	 
	
              Staunton
                Sports, LTD

            	 	 
	
              Roy
                A. Stephenson, Esq.

            	 	 
	
              Kevin
                Mc Leod

            	 	 
	
              Matthew
                Joseph Miller

            	 	 
	
              Andrew
                C T Gomarsall, Esq.

            	 	 
	
              Ian
                M. Fletcher

            	 	 
	
              Ian
                Bundock, Esq.

            	 	 
	
              HSBC
                Private Bank (Suisse) S.A.

            	 	 
	
              Private
                Pension

            	 	 
	
              Griffin,
                Sean Timothy (Mr.)

            	 	 
	
              Jason
                Carter

            	 	 
	
              Monsieur
                Paul Turner

            	 	 
	
              David
                Clews

            	 	 
	
              Cat
                All LTD Re Cater Allen Priv Bk

            	 	 
	
              Mr.
                Michael Carlin

            	 	 
	
              Mark
                McVeigh

            	 	 
	
              P
                J
                Holland

            	 	 
	
              Robin
                Syrett, Esq.

            	 	 
	
              Monsieur
                Jean Pierre Van Den Broeck

            	 	 
	
              Hornbuckle
                Mitchell

            	 	 
	
              De
                Heer M.D. Maclure

            	 	 
	
              Wueger
                Andreas/Chiaran

            	 	 
	
              Herr
                Andreas Wueger

            	 	 
	
              Terry
                Farrow

            	 	 
	
              Richard
                Rivett-Carnac

            	 	 
	
              R
                W
                Pettitt

            	 	 
	
              Legent
                Clearing, LLC

            	 	 
	
              Mr
                Steven Minkey

            	 	 
	
              De
                Heer T. M. Bosch

            	 	 
	
              Mr.
                L F Butler

            	 	 
	
              Adrian
                Cox

            	 	 
	
              Dr.
                Elizabeth J. Todd

            	 	 
	
              PFP
                Group Limited

            	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    
      	 

              Buyer

            	
              Buyer’s
                Address and

              Facsimile
                Number

            	
              Buyer’s
                Legal Representative's Address and Facsimile
                Number

            
	
              Legent
                Clearing, LLC

            	 	 
	
              Christopher
                Sheasby

            	 	 
	
              Parasol
                FX Client A/C

            	 	 
	
              Osiris
                Tsts Re D Barker Life 1

            	 	 
	
              Hornbuckle
                Mitchell

            	 	 
	
              Mr
                Derek Capelin

            	 	 
	
              Torben
                Maersk

            	 	 
	
              PFP
                Group Limited

            	 	 
	
              Legent
                Clearing, LLC

            	 	 
	
              Hans
                F. Voegeli

            	 	 
	
              Martin
                Evans

            	 	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A

    

    FORM
      OF NOTICE OF EFFECTIVENESS

    OF
      REGISTRATION STATEMENT

    

    [Transfer
      Agent]

    [Address]

    Attention:
      

    

    
      	
            	Re:	
              Rancher
                Energy Corp.

            

    

    

    Ladies
      and Gentlemen:

    

    [We
      are][I am] counsel to Rancher Energy Corp., a Nevada corporation (the
      "Company"),
      and
      have represented the Company in connection with that certain Securities Purchase
      Agreement (the "Securities
      Purchase Agreement")
      entered into by and among the Company and the buyers named therein
      (collectively, the "Holders")
      pursuant to which the Company issued to the Holders (i) senior convertible
      notes
      (the "Notes")
      convertible into the Company's common stock, par value $0.00001 per share
      (the "Common
      Stock), (ii)
      shares (the "Common
      Shares")
      of
      Common Stock and (iii) warrants exercisable for shares of Common Stock (the
      "Warrants").
      Pursuant to the Securities Purchase Agreement, the Company also has entered
      into
      a Registration Rights Agreement with the Holders (the "Registration
      Rights Agreement")
      pursuant to which the Company agreed, among other things, to register the
      Registrable Securities (as defined in the Registration Rights Agreement),
      including the Common Shares, the shares of Common Stock issuable upon conversion
      of the Notes and the shares of Common Stock issuable upon exercise of the
      Warrants, under the Securities Act of 1933, as amended (the "1933
      Act").
      In
      connection with the Company's obligations under the Registration Rights
      Agreement, on ____________ ___, 200_, the Company filed a Registration Statement
      on Form SB-2 (File No. 333-_____________) (the "Registration
      Statement")
      with
      the Securities and Exchange Commission (the "SEC")
      relating to the Registrable Securities which names each of the Holders as a
      selling stockholder thereunder.

    

    In
      connection with the foregoing, [we][I] advise you that a member of the SEC's
      staff has advised [us][me] by telephone that the SEC has entered an order
      declaring the Registration Statement effective under the 1933 Act at
[ENTER
      TIME OF EFFECTIVENESS]
      on
[ENTER
      DATE OF EFFECTIVENESS]
      and
      [we][I] have no knowledge, after telephonic inquiry of a member of the SEC's
      staff, that any stop order suspending its effectiveness has been issued or
      that
      any proceedings for that purpose are pending before, or threatened by, the
      SEC
      and the Registrable Securities are available for resale under the 1933 Act
      pursuant to the Registration Statement.

    

    This
      letter shall serve as our standing instruction to you that the shares of Common
      Stock are freely transferable by the Holders pursuant to the Registration
      Statement. You need not require further letters from us to effect any future
      legend-free issuance or reissuance of shares of Common Stock to the Holders
      as
      contemplated by the Company's Transfer Agent Instructions dated December __,
      2006.

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      	 	
              Very
                truly yours,

              

              [ISSUER'S
                COUNSEL]

              

              By:__________________________

            

    

     

    
      	CC:	
              [LIST
                NAMES OF HOLDERS]

            

    

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      B

    

    SELLING
      STOCKHOLDERS

    

    The
      shares of Common Stock being offered by the selling stockholders are common
      stock previously issued and shares of common stock issuable upon conversion
      of
      the convertible notes and upon exercise of the warrants. For additional
      information regarding the issuance of those convertible notes and warrants,
      see
      "Private Placement of Convertible Notes Common Shares and Warrants" above.
      We
      are registering the shares of Common Stock in order to permit the selling
      stockholders to offer the shares for resale from time to time. Except for the
      ownership of the Common Shares, Convertible Notes and Warrants issued pursuant
      to the Securities Purchase Agreement, the selling stockholders have not had
      any
      material relationship with us within the past three years.

    

    The
      table
      below lists the selling stockholders and other information regarding the
      beneficial ownership of the shares of Common Stock by each of the selling
      stockholders. The second column lists the number of shares of Common Stock
      beneficially owned by each selling stockholder, based on its ownership of the
      shares of common stock previously, the convertible notes and warrants, as of
      ________, 200_, assuming conversion of all convertible notes and exercise of
      the
      warrants held by the selling stockholders on that date, without regard to any
      limitations on conversions or exercise.

    

    The
      third
      column lists the shares of Common Stock being offered by this prospectus by
      each
      selling stockholder.

    

    In
      accordance with the terms of a registration rights agreement among the Company
      and the selling stockholders, this prospectus generally covers the resale of
      at
      least 130% of the sum of (i) the number of shares of Common Stock issuable
      upon
      conversion of the convertible notes as of the trading day immediately preceding
      the date the registration statement is initially filed with the SEC, (ii) the
      shares of common stock previously issued and (iii) the number of shares of
      Common Stock issuable upon exercise of the related warrants as of the trading
      day immediately preceding the date the registration statement is initially
      filed
      with the SEC.
      Because
      the conversion price of the convertible notes and the exercise price of the
      warrants may be adjusted, the number of shares that will actually be issued
      may
      be more or less than the number of shares being offered by this prospectus.
      The
      fourth column assumes the sale of all of the shares offered by the selling
      stockholders pursuant to this prospectus.

    

    Under
      the
      terms of the convertible notes and the warrants, a selling stockholder may
      not
      convert the convertible notes or exercise the warrants to the extent such
      conversion or exercise would cause such selling stockholder, together with
      its
      affiliates, to beneficially own a number of shares of Common Stock which would
      exceed [9.99][4.99]% of our then outstanding shares of Common Stock following
      such conversion or exercise, excluding for purposes of such determination shares
      of Common Stock issuable upon conversion of the convertible notes which have
      not
      been converted and upon exercise of the warrants which have not been exercised.
      The number of shares in the second column does not reflect this limitation.
      The
      selling stockholders may sell all, some or none of their shares in this
      offering. See "Plan of Distribution."

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    
      	
              Name
                of Selling Stockholder

            	 	
               

              Number
                of Shares Owned Prior to Offering

            	 	
              Maximum
                Number of Shares to be Sold Pursuant to this
                Prospectus

            	 	
              Number
                of Shares Owned After Offering

            
	 	 	 	 	 	 	 
	
              [        
]
                (1)
                

            	 	 	 	 	 	
              0

            

    

    

    (1) 

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    PLAN
      OF DISTRIBUTION

    

    We
      are
      registering the shares of Common Stock previously issued and the shares of
      common stock issuable upon conversion of the convertible notes and upon exercise
      of the warrants to permit the resale of these shares of Common Stock by the
      holders of the shares of common stock, the convertible notes and warrants from
      time to time after the date of this prospectus. We will not receive any of
      the
      proceeds from the sale by the selling stockholders of the shares of Common
      Stock. We will bear all fees and expenses incident to our obligation to register
      the shares of Common Stock.

    

    The
      selling stockholders may sell all or a portion of the shares of Common Stock
      beneficially owned by them and offered hereby from time to time directly or
      through one or more underwriters, broker-dealers or agents. If the shares of
      Common Stock are sold through underwriters or broker-dealers, the selling
      stockholders will be responsible for underwriting discounts or commissions
      or
      agent's commissions. The shares of Common Stock may be sold in one or more
      transactions at fixed prices, at prevailing market prices at the time of the
      sale, at varying prices determined at the time of sale, or at negotiated prices.
      These sales may be effected in transactions, which may involve crosses or block
      transactions, 

    

    
      	
            	·	
              on
                any national securities exchange or quotation service on which the
                securities may be listed or quoted at the time of
                sale;

            

    

    

    
      	
            	·	
              in
                the over-the-counter market;

            

    

    

    
      	
            	·	
              in
                transactions otherwise than on these exchanges or systems or in the
                over-the-counter market;

            

    

    

    
      	
            	·	
              through
                the writing of options, whether such options are listed on an options
                exchange or otherwise;

            

    

    

    
      	
            	·	
              ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits purchasers;

            

    

    

    
      	
            	·	
              block
                trades in which the broker-dealer will attempt to sell the shares
                as agent
                but may position and resell a portion of the block as principal to
                facilitate the transaction;

            

    

    

    
      	
            	·	
              purchases
                by a broker-dealer as principal and resale by the broker-dealer for
                its
                account;

            

    

    

    
      	
            	·	
              an
                exchange distribution in accordance with the rules of the applicable
                exchange;

            

    

    

    
      	
            	·	
              privately
                negotiated transactions;

            

    

    

    
      	
            	·	
              short
                sales;

            

    

    

    
      	
            	·	
              sales
                pursuant to Rule 144;

            

    

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

       

    

    
      	
            	·	
              broker-dealers
                may agree with the selling securityholders to sell a specified number
                of
                such shares at a stipulated price per
                share;

            

    

    

    
      	
            	·	
              a
                combination of any such methods of sale;
                and

            

    

    

    
      	
            	·	
              any
                other method permitted pursuant to applicable
                law.

            

    

    

    If
      the
      selling stockholders effect such transactions by selling shares of Common Stock
      to or through underwriters, broker-dealers or agents, such underwriters,
      broker-dealers or agents may receive commissions in the form of discounts,
      concessions or commissions from the selling stockholders or commissions from
      purchasers of the shares of Common Stock for whom they may act as agent or
      to
      whom they may sell as principal (which discounts, concessions or commissions
      as
      to particular underwriters, broker-dealers or agents may be in excess of those
      customary in the types of transactions involved). In connection with sales
      of
      the shares of Common Stock or otherwise, the selling stockholders may enter
      into
      hedging transactions with broker-dealers, which may in turn engage in short
      sales of the shares of Common Stock in the course of hedging in positions they
      assume. The selling stockholders may also sell shares of Common Stock short
      and
      deliver shares of Common Stock covered by this prospectus to close out short
      positions and to return borrowed shares in connection with such short sales.
      The
      selling stockholders may also loan or pledge shares of Common Stock to
      broker-dealers that in turn may sell such shares.

    

    The
      selling stockholders may pledge or grant a security interest in some or all
      of
      the shares of common stock, convertible notes or warrants or shares of Common
      Stock owned by them and, if they default in the performance of their secured
      obligations, the pledgees or secured parties may offer and sell the shares
      of
      Common Stock from time to time pursuant to this prospectus or any amendment
      to
      this prospectus under Rule 424(b)(3) or other applicable provision of the
      Securities Act of 1933, as amended, amending, if necessary, the list of selling
      stockholders to include the pledgee, transferee or other successors in interest
      as selling stockholders under this prospectus. The selling stockholders also
      may
      transfer and donate the shares of Common Stock in other circumstances in which
      case the transferees, donees, pledgees or other successors in interest will
      be
      the selling beneficial owners for purposes of this prospectus.

    

    The
      selling stockholders and any broker-dealer participating in the distribution
      of
      the shares of Common Stock may be deemed to be "underwriters" within the meaning
      of the Securities Act, and any commission paid, or any discounts or concessions
      allowed to, any such broker-dealer may be deemed to be underwriting commissions
      or discounts under the Securities Act. At the time a particular offering of
      the
      shares of Common Stock is made, a prospectus supplement, if required, will
      be
      distributed which will set forth the aggregate amount of shares of Common Stock
      being offered and the terms of the offering, including the name or names of
      any
      broker-dealers or agents, any discounts, commissions and other terms
      constituting compensation from the selling stockholders and any discounts,
      commissions or concessions allowed or reallowed or paid to
      broker-dealers.

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    Under
      the
      securities laws of some states, the shares of Common Stock may be sold in such
      states only through registered or licensed brokers or dealers. In addition,
      in
      some states the shares of Common Stock may not be sold unless such shares have
      been registered or qualified for sale in such state or an exemption from
      registration or qualification is available and is complied with.

    

    There
      can
      be no assurance that any selling stockholder will sell any or all of the shares
      of Common Stock registered pursuant to the registration statement, of which
      this
      prospectus forms a part.

    

    The
      selling stockholders and any other person participating in such distribution
      will be subject to applicable provisions of the Securities Exchange Act of
      1934,
      as amended, and the rules and regulations thereunder, including, without
      limitation, Regulation M of the Exchange Act, which may limit the timing of
      purchases and sales of any of the shares of Common Stock by the selling
      stockholders and any other participating person. Regulation M may also restrict
      the ability of any person engaged in the distribution of the shares of Common
      Stock to engage in market-making activities with respect to the shares of Common
      Stock. All of the foregoing may affect the marketability of the shares of Common
      Stock and the ability of any person or entity to engage in market-making
      activities with respect to the shares of Common Stock.

    

    We
      will
      pay all expenses of the registration of the shares of Common Stock pursuant
      to
      the registration rights agreement, estimated to be
      $[     ] in total, including, without limitation,
      Securities and Exchange Commission filing fees and expenses of compliance with
      state securities or "blue sky" laws; provided, however, that a selling
      stockholder will pay all underwriting discounts and selling commissions, if
      any.
      We will indemnify the selling stockholders against liabilities, including some
      liabilities under the Securities Act, in accordance with the registration rights
      agreements, or the selling stockholders will be entitled to contribution. We
      may
      be indemnified by the selling stockholders against civil liabilities, including
      liabilities under the Securities Act, that may arise from any written
      information furnished to us by the selling stockholder specifically for use
      in
      this prospectus, in accordance with the related registration rights agreement,
      or we may be entitled to contribution.

    

    Once
      sold
      under the registration statement, of which this prospectus forms a part, the
      shares of Common Stock will be freely tradable in the hands of persons other
      than our affiliates.

    

    
      
        
        

      

      
        3Exhibit
      10.1

     

    SECURITIES
      PURCHASE AGREEMENT

     

    SECURITIES
      PURCHASE AGREEMENT
      (the
      "Agreement"),
      dated
      as of December 21, 2006, by and among Rancher Energy Corp., a Nevada
      corporation, with headquarters located at 999-18th
      Street,
      Suite 1740, Denver, Colorado 80202 (the "Company")
      and
      the investors listed on the Schedule of Buyers attached hereto (individually,
      a
      "Buyer"
      and
      collectively, the "Buyers").

     

    WHEREAS:

     

    A.  The
      Company and each Buyer is executing and delivering this Agreement in reliance
      upon the exemption from securities registration afforded by Section 4(2) of
      the
      Securities Act of 1933, as amended (the "1933
      Act"),
      and
      Rule 506 of Regulation D ("Regulation D")
      as
      promulgated by the United States Securities and Exchange Commission (the
      "SEC")
      under
      the 1933 Act.

     

    B.  The
      Company has authorized a new series of convertible notes of the Company, in
      the
      form attached hereto as Exhibit
      A
      (the
      "Notes"),
      which
      Notes shall be convertible into the Company's common stock, par value $0.00001
      per share (the "Common
      Stock")
      (as
      converted, the "Conversion
      Shares"),
      in
      accordance with the terms of the Notes.

     

    C.  Each
      Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
      conditions stated in this Agreement, (i) that number of shares of Common Stock
      set forth opposite such Buyer's name in column (3) on the Schedule of Buyers
      attached hereto (which aggregate number of shares for all Buyers shall not
      exceed 50,895,420) (the "Common
      Shares"),
      (ii) that aggregate principal amount of the Notes set forth opposite such
      Buyer's name in column (4) on the Schedule of Buyers attached hereto (which
      aggregate amount for all Buyers shall be $0) and (iii) warrants, in
      substantially the form attached hereto as Exhibit
      B
      (the
      "Warrants"),
      to
      acquire up to that number of additional shares of Common Stock set forth
      opposite such Buyer's name in column (5) of the Schedule of Buyers (as
      exercised, collectively, the " Warrant
      Shares").

     

    D.  Contemporaneously
      with the execution and delivery of this Agreement, the parties hereto are
      executing and delivering a Registration Rights Agreement, substantially in
      the
      form attached hereto as Exhibit
      C
      (the
      "Registration
      Rights Agreement"),
      pursuant to which the Company will agree to provide certain registration rights
      with respect to the Registrable Securities (as defined in the Registration
      Rights Agreement) under the 1933 Act and the rules and regulations promulgated
      thereunder, and applicable state securities laws.

     

    E.  The
      Common Shares, the Notes, the Conversion Shares, the Warrants and the Warrant
      Shares collectively are referred to herein as the "Securities".

     

    NOW,
      THEREFORE,
      the
      Company and each Buyer hereby agree as follows:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.  PURCHASE
      AND SALE OF COMMON SHARES, NOTES AND WARRANTS.

     

    (a)  Purchase
      of Common Shares, Notes and Warrants.

     

    (i)  Common
      Shares, Notes and Warrants. Subject
      to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
      7
      below, the Company shall issue and sell to each Buyer, and each Buyer severally,
      but not jointly, agrees to purchase from the Company on the Closing Date (as
      defined below), (x) the number of Common Shares set forth opposite such
      Buyer's name in column (3) on the Schedule of Buyers, (y) a principal
      amount of Notes as is set forth opposite such Buyer's name in column (4) on
      the
      Schedule of Buyers and (z) Warrants to acquire up to that number of Warrant
      Shares as is set forth opposite such Buyer's name in column (5) on the Schedule
      of Buyers, (the "Closing").

     

    (ii)  Closing.
      The
      date and time of the Closing (the "Closing
      Date")
      shall
      be 10:00 a.m., New York City time, on the date hereof (or such later date as
      is
      mutually agreed to by the Company and each Buyer) after notification of
      satisfaction (or waiver) of the conditions to the Closing set forth in Sections
      6 and 7 below at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue,
      New York, New York 10022 unless the Company and the Buyers (as defined below)
      agree otherwise.

     

    (iii)  Purchase
      Price.
      (1)
      The
      aggregate purchase price for the Common Shares, the Notes and the Warrants
      to be
      purchased by each such Buyer at the Closing (the "Purchase
      Price")
      shall
      be the amount set forth opposite each Buyer's name in column (6) of the Schedule
      of Buyers. Each Buyer shall pay $1.50 for each Common Share and related Warrants
      and $1,000 for each $1,000 of principal amount of Notes and related Warrants
      to
      be purchased by such Buyer at the Closing.

     

    (2)  The
      Buyers and the Company agree that the Common Shares, the Notes and the Warrants
      constitute an "investment unit" for purposes of Section 1273(c)(2) of the
      Internal Revenue Code of 1986, as amended (the "Code").
      Not
      later than two days before the Closing Date, the Buyers shall notify the Company
      of their determination of the allocation of the issue price of such investment
      unit among the Common Shares, the Notes and the Warrants in accordance with
      Section 1273(c)(2) of the Code and Treasury Regulation Section 1.1273-2(h),
      and
      neither the Buyers nor the Company shall take any position inconsistent with
      such allocation in any tax return or in any judicial or administrative
      proceeding in respect of taxes.

     

    (b)  Form
      of Payment.
      On the
      Closing Date, (i) each Buyer, shall pay its Purchase Price in accordance with
      wire transfer instructions provided by the Company and (ii) the Company
      shall deliver to each Buyer the Common Shares and the Notes (allocated in the
      principal amounts as such Buyer shall request) which such Buyer is then
      purchasing hereunder along with the Warrants (allocated in the amounts as such
      Buyer shall request) which such Buyer is purchasing, in each case duly executed
      on behalf of the Company and registered in the name of such Buyer or its
      designee. 

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    (c)  Subsequent
      Sales of Common Shares, Notes and Warrants.
      At any
      time on or before the 30th
      day
      following the Closing, or such later time as the Company and the holders of
      at
      least 60% of the Registrable Securities purchased at the Closing may mutually
      agree, the Company may sell additional securities up to a maximum raised hereby
      (including the securities sold at the Closing) of $76,343,130 to such persons
      (the “Additional Buyers”) as may be approved by the Board of Directors of the
      Company. All such sales made at any additional closings (each an “Additional
      Closing”), (i) shall be made on the terms and conditions set forth in this
      Agreement, (ii) the representations and warranties of the Company set forth
      in
      Section 3 hereof (and the Schedules thereto) shall speak as of the Closing
      and
      the Company shall have no obligation to update any such disclosure, and (iii)
      the representations and warranties of the Additional Buyers in Section 2 hereof
      shall speak as of such Additional Closing. This Agreement, including without
      limitation, the Schedule of Buyers, may be amended by the Company without the
      consent of the Buyers to include any Additional Buyers and the Additional
      Buyer(s) shall be entitled to rely upon the legal opinion delivered to the
      Buyers at the Closing. Any Additional Buyers shall be deemed to be “Buyers” for
      all purposes under this Agreement.

     

    2.  BUYER'S
      REPRESENTATIONS AND WARRANTIES.
      Each
      Buyer, severally and not jointly, represents and warrants with respect to only
      itself that:

     

    (a)  No
      Sale or Distribution.
      Such
      Buyer is acquiring the Common Shares, the Notes and the Warrants, and upon
      conversion of the Notes and exercise of the Warrants (other than pursuant to
      a
      Cashless Exercise (as defined in the Warrants)) will acquire the Conversion
      Shares issuable upon conversion of the Notes and the Warrant Shares issuable
      upon exercise of the Warrants, as principal for its own account and not with
      a
      view towards, or for resale in connection with, the public sale or distribution
      thereof, except pursuant to sales registered or exempted under the 1933 Act;
      provided, however, that by making the representations herein, such Buyer does
      not agree to hold any of the Securities for any minimum or other specific term
      and reserves the right to dispose of the Securities at any time in accordance
      with or pursuant to a registration statement or an exemption under the 1933
      Act
      and pursuant to the applicable terms of the Transaction Documents (as defined
      in
      Section 3(b)). Such Buyer is acquiring the Securities hereunder in the ordinary
      course of its business. Such Buyer does not presently have any agreement or
      understanding, directly or indirectly, with any Person to distribute any of
      the
      Securities.

     

    (b)  Accredited
      Investor Status.
      Such
      Buyer is (i) an "accredited investor" as that term is defined in Rule 501(a)
      of
      Regulation D, or (ii) a resident of the Province of Ontario that is an
      "Accredited Investor" for the purpose of National Instrument 45-106 of the
      Canadian Securities Administration and, if such Buyer is relying on clause
      (ii)
      above, has delivered an executed representation letter concurrently with the
      execution and delivery of this Agreement evidencing the manner in which such
      Buyer satisfies such definition of "Accredited Investor" and containing certain
      other representations, warranties and acknowledgements of the
      Buyer.

     

    (c)  Reliance
      on Exemptions.
      Such
      Buyer understands that the Securities are being offered and sold to it in
      reliance on specific exemptions from the registration requirements of United
      States federal and state securities laws and that the Company is relying in
      part
      upon the truth and accuracy of, and such Buyer's compliance with, the
      representations, warranties, agreements, acknowledgments and understandings
      of
      such Buyer set forth herein in order to determine the availability of such
      exemptions and the eligibility of such Buyer to acquire the
      Securities.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    (d)  Information.
      Such
      Buyer and its advisors, if any, have been furnished with all materials relating
      to the business, finances and operations of the Company and materials relating
      to the offer and sale of the Securities that have been requested by such Buyer.
      Such Buyer and its advisors, if any, have been afforded the opportunity to
      ask
      questions of the Company. Neither such inquiries nor any other due diligence
      investigations conducted by such Buyer or its advisors, if any, or its
      representatives shall modify, amend or affect such Buyer's right to rely on
      the
      Company's representations and warranties contained herein. Such Buyer
      understands that its investment in the Securities involves a high degree of
      risk
      and is able to afford a complete loss of such investment. Such Buyer has sought
      such accounting, legal and tax advice as it has considered necessary to make
      an
      informed investment decision with respect to its acquisition of the
      Securities.

     

    (e)  No
      Governmental Review.
      Such
      Buyer understands that no United States federal or state agency or any other
      government or governmental agency has passed on or made any recommendation
      or
      endorsement of the Securities or the fairness or suitability of the investment
      in the Securities nor have such authorities passed upon or endorsed the merits
      of the offering of the Securities.

     

    (f)  Transfer
      or Resale.
      Such
      Buyer understands that except as provided in the Registration Rights Agreement:
      (i) the Securities have not been and are not being registered under the 1933
      Act
      or any state securities laws, and may not be offered for sale, sold, assigned
      or
      transferred unless (A) subsequently registered thereunder, (B) such Buyer shall
      have delivered to the Company an opinion of counsel, in a form reasonably
      acceptable to the Company, to the effect that such Securities to be sold,
      assigned or transferred may be sold, assigned or transferred pursuant to an
      exemption from such registration, or (C) such Buyer provides the Company with
      reasonable assurance that such Securities can be sold, assigned or transferred
      pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as amended
      (or
      a successor rule thereto) (collectively, "Rule
      144"),
      notwithstanding the forgoing, the requirement to deliver a legal opinion as
      set
      out in clause (B) above shall not apply to transfers to an affiliate of the
      Buyer; (ii) any sale of the Securities made in reliance on Rule 144 may be
      made
      only in accordance with the terms of Rule 144 and further, if Rule 144 is not
      applicable, any resale of the Securities under circumstances in which the seller
      (or the Person (as defined in Section 3(s)) through whom the sale is made)
      may
      be deemed to be an underwriter (as that term is defined in the 1933 Act) may
      require compliance with some other exemption under the 1933 Act or the rules
      and
      regulations of the SEC thereunder; and (iii) neither the Company nor any other
      Person is under any obligation to register the Securities under the 1933 Act
      or
      any state securities laws or to comply with the terms and conditions of any
      exemption thereunder. The Securities may be pledged in connection with a bona
      fide margin account or other loan or financing arrangement secured by the
      Securities and such pledge of Securities shall not be deemed to be a transfer,
      sale or assignment of the Securities hereunder, and no Buyer effecting a pledge
      of Securities shall be required to provide the Company with any notice thereof
      or otherwise make any delivery to the Company pursuant to this Agreement or
      any
      other Transaction Document (as defined in Section 3(b)), including, without
      limitation, this Section 2(f).

     

    
      
        
        

      

      
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    (g)  Legends.
      Such
      Buyer understands that the certificates or other instruments representing the
      Common Shares, the Notes and the Warrants and, until such time as the resale
      of
      the Conversion Shares and the Warrant Shares have been registered under the
      1933
      Act as contemplated by the Registration Rights Agreement, the stock certificates
      representing the Conversion Shares and the Warrant Shares, except as set forth
      below, shall bear any legend as required by the "blue sky" laws of any state
      and
      a restrictive legend in substantially the following form (and a stop-transfer
      order may be placed against transfer of such stock certificates):

     

    
      [NEITHER
        THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
        THE
        SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]
        HAVE
        BEEN][THE
        SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
        SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
        OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
        FOR
        THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
        OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
        IS
        NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
        144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
        PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
        ARRANGEMENT SECURED BY THE SECURITIES.

       

    

    The
      legend set forth above shall be removed and the Company shall issue a
      certificate without such legend to the holder of the Securities upon which
      it is
      stamped, if, unless otherwise required by state securities laws, (i) such
      Securities are registered for resale under the 1933 Act, (ii) in connection
      with
      a sale, assignment or other transfer, such holder provides the Company with
      an
      opinion of a law firm reasonably acceptable to the Company (with Schulte Roth
      & Zabel LLP being deemed acceptable), in a form reasonably acceptable to the
      Company, to the effect that such sale, assignment or transfer of the Securities
      may be made without registration under the applicable requirements of the 1933
      Act, or (iii) such holder provides the Company with reasonable assurance that
      the Securities can be sold, assigned or transferred pursuant to Rule 144 or
      Rule
      144A.

     

    (h)  Validity;
      Enforcement.
      This
      Agreement and the Registration Rights Agreement to which such Buyer is a party
      have been duly and validly authorized, executed and delivered on behalf of
      such
      Buyer and shall constitute the legal, valid and binding obligations of such
      Buyer enforceable against such Buyer in accordance with their respective terms,
      except as such enforceability may be limited by general principles of equity
      or
      to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
      and other similar laws relating to, or affecting generally, the enforcement
      of
      applicable creditors' rights and remedies.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    (i)  No
      Conflicts.
      The
      execution, delivery and performance by such Buyer of this Agreement and the
      Registration Rights Agreement and the consummation by such Buyer of the
      transactions contemplated hereby and thereby will not (i) result in a violation
      of the organizational documents of such Buyer or (ii) conflict with, or
      constitute a default (or an event which with notice or lapse of time or both
      would become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of, any agreement, indenture or
      instrument to which such Buyer is a party, or (iii) result in a violation of
      any
      law, rule, regulation, order, judgment or decree (including federal and state
      securities laws) applicable to such Buyer, except in the case of clauses (ii)
      and (iii) above, for such conflicts, defaults, rights or violations which would
      not, individually or in the aggregate, reasonably be expected to have a material
      adverse effect on the ability of such Buyer to perform its obligations
      hereunder.

     

    (j)  Residency.
      Such
      Buyer is a resident of that jurisdiction specified below its address on the
      Schedule of Buyers.

     

    (k)  Buyer's
      Broker Fees.
      Each
      Buyer shall be responsible for the payment of any placement agent's fees,
      financial advisory fees, or brokers' commissions for placement agents, financial
      advisors and/or brokers engaged by such Buyer relating to or arising out of
      the
      transactions contemplated hereby.

     

    (l)  Certain
      Trading Activities.
      Other
      than the transactions contemplated herein, since the time that such Buyer was
      first contacted by the Company, the Agent or any other Person regarding this
      investment in the Company neither the Buyer nor any Affiliate of such Buyer
      which (x) had knowledge of the transactions contemplated hereby, (y) has or
      shares discretion relating to such Buyer's investments or trading or information
      concerning such Buyer's investments and (z) is subject to such Buyer's review
      or
      input concerning such Affiliate's investments or trading (collectively,
      "Trading
      Affiliates")
      has
      directly or indirectly, nor has any Person acting on behalf of or pursuant
      to
      any understanding with such Buyer or Trading Affiliate, effected or agreed
      to
      effect any transactions in the securities of the Company. Such Buyer hereby
      covenants and agrees not to, and shall cause its Trading Affiliates not to,
      engage, directly or indirectly, in any transactions in the securities of the
      Company or involving the Company's securities during the period from the date
      hereof until (i) the later of (A) sixty (60) days after the Closing Date and
      (B)
      such time as the transactions contemplated by this Agreement are first publicly
      announced as described in Section 4(i) hereof or (ii) such time as this
      Agreement is terminated in full pursuant to Section 8 hereof. Other than to
      other Persons party to this Agreement and those expressly acknowledged by the
      Company, such Buyer has maintained the confidentiality of all disclosures made
      to it in connection with this transaction (including the existence and terms
      of
      this transaction). Such Buyer acknowledges the SEC's position set forth in
      Item
      65, Section 5 under Section A, of the Manual of Publicly Available Telephone
      Interpretations, dated July 1997, compiled by the Office of Chief Counsel,
      Division of Corporation Finance, and such Buyer will adhere to such
      position.

     

    
      
        
        

      

      
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    3.  REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.
      The
      Company represents and warrants to each of the Buyers that, as of the date
      hereof and as of the Closing Date:

     

    (a)  Organization
      and Qualification.
      The
      Company and its "Subsidiaries"
      (which
      for purposes of this Agreement means any joint venture or any entity in which
      the Company, directly or indirectly, owns any of the capital stock or holds
      an
      equity or similar interest) are entities duly organized and validly existing
      and
      in good standing under the laws of the jurisdiction in which they are formed,
      and have the requisite power and authorization to own their properties and
      to
      carry on their business as now being conducted. Each of the Company and its
      Subsidiaries is duly qualified as a foreign entity to do business and, is in
      good standing in every jurisdiction in which its ownership of property or the
      nature of the business conducted by it makes such qualification necessary,
      except to the extent that the failure to be so qualified or be in good standing
      would not reasonably be expected to have a Material Adverse Effect. As used
      in
      this Agreement, "Material
      Adverse Effect"
      means
      any material adverse effect on the business, properties, assets, operations,
      results of operations, condition (financial or otherwise) or prospects of the
      Company and its Subsidiaries, individually or taken as a whole, or on the
      transactions contemplated hereby or in the other Transaction Documents or by
      the
      agreements and instruments to be entered into in connection herewith or
      therewith, or on the authority or ability of the Company to perform its
      obligations under the Transaction Documents (as defined below). The Company
      has
      no Subsidiaries except as set forth on Schedule
      3(a).

     

    (b)  Authorization;
      Enforcement; Validity.
      The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under this Agreement, the Notes, the Registration Rights
      Agreement, the Transfer Agent Instructions (as defined in Section 5(b)), the
      Warrants and each of the other agreements entered into by the parties hereto
      in
      connection with the transactions contemplated by this Agreement (collectively,
      the "Transaction
      Documents")
      and to
      issue the Securities in accordance with the terms hereof and thereof. The
      execution and delivery of the Transaction Documents by the Company and the
      consummation by the Company of the transactions contemplated hereby and thereby,
      including, without limitation, the issuance of the Common Shares, the Notes
      and
      the Warrants, the reservation for issuance and the issuance of the Conversion
      Shares issuable
      upon conversion of the Notes and the reservation for issuance and issuance
      of
      Warrant Shares issuable upon exercise of the Warrants have been duly authorized
      by the Company's Board of Directors and, subject to obtaining the Stockholder
      Approval (as defined below) and except as set forth in Section 3(e), no further
      filing, consent, or authorization is required by the Company, its Board of
      Directors or its stockholders. This Agreement and the other Transaction
      Documents of even date herewith have been duly executed and delivered by the
      Company, and constitute the legal, valid and binding obligations of the Company,
      enforceable against the Company in accordance with their respective terms,
      except as such enforceability may be limited by general principles of equity
      or
      applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
      or
      similar laws relating to, or affecting generally, the enforcement of applicable
      creditors' rights and remedies.

     

    (c)  Issuance
      of Securities.
      The
      issuance of the Common Shares, the Notes and the Warrants are duly authorized
      and are free from all taxes, liens and charges with respect to the issue
      thereof. As of the Closing, 40,900,000 shares of Common Stock shall have been
      duly authorized and reserved for issuance pursuant to the transactions
      contemplated hereby. From and after the Stockholder Approval (as defined below),
      the Company shall have reserved from its duly authorized capital stock not
      less
      than the sum of (i) 100% of the Common Shares issued hereunder, and (ii) 130%
      of
      the maximum number of shares of Common Stock issuable (x) upon conversion of
      the
      Notes (without taking into account any limitations on the conversion of the
      Notes set forth in the Notes) and (y) upon exercise of the Warrants (without
      taking into account any limitations on the exercise of the Warrants set forth
      in
      the Warrants). Upon conversion or exercise in accordance with the Notes or
      the
      Warrants, as the case may be, the Conversion Shares and the Warrant Shares,
      respectively, will be validly issued, fully paid and nonassessable and free
      from
      all preemptive or similar rights, taxes, liens and charges with respect to
      the
      issue thereof, with the holders being entitled to all rights accorded to a
      holder of Common Stock. Assuming the accuracy of each of the representations
      and
      warranties set forth in Section 2 of this Agreement, the offer and issuance
      by
      the Company of the Securities is exempt from registration under the 1933
      Act.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    (d)  No
      Conflicts.
      Except
      as set forth on Schedule
      3(d),
      the
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated hereby
      and
      thereby (including, without limitation, the issuance of the Common Shares,
      the
      Notes and Warrants and reservation for issuance and issuance of the Conversion
      Shares and the Warrant Shares) will not (i) result in a violation of any
      articles of incorporation, articles of formation, any articles of designations
      or other constituent documents of the Company or any of its Subsidiaries, any
      capital stock of the Company or any of its Subsidiaries or bylaws of the Company
      or any of its Subsidiaries or (ii) conflict with, or constitute a default (or
      an
      event which with notice or lapse of time or both would become a default) in
      any
      respect under, or give to others any rights of termination, amendment,
      acceleration or cancellation of, any agreement, indenture or instrument to
      which
      the Company or any of its Subsidiaries is a party, or (iii) result in a
      violation of any law, rule, regulation, order, judgment or decree (including
      foreign, federal and state securities laws and regulations and the rules and
      regulations of the OTC Bulletin Board (the "Principal
      Market")
      applicable to the Company or any of its Subsidiaries or by which any property
      or
      asset of the Company or any of its Subsidiaries is bound or
      affected.

     

    (e)  Consents.
      Neither
      the Company nor any of its Subsidiaries is required to obtain any consent,
      authorization or order of, or make any filing or registration with, any court,
      governmental agency or any regulatory or self-regulatory agency or any other
      Person in order for it to execute, deliver or perform any of its obligations
      under or contemplated by the Transaction Documents, in each case in accordance
      with the terms hereof or thereof, except for the following consents,
      authorizations, orders, filings and registrations (none of which is required
      to
      be filed or obtained before the Closing): (i) the filing with the SEC of one
      or
      more Registration Statements in accordance with the requirements of the
      Registration Rights Agreement and (ii) the filing of a listing application
      for
      the Common Shares, the Conversion Shares and the Warrant Shares with the
      Principal Market, which shall be done pursuant to the rules of the Principal
      Market. The Company and its Subsidiaries are unaware of any facts or
      circumstances that might prevent the Company from obtaining or effecting any
      of
      the registration, application or filings pursuant to the preceding sentence.
      The
      Company is not in violation of the listing requirements of the Principal Market
      and has no knowledge of any facts that would reasonably lead to delisting or
      suspension of the Common Stock in the foreseeable future. 

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    (f)  Acknowledgment
      Regarding Buyer's Purchase of Securities.
      The
      Company acknowledges and agrees that each Buyer is acting solely in the capacity
      of an arm's length purchaser with respect to the Transaction Documents and
      the
      transactions contemplated hereby and thereby and that no Buyer is (i) an officer
      or director of the Company, (ii) an "affiliate" of the Company or any of its
      Subsidiaries (as defined in Rule 144 of the 1933 Act) or (iii) to the knowledge
      of the Company, a "beneficial owner" of more than 10% of the shares of Common
      Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange Act
      of
      1934, as amended (the "1934
      Act")).
      The
      Company further acknowledges that no Buyer is acting as a financial advisor
      or
      fiduciary of the Company or any of its Subsidiaries (or in any similar capacity)
      with respect to the Transaction Documents and the transactions contemplated
      hereby and thereby, and any advice given by a Buyer or any of its
      representatives or agents in connection with the Transaction Documents and
      the
      transactions contemplated hereby and thereby is merely incidental to such
      Buyer's purchase of the Securities. The Company further represents to each
      Buyer
      that the Company's decision to enter into the Transaction Documents has been
      based solely on the independent evaluation by the Company and its
      representatives.

     

    (g)  No
      General Solicitation; Placement Agent's Fees.
      Neither
      the Company, nor any of its Subsidiaries or affiliates, nor any Person acting
      on
      its or their behalf, has engaged in any form of general solicitation or general
      advertising (within the meaning of Regulation D) in connection with the offer
      or
      sale of the Securities. The Company shall be responsible for the payment of
      any
      placement agent's fees, financial advisory fees, or brokers' commissions (other
      than for persons engaged by any Buyer or its investment advisor) relating to
      or
      arising out of the transactions contemplated hereby. The Company acknowledges
      that it has engaged Knight Capital Markets, LLC as placement agent (the
      "Agent")
      in
      connection with the sale of the Securities. 

     

    (h)  No
      Integrated Offering.
      None of
      the Company, its Subsidiaries, any of their affiliates, and any Person acting
      on
      their behalf has, directly or indirectly, made any offers or sales of any
      security or solicited any offers to buy any security, under circumstances that
      would require registration of any of the Securities under the 1933 Act or cause
      this offering of the Securities to be integrated with prior offerings by the
      Company for purposes of the 1933 Act or any applicable stockholder approval
      provisions, including, without limitation, under the rules and regulations
      of
      any exchange or automated quotation system on which any of the securities of
      the
      Company are listed or designated. None of the Company, its Subsidiaries, their
      affiliates and any Person acting on their behalf will take any action or steps
      referred to in the preceding sentence that would require registration of any
      of
      the Securities under the 1933 Act or cause the offering of the Securities to
      be
      integrated with other offerings.

     

    (i)  Dilutive
      Effect.
      The
      Company understands and acknowledges that the number of Conversion Shares
      issuable upon conversion of the Notes and the Warrant Shares issuable upon
      exercise of the Warrants will increase in certain circumstances. The Company
      further acknowledges that its obligation to issue Conversion Shares upon
      conversion of the Notes in accordance with this Agreement and the
      Notes and
      its
      obligation to issue the Warrant Shares upon exercise of the Warrants in
      accordance with this Agreement and the Warrants is, in each case, absolute
      and
      unconditional, following the Stockholder Approval (as defined in
      Section 4(p)) and the filing of the amended and restated Articles of
      Incorporation (which the Company shall file with the Secretary of State of
      the
      State of Nevada immediately following Stockholder Approval), regardless of
      the
      dilutive effect that such issuance may have on the ownership interests of other
      stockholders of the Company.

     

    (j)  Application
      of Takeover Protections; Rights Agreement.
      Except
      as set forth on Schedule
      3(j),
      the
      Company and its board of directors have taken all necessary action, if any,
      in
      order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under a rights agreement)
      or other similar anti-takeover provision under the Articles of Incorporation
      (as
      defined in Section 3(r)) or the laws of the state of its incorporation which
      is
      or could become applicable to any Buyer as a result of the transactions
      contemplated by this Agreement, including, without limitation, the Company's
      issuance of the Securities and any Buyer's ownership of the Securities. The
      Company and its board of directors have taken all necessary action, if any,
      in
      order to render inapplicable any stockholder rights plan or similar arrangement
      relating to accumulations of beneficial ownership of Common Stock or a change
      in
      control of the Company.

     

    
      
        
        

      

      
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    (k)  SEC
      Documents; Financial Statements.
      Except
      as set forth on Schedule
      3(k),
      during
      the two (2) years prior to the date hereof, the Company has filed all reports,
      schedules, forms, statements and other documents required to be filed by it
      with
      the SEC pursuant to the reporting requirements of the 1934 Act (all of the
      foregoing filed prior to the date hereof and all exhibits included therein
      and
      financial statements, notes and schedules thereto and documents incorporated
      by
      reference therein being hereinafter referred to as the "SEC
      Documents").
      The
      Company has delivered to the Buyers or their respective representatives true,
      correct and complete copies of the SEC Documents not available on the EDGAR
      system. As of their respective filing dates, the SEC Documents complied in
      all
      material respects with the requirements of the 1934 Act and the rules and
      regulations of the SEC promulgated thereunder applicable to the SEC Documents,
      and none of the SEC Documents, at the time they were filed with the SEC,
      contained any untrue statement of a material fact or omitted to state a material
      fact required to be stated therein or necessary in order to make the statements
      therein, in the light of the circumstances under which they were made, not
      misleading. As of their respective filing dates, the financial statements of
      the
      Company included in the SEC Documents complied as to form in all material
      respects with applicable accounting requirements and the published rules and
      regulations of the SEC with respect thereto. Such financial statements have
      been
      prepared in accordance with generally accepted accounting principles,
      consistently applied, during the periods involved (except (i) as may be
      otherwise indicated in such financial statements or the notes thereto, or (ii)
      in the case of unaudited interim statements, to the extent they may exclude
      footnotes or may be condensed or summary statements) and fairly present in
      all
      material respects the financial position of the Company as of the dates thereof
      and the results of its operations and cash flows for the periods then ended
      (subject, in the case of unaudited statements, to normal year-end audit
      adjustments). No other information provided by or on behalf of the Company
      to
      the Buyers which is not included in the SEC Documents, including, without
      limitation, information referred to in Section 2(d) of this Agreement or in
      any
      disclosure schedules, contains any untrue statement of a material fact or omits
      to state any material fact necessary in order to make the statements therein,
      in
      the light of the circumstance under which they are or were made not misleading.
      

     

    (l)  Absence
      of Certain Changes.
      Except
      as set forth on Schedule
      3(l)(i),
      since
      March 31, 2006, there has been no material adverse change and no material
      adverse development in the business, properties, operations, condition
      (financial or otherwise), results of operations or prospects of the Company
      or
      its Subsidiaries. Except as disclosed in Schedule
      3(l)(ii),
      since
      March 31, 2006, the Company has not (i) declared or paid any dividends, (ii)
      sold any assets, individually or in the aggregate, in excess of $100,000 outside
      of the ordinary course of business or (iii) had capital expenditures,
      individually or in the aggregate, in excess of $500,000. Neither the Company
      nor
      any of its Subsidiaries has taken any steps to seek protection pursuant to
      any
      bankruptcy law nor does the Company have any knowledge or reason to believe
      that
      its creditors intend to initiate involuntary bankruptcy proceedings or any
      actual knowledge of any fact that would reasonably lead a creditor to do so.
      The
      Company and its Subsidiaries, individually and on a consolidated basis, are
      not
      as of the date hereof, and after giving effect to the transactions contemplated
      hereby to occur at the Closing, will not be Insolvent (as defined below). For
      purposes of this Section 3(l), "Insolvent"
      means,
      with respect to any Person (as defined in Section 3(s)), (i) the present fair
      saleable value of such Person's assets is less than the amount required to
      pay
      such Person's total Indebtedness (as defined in Section 3(s)), (ii) such Person
      is unable to pay its debts and liabilities, subordinated, contingent or
      otherwise, as such debts and liabilities become absolute and matured, (iii)
      such
      Person intends to incur or believes that it will incur debts that would be
      beyond its ability to pay as such debts mature or (iv) such Person has
      unreasonably small capital with which to conduct the business in which it is
      engaged as such business is now conducted and is proposed to be
      conducted.

     

    
      
        
        

      

      
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    (m)  No
      Undisclosed Events, Liabilities, Developments or Circumstances.
      No
      event, liability, development or circumstance has occurred or exists, or is
      contemplated to occur with respect to the Company, its Subsidiaries or their
      respective business, properties, prospects, operations or financial condition,
      that would be required to be disclosed by the Company under applicable
      securities laws on a registration statement on Form S-1 filed with the SEC
      relating to an issuance and sale by the Company of its Common Stock and which
      has not been publicly announced.

     

    (n)  Conduct
      of Business; Regulatory Permits.
      Neither
      the Company nor any of its Subsidiaries is in violation of any term of or in
      default under its Articles of Incorporation or its Bylaws or their
      organizational charter or bylaws, respectively. Neither the Company nor any
      of
      its Subsidiaries is in violation of any judgment, decree or order or any
      statute, ordinance, rule or regulation applicable to the Company or its
      Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
      its business in violation of any of the foregoing, except for possible
      violations which could not, individually or in the aggregate, reasonably be
      expected to have a Material Adverse Effect. Without limiting the generality
      of
      the foregoing, the Company is not in violation of any of the rules, regulations
      or requirements of the Principal Market and has no knowledge of any facts or
      circumstances that would reasonably lead to delisting or suspension of the
      Common Stock by the Principal Market in the foreseeable future. Since December
      16, 2005, (i) the Common Stock has been designated for quotation on the
      Principal Market, (ii) trading in the Common Stock has not been suspended by
      the
      SEC or the Principal Market and (iii) the Company has received no communication,
      written or oral, from the SEC or the Principal Market regarding the suspension
      or delisting of the Common Stock from the Principal Market. Except as set forth
      on Schedule
      3(n),
      the
      Company and its Subsidiaries possess all certificates, authorizations and
      permits issued by the appropriate regulatory authorities necessary to conduct
      their respective businesses, except where the failure to possess such
      certificates, authorizations or permits would not have, individually or in
      the
      aggregate, a Material Adverse Effect, and neither the Company nor any such
      Subsidiary has received any notice of proceedings relating to the revocation
      or
      modification of any such certificate, authorization or permit.

     

    
      
        
        

      

      
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    (o)  Foreign
      Corrupt Practices.
      Neither
      the Company nor any of its Subsidiaries nor any director, officer, agent,
      employee or other Person acting on behalf of the Company or any of its
      Subsidiaries has, in the course of its actions for, or on behalf of, the Company
      or any of its Subsidiaries (i) used any corporate funds for any unlawful
      contribution, gift, entertainment or other unlawful expenses relating to
      political activity; (ii) made any direct or indirect unlawful payment to any
      foreign or domestic government official or employee from corporate funds; (iii)
      violated or is in violation of any provision of the U.S. Foreign Corrupt
      Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
      payoff, influence payment, kickback or other unlawful payment to any foreign
      or
      domestic government official or employee.

     

    (p)  Sarbanes-Oxley
      Act.
      The
      Company is in compliance with any and all applicable requirements of the
      Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any
      and
      all applicable rules and regulations promulgated by the SEC thereunder that
      are
      effective as of the date hereof.

     

    (q)  Transactions
      With Affiliates.
      Except
      as set forth in the SEC Documents filed at least ten (10) days prior to the
      date
      hereof and other than the grant of stock options disclosed on Schedule
      3(q),
      none of
      the officers, directors or employees of the Company or any of its Subsidiaries
      is presently a party to any transaction with the Company or any of its
      Subsidiaries (other than for ordinary course services as employees, officers
      or
      directors), including any contract, agreement or other arrangement providing
      for
      the furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any such
      officer, director or employee or, to the knowledge of the Company or any of
      its
      Subsidiaries, any corporation, partnership, trust or other entity in which
      any
      such officer, director, or employee has a substantial interest or is an officer,
      director, trustee or partner.

     

    (r)  Equity
      Capitalization.
      As of
      the date hereof, the authorized capital stock of the Company consists of
      100,000,000 shares of Common Stock, of which as of the date hereof, 49,104,580
      are issued and outstanding, 10,000,000 shares are reserved for issuance pursuant
      to the Company's stock option plan (the "Plan")
      (of
      which options to purchase 2,325,000 shares of Common Stock have been issued
      under the Plan) and 22,140,405 shares are reserved for issuance pursuant to
      securities (other than the aforementioned options, the Notes and the Warrants)
      exercisable or exchangeable for, or convertible into, shares of Common Stock.
      All of such outstanding shares have been, or upon issuance will be, validly
      issued and are fully paid and nonassessable. Except as disclosed in Schedule
      3(r):
      (i)
      none of the Company's capital stock is subject to preemptive rights or any
      other
      similar rights or any liens or encumbrances suffered or permitted by the
      Company; (ii) there are no outstanding options, warrants, scrip, rights to
      subscribe to, calls or commitments of any character whatsoever relating to,
      or
      securities or rights convertible into, or exercisable or exchangeable for,
      any
      capital stock of the Company or any of its Subsidiaries, or contracts,
      commitments, understandings or arrangements by which the Company or any of
      its
      Subsidiaries is or may become bound to issue additional capital stock of the
      Company or any of its Subsidiaries or options, warrants, scrip, rights to
      subscribe to, calls or commitments of any character whatsoever relating to,
      or
      securities or rights convertible into, or exercisable or exchangeable for,
      any
      capital stock of the Company or any of its Subsidiaries; (iii) there are no
      outstanding debt securities, notes, credit agreements, credit facilities or
      other agreements, documents or instruments evidencing Indebtedness of the
      Company or any of its Subsidiaries or by which the Company or any of its
      Subsidiaries is or may become bound; (iv) there are no financing statements
      securing obligations in any material amounts, either singly or in the aggregate,
      filed in connection with the Company or any of its Subsidiaries; (v) there
      are
      no agreements or arrangements under which the Company or any of its Subsidiaries
      is obligated to register the sale of any of their securities under the 1933
      Act
      (except pursuant to the Registration Rights Agreement); (vi) there are no
      outstanding securities or instruments of the Company or any of its Subsidiaries
      which contain any redemption or similar provisions, and there are no contracts,
      commitments, understandings or arrangements by which the Company or any of
      its
      Subsidiaries is or may become bound to redeem a security of the Company or
      any
      of its Subsidiaries; (vii) there are no securities or instruments containing
      anti-dilution or similar provisions that will be triggered by the issuance
      of
      the Securities; (viii) the Company does not have any stock appreciation rights
      or "phantom stock" plans or agreements or any similar plan or agreement; and
      (ix) the Company and its Subsidiaries have no liabilities or obligations
      required to be disclosed in the SEC Documents but not so disclosed in the SEC
      Documents, other than those incurred in the ordinary course of the Company's
      or
      its Subsidiaries' respective businesses and which, individually or in the
      aggregate, do not or would not have a Material Adverse Effect. The Company
      has
      furnished to the Buyers true, correct and complete copies of the Company's
      Articles of Incorporation, as amended and as in effect on the date hereof (the
      "Articles
      of Incorporation"),
      and
      the Company's Bylaws, as amended and as in effect on the date hereof (the
      "Bylaws"),
      and
      the terms of all securities convertible into, or exercisable or exchangeable
      for, shares of Common Stock and the material rights of the holders thereof
      in
      respect thereto.

     

    
      
        
        

      

      
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    (s)  Indebtedness
      and Other Contracts.
      Except
      as disclosed in Schedule
      3(s),
      neither
      the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness
      (as
      defined below), (ii) is a party to any contract, agreement or instrument, the
      violation of which, or default under which, by the other party(ies) to such
      contract, agreement or instrument could reasonably be expected to result in
      a
      Material Adverse Effect, (iii) is in violation of any term of or in default
      under any contract, agreement or instrument relating to any Indebtedness, except
      where such violations and defaults would not result, individually or in the
      aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
      agreement or instrument relating to any Indebtedness, the performance of which,
      in the judgment of the Company's officers, has or is expected to have a Material
      Adverse Effect. Schedule
      3(s)
      provides
      a detailed description of the material terms of any such outstanding
      Indebtedness. For purposes of this Agreement: (x) "Indebtedness"
      of any
      Person means, without duplication (A) all indebtedness for borrowed money,
      (B)
      all obligations issued, undertaken or assumed as the deferred purchase price
      of
      property or services, including (without limitation) "capital leases" in
      accordance with generally accepted accounting principles (other than trade
      payables entered into in the ordinary course of business), (C) all reimbursement
      or payment obligations with respect to letters of credit, surety bonds and
      other
      similar instruments, (D) all obligations evidenced by notes, bonds, debentures
      or similar instruments, including obligations so evidenced incurred in
      connection with the acquisition of property, assets or businesses, (E) all
      indebtedness created or arising under any conditional sale or other title
      retention agreement, or incurred as financing, in either case with respect
      to
      any property or assets acquired with the proceeds of such indebtedness (even
      though the rights and remedies of the seller or bank under such agreement in
      the
      event of default are limited to repossession or sale of such property), (F)
      all
      monetary obligations under any leasing or similar arrangement which, in
      connection with generally accepted accounting principles, consistently applied
      for the periods covered thereby, is classified as a capital lease, (G) all
      indebtedness referred to in clauses (A) through (F) above secured by (or for
      which the holder of such Indebtedness has an existing right, contingent or
      otherwise, to be secured by) any mortgage, lien, pledge, charge, security
      interest or other encumbrance upon or in any property or assets (including
      accounts and contract rights) owned by any Person, even though the Person which
      owns such assets or property has not assumed or become liable for the payment
      of
      such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
      or obligations of others of the kinds referred to in clauses (A) through (G)
      above; (y) "Contingent
      Obligation"
      means,
      as to any Person, any direct or indirect liability, contingent or otherwise,
      of
      that Person with respect to any indebtedness, lease, dividend or other
      obligation of another Person if the primary purpose or intent of the Person
      incurring such liability, or the primary effect thereof, is to provide assurance
      to the obligee of such liability that such liability will be paid or discharged,
      or that any agreements relating thereto will be complied with, or that the
      holders of such liability will be protected (in whole or in part) against loss
      with respect thereto; and (z) "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.

     

    
      
        
        

      

      
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    (t)  Absence
      of Litigation.
      Except
      as set forth in Schedule
      3(t),
      there
      is no action, suit, proceeding, inquiry or investigation before or by the
      Principal Market, any court, public board, government agency, self-regulatory
      organization or body pending or, to the knowledge of the Company, threatened
      against or affecting the Company or any of its Subsidiaries, the Common Stock
      or
      any of the Company's Subsidiaries or any of the Company's or its Subsidiaries'
      officers or directors. 

     

    (u)  Insurance.
      Except
      as set forth on Schedule
      3(u),
      the
      Company and each of its Subsidiaries are insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its Subsidiaries are engaged. Neither the Company
      nor
      any such Subsidiary has been refused any insurance coverage sought or applied
      for and neither the Company nor any such Subsidiary has any reason to believe
      that it will not be able to renew its existing insurance coverage as and when
      such coverage expires or to obtain similar coverage from similar insurers as
      may
      be necessary to continue its business at a cost that would not have a Material
      Adverse Effect.

     

    (v)  Employee
      Relations.
      (i)
      Neither
      the Company nor any of its Subsidiaries is a party to any collective bargaining
      agreement or employs any member of a union. The Company and its Subsidiaries
      believe that their relations with their employees are good. No executive officer
      of the Company or any of its Subsidiaries (as defined in Rule 501(f) of the
      1933
      Act) has notified the Company or any such Subsidiary that such officer intends
      to leave the Company or any such Subsidiary or otherwise terminate such
      officer's employment with the Company or any such Subsidiary. No executive
      officer of the Company or any of its Subsidiaries, is, or is now expected to
      be,
      in violation of any material term of any employment contract, confidentiality,
      disclosure or proprietary information agreement, non-competition agreement,
      or
      any other contract or agreement or any restrictive covenant, and the continued
      employment of each such executive officer does not subject the Company or any
      of
      its Subsidiaries to any liability with respect to any of the foregoing
      matters.

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    (ii)  The
      Company and its Subsidiaries, to their knowledge, are in compliance with all
      federal, state, local and foreign laws and regulations respecting labor,
      employment and employment practices and benefits, terms and conditions of
      employment and wages and hours, except where failure to be in compliance would
      not, either individually or in the aggregate, reasonably be expected to result
      in a Material Adverse Effect.

     

    (w)  Title.
      Except
      as set forth on Schedule
      3(w),
      the
      Company and its Subsidiaries have good and marketable title in fee simple to
      all
      real property and good and marketable title to all personal property owned
      by
      them which is material to the business of the Company and its Subsidiaries,
      in
      each case free and clear of all liens, encumbrances and defects except such
      as
      are described in Schedule
      3(w)
      or such
      as do not materially affect the value of such property and do not interfere
      with
      the use made and proposed to be made of such property by the Company and any
      of
      its Subsidiaries. Any real property and facilities held under lease by the
      Company and any of its Subsidiaries are held by them under valid, subsisting
      and
      enforceable leases with such exceptions as are not material and do not interfere
      with the use made and proposed to be made of such property and buildings by
      the
      Company and its Subsidiaries.

     

    (x)  Intellectual
      Property Rights.
      The
      Company and its Subsidiaries own or possess adequate rights or licenses to
      use
      all trademarks, service marks and all applications and registrations therefor,
      trade names, patents, patent rights, copyrights, original works of authorship,
      inventions, trade secrets and other intellectual property rights ("Intellectual
      Property Rights")
      necessary to conduct their respective businesses as now conducted. None of
      the
      Company's registered, or applied for, Intellectual Property Rights, to the
      extent the Company has such Intellectual Property Rights, have expired or
      terminated or have been abandoned, or are expected to expire or terminate or
      expected to be abandoned, within three years from the date of this Agreement.
      The Company does not have any knowledge of any infringement by the Company
      or
      its Subsidiaries of Intellectual Property Rights of others. There is no claim,
      action or proceeding being made or brought, or to the knowledge of the Company,
      being threatened, against the Company or its Subsidiaries regarding its
      Intellectual Property Rights. Neither the Company nor any of its Subsidiaries
      is
      aware of any facts or circumstances which might give rise to any of the
      foregoing infringements or claims, actions or proceedings. The Company and
      its
      Subsidiaries have taken reasonable security measures to protect the secrecy,
      confidentiality and value of all of their Intellectual Property
      Rights.

     

    (y)  Environmental
      Laws.
      Except
      as set forth on Schedule
      3(y),
      the
      Company and its Subsidiaries, to their knowledge, (i) are in compliance with
      any
      and all Environmental Laws (as hereinafter defined), (ii) have received all
      permits, licenses or other approvals required of them under applicable
      Environmental Laws to conduct their respective businesses, (iii) are in
      compliance with all terms and conditions of any such permit, license or
      approval, (iv) do not own or operate any real property contaminated with any
      substance that is in violation of Environmental Laws, and (v) is liable for
      any
      off-site disposal or contamination pursuant to any Environmental Laws where,
      in
      each of the foregoing clauses (i), (ii), (iii), (iv) and (v) the failure to
      so
      comply could be reasonably expected to have, individually or in the aggregate,
      a
      Material Adverse Effect. There is no civil, criminal or administrative action,
      suit, investigation, inquiry or proceeding pending or, to the knowledge of
      the
      Company, threatened by or before any court or governmental authority against
      the
      Company or any of its Subsidiaries relating to or arising from the Company's
      nor
      any Subsidiary's non-compliance with any Environmental Laws, nor has the Company
      received written notice of any alleged violations of Environmental Laws. The
      term "Environmental
      Laws"
      means
      all federal, state, local or foreign laws relating to pollution or protection
      of
      human health or the environment (including, without limitation, ambient air,
      surface water, groundwater, land surface or subsurface strata), including,
      without limitation, laws relating to emissions, discharges, releases or
      threatened releases of chemicals, pollutants, contaminants, or toxic or
      hazardous substances or wastes (collectively, "Hazardous
      Materials") into
      the
      environment, or otherwise relating to the manufacture, processing, distribution,
      use, treatment, storage, disposal, transport or handling of Hazardous Materials,
      as well as all authorizations, codes, decrees, demands or demand letters,
      injunctions, judgments, licenses, notices or notice letters, orders, permits,
      plans or regulations issued, entered, promulgated or approved
      thereunder.

     

    
      
        
        

      

      
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    (z)  Subsidiary
      Rights.
      The
      Company or one of its Subsidiaries has the unrestricted right to vote, and
      (subject to limitations imposed by applicable law) to receive dividends and
      distributions on, all capital securities of its Subsidiaries as owned by the
      Company or such Subsidiary.

     

    (aa)  Tax
      Status.
      Except
      as set forth on Schedule
      3(aa),
      the
      Company and each of its Subsidiaries (i) has made or filed all foreign, federal
      and state income and all other tax returns, reports and declarations required
      by
      any jurisdiction to which it is subject, (ii) has paid all taxes and other
      governmental assessments and charges that are material in amount, shown or
      determined to be due on such returns, reports and declarations, except those
      being contested in good faith and (iii) has set aside on its books provision
      reasonably adequate for the payment of all taxes for periods subsequent to
      the
      periods to which such returns, reports or declarations apply. There are no
      unpaid taxes in any material amount claimed to be due by the taxing authority
      of
      any jurisdiction, and the officers of the Company know of no basis for any
      such
      claim.

     

    (bb)  Internal
      Accounting and Disclosure Controls.
      The
      Company and each of its Subsidiaries maintain a system of internal accounting
      controls sufficient to provide reasonable assurance that (i) transactions are
      executed in accordance with management's general or specific authorizations,
      (ii) transactions are recorded as necessary to permit preparation of financial
      statements in conformity with generally accepted accounting principles and
      to
      maintain asset and liability accountability, (iii) access to assets or
      incurrence of liabilities is permitted only in accordance with management's
      general or specific authorization and (iv) the recorded accountability for
      assets and liabilities is compared with the existing assets and liabilities
      at
      reasonable intervals and appropriate action is taken with respect to any
      difference. The Company maintains disclosure controls and procedures (as such
      term is defined in Rule 13a-14 under the 1934 Act) that are effective in
      ensuring that information required to be disclosed by the Company in the reports
      that it files or submits under the 1934 Act is recorded, processed, summarized
      and reported, within the time periods specified in the rules and forms of the
      SEC, including, without limitation, controls and procedures designed in to
      ensure that information required to be disclosed by the Company in the reports
      that it files or submits under the 1934 Act is accumulated and communicated
      to
      the Company's management, including its principal executive officer or officers
      and its principal financial officer or officers, as appropriate, to allow timely
      decisions regarding required disclosure. During the twelve months prior to
      the
      date hereof neither the Company nor any of its Subsidiaries have received any
      notice or correspondence from any accountant relating to any potential material
      weakness in any part of the system of internal accounting controls of the
      Company or any of its Subsidiaries.

     

    
      
        
        

      

      
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    (cc)  Ranking
      of Notes.
      Except
      as set forth on Schedule
      3(cc),
      no
      Indebtedness of the Company is senior to or ranks pari
      passu
      with the
      Notes in right of payment, whether with respect of payment of redemptions,
      interest, damages or upon liquidation or dissolution or otherwise.

     

    (dd)  Off
      Balance Sheet Arrangements.
      There
      is no transaction, arrangement, or other relationship between the Company and
      an
      unconsolidated or other off balance sheet entity that is required to be
      disclosed by the Company in its 1934 Act filings and is not so disclosed or
      that
      otherwise would be reasonably likely to have a Material Adverse
      Effect.

     

    (ee)  Investment
      Company Status.
      The
      Company is not, and upon consummation of the sale of the Securities will not
      be,
      an "investment company," a company controlled by an "investment company" or
      an
      "affiliated person" of, or "promoter" or "principal underwriter" for, an
      "investment company" as such terms are defined in the Investment Company Act
      of
      1940, as amended.

     

    (ff)  Transfer
      Taxes.
      On the
      Closing Date, all stock transfer or other taxes (other than income or similar
      taxes) which are required to be paid in connection with the sale and transfer
      of
      the Securities to be sold to each Buyer hereunder will be, or will have been,
      fully paid or provided for by the Company, and all laws imposing such taxes
      will
      be or will have been complied with.

     

    (gg)  Manipulation
      of Price.
      The
      Company has not, and to its knowledge no one acting on its behalf has, (i)
      taken, directly or indirectly, any action designed to cause or to result in
      the
      stabilization or manipulation of the price of any security of the Company to
      facilitate the sale or resale of any of the Securities, (ii) other than the
      Agent, sold, bid for, purchased, or paid any compensation for soliciting
      purchases of, any of the Securities, or (iii) other than the Agent, paid or
      agreed to pay to any person any compensation for soliciting another to purchase
      any other securities of the Company.

     

    (hh)  Disclosure.
      All
      disclosure provided by the Company to the Buyers regarding the Company or any
      of
      its Subsidiaries, their business and the transactions contemplated hereby in
      the
      Transaction Documents and the Schedules to this Agreement is true and correct
      and does not contain any untrue statement of a material fact or omit to state
      any material fact necessary in order to make the statements made therein, in
      the
      light of the circumstances under which they were made, not misleading. Each
      press release issued by the Company or any of its Subsidiaries during the twelve
      (12) months preceding the date of this Agreement did not at the time of release
      contain any untrue statement of a material fact or omit to state a material
      fact
      required to be stated therein or necessary in order to make the statements
      therein, in the light of the circumstances under which they were made, not
      misleading. No event or circumstance has occurred or information exists with
      respect to the Company or any of its Subsidiaries or its or their business,
      properties, prospects, operations or financial conditions, which, under
      applicable law, rule or regulation, requires public disclosure or announcement
      by the Company but which has not been so publicly announced or
      disclosed.

     

    
      
        
        

      

      
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    (ii)  Material
      Acquisition Agreements.
      The
      agreements set forth on Schedule
      3(jj)
      are all
      of the material agreements relating to the acquisition of the Big Muddy Field,
      Cole Creek South Field and South Glenrock Field and related interests therein
      (the "Acquisition
      Agreements").
      Each
      Acquisition Agreement is in full force and effect and is a valid and binding
      obligation of the Company and any Subsidiary which is a party thereto,
      enforceable against such parties in accordance with their terms. The non-binding
      letter of intent set forth on Schedule
      3(jj)
      is the
      only material agreement relating to the acquisition of the East Teapot Dome
      Field and related interests therein. None of the Company, any Subsidiary which
      is a party thereto, nor to the Company's knowledge, any third party, is in
      material breach or default under any Acquisition Agreement, and to the Company's
      knowledge, no event has occurred which, with notice or lapse of time, would
      constitute a material breach or default by the Company, any Subsidiary or any
      third party, or permit termination or modification by the other party under
      such
      Acquisition Agreement.

     

    4.  COVENANTS.

     

    (a)  Best
      Efforts.
      Each
      party shall use its best efforts timely to satisfy each of the conditions to
      be
      satisfied by it as provided in Sections 6 and 7 of this Agreement.

     

    (b)  Form
      D
      and Blue Sky.
      The
      Company agrees to file a Form D with respect to the Securities as required
      under
      Regulation D and to provide a copy thereof to each Buyer promptly after such
      filing. The Company shall, on or before the Closing Date, take such action
      as
      the Company shall reasonably determine is necessary in order to obtain an
      exemption for or to qualify the Securities for sale to the Buyers at the Closing
      pursuant to this Agreement under applicable securities or "Blue Sky" laws of
      the
      states of the United States (or to obtain an exemption from such qualification),
      and shall provide evidence of any such action so taken to the Buyers on or
      prior
      to the Closing Date. The Company shall make all filings and reports relating
      to
      the offer and sale of the Securities required under applicable securities or
      "Blue Sky" laws of the states of the United States following the Closing Date.
      

     

    (c)  Reporting
      Status.
      Until
      the date on which the Investors (as defined in the Registration Rights
      Agreement) shall have sold all the Conversion Shares and Warrant
      Shares and
      none
      of the Notes or
      Warrants is outstanding, (the "Reporting
      Period"),
      the
      Company shall timely file all reports required to be filed with the SEC pursuant
      to the 1934 Act, and the Company shall not terminate its status as an issuer
      required to file reports under the 1934 Act even if the 1934 Act or the rules
      and regulations thereunder would permit such termination.

     

    (d)  Use
      of
      Proceeds.
      The
      Company will use the proceeds from the sale of the Securities for general
      corporate purposes, and not for (A) the repayment of any outstanding
      Indebtedness of the Company or any of its Subsidiaries or (B) redemption or
      repurchase of any of its or its Subsidiaries' equity securities.

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

     

    (e)  Financial
      Information.
      The
      Company agrees to send the following to each Investor (as defined in the
      Registration Rights Agreement) during the Reporting Period (i) unless the
      following are filed with the SEC through EDGAR and are available to the public
      through the EDGAR system, within one (1) Business Day after the filing thereof
      with the SEC, a copy of its Annual Reports and Quarterly Reports on Form 10-K,
      10-KSB, 10-Q or 10-QSB, any interim reports or any consolidated balance sheets,
      income statements, stockholders' equity statements and/or cash flow statements
      for any period other than annual, any Current Reports on Form 8-K and any
      registration statements (other than on Form S-8) or amendments filed pursuant
      to
      the 1933 Act, (ii) on the same day as the release thereof, facsimile or e-mailed
      copies of all press releases issued by the Company or any of its Subsidiaries,
      and (iii) copies of any notices and other information made available or given
      to
      the stockholders of the Company generally, contemporaneously with the making
      available or giving thereof to the stockholders. As used herein, "Business
      Day"
      means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      the City of New York or the city of Denver are authorized or required by law
      to
      remain closed.

     

    (f)  Listing.
      The
      Company shall promptly secure the listing of all of the Registrable Securities
      (as defined in the Registration Rights Agreement) upon each national securities
      exchange and automated quotation system, if any, upon which the Common Stock
      is
      then listed (subject to official notice of issuance) and shall maintain, in
      accordance with the Notes and Warrants, such listing of all Registrable
      Securities from time to time issuable under the terms of the Transaction
      Documents. The Company shall maintain the Common Stocks' authorization for
      quotation on the Principal Market or an Approved Market (as defined below).
      Neither the Company nor any of its Subsidiaries shall take any action which
      would be reasonably expected to result in the delisting or suspension of the
      Common Stock on the Principal Market or an Approved Market. In addition, the
      Company shall use its best efforts to cause its shares of Common Stock,
      including all Registrable Securities, to be approved for listing or quotation
      (the "Listing")
      on any
      Approved Market as promptly as practicable, but in no event later than one
      (1)
      year after the Closing Date (the "Required
      Listing Date").
      If
      the Company meets the applicable listing requirements of an Approved Market
      and
      the Listing has not occurred on or prior to the Required Listing Date (a
      "Listing
      Failure"),
      then,
      as partial relief for the damages to any holder of Registrable Securities by
      reason of any such delay (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 an amount in cash equal to one-quarter of one percent
      (0.25%) of the aggregate Purchase Price of such Investor's Registrable
      Securities on each of the following dates: the day of the Listing Failure and
      on
      every thirtieth day (pro rated for periods totaling less than thirty days)
      thereafter until such Listing Failure is cured; provided that in no event shall
      the aggregate payments for all Listing Failures exceed twenty-four percent
      (24%)
      of the Purchase Price paid by such holder of Registrable Securities. As used
      herein, "Approved
      Market"
      shall
      mean any of the following: The New York Stock Exchange, The NASDAQ Global Select
      Market, The NASDAQ Global Market, The NASDAQ Capital Market or the American
      Stock Exchange. The Company shall pay all fees and expenses in connection with
      satisfying its obligations under this Section 4(f).

     

    (g)  Fees.
      Subject
      to Section 8 below, at Closing, the Company shall pay to Schulte Roth &
Zabel LLP or its designee(s) all reasonable legal fees and disbursements
      incurred in connection with the transactions contemplated by the Transaction
      Documents, which amount, in whole or in part, may be withheld by LP Rancher
      Ltd.
      (a Buyer) from its Purchase Price at the Closing. The Company shall be
      responsible for the payment of any placement agent's fees, financial advisory
      fees, or broker's commissions relating to or arising out of the transactions
      contemplated hereby, including, without limitation, any fees payable to the
      Agent, Source Capital and/or Falcon Capital. The Company shall pay, and hold
      each Buyer harmless against, any liability, loss or expense (including, without
      limitation, reasonable attorney's fees and out-of-pocket expenses) arising
      in
      connection with any claim relating to any such payment. 

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

     

    (h)  Pledge
      of Securities.
      The
      Company acknowledges and agrees that the Securities may be pledged by an
      Investor (as defined in the Registration Rights Agreement) in connection with
      a
      bona fide margin agreement or other loan or financing arrangement that is
      secured by the Securities. The pledge of Securities shall not be deemed to
      be a
      transfer, sale or assignment of the Securities hereunder, and no Investor
      effecting a pledge of Securities shall be required to provide the Company with
      any notice thereof or otherwise make any delivery to the Company pursuant to
      this Agreement or any other Transaction Document, including, without limitation,
      Section 2(f) hereof; provided that an Investor and its pledgee shall be required
      to comply with the provisions of Section 2(f) hereof in order to effect a sale,
      transfer or assignment of Securities to such pledgee. The Company hereby agrees
      to execute and deliver such documentation as a pledgee of the Securities may
      reasonably request in connection with a pledge of the Securities to such pledgee
      by an Investor.

     

    (i)  Disclosure
      of Transactions and Other Material Information.
      On or
      before 11:00 a.m., New York City time, on the first Business Day following
      the
      date of this Agreement, the Company shall issue a press release and file a
      Current Report on Form 8-K describing the terms of the transactions contemplated
      by the Transaction Documents in the form required by the 1934 Act and attaching
      the material Transaction Documents (including, without limitation, this
      Agreement, the form of the Notes, the form of Warrant and the form of the
      Registration Rights Agreement) as exhibits to such filing (including all
      attachments, the "8-K
      Filing").
      The
      Company shall publicly disclose on Form 8-K the terms of the studies to be
      conducted by NITEC LLC as requested by the Company of tertiary oil recovery
      potential of the fields related to the Acquisition Agreements using continuous
      CO2
      injection (the "Engineering
      Report 8-K")
      and
      shall attach the same as exhibit thereto as promptly as practicable upon receipt
      of same, but in no event later than June 30, 2007 unless, at such time, the
      Company has filed a Registration Statement but such Registration Statement
      has
      not yet been declared effective by the SEC, in which case, the Company may
      delay
      the filing of the Engineering Report 8-K until after such Registration Statement
      is declared effective, but in no event shall such Engineering Report 8-K be
      filed after September 30, 2007. The Company shall not, and shall cause each
      of
      its Subsidiaries and its and each of their respective officers, directors,
      employees and agents, not to, provide any Buyer with any material, nonpublic
      information regarding the Company or any of its Subsidiaries from and after
      the
      filing of the 8-K Filing with the SEC without the express written consent of
      such Buyer. From and after the deadlines specified above, if a Buyer has, or
      believes it has, received any such material, nonpublic information regarding
      the
      Company or any of its Subsidiaries, it shall provide the Company with written
      notice thereof. The Company shall, within five (5) Trading Days (as defined
      in
      the Notes) of receipt of such notice, make public disclosure of such material,
      nonpublic information. In the event of a breach of the foregoing covenant by
      the
      Company, any of its Subsidiaries, or any of its or their respective officers,
      directors, employees and agents, in addition to any other remedy provided herein
      or in the Transaction Documents, a Buyer shall have the right to make a public
      disclosure, in the form of a press release, public advertisement or otherwise,
      of such material, nonpublic information without the prior approval by the
      Company, its Subsidiaries, or any of its or their respective officers,
      directors, employees or agents. No Buyer shall have any liability to the
      Company, its Subsidiaries, or any of its or their respective officers,
      directors, employees, stockholders or agents for any such disclosure. Subject
      to
      the foregoing, neither the Company, its Subsidiaries nor any Buyer shall issue
      any press releases or any other public statements with respect to the
      transactions contemplated hereby; provided, however, that the Company shall
      be
      entitled, without the prior approval of any Buyer, to make any press release
      or
      other public disclosure with respect to such transactions (i) in substantial
      conformity with the 8-K Filing and contemporaneously therewith and (ii) as
      is
      required by applicable law and regulations. Without the prior written consent
      of
      any applicable Buyer, neither the Company nor any of its Subsidiaries or
      affiliates shall disclose the name of such Buyer in any filing, announcement,
      release or otherwise.

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

     

    (j)  Restriction
      on Redemption and Cash Dividends.
      So long
      as any Notes are outstanding, the Company shall not, directly or indirectly,
      redeem, or declare or pay any cash dividend or distribution on, the Common
      Stock
      without the prior express written consent of the holders of Notes representing
      not less than a 60% of the aggregate principal amount of the then outstanding
      Notes.

     

    (k)  Additional
      Notes; Variable Securities; Dilutive Issuances.
      So long
      as any Buyer beneficially owns any Securities, the Company will not issue any
      Notes other than to the Buyers as contemplated hereby and the Company shall
      not
      issue any other securities that would cause a breach or default under the Notes.
      For so long as any Notes or Warrants remain outstanding, the Company shall
      not,
      in any manner, issue or sell any rights, warrants or options to subscribe for
      or
      purchase Common Stock or directly or indirectly convertible into or exchangeable
      or exercisable for Common Stock at a price which varies or may vary with the
      market price of the Common Stock, including by way of one or more reset(s)
      to
      any fixed price unless the conversion, exchange or exercise price of any such
      security cannot be less than the then applicable Conversion Price (as defined
      in
      the Notes) with respect to the Common Stock into which any Note is convertible
      or the then applicable Exercise Price (as defined in the Warrants) with respect
      to the Common Stock into which any Warrant is exercisable; provided that
      anti-dilution provisions similar to those contained in the Notes or Warrants
      shall not be deemed for the purposes of this provision to be securities
      convertible or exercisable at prices that vary with the market price of the
      Common Stock. The Company shall not enter into or affect any Dilutive Issuances
      (as defined in the Notes) unless or until Stockholder Approval is obtained.
      For
      so long as any Notes or Warrants remain outstanding, the Company shall not,
      in
      any manner, enter into or affect any Dilutive Issuances (as defined in the
      Notes) if the effect of such Dilutive Issuance is to cause the Company to be
      required to issue upon conversion of any Note or exercise of any Warrant any
      shares of Common Stock in excess of that number of shares of Common Stock which
      the Company may issue upon conversion of the Notes and exercise of the Warrants
      without breaching the Company's obligations under the rules or regulations
      of
      the Principal Market. 

     

    (l)  Corporate
      Existence.
      So long
      as any Buyer beneficially owns any Securities, the Company shall not be party
      to
      any Fundamental Transaction (as defined in the Notes) unless the Company is
      in
      compliance with the applicable provisions governing Fundamental Transactions
      set
      forth in the Notes and the Warrants.

     

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

     

    (m)  Reservation
      of Shares.
      The
      Company shall take all action necessary to at all times have authorized, and
      reserved for the purpose of issuance, no less than (I) prior to the Stockholder
      Approval Date, 40,900,000 shares of Common Stock, and (II) from and after the
      Stockholder Approval Date, 130% of the sum of the number of shares of Common
      Stock issuable (i) upon conversion of the Notes issued at the Closing and (ii)
      upon exercise of the Warrants issued at the Closing (without taking into account
      any limitations on the Conversion of the Notes or exercise of the Warrants
      set
      forth in the Notes and Warrants, respectively).

     

    (n)  Conduct
      of Business.
      The
      business of the Company and its Subsidiaries shall not be conducted in violation
      of any law, ordinance or regulation of any governmental entity, except where
      such violations would not result, either individually or in the aggregate,
      in a
      Material Adverse Effect.

     

    (o)  Additional
      Issuances of Securities.

     

    (i)  For
      purposes of this Section 4(o), the following definitions shall
      apply.

     

    (1)  "Convertible
      Securities"
      means
      any stock or securities (other than Options) convertible into or exercisable
      or
      exchangeable for shares of Common
      Stock.

     

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

     

    (3)  "Common
      Stock Equivalents"
      means,
      collectively, Options and Convertible Securities.

     

    (ii)  From
      the
      date hereof until the earlier to occur of (i) the twelve month anniversary
      of
      the Closing Date and (ii) the date sixty days after the Effective Date of the
      Registration Statement which caused the registration of the number Registrable
      Securities equal to clause (I)(A) of the definition of Initial Required
      Registration Amount in the Registration Rights Agreement (the "Trigger
      Date"),
      the
      Company will not, directly or indirectly, file any registration statement with
      the SEC other than the Registration Statement (as defined in the Registration
      Rights Agreement). From the date hereof until the Trigger Date, the Company
      will
      not, directly or indirectly, offer, sell, grant any option to purchase, or
      otherwise dispose of (or announce any offer, sale, grant or any option to
      purchase or other disposition of) any of its or its Subsidiaries' equity or
      equity equivalent securities, including without limitation any debt, preferred
      stock or other instrument or security that is, at any time during its life
      and
      under any circumstances, convertible into or exchangeable or exercisable for
      shares of Common Stock or Common Stock Equivalents (any such offer, sale, grant,
      disposition or announcement being referred to as a "Subsequent
      Placement").

     

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

     

    (iii)  From
      the
      Trigger Date until the second anniversary of the Closing Date, the Company
      will
      not, directly or indirectly, effect any Subsequent Placement unless the Company
      shall have first complied with this Section 4(o)(iii).

     

    (1)  The
      Company shall deliver to each Buyer an irrevocable written notice
      (the "Offer
      Notice")
      of any
      proposed or intended issuance or sale or exchange (the "Offer")
      of the
      securities being offered (the "Offered
      Securities")
      in a
      Subsequent Placement, which Offer Notice shall (v) identify and describe the
      Offered Securities, (w) describe the price and other terms upon which they
      are to be issued, sold or exchanged, and the number or amount of the Offered
      Securities to be issued, sold or exchanged, (x) identify the persons or
      entities (if known) to which or with which the Offered Securities are to be
      offered, issued, sold or exchanged, (y) offer to issue and sell to or exchange
      with such Buyers at least forty percent (40%) of the Offered Securities,
      allocated among such Buyers (a) based on such Buyer's pro rata portion of the
      aggregate principal amount of Notes purchased hereunder (the "Basic
      Amount"),
      and
      (b) with respect to each Buyer that elects to purchase its Basic Amount, any
      additional portion of the Offered Securities attributable to the Basic Amounts
      of other Buyers as such Buyer shall indicate it will purchase or acquire should
      the other Buyers subscribe for less than their Basic Amounts (the "Undersubscription
      Amount"),
      which
      process shall be repeated until the Buyers shall have an opportunity to
      subscribe for any remaining Undersubscription Amount.

     

    (2)  To
      accept
      an Offer, in whole or in part, such Buyer must deliver a written notice to
      the
      Company prior to the end of the tenth (10th)
      Business Day after such Buyer's receipt of the Offer Notice (the "Offer
      Period"),
      setting forth the portion of such Buyer's Basic Amount that such Buyer elects
      to
      purchase and, if such Buyer shall elect to purchase all of its Basic Amount,
      the
      Undersubscription Amount, if any, that such Buyer elects to purchase (in either
      case, the "Notice
      of Acceptance").
      If
      the Basic Amounts subscribed for by all Buyers are less than the total of all
      of
      the Basic Amounts, then each Buyer who has set forth an Undersubscription Amount
      in its Notice of Acceptance shall be entitled to purchase, in addition to the
      Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
      for; provided,
      however,
      that if
      the Undersubscription Amounts subscribed for exceed the difference between
      the
      total of all the Basic Amounts and the Basic Amounts subscribed for (the
      "Available
      Undersubscription Amount"),
      each
      Buyer who has subscribed for any Undersubscription Amount shall be entitled
      to
      purchase only that portion of the Available Undersubscription Amount as the
      Basic Amount of such Buyer bears to the total Basic Amounts of all Buyers that
      have subscribed for Undersubscription Amounts, subject to rounding by the
      Company to the extent its deems reasonably necessary.

     

    (3)  The
      Company shall have fifteen (15) Business Days from the expiration of the Offer
      Period above to offer, issue, sell or exchange all or any part of such Offered
      Securities as to which a Notice of Acceptance has not been given by the Buyers
      (the "Refused
      Securities"),
      but
      only to the offerees described in the Offer Notice (if so described therein)
      and
      only upon terms and conditions (including, without limitation, unit prices
      and
      interest rates) that are not more favorable to the acquiring person or persons
      or less favorable to the Company than those set forth in the Offer Notice and
      (ii) to publicly announce (a) the execution of such Subsequent Placement
      Agreement (as defined below), and (b) either (x) the consummation of the
      transactions contemplated by such Subsequent Placement Agreement or (y) the
      termination of such Subsequent Placement Agreement, which shall be filed with
      the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement
      and any documents contemplated therein filed as exhibits thereto.

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

     

    (4)  In
      the
      event the Company shall propose to sell less than all the Refused Securities
      (any such sale to be in the manner and on the terms specified in Section
      4(o)(iii)(3) above), then each Buyer may, at its sole option and in its sole
      discretion, reduce the number or amount of the Offered Securities specified
      in
      its Notice of Acceptance to an amount that shall be not less than the number
      or
      amount of the Offered Securities that such Buyer elected to purchase pursuant
      to
      Section 4(o)(iii)(2) above multiplied by a fraction, (i) the numerator of which
      shall be the number or amount of Offered Securities the Company actually
      proposes to issue, sell or exchange (including Offered Securities to be issued
      or sold to Buyers pursuant to Section 4(o)(iii)(3) above prior to such
      reduction) and (ii) the denominator of which shall be the original amount of
      the
      Offered Securities. In the event that any Buyer so elects to reduce the number
      or amount of Offered Securities specified in its Notice of Acceptance, the
      Company may not issue, sell or exchange more than the reduced number or amount
      of the Offered Securities unless and until such securities have again been
      offered to the Buyers in accordance with Section 4(o)(iii)(1)
      above.

     

    (5)  Upon
      the
      closing of the issuance, sale or exchange of all or less than all of the Refused
      Securities, the Buyers shall acquire from the Company, and the Company shall
      issue to the Buyers, the number or amount of Offered Securities specified in
      the
      Notices of Acceptance, as reduced pursuant to Section 4(o)(iii)(4) above if
      the
      Buyers have so elected, upon the terms and conditions specified in the Offer.
      Notwithstanding anything to the contrary contained in this Agreement, if the
      Company does not consummate the closing of the issuance, sale or exchange of
      all
      or less than all of the Refused Securities within fifteen (15) Business Days
      of
      the expiration of the Offer Period, the Company shall issue to the Buyers the
      number or amount of Offered Securities specified in the Notices of Acceptance,
      as reduced pursuant to Section 4(o)(iii)(4) above if the Buyers have so elected,
      upon the terms and conditions specified in the Offer. The purchase by the Buyers
      of any Offered Securities is subject in all cases to the preparation, execution
      and delivery by the Company and the Buyers of a purchase agreement relating
      to
      such Offered Securities reasonably satisfactory in form and substance to the
      Buyers and their respective counsel.

     

    (6)  Any
      Offered Securities not acquired by the Buyers or other persons in accordance
      with Section 4(o)(iii)(3) above may not be issued, sold or exchanged until
      they
      are again offered to the Buyers under the procedures specified in this
      Agreement.

     

    (7)  The
      Company and the Buyers agree that if any Buyer elects to participate in the
      Offer, (x) neither the operative agreement concerning the Subsequent Placement
      (the "Subsequent
      Placement Agreement"
      with
      respect to such Offer nor any other transaction documents related thereto
      (collectively, the "Subsequent
      Placement Documents")
      shall
      include any term or provisions whereby any Buyer shall be required to agree
      to
      any restrictions in trading as to any securities of the Company owned by such
      Buyer prior to such Subsequent Placement, and (y) any registration rights set
      forth in such Subsequent Placement Documents shall be similar in all material
      respects to the registration rights contained in the Registration Rights
      Agreement.

     

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

     

    (8)  Notwithstanding
      anything to the contrary in this Section 4(o) and unless otherwise agreed to
      by
      the Buyers, the Company shall either confirm in writing to the Buyers that
      the
      transaction with respect to the Subsequent Placement has been abandoned or
      shall
      publicly disclose its intention to issue the Offered Securities, in either
      case
      in such a manner such that the Buyers will not be in possession of material
      nonpublic information, by the fifteen (15th)
      Business Day following expiration of the Offer Period. If by the fifteen
      (15th)
      following expiration of the Offer Period no public disclosure regarding a
      transaction with respect to the Offered Securities has been made, and no notice
      regarding the abandonment of such transaction has been received by the Buyers,
      such transaction shall be deemed to have been abandoned and the Buyers shall
      not
      be deemed to be in possession of any material, non-public information with
      respect to the Company. Should the Company decide to pursue such transaction
      with respect to the Offered Securities, the Company shall provide each Buyer
      with another Offer Notice and each Buyer will again have the right of
      participation set forth in this Section 4(o)(iii). The Company shall not be
      permitted to deliver more than one such Offer Notice to the Buyers in any 60
      day
      period.

     

    (iv)  The
      restrictions contained in subsections (ii) and (iii) of this Section 4(o) shall
      not apply in connection with the issuance of any Excluded Securities (as defined
      in the Notes).

     

    (p)  Stockholder
      Approval.
      

     

    (i)  The
      Company shall provide each stockholder entitled to vote at a special or annual
      meeting of stockholders of the Company (the "Stockholder
      Meeting"),
      which
      initially shall be promptly called and held not later than sixty (60) days
      after
      the Closing Date (or one-hundred twenty (120) days after the Closing Date if
      the
      proxy statement relating to the calling of such Stockholder Meeting is subject
      to SEC review) (the "Stockholder
      Meeting Deadline"),
      a
      proxy statement, substantially in the form which has been previously reviewed
      by
      the Buyers and Schulte Roth & Zabel LLP (“SRZ”)
      at the
      expense of the Company, soliciting each such stockholder's affirmative vote
      at
      the Stockholder Meeting for approval of resolutions (the "Resolutions")
      providing for the increase in the authorized Common Stock from 100,000,000
      shares to no less than 225,000,000 shares (such affirmative approval being
      referred to herein as the "Stockholder
      Approval"
      and the
      date such approval is obtained, the "Stockholder
      Approval Date"),
      and
      the Company shall use its best efforts to solicit its stockholders' approval
      of
      the Resolutions and to cause the Board of Directors of the Company to recommend
      to the stockholders that they approve the Resolutions. The Company shall be
      obligated to seek to obtain the Stockholder Approval by the Stockholder Meeting
      Deadline. If, despite the Company's best efforts the Stockholder Approval is
      not
      obtained on or prior to the Stockholder Meeting Deadline (the "Stockholder
      Approval Failure"),
      the
      Company shall cause an additional Stockholder Meeting to be held each three
      month period thereafter until such Stockholder Approval is obtained or the
      second anniversary of the Closing Date. In addition, if, despite the Company's
      best efforts there is a Stockholder Approval Failure, then, as partial relief
      for the damages to any holder by reason of any such Stockholder Approval Failure
      (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
      an
      amount equal to two percent (2.0%) of the aggregate Purchase Price of such
      Investor's Registrable Securities on the day of such Stockholder Approval
      Failure and on every thirtieth day (pro rated for periods totaling less than
      thirty days) thereafter until such Stockholder Approval Failure is cured by
      obtaining the Stockholder Approval. The payments to which an Investor shall
      be
      entitled pursuant to this Section 4(p) are referred to herein as the
      "Stockholder
      Approval Payments."
      The
      date such Stockholder Approval Payments are due shall be referred to herein
      as
      the "Stockholder
      Approval Payments Payment Date."

     

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

     

    (ii)  Stockholder
      Approval Payments shall be payable on each Stockholder Approval Payments Payment
      Date to each holder of Registrable Securities, in shares of Common Stock (the
      "Stockholder
      Approval Payments Shares")
      so
      long as there is no Equity Conditions Failure (as defined below); provided
      however, that the Company, at its option following notice to the holder of
      Registrable Securities, may pay Stockholder Approval Payments on any Stockholder
      Approval Payments Payment Date in cash (the "Cash
      Stockholder Approval Payments")
      or in
      a combination of Cash Stockholder Approval Payments and Stockholder Approval
      Payments Shares. The Company shall deliver a written notice (each, a
      "Stockholder
      Approval Payments Election Notice")
      to
      each holder of Registrable Securities on or prior to the Stockholder Approval
      Payments Payment Date (the date such notice is delivered to all of the holders,
      the "Stockholder
      Approval Payments Notice Date")
      which
      notice (i) either (A) confirms that Stockholder Approval Payments to be paid
      on
      such Stockholder Approval Payments Payment Date shall be paid entirely in
      Stockholder Approval Payments Shares or (B) elects to pay Stockholder Approval
      Payments as Cash Stockholder Approval Payments or a combination of Cash
      Stockholder Approval Payments and Stockholder Approval Payments Shares and
      specifies the amount of Stockholder Approval Payments that shall be paid as
      Cash
      Stockholder Approval Payments and the amount of Stockholder Approval Payments,
      if any, that shall be paid in Stockholder Approval Payments Shares and (ii)
      certifies that there is no Equity Conditions Failure. If the Equity Conditions
      (as defined in the Registration Rights Agreement) are not satisfied as of the
      Stockholder Approval Payments Notice Date, then unless the Company has elected
      to pay such Stockholder Approval Payments as Cash Stockholder Approval Payments,
      the Stockholder Approval Payments Election Notice shall indicate that unless
      the
      holder waives the Equity Conditions, the Stockholder Approval Payment shall
      be
      paid as Cash Stockholder Approval Payments. If the Equity Conditions were
      satisfied as of the Stockholder Approval Payments Notice Date but the Equity
      Conditions are no longer satisfied at any time prior to the Stockholder Approval
      Payments Payment Date, the Company shall provide the holder a subsequent notice
      to that effect indicating that unless the holder waives the Equity Conditions,
      the Stockholder Approval Payments shall be paid as Cash Stockholder Approval
      Payments. Stockholder Approval Payments to be paid on an Stockholder Approval
      Payments Payment Date in Stockholder Approval Payments Shares shall be paid
      in a
      number of fully paid and nonassessable shares (rounded to the nearest whole
      share) of Common Stock equal to the quotient of (1) the amount of Stockholder
      Approval Payments payable on such Stockholder Approval Payments Payment Date
      less any Cash Stockholder Approval Payments paid and (2) the Stockholder
      Approval Payments Conversion Price in effect on the applicable Stockholder
      Approval Payments Payment Date. Notwithstanding the foregoing, if the Company
      elects to pay any Stockholder Approval Payments in Stockholder Approval Payments
      Shares and the Stockholder Approval has not been obtained by the applicable
      Stockholder Approval Payments Payment Date, the Company may not pay such
      Stockholder Approval Payments in Stockholder Approval Payments Shares but
      instead shall issue to each holder of Registrable Securities a convertible
      note
      with an original principal amount equal to the amount of such Stockholder
      Approval Payments in the form attached hereto as Exhibit
      A;
      provided however that the conversion price of such convertible note shall be
      equal to the applicable Stockholder Approval Payments Conversion Price. As
      used
      herein, "Stockholder
      Approval Payments Conversion Price"
      means,
      with respect to any Stockholder Approval Payments Payment Date, that
      price which shall be the price
      computed as 90% of the arithmetic average of the Weighted Average Price (as
      defined in the Notes) of the Common Stock on each of the ten (10) consecutive
      Trading Days ending on the Trading Day immediately preceding the applicable
      Stockholder Approval Payments Payment Date (each, a "Stockholder
      Approval Payments Measuring Period").
      All
      such determinations to be appropriately adjusted for any stock split, stock
      dividend, stock combination or other similar transaction during such Stockholder
      Approval Payments Measuring Period. As used herein, "Equity
      Conditions Failure"
      means
      that on any day during the period commencing ten (10) Trading Days prior to
      the
      applicable Stockholder Approval Payments Payment Date through the applicable
      Stockholder Approval Payments Payment Date the Equity Conditions have not been
      satisfied (or waived in writing by the applicable holder of Registrable
      Securities). 

     

    
      
        
        

      

      
        -26-

        
          

        

      

      
        
        

      

    

     

    (q)  Each
      Buyer shall vote in favor of the Resolutions. Notwithstanding the foregoing,
      any
      Buyer who fails vote in favor of the Resolutions shall not be entitled to any
      Stockholder Approval Payments.

     

    5.  REGISTER;
      TRANSFER AGENT INSTRUCTIONS.

     

    (a)  Register.
      The
      Company shall maintain at its principal executive offices (or such other office
      or agency of the Company as it may designate by notice to each holder of
      Securities), a register for the Notes and the Warrants in which the Company
      shall record the name and address of the Person in whose name the Notes
      and the
      Warrants have been issued (including the name and address of each transferee),
      the principal amount of Notes held by such Person, the number of Conversion
      Shares issuable upon conversion of the Notes and the number of Warrant Shares
      issuable upon exercise of the Warrants held by such Person. The Company shall
      keep the register open and available at all times during business hours for
      inspection of any Buyer or its legal representatives.

     

    (b)  Transfer
      Agent Instructions.
      The
      Company shall issue irrevocable instructions to its transfer agent, and any
      subsequent transfer agent, to issue certificates or credit shares to the
      applicable balance accounts at The Depository Trust Company ("DTC"),
      registered in the name of each Buyer or its respective nominee(s), for the
      Conversion Shares and the Warrant Shares issued at the Closing or upon
      conversion of the Notes or exercise of the Warrants in such amounts as specified
      from time to time by each Buyer to the Company upon conversion of the Notes
      or
      exercise of the Warrants in the form of Exhibit
      D
      attached
      hereto (the "Transfer
      Agent Instructions").
      The
      Company warrants that no instruction other than the Transfer Agent Instructions
      referred to in this Section 5(b), and stop transfer instructions to give effect
      to Section 2(g) hereof, will be given by the Company to its transfer agent,
      and
      that the Securities shall otherwise be freely transferable on the books and
      records of the Company as and to the extent provided in this Agreement and
      the
      other Transaction Documents. If a Buyer effects a sale, assignment or transfer
      of the Securities in accordance with Section 2(f), the Company shall permit
      the
      transfer and shall promptly instruct its transfer agent to issue one or more
      certificates or credit shares to the applicable balance accounts at DTC in
      such
      name and in such denominations as specified by such Buyer to effect such sale,
      transfer or assignment. In the event that such sale, assignment or transfer
      involves Conversion Shares or Warrant Shares sold, assigned or transferred
      pursuant to an effective registration statement or pursuant to Rule 144, the
      transfer agent shall issue such Securities to the Buyer, assignee or transferee,
      as the case may be, without any restrictive legend. The Company acknowledges
      that a breach by it of its obligations hereunder will cause irreparable harm
      to
      a Buyer. Accordingly, the Company acknowledges that the remedy at law for a
      breach of its obligations under this Section 5(b) will be inadequate and agrees,
      in the event of a breach or threatened breach by the Company of the provisions
      of this Section 5(b), that a Buyer shall be entitled, in addition to all other
      available remedies, to an order and/or injunction restraining any breach and
      requiring immediate issuance and transfer, without the necessity of showing
      economic loss and without any bond or other security being
      required.

     

    
      
        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

     

    (c)  Additional
      Relief.
      If the
      Company shall fail for any reason or for no reason to issue to such holder
      unlegended certificates or to credit the holder's balance account with DTC
      within five (5) Trading Days of (x) receipt of documents necessary for the
      removal of legend set forth above or (y) the date of its obligation to deliver
      the shares of Common Stock as contemplated pursuant to clause (ii) below (the
      "Deadline
      Date")
      and if
      on or after the Trading Day (as defined in the Warrants) immediately following
      such Deadline Date, the holder purchases (in an open market transaction or
      otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
      holder of shares of Common Stock that the holder anticipated receiving from
      the
      Company (a "Buy-In"),
      then
      the Company shall, within three (3) Trading Days after the holder's request
      and
      in the holder's discretion, either (i) pay cash to the holder in an amount
      equal
      to the holder's total purchase price (including brokerage commissions, if any)
      for the shares of Common Stock so purchased (the "Buy-In
      Price"),
      at
      which point the Company's obligation to deliver such certificate (and to issue
      such shares of Common Stock) shall terminate, or (ii) promptly honor its
      obligation to deliver to the holder a certificate or certificates representing
      such shares of Common Stock and pay cash to the holder in an amount equal to
      the
      excess (if any) of the Buy-In Price over the product of (A) such number of
      shares of Common Stock, times (B) the Closing Bid Price on the Deadline Date.
      "Closing
      Bid Price"
      means,
      for any security as of any date, the last closing price for such security on
      Principal Market, as reported by Bloomberg, or, if the Principal Market begins
      to operate on an extended hours basis and does not designate the closing bid
      price then the last bid price of such security prior to 4:00:00 p.m., New York
      Time, as reported by Bloomberg, or, if the Principal Market is not the principal
      securities exchange or trading market for such security, the last closing price
      of such security on the principal securities exchange or trading market where
      such security is listed or traded as reported by Bloomberg, or if the foregoing
      do not apply, the last closing price of such security in the over-the-counter
      market on the electronic bulletin board for such security as reported by
      Bloomberg, or, if no closing bid price is reported for such security by
      Bloomberg, the average of the bid prices of any market makers for such security
      as reported in the "pink sheets" by Pink Sheets LLC (formerly the National
      Quotation Bureau, Inc.). If the Closing Bid Price cannot be calculated for
      a
      security on a particular date on any of the foregoing bases, the Closing Bid
      Price of such security on such date shall be the fair market value as mutually
      determined by the Company and the holder. If the Company and the holder are
      unable to agree upon the fair market value of such security, then such dispute
      shall be resolved pursuant to Section 12 of the Registration Rights Agreement.
      All such determinations to be appropriately adjusted for any stock dividend,
      stock split, stock combination or other similar transaction during the
      applicable calculation period.

     

    
      
        
        

      

      
        -28-

        
          

        

      

      
        
        

      

    

     

    6.  CONDITIONS
      TO THE COMPANY'S OBLIGATION TO SELL.

     

    The
      obligation of the Company hereunder to issue and sell the Common Shares, the
      Notes and the related Warrants to each Buyer at the Closing is subject to the
      satisfaction, at or before the Closing Date, of each of the following
      conditions, provided that these conditions are for the Company's sole benefit
      and may be waived by the Company at any time in its sole discretion by providing
      each Buyer with prior written notice thereof:

     

    (i)  Such
      Buyer shall have executed each of the Transaction Documents to which it is
      a
      party and delivered the same to the Company.

     

    (ii)  Such
      Buyer and each other Buyer shall have delivered to the Company the Purchase
      Price (less, in the case of LP Rancher, Ltd. (a Buyer), the amounts withheld
      pursuant to Section 4(g)) for the Common Shares, the Notes and the related
      Warrants being purchased by such Buyer at the Closing by wire transfer of
      immediately available funds pursuant to the wire instructions provided by the
      Company.

     

    (iii)  The
      representations and warranties of such Buyer shall be true and correct in all
      material respects (except for those representations and warranties that are
      qualified by materiality or Material Adverse Effect, which shall be true and
      correct in all respects) as of the date when made and as of the Closing Date
      as
      though made at that time (except for representations and warranties that speak
      as of a specific date, which shall be true and correct as of such specified
      date), and such Buyer shall have performed, satisfied and complied in all
      material respects with the covenants, agreements and conditions required by
      this
      Agreement to be performed, satisfied or complied with by such Buyer at or prior
      to the Closing Date.

     

    7.  CONDITIONS
      TO EACH BUYER'S OBLIGATION TO PURCHASE.

     

    The
      obligation of each Buyer hereunder to purchase the Common Shares, the
      Notes and
      the
      related Warrants at the Closing is subject to the satisfaction, at or before
      the
      Closing Date, of each of the following conditions, provided that these
      conditions are for each Buyer's sole benefit and may be waived by such Buyer
      at
      any time in its sole discretion by providing the Company with prior written
      notice thereof:

     

    (i)  The
      Company shall have duly executed and delivered (physically or by electronic
      copy) to such Buyer (i) each of the Transaction Documents and (ii) the stock
      certificates representing the Common Shares (allocated in such numbers as such
      Buyer shall request), (iii) the Notes (allocated in such principal amounts
      as such Buyer shall request), being purchased by such Buyer at the Closing
      pursuant to this Agreement, and (iv) the related Warrants (allocated in such
      amounts as such Buyer shall request) being purchased by such Buyer at the
      Closing pursuant to this Agreement. The Company shall physically deliver the
      foregoing to such Buyer no later than the second (2nd)
      Business Day following the Closing.

     

    
      
        
        

      

      
        -29-

        
          

        

      

      
        
        

      

    

     

    (ii)  Such
      Buyer shall have received the opinion of Patton Boggs LLP, the Company's outside
      counsel, dated as of the Closing Date, in substantially the form of Exhibit E
      attached
      hereto.

     

    (iii)  The
      Company shall have delivered to such Buyer a copy of the Transfer Agent
      Instructions, in the form of Exhibit D
      attached
      hereto, which instructions shall have been delivered to the Company's transfer
      agent.

     

    (iv)  The
      Company shall have delivered to such Buyer a certificate evidencing the
      formation and good standing of the Company and each of its Subsidiaries in
      such
      entity's jurisdiction of formation issued by the Secretary of State (or
      comparable office) of such jurisdiction, as of a date within 10 days of the
      Closing Date.

     

    (v)  The
      Company shall have delivered to such Buyer a certificate evidencing the
      Company's qualification as a foreign corporation and good standing issued by
      the
      Secretary of State (or comparable office) of each jurisdiction in which the
      Company conducts business, as of a date within 10 days of the Closing
      Date.

     

    (vi)  The
      Company shall have delivered to such Buyer a certified copy of the Articles
      of
      Incorporation as certified by the Secretary of State of the State of Nevada
      within ten (10) days of the Closing Date.

     

    (vii)  The
      Company shall have delivered to such Buyer a certificate, executed by the
      Secretary of the Company and dated as of the Closing Date, as to (i) the
      resolutions consistent with Section 3(b) as adopted by the Company's Board
      of
      Directors in a form reasonably acceptable to such Buyer, (ii) the Articles
      of
      Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
      form attached hereto as Exhibit F.

     

    (viii)  The
      representations and warranties of the Company shall be true and correct in
      all
      material respects (except for those representations and warranties that are
      qualified by materiality or Material Adverse Effect, which shall be true and
      correct in all respects) as of the date when made and as of the Closing Date
      as
      though made at that time (except for representations and warranties that speak
      as of a specific date, which shall be true and correct as of such specified
      date) and the Company shall have performed, satisfied and complied in all
      material respects with the covenants, agreements and conditions required by
      the
      Transaction Documents to be performed, satisfied or complied with by the Company
      at or prior to the Closing Date. Such Buyer shall have received a certificate,
      executed by the Chief Executive Officer of the Company, dated as of the Closing
      Date, to the foregoing effect and as to such other matters as may be reasonably
      requested by such Buyer in the form attached hereto as Exhibit
      G.

     

    (ix)  The
      Company shall have delivered to such Buyer a letter from the Company's transfer
      agent certifying the number of shares of Common Stock outstanding as of a date
      within five days of the Closing Date.

     

    
      
        
        

      

      
        -30-

        
          

        

      

      
        
        

      

    

     

    (x)  The
      Common Stock (I) shall be designated for quotation or listed on the Principal
      Market and (II) shall not have been suspended, as of the Closing Date, by the
      SEC or the Principal Market from trading on the Principal Market nor shall
      suspension by the SEC or the Principal Market have been threatened, as of the
      Closing Date, either (A) in writing by the SEC or the Principal Market or (B)
      by
      falling below the minimum listing maintenance requirements of the Principal
      Market.

     

    (xi)  The
      Company shall have obtained all governmental, regulatory or third party consents
      and approvals, if any, necessary for the sale of the Securities.

     

    (xii)  The
      Company shall have delivered to each Buyer a lock-up agreement in the form
      attached hereto as Exhibit
      H
      executed
      and delivered by each director and officer of the Company.

     

    (xiii)  The
      Company shall have delivered to each Buyer a voting agreement in the form
      attached hereto as Exhibit
      I
      with the
      stockholders listed on Appendix A thereto.

     

    (xiv)  The
      Company shall have received waivers, in the form attached hereto as Exhibit
      J
      (a
      "Piggy-Back
      Waiver"),
      from
      holders of not less than 50% of the securities set forth on Schedule
      7(xiv)
      attached
      hereto.

     

    (xv)  Contemporaneously
      with the Closing, the Company shall have raised no less than $50 million
      pursuant the transaction contemplated hereby.

     

    (xvi)  The
      Company shall have delivered to such Buyer such other documents relating to
      the
      transactions contemplated by this Agreement as such Buyer or its counsel may
      reasonably request.

     

    8.  TERMINATION.
      In
      the
      event that the Closing shall not have occurred with respect to a Buyer on or
      before five (5) Business Days from the date hereof due to the Company's or
      such
      Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above
      (and the nonbreaching party's failure to waive such unsatisfied condition(s)),
      the nonbreaching party shall have the option to terminate this Agreement with
      respect to such breaching party at the close of business on such date without
      liability of any party to any other party; provided,
      however,
      that if
      this Agreement is terminated pursuant to this Section 8, the Company shall
      remain obligated to reimburse the non-breaching Buyers for the expenses
      described in Section 4(g) above.

     

    9.  MISCELLANEOUS.

     

    (a)  Governing
      Law; Jurisdiction; Jury Trial.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of New
      York, without giving effect to any choice of law or conflict of law provision
      or
      rule (whether of the State of New York or any other jurisdictions) that would
      cause the application of the laws of any jurisdictions other than the State
      of
      New York. Each party hereby irrevocably submits to the exclusive jurisdiction
      of
      the state and federal courts sitting in The City of New York, Borough of
      Manhattan, for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein, and
      hereby irrevocably waives, and agrees not to assert in any suit, action or
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such court, that such suit, action or proceeding is brought in an
      inconvenient forum or that the venue of such suit, action or proceeding is
      improper. Each party hereby irrevocably waives personal service of process
      and
      consents to process being served in any such suit, action or proceeding by
      mailing a copy thereof to such party at the address for such notices to it
      under
      this Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. Nothing contained herein shall be deemed
      to limit in any way any right to serve process in any manner permitted by law.
      EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
      HEREBY. 

     

    
      
        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

     

    (b)  Counterparts.
      This
      Agreement may be executed in two or more identical counterparts, all of which
      shall be considered one and the same agreement and shall become effective when
      counterparts have been signed by each party and delivered to the other party;
      provided that a facsimile signature shall be considered due execution and shall
      be binding upon the signatory thereto with the same force and effect as if
      the
      signature were an original, not a facsimile signature.

     

    (c)  Headings.
      The
      headings of this Agreement are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Agreement.

     

    (d)  Severability.
      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.

     

    (e)  Entire
      Agreement; Amendments.
      This
      Agreement and the other Transaction Documents supersede all other prior oral
      or
      written agreements between the Buyers, the Company, their affiliates and Persons
      acting on their behalf with respect to the matters discussed herein, and this
      Agreement, the other Transaction Documents and the instruments referenced herein
      and therein contain the entire understanding of the parties with respect to
      the
      matters covered herein and therein and, except as specifically set forth herein
      or therein, neither the Company nor any Buyer makes any representation,
      warranty, covenant or undertaking with respect to such matters. No provision
      of
      this Agreement may be amended other than by an instrument in writing signed
      by
      the Company and the holders of at least 60% of the aggregate number of
      Registrable Securities issued and issuable hereunder and under the Notes, and
      any amendment to this Agreement made in conformity with the provisions of this
      Section 9(e) shall be binding on all Buyers and holders of Securities as
      applicable. No provision hereof may be waived other than by an instrument in
      writing signed by the party against whom enforcement is sought. No such
      amendment shall be effective to the extent that it applies to less than all
      of
      the holders of the applicable Securities then outstanding. 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 the Transaction Documents unless the
      same consideration also is offered to all of the parties to the Transaction
      Documents, holders of Notes or holders of the Warrants, as the case may be.
      The
      Company has not, directly or indirectly, made any agreements with any Buyers
      relating to the terms or conditions of the transactions contemplated by the
      Transaction Documents except as set forth in the Transaction Documents. Without
      limiting the foregoing, the Company confirms that, except as set forth in this
      Agreement, no Buyer has made any commitment or promise or has any other
      obligation to provide any financing to the Company or otherwise. 

     

    
      
        
        

      

      
        -32-

        
          

        

      

      
        
        

      

    

     

    (f)  Notices.
      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 an overnight courier 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:

     

    Rancher
      Energy Corp.

    999-18th
      Street,
      Suite 1740

    Denver,
      Colorado 80202

    Telephone: (303)
      629-1122

    Facsimile: (720)
      904-5698

    Attention: John
      Works, President and CEO

     

    Copy
      to:

     

    Patton
      Boggs LLP

    1660
      Lincoln Street

    Denver,
      Colorado 80264

    Telephone: (303)
      830-1776

    Facsimile: (303)
      894-9239

    Attention: Robert
      M.
      Bearman, Esq. and Mark R.  Goldschmidt,
      Esq.

     

    If
      to the
      Transfer Agent:

     

    Pacific
      Stock Transfer Company

    500
      E.
      Warm Springs Road, Suite 240

    Las
      Vegas
      NV 89119

    Telephone: (702)
      361-3033

    Facsimile: (702)
      433-1979

    Attention: 

     

    If
      to a
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
      with copies to such Buyer's representatives as set forth on the Schedule of
      Buyers, 

     

    
      
        
        

      

      
        -33-

        
          

        

      

      
        
        

      

    

     

    with
      a
      copy (for informational purposes only) to:

     

    Schulte
      Roth & Zabel LLP 

    919
      Third
      Avenue

    New
      York,
      New York 10022

    Telephone: (212)
      756-2000

    Facsimile: (212)
      593-5955

    Attention: Eleazer
      N. Klein, Esq.

     

    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 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 an
      overnight courier service shall be rebuttable evidence of personal service,
      receipt by facsimile or receipt from an overnight courier service in accordance
      with clause (i), (ii) or (iii) above, respectively.

     

    (g)  Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and assigns, including any purchasers of the Notes
      or the Warrants. The Company shall not assign this Agreement or any rights
      or
      obligations hereunder without the prior written consent of the holders of at
      least 60% of the aggregate number of Registrable Securities issued and issuable
      hereunder, including by way of a Fundamental Transaction (unless the Company
      is
      in compliance with the applicable provisions governing Fundamental Transactions
      set forth in the Notes and the Warrants). A Buyer may assign some or all of
      its
      rights hereunder without the consent of the Company, in which event such
      assignee shall be deemed to be a Buyer hereunder with respect to such assigned
      rights

     

    (h)  No
      Third Party Beneficiaries.
      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.

     

    (i)  Survival.
      Unless
      this Agreement is terminated under Section 8, the representations and warranties
      of the Company and the Buyers contained in Sections 2 and 3, and the agreements
      and covenants set forth in Sections 4, 5 and 9 shall survive the Closing. Each
      Buyer shall be responsible only for its own representations, warranties,
      agreements and covenants hereunder.

     

    (j)  Further
      Assurances.
      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.

     

    (k)  Indemnification.
      In
      consideration of each Buyer's execution and delivery of the Transaction
      Documents and acquiring the Securities thereunder and in addition to all of
      the
      Company's other obligations under the Transaction Documents, the Company shall
      defend, protect, indemnify and hold harmless each Buyer and each other holder
      of
      the Securities and all of their stockholders, partners, members, officers,
      directors, employees and direct or indirect investors and any of the foregoing
      Persons' agents or other representatives (including, without limitation, those
      retained in connection with the transactions contemplated by this Agreement)
      (collectively, the "Indemnitees")
      from
      and against any and all actions, causes of action, suits, claims, losses, costs,
      penalties, fees, liabilities and damages, and expenses in connection therewith
      (irrespective of whether any such Indemnitee is a party to the action for which
      indemnification hereunder is sought), and including reasonable attorneys' fees
      and disbursements (the "Indemnified
      Liabilities"),
      incurred by any Indemnitee as a result of, or arising out of, or relating to
      (a)
      any misrepresentation or breach of any representation or warranty made by the
      Company in the Transaction Documents or any other certificate, instrument or
      document contemplated hereby or thereby, (b) any breach of any covenant,
      agreement or obligation of the Company contained in the Transaction Documents
      or
      any other certificate, instrument or document contemplated hereby or thereby
      or
      (c) any cause of action, suit or claim brought or made against such Indemnitee
      by a third party (including for these purposes a derivative action brought
      on
      behalf of the Company) and arising out of or resulting from (i) the execution,
      delivery, performance or enforcement of the Transaction Documents or any other
      certificate, instrument or document contemplated hereby or thereby, (ii) any
      transaction financed or to be financed in whole or in part, directly or
      indirectly, with the proceeds of the issuance of the Securities, (iii) any
      disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status
      of
      such Buyer or holder of the Securities as an investor in the Company pursuant
      to
      the transactions contemplated by the Transaction Documents. The Company shall
      not be obligated to indemnify an Indemnitee pursuant to this Section 9(k) for
      Indemnified Liabilities to the extent such Indemnified Liabilities are caused
      by
      acts of gross negligence or willful misconduct on the part of such Indemnitee.
      To the extent that the foregoing undertaking by the Company may be unenforceable
      for any reason, the Company shall make the maximum contribution to the payment
      and satisfaction of each of the Indemnified Liabilities that is permissible
      under applicable law. Except as otherwise set forth herein, the mechanics and
      procedures with respect to the rights and obligations under this Section 9(k)
      shall be the same as those set forth in Section 6 of the Registration Rights
      Agreement.

     

    
      
        
        

      

      
        -34-

        
          

        

      

      
        
        

      

    

     

    (l)  No
      Strict Construction.
      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.

     

    (m)  Remedies.
      Each
      Buyer and each holder of the Securities shall have all rights and remedies
      set
      forth in the Transaction Documents and all rights and remedies which such
      holders have been granted at any time under any other agreement or contract
      and
      all of the rights which such holders have under any law. Any Person having
      any
      rights under any provision of this Agreement shall be entitled to enforce such
      rights specifically (without posting a bond or other security), to recover
      damages by reason of any breach of any provision of this Agreement and to
      exercise all other rights granted by law. Furthermore, the Company recognizes
      that in the event that it fails to perform, observe, or discharge any or all
      of
      its obligations under the Transaction Documents, any remedy at law may prove
      to
      be inadequate relief to the Buyers. The Company therefore agrees that the Buyers
      shall be entitled to seek temporary and permanent injunctive relief in any
      such
      case without the necessity of proving actual damages and without posting a
      bond
      or other security.

     

    
      
        
        

      

      
        -35-

        
          

        

      

      
        
        

      

    

     

    (n)  Rescission
      and
      Withdrawal Right.
      Notwithstanding anything to the contrary contained in (and without limiting
      any
      similar provisions of) the Transaction Documents, whenever any Buyer exercises
      a
      right, election, demand or option under a Transaction Document and the Company
      does not timely perform its related obligations within the periods therein
      provided, then such Buyer may rescind or withdraw, in its sole discretion from
      time to time upon written notice to the Company, any relevant notice, demand
      or
      election in whole or in part without prejudice to its future actions and
      rights.

     

    (o)  Payment
      Set Aside.
      To the
      extent that the Company makes a payment or payments to the Buyers hereunder
      or
      pursuant to any of the other Transaction Documents or the Buyers enforce or
      exercise their rights hereunder or thereunder, and such payment or payments
      or
      the proceeds of such enforcement or exercise or any part thereof are
      subsequently invalidated, declared to be fraudulent or preferential, set aside,
      recovered from, disgorged by or are required to be refunded, repaid or otherwise
      restored to the Company, a trustee, receiver or any other Person under any
      law
      (including, without limitation, any bankruptcy law, foreign, state or federal
      law, common law or equitable cause of action), then to the extent of any such
      restoration the obligation or part thereof originally intended to be satisfied
      shall be revived and continued in full force and effect as if such payment
      had
      not been made or such enforcement or setoff had not occurred.

     

    (p)  Independent
      Nature of Buyers' Obligations and Rights.
      The
      obligations of each Buyer under any Transaction Document are several and not
      joint with the obligations of any other Buyer, and no Buyer shall be responsible
      in any way for the performance of the obligations of any other Buyer under
      any
      Transaction Document. Nothing contained herein or in any other Transaction
      Document, and no action taken by any Buyer pursuant hereto or thereto, shall
      be
      deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
      do not so constitute, 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, and the Company will not assert any such claim
      with respect to such obligations or the transactions contemplated by the
      Transaction Documents and the Company acknowledges that the Buyers are not
      acting in concert or as a group with respect to such obligations or the
      transactions contemplated by the Transaction Documents. The Company acknowledges
      and each Buyer confirms that it has independently participated in the
      negotiation of the transaction contemplated hereby with the advice of its own
      counsel and advisors. Each Buyer shall be entitled to independently protect
      and
      enforce its rights, including, without limitation, the rights arising out of
      this Agreement or out of any other Transaction Documents, and it shall not
      be
      necessary for any other Buyer to be joined as an additional party in any
      proceeding for such purpose.

     

    (q)  Sales
      to Buyers Resident in Canada.
      Solicitations of and sales to Buyers resident in or otherwise subject to the
      securities laws of Canada will be conducted by a Canadian affiliate of the
      Agent
      or other registered dealers in Canada selected by the Agent. Such Buyers will
      also need to qualify under a prospectus exemption in their jurisdiction of
      residence. The Company is not a "reporting issuer" in any province of Canada,
      and the Securities will be subject to resale restrictions in
      Canada.

     

    [Signature
      Page Follows]

    
      
        
        

      

      
        -36-

        
          

        

      

       

    

    

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

    
      	 	 	 
	 	
              COMPANY:

               

              RANCHER
                ENERGY CORP.

            
	 
 	 
 	 
 
	 	By:  	/s/ John
              Works 
	 	
              
                

              

              Name: John Works

              Title: President and Chief Executive Officers

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    

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

    
      	 	 	 
	 	
              BUYERS:

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              
                

              

              Name:

              
                Title:

              

            

    

     

    
      	 	 	Address:
	 	 	
               

              
                

              

              

              

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    SCHEDULE
      OF BUYERS

    

    
      	
              (1)

            	 	
              (2)

            	 	
              (3)

            	 	
              (4)

            	 	
              (5)

            	 	
              (6)

            	 	
              (7)

            	 
	
              Buyer

            	 	
              Address
                and

              Facsimile
                Number

            	 	
              Number
                of

              Common
                Shares

            	 	
              Aggregate

              Principal

              Amount
                of

              Notes

            	 	
              Number
                of

              Warrant
                Shares

            	 	
              Purchase
                Price

            	 	
              Legal
                Representative's Address 
and Facsimile Number

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              LP
                Rancher Ltd

            	 	 	 	 	 	
              1,169,053

            	 	 	
              0

            	 	 	
              1,169,053

            	 	
              $

            	
              1,753,580.00

            	 	 	
              Schulte
                Roth & Zabel LLP 919

              Third
                Avenue

              New
                York, New York 10022

              Attention:
                Eleazer Klein, Esq.

              Facsimile:
                (212) 593-5955

              Telephone:
                (212) 756-2376

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Latigo
                Fund L.P.

            	 	 	 	 	 	
              164,280

            	 	 	
              0

            	 	 	
              164,280

            	 	
              $

            	
              246,420.00

            	 	 	
              Schulte
                Roth & Zabel LLP 919

              Third
                Avenue

              New
                York, New York 10022

              Attention:
                Eleazer Klein, Esq.

              Facsimile:
                (212) 593-5955

              Telephone:
                (212) 756-2376

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Old
                Westbury Real Return Fund

            	 	 	 	 	 	
              6,666,666

            	 	 	
              0

            	 	 	
              6,666,666

            	 	
              $

            	
              10,000,000.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Bank
                sal. Oppenheim

            	 	 	 	 	 	
              250,000

            	 	 	
              0

            	 	 	
              250,000

            	 	
              $

            	
              375,000.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Millennium
                Global Natural Resources Fund Limited

            	 	 	 	 	 	
              1,333,333

            	 	 	
              0

            	 	 	
              1,333,333

            	 	
              $

            	
              1,999,999.50

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Millennium
                Global Natural Resources Fund Limited

            	 	 	 	 	 	
              4,000,000

            	 	 	
              0

            	 	 	
              4,000,000

            	 	
              $

            	
              6,000,000.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Morgan
                Stanley Co. for a/c Persistency

            	 	 	 	 	 	
              3,333,333

            	 	 	
              0

            	 	 	
              3,333,333

            	 	
              $

            	
              5,000,000.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Tenor
                Opportunity Master Fund Ltd.

            	 	 	 	 	 	
              333,333

            	 	 	
              0

            	 	 	
              333,333

            	 	
              $

            	
              500,000.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              VR
                Global Partners L.P.

            	 	 	 	 	 	
              1,333,333

            	 	 	
              0

            	 	 	
              1,333,333

            	 	
              $

            	
              2,000,000.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Affaires
                Financieres SA

            	 	 	 	 	 	
              666,666

            	 	 	
              0

            	 	 	
              666,666

            	 	
              $

            	
              1,000,000.00

            	 	 	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              Spartan
                Arbitrage Fund LP

            	 	 	 	 	 	
              35,000

            	 	 	
              0

            	 	 	
              35,000

            	 	
              $

            	
              52,500.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              MMCap
                International Inc.

            	 	 	 	 	 	
              200,000

            	 	 	
              0

            	 	 	
              200,000

            	 	
              $

            	
              300,000.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              NBCN
                INC. ITF Jane Day

            	 	 	 	 	 	
              30,000

            	 	 	
              0

            	 	 	
              30,000

            	 	
              $

            	
              45,000.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              NBCN
                INC. ITF Purling Holdings

            	 	 	 	 	 	
              35,000

            	 	 	
              0

            	 	 	
              35,000

            	 	
              $

            	
              52,500.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              NBCN
                INC. ITF Scott Paterson

            	 	 	 	 	 	
              100,000

            	 	 	
              0

            	 	 	
              100,000

            	 	
              $

            	
              150,000.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              NBCN
                INC. ITF Don Hovis

            	 	 	 	 	 	
              15,000

            	 	 	
              0

            	 	 	
              15,000

            	 	
              $

            	
              22,500.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              NBCN
                INC. ITF Don McFarlane

            	 	 	 	 	 	
              33,800

            	 	 	
              0

            	 	 	
              33,800

            	 	
              $

            	
              50,700.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Jana
                Piranha Master Fund LTD

            	 	 	 	 	 	
              5,333,333

            	 	 	
              0

            	 	 	
              5,333,333

            	 	
              $

            	
              8,000,000.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Passport
                Global Master

            	 	 	 	 	 	
              2,000,000

            	 	 	
              0

            	 	 	
              2,000,000

            	 	
              $

            	
              3,000,000.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Hound
                Partners Offshore Fund

            	 	 	 	 	 	
              1,340,266

            	 	 	
              0

            	 	 	
              1,340,266

            	 	
              $

            	
              2,010,400.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Hound
                Partners, L.P.

            	 	 	 	 	 	
              1,326,400

            	 	 	
              0

            	 	 	
              1,326,400

            	 	
              $

            	
              1,989,600.00

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Jennifer
                Wisden

            	 	 	 	 	 	
              66,666

            	 	 	
              0

            	 	 	
              66,666

            	 	
              $

            	
              100,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Pierce
                A Buxton

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Bobby
                Powell

            	 	 	 	 	 	
              13,333

            	 	 	
              0

            	 	 	
              13,333

            	 	
              $

            	
              20,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Jonathan
                G Reed

            	 	 	 	 	 	
              13,333

            	 	 	
              0

            	 	 	
              13,333

            	 	
              $

            	
              20,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Patrick
                Roberts 25 Ambra

            	 	 	 	 	 	
              66,666

            	 	 	
              0

            	 	 	
              66,666

            	 	
              $

            	
              100,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Angus
                I McIntosh

            	 	 	 	 	 	
              10,000

            	 	 	
              0

            	 	 	
              10,000

            	 	
              $

            	
              15,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Harris
                N E

            	 	 	 	 	 	
              13,333

            	 	 	
              0

            	 	 	
              13,333

            	 	
              $

            	
              20,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mr
                Frederick Mark Tughan

            	 	 	 	 	 	
              13,333

            	 	 	
              0

            	 	 	
              13,333

            	 	
              $

            	
              20,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Malcolm
                Plaister

            	 	 	 	 	 	
              51,333

            	 	 	
              0

            	 	 	
              51,333

            	 	
              $

            	
              77,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mr.
                M.J. Knott

            	 	 	 	 	 	
              13,333

            	 	 	
              0

            	 	 	
              13,333

            	 	
              $

            	
              20,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Louvre
                RE Fitzwilliam

            	 	 	 	 	 	
              200,000

            	 	 	
              0

            	 	 	
              200,000

            	 	
              $

            	
              300,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              10,666

            	 	 	
              0

            	 	 	
              10,666

            	 	
              $

            	
              16,000

            	 	 	 	 

    

    
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Brewin
                Dolphin

            	 	 	 	 	 	
              100,000

            	 	 	
              0

            	 	 	
              100,000

            	 	
              $

            	
              150,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Abbey
                National

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Brian
                Withington

            	 	 	 	 	 	
              13,333

            	 	 	
              0

            	 	 	
              13,333

            	 	
              $

            	
              20,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mrs.
                S M Wild

            	 	 	 	 	 	
              20,000

            	 	 	
              0

            	 	 	
              20,000

            	 	
              $

            	
              30,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              De
                Heer T. Haddad

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Hornbuckle
                Mtichell Tst

            	 	 	 	 	 	
              18,666

            	 	 	
              0

            	 	 	
              18,666

            	 	
              $

            	
              28,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              20,000

            	 	 	
              0

            	 	 	
              20,000

            	 	
              $

            	
              30,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Adrian
                Cox

            	 	 	 	 	 	
              26,666

            	 	 	
              0

            	 	 	
              26,666

            	 	
              $

            	
              40,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Robert
                Hughes

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Direct
                Currency Exchange PLC

            	 	 	 	 	 	
              66,666

            	 	 	
              0

            	 	 	
              66,666

            	 	
              $

            	
              100,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              John
                Howland Jackson, Esq.

            	 	 	 	 	 	
              66,666

            	 	 	
              0

            	 	 	
              66,666

            	 	
              $

            	
              100,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Resolute
                Investment Holdings

            	 	 	 	 	 	
              133,333

            	 	 	
              0

            	 	 	
              133,333

            	 	
              $

            	
              200,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Angus
                I McIntosh

            	 	 	 	 	 	
              3,333

            	 	 	
              0

            	 	 	
              3,333

            	 	
              $

            	
              5,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Picon
                Consultants Ltd

            	 	 	 	 	 	
              26,666

            	 	 	
              0

            	 	 	
              26,666

            	 	
              $

            	
              40,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Thomas
                E Teunissen

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              RBC
                Trust Company

            	 	 	 	 	 	
              66,666

            	 	 	
              0

            	 	 	
              66,666

            	 	
              $

            	
              100,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mr
                A S Gould

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              10,000

            	 	 	
              0

            	 	 	
              10,000

            	 	
              $

            	
              15,000

            	 	 	 	 

    

    
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Jonathan
                G Reed

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mr
                Paul Francis Owen Hollowday

            	 	 	 	 	 	
              133,333

            	 	 	
              0

            	 	 	
              133,333

            	 	
              $

            	
              200,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Hornbuckle
                Mtichell Tst

            	 	 	 	 	 	
              66,666

            	 	 	
              0

            	 	 	
              66,666

            	 	
              $

            	
              100,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Richmond
                Restaurants Limited

            	 	 	 	 	 	
              26,666

            	 	 	
              0

            	 	 	
              26,666

            	 	
              $

            	
              40,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Rensburg
                Sheppards Investment Manag

            	 	 	 	 	 	
              16,666

            	 	 	
              0

            	 	 	
              16,666

            	 	
              $

            	
              25,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Pierce
                A Buxton

            	 	 	 	 	 	
              16,666

            	 	 	
              0

            	 	 	
              16,666

            	 	
              $

            	
              25,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Peter
                Jonathan Battle

            	 	 	 	 	 	
              10,000

            	 	 	
              0

            	 	 	
              10,000

            	 	
              $

            	
              15,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              R
                T
                Rivett-Carnac

            	 	 	 	 	 	
              8,333

            	 	 	
              0

            	 	 	
              8,333

            	 	
              $

            	
              12,500

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              MH
                Clarke

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Ian
                Bundock, Esq.

            	 	 	 	 	 	
              866

            	 	 	
              0

            	 	 	
              866

            	 	
              $

            	
              1,300

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Tyrolese
                Trust Co Ltd G R Bird as T Tees of the ABN

            	 	 	 	 	 	
              100,000

            	 	 	
              0

            	 	 	
              100,000

            	 	
              $

            	
              150,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Malcolm
                John Lanyon /or Elizabeth 

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Philip
                Martin Davis

            	 	 	 	 	 	
              13,333

            	 	 	
              0

            	 	 	
              13,333

            	 	
              $

            	
              20,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Stuart
                Canwell

            	 	 	 	 	 	
              100,000

            	 	 	
              0

            	 	 	
              100,000

            	 	
              $

            	
              150,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              65,800

            	 	 	
              0

            	 	 	
              65,800

            	 	
              $

            	
              98,700

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              40,000

            	 	 	
              0

            	 	 	
              40,000

            	 	
              $

            	
              60,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              T
                G
                Graveney

            	 	 	 	 	 	
              16,666

            	 	 	
              0

            	 	 	
              16,666

            	 	
              $

            	
              25,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              15,333

            	 	 	
              0

            	 	 	
              15,333

            	 	
              $

            	
              23,000

            	 	 	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              Paul
                Gelinas

            	 	 	 	 	 	
              10,000

            	 	 	
              0

            	 	 	
              10,000

            	 	
              $

            	
              15,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Thomas
                P Gelinas

            	 	 	 	 	 	
              7,000

            	 	 	
              0

            	 	 	
              7,000

            	 	
              $

            	
              10,500

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Monsieur
                Paul Turner

            	 	 	 	 	 	
              66,666

            	 	 	
              0

            	 	 	
              66,666

            	 	
              $

            	
              100,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              CSTDN
                for Julia Curtiss Porter Inc.

            	 	 	 	 	 	
              60,000

            	 	 	
              0

            	 	 	
              60,000

            	 	
              $

            	
              90,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              PFP
                Group Limited

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              30,000

            	 	 	
              0

            	 	 	
              30,000

            	 	
              $

            	
              45,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Griffin,
                Sean Timothy (Mr.)

            	 	 	 	 	 	
              20,000

            	 	 	
              0

            	 	 	
              20,000

            	 	
              $

            	
              30,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Miss
                K. R. Rankin

            	 	 	 	 	 	
              11,333

            	 	 	
              0

            	 	 	
              11,333

            	 	
              $

            	
              17,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Barclays
                Bank PLC

            	 	 	 	 	 	
              10,000

            	 	 	
              0

            	 	 	
              10,000

            	 	
              $

            	
              15,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Miss
                H Pearson

            	 	 	 	 	 	
              10,000

            	 	 	
              0

            	 	 	
              10,000

            	 	
              $

            	
              15,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              De
                Heer T. Haddad

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mr.
                M. Wilson

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Martin
                Evans

            	 	 	 	 	 	
              50,000

            	 	 	
              0

            	 	 	
              50,000

            	 	
              $

            	
              75,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Calum
                Cameron

            	 	 	 	 	 	
              13,333

            	 	 	
              0

            	 	 	
              13,333

            	 	
              $

            	
              20,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mr.
                Simon Piper

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Van
                Moer Santerre ET BLD DU Souverain

            	 	 	 	 	 	
              13,333

            	 	 	
              0

            	 	 	
              13,333

            	 	
              $

            	
              20,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              12,541

            	 	 	
              0

            	 	 	
              12,541

            	 	
              $

            	
              18,812

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              M.
                Johannesson Johannes Ingi

            	 	 	 	 	 	
              10,000

            	 	 	
              0

            	 	 	
              10,000

            	 	
              $

            	
              15,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Marie
                Adelhag

            	 	 	 	 	 	
              4,666

            	 	 	
              0

            	 	 	
              4,666

            	 	
              $

            	
              7,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              M.
                Et MME Whalley

            	 	 	 	 	 	
              4,666

            	 	 	
              0

            	 	 	
              4,666

            	 	
              $

            	
              7,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mr.
                T.E.E. George

            	 	 	 	 	 	
              792

            	 	 	
              0

            	 	 	
              792

            	 	
              $

            	
              1,188

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Purbeck
                Pension 

            	 	 	 	 	 	
              133,333

            	 	 	
              0

            	 	 	
              133,333

            	 	
              $

            	
              200,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Direct
                Currency Exchange PLC

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              P
                J
                Holland

            	 	 	 	 	 	
              30,000

            	 	 	
              0

            	 	 	
              30,000

            	 	
              $

            	
              45,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Monsieur
                Jean Pierre Van Den Broeck

            	 	 	 	 	 	
              23,333

            	 	 	
              0

            	 	 	
              23,333

            	 	
              $

            	
              35,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Thomas
                E Teunissen

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Pelttari
                Hannu

            	 	 	 	 	 	
              9,333

            	 	 	
              0

            	 	 	
              9,333

            	 	
              $

            	
              14,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Callow
                D J

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mr.
                David Alan Streatfield

            	 	 	 	 	 	
              73,333

            	 	 	
              0

            	 	 	
              73,333

            	 	
              $

            	
              110,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              De
                Heer A. Advaney

            	 	 	 	 	 	
              66,666

            	 	 	
              0

            	 	 	
              66,666

            	 	
              $

            	
              100,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              John
                Garvey

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mr.
                James W. E. Lewis

            	 	 	 	 	 	
              25,000

            	 	 	
              0

            	 	 	
              25,000

            	 	
              $

            	
              37,500

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              IR
                Jessett

            	 	 	 	 	 	
              13,333

            	 	 	
              0

            	 	 	
              13,333

            	 	
              $

            	
              20,000

            	 	 	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              De
                Heer M.D. Maclure

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mrs.
                J.C. Maclure

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Cater
                Allen Bank Romford

            	 	 	 	 	 	
              200,000

            	 	 	
              0

            	 	 	
              200,000

            	 	
              $

            	
              300,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              NJ
                & CJ Bratton

            	 	 	 	 	 	
              13,000

            	 	 	
              0

            	 	 	
              13,000

            	 	
              $

            	
              19,500

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              HR
                M P Hayes

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Alliance
                Trust Pensions LTD

            	 	 	 	 	 	
              133,333

            	 	 	
              0

            	 	 	
              133,333

            	 	
              $

            	
              200,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              The
                DirectorsMDL Manx Limited

            	 	 	 	 	 	
              66,666

            	 	 	
              0

            	 	 	
              66,666

            	 	
              $

            	
              100,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Gundersen
                M.

            	 	 	 	 	 	
              66,666

            	 	 	
              0

            	 	 	
              66,666

            	 	
              $

            	
              100,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              PPE
                LTD

            	 	 	 	 	 	
              25,000

            	 	 	
              0

            	 	 	
              25,000

            	 	
              $

            	
              37,500

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              PPE
                LTD

            	 	 	 	 	 	
              25,000

            	 	 	
              0

            	 	 	
              25,000

            	 	
              $

            	
              37,500

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Phillip
                Patrick Macdonald

            	 	 	 	 	 	
              32,000

            	 	 	
              0

            	 	 	
              32,000

            	 	
              $

            	
              48,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Farrant

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              26,666

            	 	 	
              0

            	 	 	
              26,666

            	 	
              $

            	
              40,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Ronald
                A. Alder

            	 	 	 	 	 	
              25,000

            	 	 	
              0

            	 	 	
              25,000

            	 	
              $

            	
              37,500

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mark
                Douglas Blundell Charles Schwab

            	 	 	 	 	 	
              16,000

            	 	 	
              0

            	 	 	
              16,000

            	 	
              $

            	
              24,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Capelin
                Financial Management

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              James
                Lawsonbrown

            	 	 	 	 	 	
              5,000

            	 	 	
              0

            	 	 	
              5,000

            	 	
              $

            	
              7,500

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Robert
                Hughes

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mr.
                Paul Francis Owen Hollowday

            	 	 	 	 	 	
              133,333

            	 	 	
              0

            	 	 	
              133,333

            	 	
              $

            	
              200,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Alliance
                Trust Pensions LTD

            	 	 	 	 	 	
              72,086

            	 	 	
              0

            	 	 	
              72,086

            	 	
              $

            	
              108,130

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Ms.
                Myra Tabor

            	 	 	 	 	 	
              61,246

            	 	 	
              0

            	 	 	
              61,246

            	 	
              $

            	
              91,870

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mulhall
                A M

            	 	 	 	 	 	
              10,000

            	 	 	
              0

            	 	 	
              10,000

            	 	
              $

            	
              15,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Maypole
                Contracts LTD

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mr.
                Rudolf Mueller

            	 	 	 	 	 	
              100,000

            	 	 	
              0

            	 	 	
              100,000

            	 	
              $

            	
              150,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Jennifer
                Wisden

            	 	 	 	 	 	
              66,666

            	 	 	
              0

            	 	 	
              66,666

            	 	
              $

            	
              100,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Resolute
                Investment Holdings

            	 	 	 	 	 	
              133,333

            	 	 	
              0

            	 	 	
              133,333

            	 	
              $

            	
              200,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              66,666

            	 	 	
              0

            	 	 	
              66,666

            	 	
              $

            	
              100,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Pierce
                A Buxton

            	 	 	 	 	 	
              16,666

            	 	 	
              0

            	 	 	
              16,666

            	 	
              $

            	
              25,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              S.
                R. Nelson

            	 	 	 	 	 	
              13,333

            	 	 	
              0

            	 	 	
              13,333

            	 	
              $

            	
              20,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Carol
                M. Gregory

            	 	 	 	 	 	
              39,333

            	 	 	
              0

            	 	 	
              39,333

            	 	
              $

            	
              59,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Collins
                Stewart

            	 	 	 	 	 	
              41,666

            	 	 	
              0

            	 	 	
              41,666

            	 	
              $

            	
              62,500

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Staunton
                Sports, LTD

            	 	 	 	 	 	
              75,000

            	 	 	
              0

            	 	 	
              75,000

            	 	
              $

            	
              112,500

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Roy
                A. Stephenson, Esq.

            	 	 	 	 	 	
              66,666

            	 	 	
              0

            	 	 	
              66,666

            	 	
              $

            	
              100,000

            	 	 	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              Kevin
                Mc Leod

            	 	 	 	 	 	
              50,000

            	 	 	
              0

            	 	 	
              50,000

            	 	
              $

            	
              75,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Matthew
                Joseph Miller

            	 	 	 	 	 	
              30,000

            	 	 	
              0

            	 	 	
              30,000

            	 	
              $

            	
              45,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Andrew
                C T Gomarsall, Esq.

            	 	 	 	 	 	
              26,666

            	 	 	
              0

            	 	 	
              26,666

            	 	
              $

            	
              40,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Ian
                M. Fletcher

            	 	 	 	 	 	
              20,000

            	 	 	
              0

            	 	 	
              20,000

            	 	
              $

            	
              30,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Ian
                Bundock, Esq.

            	 	 	 	 	 	
              16,666

            	 	 	
              0

            	 	 	
              16,666

            	 	
              $

            	
              25,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              HSBC
                Private Bank (Suisse) S.A.

            	 	 	 	 	 	
              13,333

            	 	 	
              0

            	 	 	
              13,333

            	 	
              $

            	
              20,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Private
                Pension

            	 	 	 	 	 	
              13,333

            	 	 	
              0

            	 	 	
              13,333

            	 	
              $

            	
              20,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Griffin,
                Sean Timothy (Mr.)

            	 	 	 	 	 	
              10,000

            	 	 	
              0

            	 	 	
              10,000

            	 	
              $

            	
              15,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Jason
                Carter

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Monsieur
                Paul Turner

            	 	 	 	 	 	
              66,666

            	 	 	
              0

            	 	 	
              66,666

            	 	
              $

            	
              100,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              David
                Clews

            	 	 	 	 	 	
              40,000

            	 	 	
              0

            	 	 	
              40,000

            	 	
              $

            	
              60,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Cat
                All LTD Re Cater Allen Priv Bk

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mr.
                Michael Carlin

            	 	 	 	 	 	
              53,333

            	 	 	
              0

            	 	 	
              53,333

            	 	
              $

            	
              80,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mark
                McVeigh

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              P
                J
                Holland

            	 	 	 	 	 	
              30,000

            	 	 	
              0

            	 	 	
              30,000

            	 	
              $

            	
              45,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Robin
                Syrett, Esq.

            	 	 	 	 	 	
              16,666

            	 	 	
              0

            	 	 	
              16,666

            	 	
              $

            	
              25,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Monsieur
                Jean Pierre Van Den Broeck

            	 	 	 	 	 	
              10,000

            	 	 	
              0

            	 	 	
              10,000

            	 	
              $

            	
              15,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Hornbuckle
                Mitchell

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              De
                Heer M.D. Maclure

            	 	 	 	 	 	
              3,333

            	 	 	
              0

            	 	 	
              3,333

            	 	
              $

            	
              5,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Wueger
                Andreas/Chiaran

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Herr
                Andreas Wueger

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Terry
                Farrow

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Richard
                Rivett-Carnac

            	 	 	 	 	 	
              3,333

            	 	 	
              0

            	 	 	
              3,333

            	 	
              $

            	
              5,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              R
                W
                Pettitt

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              27,466

            	 	 	
              0

            	 	 	
              27,466

            	 	
              $

            	
              41,200

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mr
                Steven Minkey

            	 	 	 	 	 	
              16,666

            	 	 	
              0

            	 	 	
              16,666

            	 	
              $

            	
              25,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              De
                Heer T. M. Bosch

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mr.
                L F Butler

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Adrian
                Cox

            	 	 	 	 	 	
              20,000

            	 	 	
              0

            	 	 	
              20,000

            	 	
              $

            	
              30,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Dr.
                Elizabeth J. Todd

            	 	 	 	 	 	
              16,000

            	 	 	
              0

            	 	 	
              16,000

            	 	
              $

            	
              24,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              PFP
                Group Limited

            	 	 	 	 	 	
              33,333

            	 	 	
              0

            	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              16,000

            	 	 	
              0

            	 	 	
              16,000

            	 	
              $

            	
              24,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Christopher
                Sheasby

            	 	 	 	 	 	
              10,000

            	 	 	
              0

            	 	 	
              10,000

            	 	
              $

            	
              15,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Parasol
                FX Client A/C

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              Osiris
                Tsts Re D Barker Life 1

            	 	 	 	 	 	
              66,666

            	 	 	
              0

            	 	 	
              66,666

            	 	
              $

            	
              100,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Hornbuckle
                Mitchell

            	 	 	 	 	 	
              13,333

            	 	 	
              0

            	 	 	
              13,333

            	 	
              $

            	
              20,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Mr
                Derek Capelin

            	 	 	 	 	 	
              6,666

            	 	 	
              0

            	 	 	
              6,666

            	 	
              $

            	
              10,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Torben
                Maersk

            	 	 	 	 	 	
              349,993

            	 	 	 	 	 	
              349,993

            	 	
              $

            	
              524,990

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              PFP
                Group Limited

            	 	 	 	 	 	
              66,653

            	 	 	 	 	 	
              66,653

            	 	
              $

            	
              99,980

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Legent
                Clearing, LLC

            	 	 	 	 	 	
              29,969

            	 	 	 	 	 	
              29,969

            	 	
              $

            	
              44,954

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Hans
                F. Voegeli

            	 	 	 	 	 	
              14,660

            	 	 	 	 	 	
              14,660

            	 	
              $

            	
              21,990

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Martin
                Evans

            	 	 	 	 	 	
              33,333

            	 	 	 	 	 	
              33,333

            	 	
              $

            	
              50,000

            	 	 	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    

    EXHIBITS

    

      
        	
                Exhibit
                  A

              	
                Form
                  of Notes

              
	
                Exhibit
                  B

              	
                Form
                  of Warrant

              
	
                Exhibit
                  C

              	
                Form
                  of Registration Rights Agreement

              
	
                Exhibit
                  D

              	
                Form
                  of Transfer Agent Instructions

              
	
                Exhibit
                  E

              	
                Form
                  of Opinion of Company’s Counsel

              
	
                Exhibit
                  F

              	
                Form
                  of Secretary's Certificate

              
	
                Exhibit
                  G

              	
                Form
                  of Officers Certificate

              
	
                Exhibit
                  H

              	
                Form
                  of Lock-Up Agreement

              
	
                Exhibit
                  I

              	
                Form
                  of Voting Agreement

              
	
                Exhibit
                  J

              	
                Form
                  of Waiver Letter

              

      

    

    
    

     

    SCHEDULES

    

    
      	
              Schedule
                3(a)

            	
              Subsidiaries

            
	
              Schedule
                3(d)

            	
              No
                Conflicts

            
	
              Schedule
                3(j)

            	
              Application
                of Takeover Protections

            
	
              Schedule
                3(k)

            	
              SEC
                Documents

            
	
              Schedule
                3(l)(i) &(ii)

            	
              Absence
                of Certain Changes

            
	
              Schedule
                3(n) 

            	
              Regulatory
                Permits

            
	
              Schedule
                3(q)

            	
              Transactions
                with Affiliates

            
	
              Schedule
                3(r) 

            	
              Equity
                Capitalization

            
	
              Schedule
                3(s)

            	
              Indebtedness
                and Other Contracts

            
	
              Schedule
                3(t)

            	
              Absence
                of Litigation

            
	
              Schedule
                3(u)

            	
              Insurance

            
	
              Schedule
                3(w) 

            	
              Title

            
	
              Schedule
                3(y)

            	
              Environmental
                Laws

            
	
              Schedule
                3(aa)

            	
              Tax
                Status

            
	
              Schedule
                3(cc)

            	
              Ranking
                of Notes

            
	
              Schedule
                3(jj)

            	
              Material
                Acquisition Agreements

            
	
              Schedule
                4(r)

            	
              Anadarko
                Delivery Agreement

            
	
              Schedule
                7(xiv)

            	
              List
                of Unitholders 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    [FORM
      OF CONVERTIBLE NOTE]

     

    NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
      IN A
      FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
      UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
      SAID
      ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
      WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
      BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE
      TERMS
      OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL
      AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON
      CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
      PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

    

      RANCHER
        ENERGY
        CORP.

    

    

      CONVERTIBLE
        NOTE

    

     

    
      	
              Issuance
                Date: December [__], 2006

            	
              Original
                Principal Amount: U.S.
                $_____________

            

    

    

    FOR
      VALUE RECEIVED,
      Rancher
      Energy Corp., a Nevada corporation (the "Company"),
      hereby promises to pay to [BUYERS] or registered assigns ("Holder")
      the
      amount set out above as the Original Principal Amount (as reduced pursuant
      to
      the terms hereof pursuant to conversion or otherwise, the "Principal")
      when
      due, whether upon the Maturity Date (as defined below), acceleration, redemption
      or otherwise (in each case in accordance with the terms hereof) and to pay
      interest ("Interest"),
      if
      any, on any outstanding Principal at the Interest Rate as may be required by
      Section 2 hereof. This Convertible Note (including all Convertible Notes issued
      in exchange, transfer or replacement hereof, this "Note")
      is one
      of an issue of Convertible Notes issued pursuant to the Securities Purchase
      Agreement (as defined below) on the Closing Date (collectively, the
      "Notes"
      and
      such other Convertible Notes, the "Other Notes").
      Certain capitalized terms used herein are defined in Section 26.

     

    (1)  PAYMENTS
      OF PRINCIPAL.
      On the
      Maturity Date, the Company shall pay to the Holder an amount in cash
      representing all outstanding Principal, accrued and unpaid Interest, if any,
      and
      accrued and unpaid Late Charges, if any, on such Principal and Interest. The
      "Maturity Date"
      shall
      be [INSERT DATE THAT IS 120 DAYS FROM ISSUANCE DATE], as may be extended at
      the
      option of the Holder (i) in the event that, and for so long as, a Trigger Event
      (as defined in Section 4(a)) shall have occurred and be continuing on the
      Maturity Date (as may be extended pursuant to this Section 1) or any event
      that
      shall have occurred and be continuing that with the passage of time and the
      failure to cure would result in a Trigger Event, (ii) through the date that
      is
      ten (10) Business Days after the consummation of a Change of Control in the
      event that a Change of Control is publicly announced or a Change of Control
      Notice (as defined in Section 5(b)) is delivered prior to the Maturity Date
      and
      (iii) for an additional ninety (90) day period in the event that as of the
      Maturity Date the Stockholder Approval has not been obtained. Other than as
      specifically permitted by the Note, the Company may not prepay any portion
      of
      the outstanding Principal, accrued and unpaid Interest or accrued and unpaid
      Late Charges, if any, on Principal and Interest.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (2)  INTEREST;
      INTEREST RATE.
      Prior
      to
      the occurrence of a Trigger Event, no Interest shall accrue on the outstanding
      Principal of this Note. From
      and
      after the occurrence and during the continuance of a Trigger Event, Interest
      shall accrue on such outstanding Principal at an interest rate equal to twelve
      percent (12.0%) per annum commencing on the date of the occurrence of such
      Trigger Event. In the event that such Trigger Event is subsequently cured,
      and
      no other Trigger Events have occurred and are continuing, Interest shall cease
      to accrue hereunder as of the date of such cure; provided that the Interest
      as
      calculated and unpaid at such interest rate during the continuance of such
      Trigger Event shall continue to apply to the extent relating to the days after
      the occurrence of such Trigger Event through and including the date of cure
      of
      such Trigger Event.
      Any
      Interest that shall accrue hereunder shall be payable upon any conversion or
      redemption of this Note in accordance with the terms set forth herein and on
      the
      Maturity Date.

     

    (3)  CONVERSION
      OF NOTES.
      This
      Note shall be convertible into shares of the Company's common stock, par value
      $0.00001 per share (the "Common
      Stock"),
      on
      the terms and conditions set forth in this Section 3.

     

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

     

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

     

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

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (ii)  "Conversion
      Price"
      means,
      as of any Conversion Date (as defined below) or other date of determination,
      $1.50, subject to adjustment as provided herein.

     

    (c)  Mechanics
      of Conversion.

     

    (i)  Optional
      Conversion.
      To
      convert any Conversion Amount into shares of Common Stock on any date (a
      "Conversion
      Date"),
      the
      Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt
      on or
      prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice
      of conversion in the form attached hereto as Exhibit
      I
      (the
      "Conversion
      Notice")
      to the
      Company and (B) if required by Section 3(c)(iii), surrender this Note to a
      common carrier for delivery to the Company as soon as practicable on or
      following such date (or an indemnification undertaking with respect to this
      Note
      in the case of its loss, theft or destruction). On or before the second
      (2nd)
      Trading
      Day following the date of receipt of a Conversion Notice, the Company shall
      transmit by facsimile a confirmation of receipt of such Conversion Notice to
      the
      Holder and the Company's transfer agent (the "Transfer
      Agent").
      On or
      before the third (3rd)
      Trading
      Day following the date of receipt of a Conversion Notice (the "Share
      Delivery Date"),
      the
      Company shall (X) provided that the Transfer Agent is participating in the
      Depository Trust Company ("DTC")
      Fast
      Automated Securities Transfer Program, credit such aggregate number of shares
      of
      Common Stock to which the Holder shall be entitled to the Holder's or its
      designee's balance account with DTC through its Deposit Withdrawal Agent
      Commission system or (Y) if the Transfer Agent is not participating in the
      DTC
      Fast Automated Securities Transfer Program, issue and deliver to the address
      as
      specified in the Conversion Notice, a certificate, registered in the name of
      the
      Holder or its designee, for the number of shares of Common Stock to which the
      Holder shall be entitled. If this Note is physically surrendered for conversion
      as required by Section 3(c)(iii) and the outstanding Principal of this Note
      is
      greater than the Principal portion of the Conversion Amount being converted,
      then the Company shall as soon as practicable and in no event later than three
      (3) Business Days after receipt of this Note and at its own expense, issue
      and
      deliver to the holder a new Note (in accordance with Section 16(d)) representing
      the outstanding Principal not converted. The Person or Persons entitled to
      receive the shares of Common Stock issuable upon a conversion of this Note
      shall
      be treated for all purposes as the record holder or holders of such shares
      of
      Common Stock on the Conversion Date. 

     

    (ii)  If
      within
      five (5) Trading Days after the Company's receipt of the facsimile copy of
      a
      Conversion Notice the Company shall fail to issue and deliver a certificate
      to
      the Holder or credit the Holder's balance account with DTC for the number of
      shares of Common Stock to which the Holder is entitled upon such holder's
      conversion of any Conversion Amount (a
      "Conversion
      Failure"),
      and if
      on or after such Trading Day the Holder purchases (in an open market transaction
      or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder
      of
      Common Stock issuable upon such conversion that the Holder anticipated receiving
      from the Company (a "Buy-In"),
      then
      the Company shall, within three (3) Trading Days after the Holder's request
      and
      in the Holder's discretion, either (i) pay cash to the Holder in an amount
      equal
      to the Holder's total purchase price (including brokerage commissions and other
      out-of-pocket expenses, if any) for the shares of Common Stock so purchased
      (the
"Buy-In
      Price"),
      at
      which point the Company's obligation to deliver such certificate (and to issue
      such Common Stock) shall terminate, or (ii) promptly honor its obligation to
      deliver to the Holder a certificate or certificates representing such Common
      Stock and pay cash to the Holder in an amount equal to the excess (if any)
      of
      the Buy-In Price over the product of (A) such number of shares of Common Stock,
      times (B) the Closing Bid Price on the Conversion Date.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (iii)  Registration;
      Book-Entry.
      The
      Company shall maintain a register (the "Register")
      for
      the recordation of the names and addresses of the holders of each Note and
      the
      principal amount of the Notes held by such holders (the "Registered
      Notes").
      The
      entries in the Register shall be conclusive and binding for all purposes absent
      manifest error. The Company and the holders of the Notes shall treat each Person
      whose name is recorded in the Register as the owner of a Note for all purposes,
      including, without limitation, the right to receive payments of principal and
      interest hereunder, notwithstanding notice to the contrary. A Registered Note
      may be assigned or sold in whole or in part only by registration of such
      assignment or sale on the Register. Upon its receipt of a request to assign
      or
      sell all or part of any Registered Note by a Holder, the Company shall record
      the information contained therein in the Register and issue one or more new
      Registered Notes in the same aggregate principal amount as the principal amount
      of the surrendered Registered Note to the designated assignee or transferee
      pursuant to Section 16. Notwithstanding anything to the contrary set forth
      herein, upon conversion of any portion of this Note in accordance with the
      terms
      hereof, the Holder shall not be required to physically surrender this Note
      to
      the Company unless (A) the full Conversion Amount represented by this Note
      is
      being converted or (B) the Holder has provided the Company with prior written
      notice (which notice may be included in a Conversion Notice) requesting
      reissuance of this Note upon physical surrender of this Note. The Holder and
      the
      Company shall maintain records showing the Principal, Interest and Late Charges,
      if any, converted and the dates of such conversions or shall use such other
      method, reasonably satisfactory to the Holder and the Company, so as not to
      require physical surrender of this Note upon conversion.

     

    (iv)  Pro
      Rata Conversion; Disputes.
      In the
      event that the Company receives a Conversion Notice from more than one holder
      of
      Notes for the same Conversion Date and the Company can convert some, but not
      all, of such portions of the Notes submitted for conversion, the Company shall
      convert from each holder of Notes electing to have Notes converted on such
      date
      a pro rata amount of such holder's portion of its Notes submitted for conversion
      based on the principal amount of Notes submitted for conversion on such date
      by
      such holder relative to the aggregate principal amount of all Notes submitted
      for conversion on such date. In the event of a dispute as to the number of
      shares of Common Stock issuable to the Holder in connection with a conversion
      of
      this Note, the Company shall issue to the Holder the number of shares of Common
      Stock not in dispute and resolve such dispute in accordance with Section
      21.

     

    (v)  Automatic
      Conversion.
      On the
      Stockholder Approval Date all of the Conversion Amount then remaining under
      this
      Note shall be converted into fully paid, validly issued and nonassessable shares
      of Common Stock in accordance with Section 3(c) hereof at the Conversion Rate
      as
      of the Mandatory Conversion Date (as defined below) with respect to the
      Conversion Amount (the "Automatic
      Conversion").
      The
      Company shall deliver, within not more than one (1) Trading Day following
      the Stockholder Approval Date, a
      written
      notice thereof by facsimile and overnight courier to all, but not less than
      all,
      of the holders of Notes and the Transfer Agent (the "Automatic
      Conversion Notice"
      and the
      date all of the holders received such notice is referred to as the "Automatic
      Conversion Notice Date").
      The
      Mandatory Conversion Notice shall state (1) the aggregate Conversion Amount
      of
      the Notes that shall be subject to the Automatic Conversion pursuant hereto
      (and
      analogous provisions under the Other Notes) and (2) the number of shares of
      Common Stock to be issued to the Holder on the applicable Conversion Date.
      The
      mechanics of conversion set forth in Section 3(c) shall apply to the Automatic
      Conversion as if the Company and the Transfer Agent had received from the Holder
      on the Stockholder Approval Date a Conversion Notice with respect to the
      Conversion Amount remaining under this Note. 

     

    
      
        
        

      

      
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    (4)  RIGHTS
      UPON TRIGGER EVENT.

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

    (vi)  A)
      any
      payment default or other default occurs under any Indebtedness of the Company
      or
      any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase
      Agreement) (other than Permitted Senior Indebtedness) that results in a
      redemption of or acceleration prior to maturity of $1,000,000 or more of such
      Indebtedness in the aggregate, (B) any material default occurs under any
      Indebtedness of the Company (other than Permitted Senior Indebtedness) or any
      of
      its Subsidiaries having an aggregate outstanding balance in excess of $1,000,000
      and such default continues uncured for more than ten (10) Business Days, other
      than, in each case (A) or (B) above, a default with respect to any Other Notes,
      or (C) any "event of default" occurs under the Permitted Senior
      Indebtedness;

     

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

     

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

     

    (ix)  a
      final
      judgment or judgments for the payment of money aggregating in excess of
      $1,000,000 are rendered against the Company or any of its Subsidiaries and
      which
      judgments are not, within sixty (60) days after the entry thereof, bonded,
      discharged or stayed pending appeal, or are not discharged within sixty (60)
      days after the expiration of such stay; provided, however, that any judgment
      which is covered by insurance or an indemnity from a credit worthy party shall
      not be included in calculating the $1,000,000 amount set forth above so long
      as
      the Company provides the Holder a written statement from such insurer or
      indemnity provider (which written statement shall be reasonably satisfactory
      to
      the Holder) to the effect that such judgment is covered by insurance or an
      indemnity and the Company will receive the proceeds of such insurance or
      indemnity within thirty (30) days of the issuance of such judgment;

     

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

     

    
      
        
        

      

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

     

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

     

    (b)  Redemption
      Right.
      Upon
      the occurrence of a Trigger Event with respect to this Note or any Other Note,
      the Company shall within (1) Business Day deliver written notice thereof via
      facsimile or e-mail and overnight courier (a "Trigger
      Event Notice")
      to the
      Holder. At any time after the earlier of the Holder's receipt of a Trigger
      Event
      Notice and the Holder becoming aware of a Trigger Event, the Holder may require
      the Company to redeem all or any portion of this Note by delivering written
      notice thereof (the "Trigger
      Event Redemption Notice")
      to the
      Company, which Trigger Event Redemption Notice shall indicate the portion of
      this Note the Holder is electing to redeem. Each portion of this Note subject
      to
      redemption by the Company pursuant to this Section 4(b) shall be redeemed by
      the
      Company at a price equal to the Conversion Amount to be redeemed (the
      "Trigger
      Event Redemption
      Price").
      Redemptions required by this Section 4(b) shall be made in accordance with
      the
      provisions of Section 10. To the extent redemptions required by this Section
      4(b) are deemed or determined by a court of competent jurisdiction to be
      prepayments of the Note by the Company, such redemptions shall be deemed to
      be
      voluntary prepayments. The parties hereto agree that in the event of the
      Company's redemption of any portion of the Note under this Section 4(b), the
      Holder's damages would be uncertain and difficult to estimate because of the
      parties' inability to predict future interest rates and the uncertainty of
      the
      availability of a suitable substitute investment opportunity for the Holder.
      Accordingly, any Redemption Premium due under this Section 4(b) is intended
      by
      the parties to be, and shall be deemed, a reasonable estimate of the Holder's
      actual loss of its investment opportunity and not as a penalty.

     

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

     

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

     

    
      
        
        

      

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    (9)  RESERVATION
      OF AUTHORIZED SHARES.

     

    (a)  Reservation.
      Following the Stockholder Approval Date, so long as any of the Notes are
      outstanding, the Company shall take all action necessary to reserve and keep
      available out of its authorized and unissued Common Stock, solely for the
      purpose of effecting the conversion of the Notes, 130% of the number of shares
      of Common Stock as shall from time to time be necessary to effect the conversion
      of all of the Notes then outstanding; provided that at no time shall the number
      of shares of Common Stock so reserved be less than the number of shares required
      to be reserved by the previous sentence (without regard to any limitations
      on
      conversions) (the "Required
      Reserve Amount").
      The
      number of shares of Common Stock reserved for conversions of the Notes and
      each
      increase in the number of shares so reserved shall be allocated pro rata among
      the holders of the Notes based on the principal amount of the Notes held by
      each
      holder at the Closing (as defined in the Securities Purchase Agreement) or
      increase in the number of reserved shares, as the case may be (the "Authorized
      Share Allocation").
      In
      the event that a holder shall sell or otherwise transfer any of such holder's
      Notes, each transferee shall be allocated a pro rata portion of such holder's
      Authorized Share Allocation. Any shares of Common Stock reserved and allocated
      to any Person which ceases to hold any Notes shall be allocated to the remaining
      holders of Notes, pro rata based on the principal amount of the Notes then
      held
      by such holders.

     

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

     

    (10)  HOLDER'S
      REDEMPTIONS.

     

    (a)  Mechanics.
      The
      Company shall deliver the applicable Trigger Event Redemption Price to the
      Holder within five (5) Business Days after the Company's receipt of the Holder's
      Trigger Event Redemption Notice. If the Holder has submitted a Change of Control
      Redemption Notice in accordance with Section 5(b), the Company shall deliver
      the
      applicable Change of Control Redemption Price to the Holder concurrently with
      the consummation of such Change of Control if such notice is received prior
      to
      the consummation of such Change of Control and within five (5) Business Days
      after the Company's receipt of such notice otherwise. In the event of a
      redemption of less than all of the Conversion Amount of this Note, the Company
      shall promptly cause to be issued and delivered to the Holder a new Note (in
      accordance with Section 16(d)) representing the outstanding Principal which
      has
      not been redeemed. In the event that the Company does not pay the applicable
      Redemption Price to the Holder within the time period required, at any time
      thereafter and until the Company pays such unpaid Redemption Price in full,
      the
      Holder shall have the option, in lieu of redemption, to require the Company
      to
      promptly return to the Holder all or any portion of this Note representing
      the
      Conversion Amount that was submitted for redemption and for which the applicable
      Redemption Price (together with any Late Charges thereon) has not been paid.
      Upon the Company's receipt of such notice, (x) the Redemption Notice shall
      be
      null and void with respect to such Conversion Amount, (y) the Company shall
      immediately return this Note, or issue a new Note (in accordance with Section
      16(d)) to the Holder representing such Conversion Amount and (z) the Conversion
      Price of this Note or such new Notes shall be adjusted to the lesser of (A)
      the
      Conversion Price as in effect on the date on which the Redemption Notice is
      voided and (B) the lowest Closing Bid Price of the Common Stock during the
      period beginning on and including the date on which the Redemption Notice is
      delivered to the Company and ending on and including the date on which the
      Redemption Notice is voided. The Holder's delivery of a notice voiding a
      Redemption Notice and exercise of its rights following such notice shall not
      affect the Company's obligations to make any payments of Late Charges which
      have
      accrued prior to the date of such notice with respect to the Conversion Amount
      subject to such notice.

     

    
      
        
        

      

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

     

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

     

    
      
        
        

      

      
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    (12)  COVENANTS.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

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

     

    (16)  REISSUANCE
      OF THIS NOTE.

     

    (a)  Transfer.
      If this
      Note is to be transferred, the Holder shall surrender this Note to the Company,
      whereupon the Company will forthwith issue and deliver upon the order of the
      Holder a new Note (in accordance with Section 16(d)), registered as the Holder
      may request, representing the outstanding Principal being transferred by the
      Holder and, if less then the entire outstanding Principal is being transferred,
      a new Note (in accordance with Section 16(d)) to the Holder representing the
      outstanding Principal not being transferred. The Holder and any assignee, by
      acceptance of this Note, acknowledge and agree that, by reason of the provisions
      of Section 3(c)(iii) following conversion or redemption of any portion of this
      Note, the outstanding Principal represented by this Note may be less than the
      Principal stated on the face of this Note.

     

    (b)  Lost,
      Stolen or Mutilated Note.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Note, and, in the case of loss,
      theft or destruction, of any indemnification undertaking by the Holder to the
      Company in customary form and, in the case of mutilation, upon surrender and
      cancellation of this Note, the Company shall execute and deliver to the Holder
      a
      new Note (in accordance with Section 16(d)) representing the outstanding
      Principal.

     

    (c)  Note
      Exchangeable for Different Denominations.
      This
      Note is exchangeable, upon the surrender hereof by the Holder at the principal
      office of the Company, for a new Note or Notes (in accordance with Section
      16(d)
      and in principal amounts of at least $100,000) representing in the aggregate
      the
      outstanding Principal of this Note, and each such new Note will represent such
      portion of such outstanding Principal as is designated by the Holder at the
      time
      of such surrender.

     

    (d)  Issuance
      of New Notes.
      Whenever the Company is required to issue a new Note pursuant to the terms
      of
      this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall
      represent, as indicated on the face of such new Note, the Principal remaining
      outstanding (or in the case of a new Note being issued pursuant to Section
      16(a)
      or Section 16(c), the Principal designated by the Holder which, when added
      to
      the principal represented by the other new Notes issued in connection with
      such
      issuance, does not exceed the Principal remaining outstanding under this Note
      immediately prior to such issuance of new Notes), (iii) shall have an issuance
      date, as indicated on the face of such new Note, which is the same as the
      Issuance Date of this Note, (iv) shall have the same rights and conditions
      as
      this Note, and (v) shall represent accrued and unpaid Interest and Late Charges
      on the Principal and Interest of this Note, if any, from the Issuance
      Date.

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (22)  NOTICES;
      PAYMENTS.

     

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

     

    (b)  Payments.
      Whenever any payment of cash is to be made by the Company to any Person pursuant
      to this Note, such payment shall be made in lawful money of the United States
      of
      America by a check drawn on the account of the Company and sent via overnight
      courier service to such Person at such address as previously provided to the
      Company in writing (which address, in the case of each of the Purchasers, shall
      initially be as set forth on the Schedule of Buyers attached to the Securities
      Purchase Agreement); provided that the Holder may elect to receive a payment
      of
      cash via wire transfer of immediately available funds by providing the Company
      with prior written notice setting out such request and the Holder's wire
      transfer instructions. Whenever any amount expressed to be due by the terms
      of
      this Note is due on any day which is not a Business Day, the same shall instead
      be due on the next succeeding day which is a Business Day and, in the case
      of
      any Interest Date which is not the date on which this Note is paid in full,
      the
      extension of the due date thereof shall not be taken into account for purposes
      of determining the amount of Interest due on such date. Any amount of Principal
      or other amounts due under the Transaction Documents which is not paid when
      due
      shall result in a late charge being incurred and payable by the Company in
      an
      amount equal to interest on such amount at the rate of twelve percent (12%)
      per
      annum from the date such amount was due until the same is paid in full
      ("Late
      Charge").

     

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

     

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

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    (b)  "Bloomberg"
      means
      Bloomberg Financial Markets.

     

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

     

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

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (e)  "Closing
      Bid Price"
      and
      "Closing
      Sale Price"
      means,
      for any security as of any date, the last closing bid price and last closing
      trade price, respectively, for such security on the Principal Market, as
      reported by Bloomberg, or, if the Principal Market begins to operate on an
      extended hours basis and does not designate the closing bid price or the closing
      trade price, as the case may be, then the last bid price or last trade price,
      respectively, of such security prior to 4:00:00 p.m., New York Time, as reported
      by Bloomberg, or, if the Principal Market is not the principal securities
      exchange or trading market for such security, the last closing bid price or
      last
      trade price, respectively, of such security on the principal securities exchange
      or trading market where such security is listed or traded as reported by
      Bloomberg, or if the foregoing do not apply, the last closing bid price or
      last
      trade price, respectively, of such security in the over-the-counter market
      on
      the electronic bulletin board for such security as reported by Bloomberg, or,
      if
      no closing bid price or last trade price, respectively, is reported for such
      security by Bloomberg, the average of the bid prices, or the ask prices,
      respectively, of any market makers for such security as reported in the "pink
      sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).
      If
      the Closing Bid Price or the Closing Sale Price cannot be calculated for a
      security on a particular date on any of the foregoing bases, the Closing Bid
      Price or the Closing Sale Price, as the case may be, of such security on such
      date shall be the fair market value as mutually determined by the Company and
      the Holder. If the Company and the Holder are unable to agree upon the fair
      market value of such security, then such dispute shall be resolved pursuant
      to
      Section 21. All such determinations to be appropriately adjusted for any stock
      dividend, stock split, stock combination or other similar transaction during
      the
      applicable calculation period.

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    (q)  "Permitted
      Indebtedness"
      means
      (i) the Indebtedness evidenced by this Note and the Other Notes and (ii)
      Permitted Senior Indebtedness and (iii) bonds required to be posted by the
      company to obtain regulatory permits, licenses or insurance as part of
      conducting its business.

     

    (r)  "Permitted
      Senior Indebtedness"
      the
      principal of (and premium, if any), interest on, and all fees and other amounts
      (including, without limitation, any reasonable out-of-pocket costs, enforcement
      expenses (including reasonable out-of-pocket legal fees and disbursements),
      collateral protection expenses and other reimbursement or indemnity obligations
      relating thereto) payable by Company and/or its Subsidiaries under or in
      connection with (1) [INSERT DESCRIPTION OF DEBT FINANCING] and (2) [INSERT
      DESCRIPTION OF PRODUCTION BASED DEBT FINANCING]; provided, however, that the
      aggregate amount of Indebtedness outstanding at any time under clause (2) of
      the
      foregoing does not exceed $7,500,000.

     

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

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

    (z)  "Required
      Holders"
      means
      the holders of Notes representing at least two-thirds (2/3rd)
      of the
      aggregate principal amount of the Notes then outstanding.

     

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

     

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

     

    (cc)  "Stockholder
      Approval"
      has the
      meaning ascribed to such term in the Securities Purchase Agreement.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (dd)  "Stockholder
      Approval Date"
      has the
      meaning ascribed to such term in the Securities Purchase Agreement.

     

    (ee)  "Subscription
      Date"
      means
      December [__], 2006.

     

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

     

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

     

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

     

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

     

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

     

    (kk)  "Weighted
      Average Price"
      means,
      for any security as of any date, the dollar volume-weighted average price for
      such security on the Principal Market during the period beginning at 9:30:01
      a.m., New York Time (or such other time as the Principal Market publicly
      announces is the official open of trading), and ending at 4:00:00 p.m., New
      York
      Time (or such other time as the Principal Market publicly announces is the
      official close of trading) as reported by Bloomberg through its "Volume at
      Price" functions, or, if the foregoing does not apply, the dollar
      volume-weighted average price of such security in the over-the-counter market
      on
      the electronic bulletin board for such security during the period beginning
      at
      9:30:01 a.m., New York Time (or such other time as such market publicly
      announces is the official open of trading), and ending at 4:00:00 p.m., New
      York
      Time (or such other time as such market publicly announces is the official
      close
      of trading) as reported by Bloomberg, or, if no dollar volume-weighted average
      price is reported for such security by Bloomberg for such hours, the average
      of
      the highest closing bid price and the lowest closing ask price of any of the
      market makers for such security as reported in the "pink sheets" by Pink Sheets
      LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average
      Price cannot be calculated for a security on a particular date on any of the
      foregoing bases, the Weighted Average Price of such security on such date shall
      be the fair market value as mutually determined by the Company and the Holder.
      If the Company and the Holder are unable to agree upon the fair market value
      of
      such security, then such dispute shall be resolved pursuant to Section 21.
      All
      such determinations to be appropriately adjusted for any stock dividend, stock
      split, stock combination or other similar transaction during the applicable
      calculation period.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

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

     

    [Signature
      Page Follows]

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

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

    
      	 	 	 
	 	
              RANCHER
                ENERGY CORP.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:

              
                Title:

              

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    EXHIBIT
      I

     

    RANCHER
      ENERGY CORP.

     

    CONVERSION
      NOTICE

     

    Reference
      is made to the Convertible Note (the "Note")
      issued
      to the undersigned by Rancher Energy Corp. (the "Company").
      In
      accordance with and pursuant to the Note, the undersigned hereby elects to
      convert the Conversion Amount (as defined in the Note) of the Note indicated
      below into shares of Common Stock par value $0.00001 per share (the
      "Common
      Stock")
      of the
      Company, as of the date specified below.

    

    
      	
              Date
                of Conversion:
                ___________________________________________________________________________________

            
	
              Aggregate
                Conversion Amount to be converted: 
                _____________________________________________________________

            
	
              Please
                confirm the following information:

            
	
              Conversion
                Price:
                _____________________________________________________________________________________

            
	
              Number
                of shares of Common Stock to be issued:
                _____________________________________________________________

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

            
	
              Issue
                to: 
                ____________________________________________________________________________________________

            
	
              _________________________________________________________________________________

            
	
              _________________________________________________________________________________

            
	
              Facsimile
                Number:
                _____________________________________________________________________________________

            
	
              Authorization:
                ________________________________________________________________________________________

            
	
              By:
                __________________________________________________________________________________________

            
	
              Title:
                ___________________________________________________________________________________

            
	
              Dated:
                _____________________________________________________________________________________________________

            
	
              Account
                Number:
                ______________________________________________________________________________________

            
	
                (if
                electronic book entry transfer)

            
	
              Transaction
                Code Number:
                _______________________________________________________________________________

            
	
                (if
                electronic book entry transfer)

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

     

    ACKNOWLEDGMENT

     

    The
      Company hereby acknowledges this Conversion Notice and hereby directs Pacific
      Stock Transfer Company to issue the above indicated number of shares of Common
      Stock in accordance with the Transfer Agent Instructions dated November __,
      2006
      from the Company and acknowledged and agreed to by Pacific Stock Transfer
      Company.

    
      	 	 	 
	 	
              RANCHER
                ENERGY CORP.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:

              
                Title:

              

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    [FORM
      OF WARRANT]

     

    NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
      IN A
      FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
      UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
      SAID
      ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
      WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
      BY THE SECURITIES.

    

    RANCHER
      ENERGY CORP.

     

    
      WARRANT
        TO
        PURCHASE
        COMMON
        STOCK

    

    

    Warrant
      No.:    

    Number
      of
      Shares of Common Stock:_____________

    Date
      of
      Issuance: December __, 2006 ("Issuance
      Date")

    

    Rancher
      Energy Corp., a Nevada corporation (the "Company"),
      hereby certifies that, for good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, [BUYERS], the registered holder
      hereof or its permitted assigns (the "Holder"),
      is
      entitled, subject to the terms set forth below, to purchase from the Company,
      at
      the Exercise Price (as defined below) then in effect, upon surrender of this
      Warrant to Purchase Common Stock (including any Warrants to Purchase Common
      Stock issued in exchange, transfer or replacement hereof, the "Warrant"),
      at
      any time or times on or after the date hereof, but not after 11:59 p.m., New
      York time, on the Expiration Date (as defined below), ______________
      (_____________)1 
      fully
      paid nonassessable shares of Common Stock (as defined below) (the
      "Warrant
      Shares").
      Except as otherwise defined herein, capitalized terms in this Warrant shall
      have
      the meanings set forth in Section 15. This Warrant is one of the Warrants to
      purchase Common Stock (the "SPA
      Warrants")
      issued
      pursuant to Section 1 of that certain Securities Purchase Agreement, dated
      as of
      December __, 2006 (the "Subscription
      Date"),
      by
      and among the Company and the investors (the "Buyers")
      referred to therein (the "Securities
      Purchase Agreement").

    
       

      
        

      

      1 Insert
        an
        amount equal to the sum of (x) the number of Common Shares and (y) the
        Conversion Shares underlying the Notes being issued to the Holder pursuant
        to
        the Securities Purchase Agreement.

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.  EXERCISE
      OF WARRANT.

     

    (a)  Mechanics
      of Exercise.
      Subject
      to the terms and conditions hereof (including, without limitation, the
      limitations set forth in Section 1(f)), this Warrant may be exercised by the
      Holder on any day on or after the date hereof, in whole or in part, by
      (i) delivery of a written notice, in the form attached hereto as
Exhibit
      A
      (the
      "Exercise
      Notice"),
      of
      the Holder's election to exercise this Warrant and (ii) (A) payment to the
      Company of an amount equal to the applicable Exercise Price multiplied by the
      number of Warrant Shares as to which this Warrant is being exercised (the
      "Aggregate
      Exercise Price")
      in
      cash or by wire transfer of immediately available funds or (B) by notifying
      the
      Company that this Warrant is being exercised pursuant to a Cashless Exercise
      (as
      defined in Section 1(d)). The Holder shall not be required to deliver the
      original Warrant in order to effect an exercise hereunder. Execution and
      delivery of the Exercise Notice with respect to less than all of the Warrant
      Shares shall have the same effect as cancellation of the original Warrant and
      issuance of a new Warrant evidencing the right to purchase the remaining number
      of Warrant Shares. On or before the first (1st)
      Business Day following the date on which the Company has received each of the
      Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless
      Exercise) (the "Exercise
      Delivery Documents"),
      the
      Company shall transmit by facsimile an acknowledgment of confirmation of receipt
      of the Exercise Delivery Documents to the Holder and the Company's transfer
      agent (the "Transfer
      Agent").
      On or
      before the third (3rd)
      Business Day following the date on which the Company has received all of the
      Exercise Delivery Documents (the "Share
      Delivery Date"),
      the
      Company shall (X) provided that the Transfer Agent is participating in The
      Depository Trust Company ("DTC")
      Fast
      Automated Securities Transfer Program, upon the request of the Holder, credit
      such aggregate number of shares of Common Stock to which the Holder is entitled
      pursuant to such exercise to the Holder's or its designee's balance account
      with
      DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
      Transfer Agent is not participating in the DTC Fast Automated Securities
      Transfer Program, issue and dispatch by overnight courier to the address as
      specified in the Exercise Notice, a certificate, registered in the Company's
      share register in the name of the Holder or its designee, for the number of
      shares of Common Stock to which the Holder is entitled pursuant to such
      exercise. Upon delivery of the Exercise Notice and Aggregate Exercise Price
      referred to in clause (ii)(A) above or notification to the Company of a Cashless
      Exercise referred to in Section 1(d), the Holder shall be deemed for all
      corporate purposes to have become the holder of record of the Warrant Shares
      with respect to which this Warrant has been exercised, irrespective of the
      date
      of delivery of the certificates evidencing such Warrant Shares. If this Warrant
      is submitted in connection with any exercise pursuant to this Section 1(a)
      and
      the number of Warrant Shares represented by this Warrant submitted for exercise
      is greater than the number of Warrant Shares being acquired upon an exercise,
      then the Company shall as soon as practicable and in no event later than three
      Business Days after any exercise and at its own expense, issue a new Warrant
      (in
      accordance with Section 7(d)) representing the right to purchase the number
      of
      Warrant Shares purchasable immediately prior to such exercise under this
      Warrant, less the number of Warrant Shares with respect to which this Warrant
      is
      exercised. No fractional shares of Common Stock are to be issued upon the
      exercise of this Warrant, but rather the number of shares of Common Stock to
      be
      issued shall be rounded up to the nearest whole number. The Company shall pay
      any and all taxes which may be payable with respect to the issuance and delivery
      of Warrant Shares upon exercise of this Warrant. NOTWITHSTANDING
      ANY PROVISION OF THIS WARRANT TO THE CONTRARY, UNTIL THE STOCKHOLDER APPROVAL
      DATE (AS DEFINED IN THE SECURITIES PURCHASE AGREEMENT), THIS WARRANT NOT BE
      EXERCISABLE.

     

    
      
        
        

      

      
        -2-

        
          

        

      

       

    

     

    (b)  Exercise
      Price.
      For
      purposes of this Warrant, "Exercise
      Price"
      means
      $1.50, subject to adjustment as provided herein.

     

    (c)  Company's
      Failure to Timely Deliver Securities.
      If
      within five (5) Trading Days after the Company's receipt of the facsimile copy
      of a Exercise Notice the Company shall fail to issue and deliver a certificate
      to the Holder and register such shares of Common Stock on the Company's share
      register or credit the Holder's balance account with DTC for the number of
      shares of Common Stock to which the Holder is entitled upon the Holder's
      exercise hereunder, and if on or after such Trading Day the Holder purchases
      (in
      an open market transaction or otherwise) shares of Common Stock to deliver
      in
      satisfaction of a sale by the Holder of shares of Common Stock issuable upon
      such exercise that the Holder anticipated receiving from the Company (a
"Buy-In"),
      then
      the Company shall, within three (3) Business Days after the Holder's request
      and
      in the Holder's discretion, either (i) pay cash to the Holder in an amount
      equal
      to the Holder's total purchase price (including brokerage commissions, if any)
      for the shares of Common Stock so purchased (the "Buy-In
      Price"),
      at
      which point the Company's obligation to deliver such certificate (and to issue
      such shares of Common Stock) shall terminate, or (ii) promptly honor its
      obligation to deliver to the Holder a certificate or certificates representing
      such shares of Common Stock and pay cash to the Holder in an amount equal to
      the
      excess (if any) of the Buy-In Price over the product of (A) such number of
      shares of Common Stock, times (B) the Weighted Average Price on the date of
      exercise.

     

    (d)  Cashless
      Exercise.
       Notwithstanding
      anything contained herein to the contrary, if at any time after the twelve
      (12)
      month anniversary of the Issuance Date, a Registration Statement (as defined
      in
      the Registration Rights Agreement) covering the Warrant Shares that are the
      subject of an Exercise Notice (the "Unavailable
      Warrant Shares")
      is not
      available for the resale of such Unavailable Warrant Shares, the Holder may,
      in
      its sole discretion, exercise this Warrant in whole or in part and, in lieu
      of
      making the cash payment otherwise contemplated to be made to the Company upon
      such exercise in payment of the Aggregate Exercise Price, elect instead to
      receive upon such exercise the "Net Number" of shares of Common Stock determined
      according to the following formula (a "Cashless
      Exercise"):

     

    Net
      Number = (A
      x
      B) - (A x C)

    B

     

    For
      purposes of the foregoing formula:

     

    A
      = the
      total number of shares with respect to which this Warrant is then being
      exercised.

     

    B
      = the
      arithmetic average of the Weighted Average Prices of the shares of Common Stock
      (as reported by Bloomberg) for the five (5) consecutive Trading Days ending
      on
      the date immediately preceding the date of the Exercise Notice.

     

    
      
        
        

      

      
        -3-

        
          

        

      

       

    

     

    C
      = the
      Exercise Price then in effect for the applicable Warrant Shares at the time
      of
      such exercise.

    

    (e)  Disputes.
      In the
      case of a dispute as to the determination of the Exercise Price or the
      arithmetic calculation of the Warrant Shares, the Company shall promptly issue
      to the Holder the number of Warrant Shares that are not disputed and resolve
      such dispute in accordance with Section 12.

     

    (f)  Limitations
      on Exercises. 

     

    (1)  Beneficial
      Ownership.
      The
      Company shall not effect the exercise of this Warrant, and the Holder shall
      not
      have the right to exercise this Warrant, to the extent that after giving effect
      to such exercise, such Person (together with such Person's affiliates) would
      beneficially own in excess of 9.99% (the "Maximum
      Percentage")
      of the
      shares of Common Stock outstanding immediately after giving effect to such
      exercise. For purposes of the foregoing sentence, the aggregate number of shares
      of Common Stock beneficially owned by such Person and its affiliates shall
      include the number of shares of Common Stock issuable upon exercise of this
      Warrant with respect to which the determination of such sentence is being made,
      but shall exclude shares of Common Stock which would be issuable upon (i)
      exercise of the remaining, unexercised portion of this Warrant beneficially
      owned by such Person and its affiliates and (ii) exercise or conversion of
      the
      unexercised or unconverted portion of any other securities of the Company
      beneficially owned by such Person and its affiliates (including, without
      limitation, any convertible notes or convertible preferred stock or warrants)
      subject to a limitation on conversion or exercise analogous to the limitation
      contained herein. Except as set forth in the preceding sentence, for purposes
      of
      this paragraph, beneficial ownership shall be calculated in accordance with
      Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes
      of this Warrant, in determining the number of outstanding shares of Common
      Stock, the Holder may rely on the number of outstanding shares of Common Stock
      as reflected in (1) the Company's most recent Form 10-K, Form 10-KSB, Form
      10-Q,
      Form 10-QSB, Current Report on Form 8-K or other public filing with the
      Securities and Exchange Commission, as the case may be, (2) a more recent public
      announcement by the Company or (3) any other notice by the Company or the
      Transfer Agent setting forth the number of shares of Common Stock outstanding.
      For any reason at any time, upon the written or oral request of the Holder,
      the
      Company shall within one Business Day confirm orally and in writing to the
      Holder the number of shares of Common Stock then outstanding. In any case,
      the
      number of outstanding shares of Common Stock shall be determined after giving
      effect to the conversion or exercise of securities of the Company, including
      the
      SPA Notes and the SPA Warrants, by the Holder and its affiliates since the
      date
      as of which such number of outstanding shares of Common Stock was reported.
      By
      written notice to the Company, the Holder may from time to time increase or
      decrease the Maximum Percentage to any other percentage not in excess of 9.99%
      specified in such notice; provided that (i) any such increase will not be
      effective until the sixty-first (61st)
      day
      after such notice is delivered to the Company, and (ii) any such increase or
      decrease will apply only to the Holder and not to any other holder of SPA
      Warrants.

     

    
      
        
        

      

      
        -4-

        
          

        

      

       

    

     

    (2)  Principal
      Market Regulation.
      The
      Company shall not be obligated to issue any shares of Common Stock upon exercise
      of this Warrant or conversion of SPA Notes and no Buyer shall be entitled to
      receive any shares of Common Stock if the issuance of such shares of Common
      Stock would exceed that number of shares of Common Stock which the Company
      may
      issue upon exercise or conversion, as applicable, of the SPA Warrants and SPA
      Notes or otherwise without breaching the Company's obligations under the rules
      or regulations of any applicable Eligible Market (the "Exchange
      Cap"),
      except that such limitation shall not apply in the event that the Company (A)
      obtains the approval of its stockholders as required by the applicable rules
      of
      the Eligible Market for issuances of shares of Common Stock in excess of such
      amount or (B) obtains a written opinion from outside counsel to the Company
      that
      such approval is not required, which opinion shall be reasonably satisfactory
      to
      the Required Holders. Until such approval or written opinion is obtained, no
      Buyer shall be issued in the aggregate, upon exercise or conversion, as
      applicable, of any SPA Warrants or SPA Notes, shares of Common Stock in an
      amount greater than the product of the Exchange Cap multiplied by a fraction,
      the numerator of which is the total number of shares of Common Stock underlying
      the SPA Warrants issued to such Buyer pursuant to the Securities Purchase
      Agreement on the Issuance Date and the denominator of which is the aggregate
      number of shares of Common Stock underlying the SPA Warrants issued to the
      Buyers pursuant to the Securities Purchase Agreement on the Issuance Date (with
      respect to each Buyer, the "Exchange
      Cap Allocation").
      In
      the event that any Buyer shall sell or otherwise transfer any of such Buyer's
      SPA Warrants, the transferee shall be allocated a pro rata portion of such
      Buyer's Exchange Cap Allocation, and the restrictions of the prior sentence
      shall apply to such transferee with respect to the portion of the Exchange
      Cap
      Allocation allocated to such transferee. In the event that any holder of SPA
      Warrants shall exercise all of such holder's SPA Warrants into a number of
      shares of Common Stock which, in the aggregate, is less than such holder's
      Exchange Cap Allocation, then the difference between such holder's Exchange
      Cap
      Allocation and the number of shares of Common Stock actually issued to such
      holder shall be allocated to the respective Exchange Cap Allocations of the
      remaining holders of SPA Warrants on a pro rata basis in proportion to the
      shares of Common Stock underlying the SPA Warrants then held by each such
      holder. In the event that the Company is prohibited from issuing any Warrant
      Shares for which an Exercise Notice has been received as a result of the
      operation of this Section 1(f)(2), the Company shall pay cash in exchange for
      cancellation of such Warrant Shares, at a price per Warrant Share equal to
      the
      difference between the Weighted Average Price and the Exercise Price as of
      the
      date of the attempted exercise.

    
      
        
        

      

      
        -5-

        
          

        

      

       

    

     

    (g)  Insufficient
      Authorized Shares.
      If at
      any time from and after the Stockholder Approval Date and while any of the
      Warrants remain outstanding the Company does not have a sufficient number of
      authorized and unreserved shares of Common Stock to satisfy its obligation
      to
      reserve for issuance upon exercise of the Warrants no less than 130% of the
      number of shares of Common Stock as shall from time to time be necessary to
      effect the exercise of all of the Warrants then outstanding (the "Required
      Reserve Amount")
      (an
      "Authorized
      Share Failure"),
      then
      the Company shall immediately take all action necessary to increase the
      Company's authorized shares of Common Stock to an amount sufficient to allow
      the
      Company to reserve the Required Reserve Amount for the Warrants then
      outstanding. Without limiting the generality of the foregoing sentence, as
      soon
      as practicable after the date of the occurrence of an Authorized Share Failure,
      but in no event later than sixty (60) days after the occurrence of such
      Authorized Share Failure, the Company shall hold a meeting of its stockholders
      for the approval of an increase in the number of authorized shares of Common
      Stock. In connection with such meeting, the Company shall provide each
      stockholder with a proxy statement and shall use its best efforts to solicit
      its
      stockholders' approval of such increase in authorized shares of Common Stock
      and
      to cause its board of directors to recommend to the stockholders that they
      approve such proposal.

     

    (h)  Accelerated
      Maturity.
      Notwithstanding the foregoing, in the event that the Conditions to Accelerated
      Maturity (as defined below) are satisfied, then the Company shall have the
      right
      to send a written notice (the "Accelerated
      Maturity Notice")
      to the
      Holder on the Business Day immediately after the Measuring Period (as defined
      below) (the "Accelerated
      Maturity Notice Date")
      indicating that the Expiration Date shall be accelerated to not earlier than
      the
      thirtieth (30th)
      day
      (the "Warrant
      Cancellation Date")
      following receipt of such written notice; provided, that nothing in this
      subsection shall prevent the Holder from exercising this Warrant, in whole
      or
      part, prior to such accelerated Expiration Date. "Conditions
      to Accelerated Maturity"
      means
      the following conditions: (i) the Common Stock shall have traded at or above
      $3.50 per share on each day during the twenty (20) consecutive Trading Days
      immediately prior to the Accelerated Maturity Notice Date; (ii) on each day
      during the period beginning forty-five (45) days prior to the applicable date
      of
      determination and ending on and including the applicable date of determination
      (the "Measuring
      Period"),
      (x)
the
      Registration Statement filed pursuant to the Registration Rights Agreement
      shall
      be effective and available for the resale of all remaining Warrant Shares in
      accordance with the terms of the Registration Rights Agreement and there shall
      not have been any Grace Periods (as defined in the Registration Rights
      Agreement) or
      (y)
      all
      shares of Common Stock issuable upon exercise of the Warrants shall be eligible
      for sale without restriction and without the need for registration under any
      applicable federal or state securities laws;
      (iii)
the
      Company shall have no knowledge of any fact that would cause (x) the
      Registration Statement required pursuant to the Registration Rights Agreement
      not to be effective and available for the resale of all remaining Warrant Shares
      in accordance with the terms of the Registration Rights Agreement or (y) any
      shares of Common Stock issuable upon exercise of the Warrants not to be eligible
      for sale without restriction pursuant to Rule 144(k) and any applicable state
      securities laws; (iv) during
      the twenty (20) consecutive Trading Days immediately prior to the Accelerated
      Maturity Notice Date an average of 500,000 shares of Common Stock shall have
      traded per day; provided,
      that
      all trades executed by the Holder or any Affiliate thereof shall be disregarded
      for purposes of determining compliance with clause (iv) of the Conditions to
      Accelerated Maturity; (v) on each day during the Measuring Period, the
Common
      Stock
      is
      designated for quotation on its principal market and shall not have been
      suspended from trading on such market; (vi) any applicable shares of
Common
      Stock that
      may
      be issuable upon exercise of this Warrant after the Accelerated Maturity Notice
      (without regard to any limitation on exercise of the Warrants), may be issued
      in
      full without violating Section 1(f) hereof and the rules or regulations of
      the
      Principal Market or any applicable Eligible Market; (vii) the Company otherwise
      shall have been in material compliance with and shall not have materially
      breached any provision, covenant, representation or warranty of any Transaction
      Document (as defined in the Securities Purchase Agreement) and (viii) the
      Stockholder Approval has been obtained.

     

    
      
        
        

      

      
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    2.  ADJUSTMENT
      OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
      The
      Exercise Price and the number of Warrant Shares shall be adjusted from time
      to
      time as follows:

     

    (a)  Adjustment
      upon Issuance of shares of Common Stock.
      If and
      whenever on or after the Subscription Date and through the first anniversary
      of
      the later to occur of (i) the Additional Effective Date and (ii) the Initial
      Effective Date (each as defined in the Registration Rights Agreement) (the
      "Full
      Rachet Period"),
      the
      Company issues or sells, or in accordance with this Section 2 is deemed to
      have
      issued or sold, any shares of Common Stock (including the issuance or sale
      of
      shares of Common Stock owned or held by or for the account of the Company,
      but
      excluding shares of Common Stock deemed to have been issued by the Company
      in
      connection with any Excluded Securities (as defined in the SPA Notes) for a
      consideration per share (the "New
      Issuance Price")
      less
      than a price (the "Applicable
      Price")
      equal
      to the Exercise Price in effect immediately prior to such issue or sale or
      deemed issuance or sale (the foregoing a "Dilutive
      Issuance"),
      then
      immediately after such Dilutive Issuance, the Exercise Price then in effect
      shall be reduced to an amount equal to the New Issuance Price. In the event
      of
      any Dilutive Issuance after the end of the Full Ratchet Period, then immediately
      after such Dilutive Issuance, the Exercise Price then in effect shall be reduced
      to an amount equal to the product of (A) the Exercise Price in effect
      immediately prior to such Dilutive Issuance and (B) the quotient determined
      by
      dividing (1) the sum of (I) the product derived by multiplying the Exercise
      Price in effect immediately prior to such Dilutive Issuance and the number
      of
      shares of Common Stock Deemed Outstanding immediately prior to such Dilutive
      Issuance plus (II) the consideration, if any, received by the Company upon
      such
      Dilutive Issuance, by (2) the product derived by multiplying (I) the Exercise
      Price in effect immediately prior to such Dilutive Issuance by (II) the number
      of shares of Common Stock Deemed Outstanding immediately after such Dilutive
      Issuance.
      Upon
      each such adjustment of the Exercise Price hereunder, the number of Warrant
      Shares shall be adjusted to the number of shares of Common Stock determined
      by
      multiplying the Exercise Price in effect immediately prior to such adjustment
      by
      the number of Warrant Shares acquirable upon exercise of this Warrant
      immediately prior to such adjustment and dividing the product thereof by the
      Exercise Price resulting from such adjustment. For purposes of determining
      the
      adjusted Exercise Price under this Section 2(a), the following shall be
      applicable:

    
      
        
        

      

      
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    (i)  
      Issuance
      of Options.
      If the
      Company in any manner grants any Options and the lowest price per share for
      which one share of Common Stock is issuable upon the exercise of any such Option
      or upon conversion, exercise or exchange of any Convertible Securities issuable
      upon exercise of any such Option is less than the Applicable Price, then such
      share of Common Stock shall be deemed to be outstanding and to have been issued
      and sold by the Company at the time of the granting or sale of such Option
      for
      such price per share. For purposes of this Section 2(a)(i), the "lowest price
      per share for which one share of Common Stock is issuable upon exercise of
      such
      Options or upon conversion, exercise or exchange of such Convertible Securities"
      shall be equal to the sum of the lowest amounts of consideration (if any)
      received or receivable by the Company with respect to any one share of Common
      Stock upon the granting or sale of the Option, upon exercise of the Option
      and
      upon conversion, exercise or exchange of any Convertible Security issuable
      upon
      exercise of such Option. No further adjustment of the Exercise Price or number
      of Warrant Shares shall be made upon the actual issuance of such shares of
      Common Stock or of such Convertible Securities upon the exercise of such Options
      or upon the actual issuance of such shares of Common Stock upon conversion,
      exercise or exchange of such Convertible Securities. 

    

    (ii)  
      Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any Convertible Securities and the lowest
      price per share for which one share of Common Stock is issuable upon the
      conversion, exercise or exchange thereof is less than the Applicable Price,
      then
      such share of Common Stock shall be deemed to be outstanding and to have been
      issued and sold by the Company at the time of the issuance or sale of such
      Convertible Securities for such price per share. For the purposes of this
      Section 2(a)(ii), the "lowest price per share for which one share of Common
      Stock is issuable upon the conversion, exercise or exchange" shall be equal
      to
      the sum of the lowest amounts of consideration (if any) received or receivable
      by the Company with respect to one share of Common Stock upon the issuance
      or
      sale of the Convertible Security and upon conversion, exercise or exchange
      of
      such Convertible Security. No further adjustment of the Exercise Price or number
      of Warrant Shares shall be made upon the actual issuance of such shares of
      Common Stock upon conversion, exercise or exchange of such Convertible
      Securities, and if any such issue or sale of such Convertible Securities is
      made
      upon exercise of any Options for which adjustment of this Warrant has been
      or is
      to be made pursuant to other provisions of this Section 2(a), no further
      adjustment of the Exercise Price or number of Warrant Shares shall be made
      by
      reason of such issue or sale. 

     

    
      
        
        

      

      
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    (iii)  
      Change
      in Option Price or Rate of Conversion.
      If the
      purchase price provided for in any Options, the additional consideration, if
      any, payable upon the issue, conversion, exercise or exchange of any Convertible
      Securities, or the rate at which any Convertible Securities are convertible
      into
      or exercisable or exchangeable for shares of Common Stock increases or decreases
      at any time, the Exercise Price and the number of Warrant Shares in effect
      at
      the time of such increase or decrease shall be adjusted to the Exercise Price
      and the number of Warrant Shares which would have been in effect at such time
      had such Options or Convertible Securities provided for such increased or
      decreased purchase price, additional consideration or increased or decreased
      conversion rate, as the case may be, at the time initially granted, issued
      or
      sold. For purposes of this Section 2(a)(iii), if the terms of any Option or
      Convertible Security that was outstanding as of the date of issuance of this
      Warrant are increased or decreased in the manner described in the immediately
      preceding sentence, then such Option or Convertible Security and the shares
      of
      Common Stock deemed issuable upon exercise, conversion or exchange thereof
      shall
      be deemed to have been issued as of the date of such increase or decrease.
      No
      adjustment pursuant to this Section 2(a) shall be made if such adjustment would
      result in an increase of the Exercise Price then in effect or a decrease in
      the
      number of Warrant Shares.

     

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

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

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

     

    (b)  Adjustment
      upon Subdivision or Combination of Common Stock.
      If the
      Company at any time on or after the Subscription Date subdivides (by any stock
      split, stock dividend, recapitalization or otherwise) one or more classes of
      its
      outstanding shares of Common Stock into a greater number of shares, the Exercise
      Price in effect immediately prior to such subdivision will be proportionately
      reduced and the number of Warrant Shares will be proportionately increased.
      If
      the Company at any time on or after the Subscription Date combines (by
      combination, reverse stock split or otherwise) one or more classes of its
      outstanding shares of Common Stock into a smaller number of shares, the Exercise
      Price in effect immediately prior to such combination will be proportionately
      increased and the number of Warrant Shares will be proportionately decreased.
      Any adjustment under this Section 2(b) shall become effective at the close
      of
      business on the date the subdivision or combination becomes
      effective.

     

    (c)  Other
      Events.
      If any
      event occurs of the type contemplated by the provisions of this Section 2 but
      not expressly provided for by such provisions (including, without limitation,
      the granting of stock appreciation rights, phantom stock rights or other rights
      with equity features), then the Company's Board of Directors will make an
      appropriate adjustment in the Exercise Price and the number of Warrant Shares
      so
      as to protect the rights of the Holder; provided that no such adjustment
      pursuant to this Section 2(c) will increase the Exercise Price or decrease
      the
      number of Warrant Shares as otherwise determined pursuant to this Section
      2.

    
      
        
        

      

      
        -10-

        
          

        

      

       

    

     

    3.  RIGHTS
      UPON DISTRIBUTION OF ASSETS.
      If the
      Company shall declare or make any dividend or other distribution of its assets
      (or rights to acquire its assets) to holders of shares of Common Stock, by
      way
      of return of capital or otherwise (including, without limitation, any
      distribution of cash, stock or other securities, property or options by way
      of a
      dividend, spin off, reclassification, corporate rearrangement, scheme of
      arrangement or other similar transaction) (a "Distribution"),
      at
      any time after the issuance of this Warrant, then, in each such
      case:

     

    (a)  any
      Exercise Price in effect immediately prior to the close of business on the
      record date fixed for the determination of holders of shares of Common Stock
      entitled to receive the Distribution shall be reduced, effective as of the
      close
      of business on such record date, to a price determined by multiplying such
      Exercise Price by a fraction of which (i) the numerator shall be the Weighted
      Average Price of the shares of Common Stock on the Trading Day immediately
      preceding such record date minus the value of the Distribution (as determined
      in
      good faith by the Company's Board of Directors) applicable to one share of
      shares of Common Stock, and (ii) the denominator shall be the Weighted Average
      Price of the shares of Common Stock on the Trading Day immediately preceding
      such record date; and

    

    (b)  the
      number of Warrant Shares shall be increased to a number of shares equal to
      the
      number of shares of Common Stock obtainable immediately prior to the close
      of
      business on the record date fixed for the determination of holders of shares
      of
      Common Stock entitled to receive the Distribution multiplied by the reciprocal
      of the fraction set forth in the immediately preceding paragraph (a); provided
      that in the event that the Distribution is of shares of Common Stock (or common
      stock) ("Other
      Shares of Common Stock")
      of a
      company whose common shares are traded on a national securities exchange or
      a
      national automated quotation system, then the Holder may elect to receive a
      warrant to purchase Other Shares of Common Stock in lieu of an increase in
      the
      number of Warrant Shares, the terms of which shall be identical to those of
      this
      Warrant, except that such warrant shall be exercisable into the number of shares
      of Other Shares of Common Stock that would have been payable to the Holder
      pursuant to the Distribution had the Holder exercised this Warrant immediately
      prior to such record date and with an aggregate exercise price equal to the
      product of the amount by which the exercise price of this Warrant was decreased
      with respect to the Distribution pursuant to the terms of the immediately
      preceding paragraph (a) and the number of Warrant Shares calculated in
      accordance with the first part of this paragraph (b).

     

    4.  PURCHASE
      RIGHTS; FUNDAMENTAL TRANSACTIONS.

     

    (a)  Purchase
      Rights.
      In
      addition to any adjustments pursuant to Section 2 above, if at any time the
      Company grants, issues or sells any Options, Convertible Securities or rights
      to
      purchase stock, warrants, securities or other property pro rata to the record
      holders of any class of shares of Common Stock (the "Purchase
      Rights"),
      then
      the Holder will be entitled to acquire, upon the terms applicable to such
      Purchase Rights, the aggregate Purchase Rights which the Holder could have
      acquired if the Holder had held the number of shares of Common Stock acquirable
      upon complete exercise of this Warrant (without regard to any limitations on
      the
      exercise of this Warrant) 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 shares of Common Stock
      are
      to be determined for the grant, issue or sale of such Purchase
      Rights.

    
      
        
        

      

      
        -11-

        
          

        

      

       

    

     

    (b)  Fundamental
      Transactions.
      The
      Company shall not enter into or be party to a Fundamental Transaction unless
      (i)  the Successor Entity assumes in writing all of the obligations of the
      Company under this Warrant and the other Transaction Documents in accordance
      with the provisions of this Section (4)(b) pursuant to written agreements in
      form and substance satisfactory to the Required Holders and approved by the
      Required Holders prior to such Fundamental Transaction, including agreements
      to
      deliver to each holder of Warrants in exchange for such Warrants a security
      of
      the Successor Entity evidenced by a written instrument substantially similar
      in
      form and substance to this Warrant, including, without limitation, an adjusted
      exercise price equal to the value for the shares of Common Stock reflected
      by
      the terms of such Fundamental Transaction, and exercisable for a corresponding
      number of shares of capital stock equivalent to the shares of Common Stock
      acquirable and receivable upon exercise of this Warrant (without regard to
      any
      limitations on the exercise of this Warrant) prior to such Fundamental
      Transaction, and satisfactory to the Required Holders. Upon the occurrence
      of
      any Fundamental Transaction, the Successor Entity shall succeed to, and be
      substituted for (so that from and after the date of such Fundamental
      Transaction, the provisions of this Warrant referring to the "Company" shall
      refer instead to the Successor Entity), and may exercise every right and power
      of the Company and shall assume all of the obligations of the Company under
      this
      Warrant with the same effect as if such Successor Entity had been named as
      the
      Company herein. Upon consummation of the Fundamental Transaction, the Successor
      Entity shall deliver to the Holder confirmation that there shall be issued
      upon
      exercise of this Warrant at
      any
      time after the consummation of the Fundamental Transaction, in lieu of the
      shares of the Common Stock (or
      other
      securities, cash, assets or other property) issuable
      upon the exercise of the Warrant prior to such Fundamental Transaction, such
      shares of stock, securities, cash, assets or any other property whatsoever
      (including warrants or other purchase or subscription rights) which the Holder
      would have been entitled to receive upon the happening of such Fundamental
      Transaction had this Warrant been converted immediately prior to such
      Fundamental Transaction, as adjusted in accordance with the provisions of this
      Warrant.
      In
      addition to and not in substitution for any other rights hereunder, prior to
      the
      consummation of any Fundamental Transaction pursuant to which holders of shares
      of Common Stock are entitled to receive securities or other assets with respect
      to or in exchange for shares of Common Stock (a "Corporate
      Event"),
      the
      Company shall make appropriate provision to insure that the Holder will
      thereafter have the right to receive upon an exercise of this Warrant
at
      any
      time after the consummation of the Fundamental Transaction but
      prior
      to the Expiration Date,
      in lieu
      of the shares of the Common Stock (or
      other
      securities, cash, assets or other property) issuable
      upon the exercise of this Warrant prior to such Fundamental
      Transaction,
      such
      shares of stock, securities, cash, assets or any other property whatsoever
      (including warrants or other purchase or subscription rights) which the Holder
      would have been entitled to receive upon the happening of such Fundamental
      Transaction had this Warrant been exercised immediately prior to such
      Fundamental Transaction. Provision
      made pursuant to the preceding sentence shall be in a form and substance
      reasonably satisfactory to the Required Holders. The provisions of this Section
      shall apply similarly and equally to successive Fundamental Transactions and
      Corporate Events and shall be applied without regard to any limitations on
      the
      exercise of this Warrant. 

     

    
      
        
        

      

      
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    (c)  Notwithstanding
      the foregoing, in the event of a Fundamental Transaction other than one in
      which
      a Successor Entity that is a publicly traded corporation whose stock is quoted
      or listed for trading on an Eligible Market assumes this Warrant such that
      the
      Warrant shall be exercisable for the publicly traded Common Stock of such
      Successor Entity, at the request of the Holder delivered before the 90th day
      after such Fundamental Transaction, the
      Company (or the Successor Entity) shall purchase this Warrant from the Holder
      by
      paying to the Holder, within five Business Days after such request (or, if
      later, on the effective date of the Fundamental Transaction),
      cash in
      an amount equal to the Black Scholes Value of the remaining unexercised portion
      of this Warrant on the date of such Fundamental Transaction. 

     

    5.  NONCIRCUMVENTION.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Articles of Incorporation, Bylaws or through any reorganization, transfer
      of
      assets, consolidation, merger, scheme of arrangement, dissolution, issue or
      sale
      of securities, or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms of this Warrant, and will at
      all
      times in good faith carry out all the provisions of this Warrant and take all
      action as may be required to protect the rights of the Holder. Without limiting
      the generality of the foregoing, the Company (i) shall not increase the par
      value of any shares of Common Stock receivable upon the exercise of this Warrant
      above the Exercise Price then in effect, (ii) shall take all such actions
      as may be necessary or appropriate in order that the Company may validly and
      legally issue fully paid and nonassessable shares of Common Stock upon the
      exercise of this Warrant, and (iii) shall, so long as any of the SPA Warrants
      are outstanding, subsequent to the Stockholder Approval Date take all action
      necessary to reserve and keep available out of its authorized and unissued
      shares of Common Stock, solely for the purpose of effecting the exercise of
      the
      SPA Warrants, 130% of the number of shares of Common Stock as shall from time
      to
      time be necessary to effect the exercise of the SPA Warrants then outstanding
      (without regard to any limitations on exercise).

     

    6.  WARRANT
      HOLDER NOT DEEMED A STOCKHOLDER.
      Except
      as otherwise specifically provided herein, the Holder, solely in such Person's
      capacity as a holder of this Warrant, shall not be entitled to vote or receive
      dividends or be deemed the holder of share capital of the Company for any
      purpose, nor shall anything contained in this Warrant be construed to confer
      upon the Holder, solely in such Person's capacity as the Holder of this Warrant,
      any of the rights of a stockholder of the Company or any right to vote, give
      or
      withhold consent to any corporate action (whether any reorganization, issue
      of
      stock, reclassification of stock, consolidation, merger, conveyance or
      otherwise), receive notice of meetings, receive dividends or subscription
      rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
      which such Person is then entitled to receive upon the due exercise of this
      Warrant. In addition, nothing contained in this Warrant shall be construed
      as
      imposing any liabilities on the Holder to purchase any securities (upon exercise
      of this Warrant or otherwise) or as a stockholder of the Company, whether such
      liabilities are asserted by the Company or by creditors of the Company.
      Notwithstanding this Section 6, the Company shall provide the Holder with copies
      of the same notices and other information given to the stockholders of the
      Company generally, contemporaneously with the giving thereof to the
      stockholders.

     

    
      
        
        

      

      
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    7.  REISSUANCE
      OF WARRANTS.

     

    (a)  Transfer
      of Warrant.
      If this
      Warrant is to be transferred, the Holder shall surrender this Warrant to the
      Company, whereupon the Company will forthwith issue and deliver upon the order
      of the Holder a new Warrant (in accordance with Section 7(d)), registered as
      the
      Holder may request, representing the right to purchase the number of Warrant
      Shares being transferred by the Holder and, if less then the total number of
      Warrant Shares then underlying this Warrant is being transferred, a new Warrant
      (in accordance with Section 7(d)) to the Holder representing the right to
      purchase the number of Warrant Shares not being transferred.

     

    (b)  Lost,
      Stolen or Mutilated Warrant.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Warrant, and, in the case of
      loss, theft or destruction, of any indemnification undertaking by the Holder
      to
      the Company in customary form and, in the case of mutilation, upon surrender
      and
      cancellation of this Warrant, the Company shall execute and deliver to the
      Holder a new Warrant (in accordance with Section 7(d)) representing the right
      to
      purchase the Warrant Shares then underlying this Warrant.

     

    (c)  Exchangeable
      for Multiple Warrants.
      This
      Warrant is exchangeable, upon the surrender hereof by the Holder at the
      principal office of the Company, for a new Warrant or Warrants (in accordance
      with Section 7(d)) representing in the aggregate the right to purchase the
      number of Warrant Shares then underlying this Warrant, and each such new Warrant
      will represent the right to purchase such portion of such Warrant Shares as
      is
      designated by the Holder at the time of such surrender; provided, however,
      that
      no Warrants for fractional shares of Common Stock shall be given.

     

    (d)  Issuance
      of New Warrants.
      Whenever the Company is required to issue a new Warrant pursuant to the terms
      of
      this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
      (ii) shall represent, as indicated on the face of such new Warrant, the right
      to
      purchase the Warrant Shares then underlying this Warrant (or in the case of
      a
      new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant
      Shares designated by the Holder which, when added to the number of shares of
      Common Stock underlying the other new Warrants issued in connection with such
      issuance, does not exceed the number of Warrant Shares then underlying this
      Warrant), (iii) shall have an issuance date, as indicated on the face of such
      new Warrant which is the same as the Issuance Date, and (iv) shall have the
      same
      rights and conditions as this Warrant.

     

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

    
      
        
        

      

      
        -14-

        
          

        

      

       

    

     

    9.  AMENDMENT
      AND WAIVER.
      Except
      as otherwise provided herein, the provisions of this Warrant may be amended
      and
      the Company may take any action herein prohibited, or omit to perform any act
      herein required to be performed by it, only if the Company has obtained the
      written consent of the Required Holders; provided that no such action may
      increase the exercise price of any SPA Warrant or decrease the number of shares
      or class of stock obtainable upon exercise of any SPA Warrant without the
      written consent of the Holder. No such amendment shall be effective to the
      extent that it applies to less than all of the holders of the SPA Warrants
      then
      outstanding.

     

    10.  GOVERNING
      LAW.
      This
      Warrant shall be governed by and construed and enforced in accordance with,
      and
      all questions concerning the construction, validity, interpretation and
      performance of this Warrant 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.

     

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

     

    12.  DISPUTE
      RESOLUTION.
      In the
      case of a dispute as to the determination of the Exercise Price or the
      arithmetic calculation of the Warrant Shares, the Company shall submit the
      disputed determinations or arithmetic calculations via facsimile within two
      Business Days of receipt of the Exercise Notice giving rise to such dispute,
      as
      the case may be, to the Holder. If the Holder and the Company are unable to
      agree upon such determination or calculation of the Exercise Price or the
      Warrant Shares within three Business Days of such disputed determination or
      arithmetic calculation being submitted to the Holder, then the Company shall,
      within two Business Days submit via facsimile (a) the disputed determination
      of
      the Exercise Price to an independent, reputable investment bank selected by
      the
      Company and approved by the Holder or (b) the disputed arithmetic calculation
      of
      the Warrant Shares to the Company's independent, outside accountant. The Company
      shall cause at its expense the investment bank or the accountant, as the case
      may be, to perform the determinations or calculations and notify the Company
      and
      the Holder of the results no later than ten Business Days from the time it
      receives the disputed determinations or calculations. Such investment bank's
      or
      accountant's determination or calculation, as the case may be, shall be binding
      upon all parties absent demonstrable error.

     

    
      
        
        

      

      
        -15-

        
          

        

      

       

    

     

    13.  REMEDIES,
      OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
      The
      remedies provided in this Warrant shall be cumulative and in addition to all
      other remedies available under this Warrant and the other Transaction Documents,
      at law or in equity (including a decree of specific performance and/or other
      injunctive relief), and nothing herein shall limit the right of the Holder
      right
      to pursue actual damages for any failure by the Company to comply with the
      terms
      of this Warrant. The Company acknowledges that a breach by it of its obligations
      hereunder will cause irreparable harm to the Holder and that the remedy at
      law
      for any such breach may be inadequate. The Company therefore agrees that, in
      the
      event of any such breach or threatened breach, the holder of this Warrant shall
      be entitled, in addition to all other available remedies, to an injunction
      restraining any breach, without the necessity of showing economic loss and
      without any bond or other security being required.

     

    14.  TRANSFER.This
      Warrant may be offered for sale, sold, transferred or assigned without the
      consent of the Company, except as may otherwise be required by Section 2(f)
      of
      the Securities Purchase Agreement.

     

    15.  CERTAIN
      DEFINITIONS.
      For
      purposes of this Warrant, the following terms shall have the following
      meanings:

     

    (a)  "Black
      Scholes Value"
      means
      the value of this Warrant based on the Black and Scholes Option Pricing Model
      obtained from the "OV" function on Bloomberg determined as of the day
      immediately following the public announcement of the applicable Fundamental
      Transaction and reflecting (i) a risk-free interest rate corresponding to the
      U.S. Treasury rate for a period equal to the remaining term of this Warrant
      as
      of such date of request and (ii) an expected volatility equal to the greater
      of
      60% and the 100 day volatility obtained from the HVT function on
      Bloomberg.

     

    (b)  "Bloomberg"
      means
      Bloomberg Financial Markets.

     

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

     

    (d)  "Common
      Stock"
      means
      (i) the Company's shares of Common Stock, par value $0.00001 per share, and
      (ii) any share capital into which such Common Stock shall have been changed
      or any share capital resulting from a reclassification of such Common
      Stock.

     

    (e)  "Common
      Stock Deemed Outstanding"
      means,
      at any given time, the number of shares of Common Stock actually outstanding
      at
      such time, plus the number of shares of Common Stock deemed to be outstanding
      pursuant to Sections 2(a)(i) and 2(a)(ii) hereof regardless of whether the
      Options or Convertible Securities are actually exercisable at such time, but
      excluding any shares of Common Stock owned or held by or for the account of
      the
      Company or issuable upon exercise of the SPA Warrants.

     

    
      
        
        

      

      
        -16-

        
          

        

      

       

    

     

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

     

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

     

    (h)  "Expiration
      Date"
      means
      the date sixty (60) months after the date the Stockholder Approval (as defined
      in the Securities Purchase Agreement) is obtained or, if such date falls on
      a
      day other than a Business Day or on which trading does not take place on the
      Principal Market (a "Holiday"),
      the
      next date that is not a Holiday.

     

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        -17-

        
          

        

      

       

    

     

    (n)  "Registration
      Rights Agreement"
      means
      that certain registration rights agreement by and among the Company and the
      Buyers.

     

    (o)  "Required
      Holders"
      means
      the holders of the SPA Warrants representing at least a majority of shares
      of
      Common Stock underlying the SPA Warrants then outstanding.

     

    (p)  "SPA
      Notes"
      means
      the Notes (as defined in the Securities Purchase Agreement).

     

    (q)  "Successor
      Entity"
      means
      the Person (or, if so elected by the Required Holders, the Parent Entity) formed
      by, resulting from or surviving any Fundamental Transaction or the Person (or,
      if so elected by the Required Holders, the Parent Entity) with which such
      Fundamental Transaction shall have been entered into.

     

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

     

    (s)  "Weighted
      Average Price"
      means,
      for any security as of any date, the dollar volume-weighted average price for
      such security on the Principal Market during the period beginning at 9:30:01
      a.m., New York City time, and ending at 4:00:00 p.m., New York City time, as
      reported by Bloomberg through its "Volume at Price" function or, if the
      foregoing does not apply, the dollar volume-weighted average price of such
      security in the over-the-counter market on the electronic bulletin board for
      such security during the period beginning at 9:30:01 a.m., New York City time,
      and ending at 4:00:00 p.m., New York City time, as reported by Bloomberg, or,
      if
      no dollar volume-weighted average price is reported for such security by
      Bloomberg for such hours, the average of the highest closing bid price and
      the
      lowest closing ask price of any of the market makers for such security as
      reported in the "pink sheets" by Pink Sheets LLC (formerly the National
      Quotation Bureau, Inc.). If the Weighted Average Price cannot be calculated
      for
      such security on such date on any of the foregoing bases, the Weighted Average
      Price of such security on such date shall be the fair market value as mutually
      determined by the Company and the Required Holders. If the Company and the
      Required Holders are unable to agree upon the fair market value of the such
      security, then such dispute shall be resolved pursuant to Section 12 with the
      term "Weighted Average Price" being substituted for the term "Exercise Price."
      All such determinations shall be appropriately adjusted for any share dividend,
      share split or other similar transaction during such period.

     

    [Signature
      Page Follows]

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

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

    

    
      	 	 	 
	 	
              RANCHER
                ENERGY CORP.

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
                

              

              Name: 

              Title: 

            

    

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    EXHIBIT
      A

    

    EXERCISE
      NOTICE

     

    TO
      BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
      TO PURCHASE COMMON STOCK

    

    RANCHER
      ENERGY CORP.

     

    The
      undersigned holder hereby exercises the right to purchase _________________
      of
      the shares of Common Stock ("Warrant
      Shares")
      of
      Rancher Energy Corp., a Nevada corporation (the "Company"),
      evidenced by the attached Warrant to Purchase Common Stock (the "Warrant").
      Capitalized terms used herein and not otherwise defined shall have the
      respective meanings set forth in the Warrant.

    

    1.
      Form
      of Exercise Price. The Holder intends that payment of the Exercise Price shall
      be made as:

    

    ____________ a
      "Cash
      Exercise"
      with
      respect to _________________ Warrant Shares; and/or

    

    ____________ a
      "Cashless
      Exercise"
      with
      respect to _______________ Warrant Shares.

    

    2.
      Payment of Exercise Price. In the event that the holder has elected a Cash
      Exercise with respect to some or all of the Warrant Shares to be issued pursuant
      hereto, the holder shall pay the Aggregate Exercise Price in the sum of
      $___________________ to the Company in accordance with the terms of the
      Warrant.

    

    3.
      Delivery of Warrant Shares. The Company shall deliver to the holder __________
      Warrant Shares in accordance with the terms of the Warrant.

    

    Date:
      _______________ __, ______

    

    ______________________________

    Name
      of
      Registered Holder

    
      	 	 	 	 
	By:	 	 	
            
	
              
                

              

              Name:

              Title:

            	 	 	
            

    

       

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    ACKNOWLEDGMENT

    

    The
      Company hereby acknowledges this Exercise Notice and hereby directs [Transfer
      Agent]
      to issue
      the above indicated number of shares of Common Stock in accordance with the
      Transfer Agent Instructions dated December __, 2006 from the Company and
      acknowledged and agreed to by [Transfer
      Agent].

     

    
      	 	 	 
	 	
              
                RANCHER
                  ENERGY CORP.

              

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
                

              

              Name: 

              Title: 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    REGISTRATION
      RIGHTS AGREEMENT

     

    REGISTRATION
      RIGHTS AGREEMENT
      (this
      "Agreement"),
      dated
      as of December __, 2006, by and among Rancher Energy Corp., a Nevada
      corporation,
      with
      headquarters located at 999-18th
      Street,
      Suite 1740, Denver, Colorado 80202
      (the "Company"),
      and
      the undersigned buyers (each, a "Buyer",
      and
      collectively, the "Buyers").

    

    WHEREAS:

     

    A. In
      connection with the Securities Purchase Agreement by and among the parties
      hereto of even date herewith (the "Securities
      Purchase Agreement"),
      the
      Company has agreed, upon the terms and subject to the conditions set forth
      in
      the Securities Purchase Agreement, to issue and sell to each Buyer (i)
      convertible notes of the Company (the "Notes")
      which
      will, among other things, be convertible into shares of the Company's common
      stock, par value $.00001 value per share (the "Common
      Stock")
      (as
      converted, the "Conversion
      Shares")
      in
      accordance with the terms of the Notes, (ii) shares (the "Common
      Shares")
      of
      Common Stock and (iii) warrants (the "Warrants")
      which
      will be exercisable to purchase shares of Common Stock (as exercised
      collectively, the "Warrant
      Shares").

     

    B. To
      induce
      the Buyers to execute and deliver the Securities Purchase 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 Securities Purchase Agreement. As used in this
      Agreement, the following terms shall have the following meanings:

     

    a.  "Additional
      Effectiveness Date"
      means
      the date the Additional Registration Statement is declared effective by the
      SEC.

     

    b.  "Additional
      Effectiveness Deadline"
      means
      the earlier to occur of (i) the date which is five (5) days after the Company
      learns that no review of the Additional Registration Statement will be made
      by
      the staff of the SEC or that the staff has no further comments on the Additional
      Registration Statement, and (ii) the date which is one hundred and twenty (120)
      days after the Additional Filing Date (as defined below), or if there is a
      full
      review of the Additional Registration Statement by the SEC, one hundred and
      fifty (150) days after the Additional Filing Date.

     

    c.  "Additional
      Filing Date"
      means
      the date on which the Additional Registration Statement (as defined below)
      is
      filed with the SEC.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    d.  "Additional
      Filing Deadline"
      means
      (i) if the Stockholder Approval (as defined in the Securities Purchase
      Agreement) is not obtained by the Initial Filing Deadline and no Cutback Shares
      are required to be included in the Additional Registration Statement, the date
      five (5) days after the Stockholder Approval is obtained or (ii) if Cutback
      Shares are required to be included in the Additional Registration Statement,
      the
      date six (6) months from the Initial Filing Date.

     

    e.  "Additional
      Registrable Securities"
      means,
      (i) if the Stockholder Approval is not obtained by the Initial Filing Deadline,
      (x) the Conversion Shares issuable upon conversion or redemption of the Notes
      and (y) any Warrant Shares issued or issuable upon exercise of the Warrants
      not
      previously included on a Registration Statement, (ii) any Cutback Shares not
      previously included on a Registration Statement and (iii) any share capital
      of
      the Company issued or issuable with respect to the Notes, the Conversion Shares,
      the Warrants, the Warrant Shares or Cutback Shares, as applicable, as a result
      of any stock split, stock dividend, recapitalization, exchange or similar event
      or otherwise, without regard to any limitations on conversions of Notes or
      exercises of the Warrants.

     

    f.  "Additional
      Registration Statement"
      means a
      registration statement or registration statements of the Company filed under
      the
      1933 Act covering any Additional Registrable Securities.

     

    g.  "Additional
      Required Registration Amount"
      means
      the sum of 130% of (i) if the Stockholder Approval is not obtained by the
      Initial Filing Deadline, (x) the number of Conversion Shares issuable pursuant
      to the Notes as of the trading day immediately preceding the applicable date
      of
      determination, and (y) the number of Warrant Shares issued and issuable pursuant
      to the Warrants as of the trading day immediately preceding the applicable
      date
      of determination not previously included on a Registration Statement and (ii)
      any Cutback Shares not previously included on a Registration Statement, all
      subject to adjustment as provided in Section 2(e), without regard to any
      limitations on conversions of the Notes or exercises of the
      Warrants.

     

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

     

    i.  "Closing
      Date"
      shall
      mean the initial Closing Date, as set forth in the Securities Purchase
      Agreement.

     

    j.  "Effective
      Date"
      means
      the Initial Effective Date and the Additional Effective Date, as
      applicable.

     

    k.  "Effectiveness
      Deadline"
      means
      the Initial Effectiveness Deadline (as defined below) and the Additional
      Effectiveness Deadline (as defined below), as applicable.

     

    l.  "Equity
      Conditions"
      means
      each of the following conditions on each applicable date of determination:
      (i)
      the Common
      Stock
      is
      designated for quotation on the Principal Market or any applicable Eligible
      Market (each as defined in the Securities Purchase Agreement) and shall not
      have
      been suspended from trading on such exchange or market (other than suspensions
      of not more than two (2) days and occurring prior to the applicable date of
      determination due to business announcements by the Company) nor shall delisting
      or suspension by such exchange or market been threatened or pending either
      (A)
      in writing by such exchange or market or (B) by falling below the then effective
      minimum listing maintenance requirements of such exchange or market; (ii) the
      Company shall have delivered Conversion Shares upon conversion of the Notes
      and
      Warrant Shares upon exercise of the Warrants to the holders on a timely basis
      as
      set forth in Section 2(c)(ii) of the Notes and Sections 2(a) of the Warrants;
      (iii) any applicable shares of Common
      Stock to
      be
      issued in connection with the event requiring determination may be issued in
      full without violating the rules or regulations of the exchange or market upon
      which the Company's Common Stock is then listed or quoted; (iv) the Company
      shall not have failed to timely make any payments within five (5) Business
      Days
      of when such payment is due pursuant to any Transaction Document (as defined
      in
      the Securities Purchase Agreement; (v) there shall not have occurred either
      (A)
      the public announcement of a pending, proposed or intended Fundamental
      Transaction (as defined in the Notes) which has not been abandoned, terminated
      or consummated, or (B) an
      Event
      of Default (as defined in the Notes) or (C) an event that with the passage
      of
      time or giving of notice would constitute an Event of Default; and (vi)
the
      Company otherwise shall have been in material compliance with and shall not have
      materially breached any provision, covenant, representation or warranty of
      any
      Transaction Document.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    m.  "Equity
      Conditions Failure"
      means
      that on any day during the period commencing ten (10) Trading Days prior to
      the
      applicable Registration Delay Payments Payment Date through the applicable
      Registration Delay Payments Payment Date, the Equity Conditions have not been
      satisfied (or waived in writing by the applicable holder of Registrable
      Securities). 

     

    n.  "Filing
      Deadline"
      means
      the Initial Filing Deadline (as defined below) and the Additional Filing
      Deadline, as applicable.

     

    o.  "Initial
      Effective Date"
      means
      the date the Initial Registration Statement is declared effective by the
      SEC.

     

    p.  "Initial
      Effectiveness Deadline"
      means
      the earlier to occur of (i) the date which is five (5) days after the Company
      learns that no review of the Initial Registration Statement will be made by
      the
      staff of the SEC or that the staff has no further comments on the Initial
      Registration Statement, (ii) the date which is one hundred and twenty (120)
      days
      after the Closing Date, or if there is a full review of the Initial Registration
      Statement by the SEC, one hundred and fifty (150) days after the Closing
      Date.

     

    q.  "Initial
      Filing Date"
      means
      the date on which the Initial Registration Statement (as defined below) is
      filed
      with the SEC.

     

    r.  "Initial
      Filing Deadline"
      means
      the date seventy-five (75) days after the Closing Date.

     

    s.  "Initial
      Registrable Securities"
      means
      (A) if the Stockholder Approval is obtained by the Initial Filing Deadline,
      (i)
      the Conversion Shares issued or issuable upon conversion or redemption of the
      Notes, (ii) the Common Shares, (iii) the Warrant Shares issued or issuable
      upon
      exercise of the Warrants and (iv) any share capital of the Company issued or
      issuable with respect to the Common Shares, the Warrant Shares or the Warrants,
      the Conversion Shares and the Notes, 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 or exercises of the
      Warrants and (B) if the Stockholder Approval is not obtained by the Initial
      Filing Deadline, the Common Shares.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    t.  "Initial
      Required Registration Amount"
      means
      (I) (A) if the Stockholder Approval is obtained by the Initial Filing Deadline,
      130% of the sum of (i), the number of Conversion Shares issued or issuable
      pursuant to the Notes as of the trading day immediately preceding the applicable
      date of determination, (ii) the number of Common Shares issued and (iii) the
      number of Warrant Shares issued and issuable pursuant to the Warrants as of
      the
      trading day immediately preceding the applicable date of determination, all
      subject to adjustment as provided in Section 2(e), without regard to any
      limitations on conversions of the Notes or exercises of the Warrants, and (B)
      if
      the Stockholder Approval is not obtained by the Initial Filing Deadline, the
      number of Common Shares issued or (II) such other amount as may be required
      by
      the staff of the SEC. Any shares included under clause (I) of the immediately
      preceding sentence but excluded from the definition of Initial Required
      Registration Amount because of clause (II), are referred to herein as the
      "Cutback
      Shares".

     

    u.  "Initial
      Registration Statement"
      means a
      registration statement or registration statements of the Company filed under
      the
      1933 Act covering the Initial Registrable Securities.

     

    v.  "Investor"
      means a
      Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights
      under this Agreement 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 and who
      agrees to become bound by the provisions of this Agreement in accordance with
      Section 9.

     

    w.  "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.

     

    x.  "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.

     

    y.  "Registrable
      Securities"
      means
      the Initial Registrable Securities and the Additional Registrable
      Securities.

     

    z.  "Registration
      Delay Payments Conversion Price"
      means,
      with respect to any Registration Delay Payments Payment Date, that
      price which shall be the price
      computed as 90% of the arithmetic average of the Weighted Average Price (as
      defined in the Notes) of the Common Stock on each of the ten (10) consecutive
      Trading Days ending on the Trading Day immediately preceding the applicable
      Registration Delay Payments Payment Date (each, a "Registration
      Delay Payments Measuring Period").
      All
      such determinations to be appropriately adjusted for any stock split, stock
      dividend, stock combination or other similar transaction during such
      Registration Delay Payments Measuring Period.

     

    
      
        
        

      

      
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    aa.  "Registration
      Statement"
      means a
      registration statement or registration statements of the Company filed under
      the
      1933 Act covering the Registrable Securities.

     

    bb.  "Required
      Holders"
      means
      the holders of at least a majority of the Registrable Securities.

     

    cc.  "Rule
      415"
      means
      Rule 415 under the 1933 Act or any successor rule providing for offering
      securities on a continuous or delayed basis.

     

    dd.  "SEC"
      means
      the United States Securities and Exchange Commission.

     

    2.  Registration.

     

    a.  Initial
      Mandatory Registration.
      The
      Company shall prepare, and, as soon as practicable, but in no event later than
      the Initial Filing Deadline, file with the SEC the Initial Registration
      Statement on Form S-3 covering the resale of all of the Initial Registrable
      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(e). The Initial Registration Statement prepared
      pursuant hereto shall register for resale at least the number of shares of
      Common Stock equal to the Initial Required Registration Amount determined as
      of
      date the Registration Statement is initially filed with the SEC. The Initial
      Registration Statement shall contain (except if otherwise directed by the
      Required Holders) the "Selling
      Stockholders"
      and
      "Plan
      of Distribution"
      sections in substantially the form attached hereto as Exhibit
      B.
      The
      Company shall use its best efforts to have the Initial Registration Statement
      declared effective by the SEC as soon as practicable, but in no event later
      than
      the Initial Effectiveness Deadline. By 9:30 am on the date following the Initial
      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.  Additional
      Mandatory Registrations.
      The
      Company shall prepare, and, as soon as practicable but in no event later than
      the Additional Filing Deadline, file with the SEC an Additional Registration
      Statement on Form S-3 covering the resale of all of the Additional Registrable
      Securities not previously registered on an Additional Registration Statement
      hereunder. To the extent the staff of the SEC does not permit the Additional
      Required Registration Amount to be registered on the Additional Registration
      Statement, which are Cutback Shares hereunder, the Company shall file Additional
      Registration Statements successively trying to register on each such Additional
      Registration Statement the maximum number of remaining Additional Registrable
      Securities until the Additional Required Registration Amount has been registered
      with the SEC. 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(e). Each Additional Registration Statement
      prepared pursuant hereto shall register for resale at least that number of
      shares of Common Stock equal to the Additional Required Registration Amount
      as
      of date the Registration Statement is initially filed with the SEC. Each
      Additional Registration Statement shall contain (except if otherwise directed
      by
      the Required Holders) the "Selling
      Stockholders"
      and
      "Plan
      of Distribution"
      sections in substantially the form attached hereto as Exhibit
      B.
      The
      Company shall use its best efforts to have each Additional Registration
      Statement declared effective by the SEC as soon as practicable, but in no event
      later than the Additional Effectiveness Deadline. By 9:30 am on the date
      following the Additional 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.

     

    
      
        
        

      

      
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    c.  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. In no event shall
      the Company include any securities other than Registrable Securities on any
      Registration Statement filed with the SEC during the 12-month period following
      the Closing Date without the prior written consent of the Required Holders
      except for those shares of Common Stock and warrants to purchase shares of
      Common Stock identified on Schedule
      2(c)(i)
      attached
      hereto (which shall exclude any securities for which the Company has obtained
      waivers pursuant to Section 7(xiv) of the Securities Purchase Agreement). In
      no
      event shall the Company include any securities other than Registrable Securities
      on any Registration Statement filed with the SEC after the 12-month period
      following the Closing Date without the prior written consent of the Required
      Holders except for up to 3,500,000 shares of Common Stock issuable by the
      Company upon exercise of warrants issued by the Company to Knight Capital
      Markets, LLC, and the Company's other placement agents on the Closing Date,
      no
      more than 5,000,000 shares of Common Stock issuable by the Company upon exercise
      of warrants to be issued by the Company to the Company's secured lenders and
      those shares of Common Stock and warrants to purchase shares of Common Stock
      identified on Schedule
      2(c)(ii)
      attached
      hereto. If the SEC requires that the Company register less than the amount
      of
      shares of Common Stock originally included on any Registration Statement at
      the
      time it was filed, the Registrable Securities on such registration statement
      and
      any other securities allowed to be registered on such Registration Statement
      (as
      set forth below) shall be decreased on a pro rata basis. 

     

    d.  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"),
      which
      shall be Schulte Roth & Zabel LLP or such other counsel as thereafter
      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.

     

    
      
        
        

      

      
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    e.  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 acceptable
      to
      the Required Holders 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.

     

    f.  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 fifteen (15) 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
      or the exercise of the Warrants and 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) and that the Warrants are then
      exercisable for shares of Common Stock at the then prevailing Exercise Price
      (as
      defined in the Warrants).

     

    g.  Effect
      of Failure to File and Obtain and Maintain Effectiveness of Registration
      Statement.
      

     

    (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 shares of Common Stock) (a "Maintenance
      Failure")
      then,
      as liquidated damages and not as a penalty 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 be the exclusive economic remedy available with
      respect to Filing Failures, Effectiveness Failures and Maintenance Failures),
      the Company shall pay to each holder of Registrable Securities relating to
      such
      Registration Statement an amount equal to one percent (1.0%) of the aggregate
      Purchase Price (as such term is defined in the Securities Purchase Agreement)
      of
      such Investor's 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) thereafter
      until such Filing Failure is cured; (ii) the day of an Effectiveness Failure
      and
      on every thirtieth day (pro rated for periods totaling less than thirty days)
      thereafter until such Effectiveness Failure is cured; (iii) the initial day
      of a
      Maintenance Failure and on every thirtieth day (pro rated for periods totaling
      less than thirty days) thereafter until such Maintenance Failure is cured.
      If
      all of the Cutback Shares, if any, have not been registered on a Registration
      Statement which has been declared effective by the SEC on or before the six
      (6)
      month anniversary of the Closing Date (a "Cutback
      Failure")
      then,
      as liquidated damages and not as a penalty to any holder by reason of any such
      delay in or reduction of its ability to sell any Cutback Shares (which remedy
      shall be the exclusive economic remedy available with respect to Cutback
      Failures), the Company shall pay to each holder of Cutback Shares relating
      to
      such Registration Statement an amount equal to one half of a percent (0.5%)
      of
      the aggregate Purchase Price (as such term is defined in the Securities Purchase
      Agreement) of such Investor's Cutback Shares included in such Registration
      Statement on the day of a Cutback Failure and on every thirtieth day (pro rated
      for periods totaling less than thirty days) thereafter until such Cutback
      Failure is cured. 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 be paid on the day of the Filing Failure,
      Effectiveness Failure, Cutback Failure or the initial day of Maintenance
      Failure, as applicable, and thereafter on the earlier of (I) on the thirtieth
      day after the event or failure giving rise to the Registration Delay Payments
      are incurred and (II) the third Business Day after the event or failure giving
      rise to the Registration Delay Payments is cured. The date such Registration
      Delay Payments are due shall be referred to herein as a "Registration
      Delay Payments Payment Date."
      In the
      event the Company fails to make Registration Delay Payments in a timely manner,
      such Registration Delay Payments shall bear interest at the rate of one and
      one-half percent (1.5%) per month (prorated for partial months) until paid
      in
      full. Notwithstanding anything herein or in the Securities Purchase Agreement
      to
      the contrary, in no event shall the aggregate amount of Registration Delay
      Payments (other than Registration Delay Payments payable pursuant to events
      that
      are within the control of the Company) exceed, in the aggregate, 24% of the
      aggregate Purchase Price.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (b)  Registration
      Delay Payments shall be payable on each Registration Delay Payments Payment
      Date, to each holder of Registrable Securities relating to such Registration
      Statement, in shares of Common Stock ("Registration
      Delay Payments Shares")
      so
      long as there is no Equity Conditions Failure; provided however, that the
      Company, at its option following notice to the holder of Registrable Securities,
      may pay Registration Delay Payments on any Registration Delay Payments Payment
      Date in cash ("Cash
      Registration Delay Payments")
      or in
      a combination of Cash Registration Delay Payments and Registration Delay
      Payments Shares. The Company shall deliver a written notice (each, an
      "Registration
      Delay Payments Election Notice")
      to
      each holder of Registrable Securities relating to such Registration Statement
      on
      or prior to the Registration Delay Payments Payment Date (the date such notice
      is delivered to all of the holders, the "Registration
      Delay Payments Notice Date")
      which
      notice (i) either (A) confirms that Registration Delay Payments to be paid
      on
      such Registration Delay Payments Payment Date shall be paid entirely in
      Registration Delay Payments Shares or (B) elects to pay Registration Delay
      Payments as Cash Registration Delay Payments or a combination of Cash
      Registration Delay Payments and Registration Delay Payments Shares and specifies
      the amount of Registration Delay Payments that shall be paid as Cash
      Registration Delay Payments and the amount of Registration Delay Payments,
      if
      any, that shall be paid in Registration Delay Payments Shares and (ii) certifies
      that there is no Equity Conditions Failure. If the Equity Conditions are not
      satisfied as of the Registration Delay Payments Notice Date, then unless the
      Company has elected to pay such Registration Delay Payments as Cash Registration
      Delay Payments, the Registration Delay Payments Election Notice shall indicate
      that unless the holder waives the Equity Conditions, the Registration Delay
      Payment shall be paid as Cash Registration Delay Payments. If the Equity
      Conditions were satisfied as of the Registration Delay Payments Notice Date
      but
      the Equity Conditions are no longer satisfied at any time prior to the
      Registration Delay Payments Payment Date, the Company shall provide the holder
      a
      subsequent notice to that effect indicating that unless the holder waives the
      Equity Conditions, the Registration Delay Payments shall be paid as Cash
      Registration Delay Payments. Registration Delay Payments to be paid on an
      Registration Delay Payments Payment Date in Registration Delay Payments Shares
      shall be paid in a number of fully paid and nonassessable shares (rounded to
      the
      nearest whole share in accordance) of Common Stock equal to the quotient of
      (1)
      the amount of Registration Delay Payments payable on such Registration Delay
      Payments Payment Date less any Cash Registration Delay Payments paid and (2)
      the
      Registration Delay Payments Conversion Price in effect on the applicable
      Registration Delay Payments Payment Date. Notwithstanding the foregoing, if
      the
      Company elects to pay any Registration Delay Payments in Registration Delay
      Payment Shares and the Stockholder Approval (as defined in the Securities
      Purchase Agreement) has not been obtained by the applicable Registration Delay
      Payments Payment Date, the Company may not pay such Registration Delay Payments
      in Registration Delay Payments Shares but instead shall issue to each holder
      of
      Registrable Securities relating to such Registration Statement a convertible
      note with an original principal amount equal to the amount of such Registration
      Delay Payments in the form attached hereto as Exhibit
      A
      to the
      Securities Purchase Agreement; provided however that the conversion price of
      such convertible note shall be equal to the applicable Registration Delay
      Payments Conversion Price.

     

    
      
        
        

      

      
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    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 submit to the SEC, within two (2) Business Days after 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, a request for acceleration of
      effectiveness of such Registration Statement to a time and date not later than
      48 hours after the submission of such request. 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.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    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 until such time as all of such
      Registrable Securities shall have been disposed of in accordance with the
      intended methods of disposition by the seller or sellers thereof as set forth
      in
      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 to review and comment upon (i) a
      Registration Statement at least five (5) 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 reasonably objects. The
      Company shall not submit a request for acceleration of the effectiveness of
      a
      Registration Statement or any amendment or supplement thereto without the prior
      approval of Legal Counsel, which consent shall not be unreasonably withheld.
      The
      Company shall furnish to Legal Counsel, 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, (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, and
      all exhibits and (iii) upon the effectiveness of any Registration Statement,
      one
      copy of the prospectus included in such Registration Statement and all
      amendments and supplements thereto. The Company shall reasonably cooperate
      with
      Legal Counsel in performing the Company's obligations pursuant to this Section
      3.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    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.

     

    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 actual 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 on the same day of such effectiveness
      and
      by overnight mail), (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 reasonable determination that a post-effective amendment
      to a Registration Statement would be appropriate.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    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
      actual notice of the initiation or threat of any proceeding for such
      purpose.

     

    h.  If
      any
      Investor is required under applicable securities laws to be described in the
      Registration Statement as an underwriter, at the reasonable request of such
      Investor, the Company shall furnish to such Investor, on the date of the
      effectiveness of the Registration Statement and thereafter from time to time
      on
      such dates as an Investor may reasonably request (i) a letter, dated such date,
      from the Company's independent certified public accountants in form and
      substance as is customarily given by independent certified public accountants
      to
      underwriters in an underwritten public offering, addressed to the Investors,
      and
      (ii) an opinion, dated as of such date, of counsel representing the Company
      for
      purposes of such Registration Statement, in form, scope and substance as is
      customarily given in an underwritten public offering, addressed to the
      Investors.

     

    i.  Upon
      the
      request of any Investor in connection with such Investor's due diligence
      requirements, if any, the Company shall make available for inspection by (i)
      any
      Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents
      retained by the Investors (collectively, the "Inspectors"),
      all
      pertinent financial and other records, and pertinent corporate documents and
      properties of the Company (collectively, the "Records"),
      as
      shall be reasonably deemed necessary by each Inspector, and cause the Company's
      officers, directors and employees to supply all information which any Inspector
      may reasonably request; provided, however, that each Inspector shall agree
      to
      hold in strict confidence and shall not make any disclosure (except to an
      Investor) or use of any Record or other information which the Company determines
      in good faith to be confidential, and of which determination the Inspectors
      are
      so notified, unless (a) the disclosure of such Records is necessary to avoid
      or
      correct a misstatement or omission in any Registration Statement or is otherwise
      required under the 1933 Act, (b) the release of such Records is ordered pursuant
      to a final, non-appealable subpoena or order from a court or government body
      of
      competent jurisdiction, or (c) the information in such Records has been made
      generally available to the public other than by disclosure in violation of
      this
      or any other agreement of which the Inspector has knowledge. Each Investor
      agrees that it shall, upon learning that disclosure of such Records is sought
      in
      or by a court or governmental body of competent jurisdiction or through other
      means, give prompt notice to the Company and allow the Company, at its expense,
      to undertake appropriate action to prevent disclosure of, or to obtain a
      protective order for, the Records deemed confidential. Nothing herein (or in
      any
      other confidentiality agreement between the Company and any Investor) shall
      be
      deemed to limit the Investors' ability to sell Registrable Securities in a
      manner which is otherwise consistent with applicable laws and
      regulations.

     

    
      
        
        

      

      
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    j.  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, (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,
      non-appealable 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.

     

    k.  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 the Principal
      Market or 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.
      The
      Company shall pay all fees and expenses in connection with satisfying its
      obligation under this Section 3(k).

     

    l.  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.

     

    m.  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 to any Registration
      Statement if reasonably requested by an Investor holding any Registrable
      Securities.

     

    n.  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.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    o.  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.

     

    p.  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.

     

    q.  Within
      two (2) Business Days after a Registration Statement which covers Registrable
      Securities is ordered 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 the form
      attached hereto as Exhibit
      A.

     

    r.  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 and its counsel, in the best
      interest of the Company and, in the opinion of counsel to the Company, otherwise
      required (a "Grace
      Period");
      provided, that the Company shall promptly (i) notify the Investors in writing
      of
      the existence of material, non-public information giving rise to a Grace Period
      (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 no Grace Period shall
      exceed fifteen (15) consecutive days and during any three hundred sixty five
      (365) day period such Grace Periods shall not exceed an aggregate of forty
      (40)
      days and the first day of any Grace Period must be at least five (5) 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
      Securities Purchase Agreement in connection with any sale of Registrable
      Securities with respect to which an 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
      requirements exists), prior to the Investor's receipt of the notice of a Grace
      Period and for which the Investor has not yet settled. 

     

    s.  The
      Company shall make any filing as may be required by NASD Rule 2710 in connection
      with the offering under any Registration Statement of the applicable Registrable
      Securities and shall make any such filing concurrently with its initial filing
      of such Registration Statement with the SEC. 

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    t.  Until
      the
      twelve month anniversary of the later to occur of (i) the Initial Effective
      Date
      and (ii) the Additional Effective Date, the Company shall not enter into any
      Subsequent Placement (as defined in the Securities Purchase Agreement) where
      such Subsequent Placement provides for registration rights (including piggy-back
      registration right) to any one or more of the investors in such Subsequent
      Placement, without the prior written consent of the Required
      Holders.

     

    u.  From
      the
      date hereof until the date that is ninety (90) days following the later to
      occur
      of (i) the Initial Effective Date and (ii) the Additional Effective Date, the
      Company will not, directly or indirectly, file any registration statement (other
      than on Form S-8 or the filing of any post-effective amendments filed solely
      for
      the purpose of updating financial or other information in any registration
      statement of the Company that has been declared effective by the SEC prior
      to
      the date of this Agreement) with the SEC other than the Registration Statement.
      

     

    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 that such Investor shall
      furnish to the Company such 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 Securities Purchase 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.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    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.

     

    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. The Company shall also
      reimburse the Investors for the fees and disbursements of Legal Counsel in
      connection with registration, filing or qualification pursuant to Sections
      2 and
      3 of this Agreement which amount shall be limited to $20,000.

     

    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 (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, if such prospectus was timely made available by the Company pursuant
      to
      Section 3(d) and (ii) shall not be available to the extent such Claim is based
      on a failure of the Investor to deliver or to cause to be delivered the
      prospectus made available by the Company, including a corrected prospectus,
      if
      such prospectus or corrected prospectus was timely made available by the Company
      pursuant to Section 3(d); and (iii) 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.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    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 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.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    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 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 (ii) 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.

     

    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 or quarterly report of the Company
      and such other reports and documents so filed by the Company, 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 and 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 Securities Purchase Agreement.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    10.  Amendment
      of Registration Rights.

     

    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
      this
      Agreement unless the same consideration also is offered to all of the parties
      to
      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: 

    

    Rancher
      Energy Corp.

    999-18th
      Street,
      Suite 1740

    Denver,
      Colorado 80202

    Telephone:
      (303) 629-1122

    Facsimile: (720)
      904-5698

    Attention: John
      Works, President and CEO

    

    With
      a
      copy to: 

    

    Patton
      Boggs LLP

    1660
      Lincoln Street

    Denver,
      Colorado 80264

    Telephone:
      (303) 830-1776

    Facsimile:
      (303) 894-9239

    Attention:
      Robert Bearman, Esq. and Mark Goldschmidt, Esq.

    

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    If
      to
      Legal Counsel:

    

    
      	 	 	
              Schulte
                Roth & Zabel LLP

            

    

    
      	 	 	
              919
                Third Avenue

            

    

    
      	 	 	
              New
                York, New York 10022

            

    

    
      	 	 	
              Telephone:
                (212) 756-2000

            

    

    
      	 	 	
              Facsimile:
                (212) 593-5955

            

    

    
      	 	 	
              Attention:
                Eleazer N. Klein, Esq.

            

    

    

    If
      to a
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers
      attached hereto, with copies to such Buyer's representatives as set forth on
      the
      Schedule of Buyers, 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 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.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    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.

     

    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 Investor hereunder are several and not joint with the
      obligations of any other Investor, and no provision of this Agreement is
      intended to confer any obligations on any Investor vis-à-vis any other Investor.
      Nothing contained herein, and no action taken by any Investor pursuant hereto,
      shall be deemed to constitute the Investors as a partnership, an association,
      a
      joint venture or any other kind of entity, or create a presumption that the
      Investors are in any way acting in concert or as a group with respect to such
      obligations or the transactions contemplated herein.

     

    *
      * * * *
      *

    

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

       

    

    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:

            
	 	 
	 	
              RANCHER
                ENERGY CORP.

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:  
                

            
	 	
              Title:    

            

    

     

    
      
        
        

      

      
        23

        
          

        

      

       

    

    

    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:

                

              

            
	 
 	 
 	 
 
	
            	By:          
              	
            
	 	
              

              Name:

              Title:

            
	 	
            

    

    
      	 	 	 
	
            	
              Address:

            	
            
	 	
              

              

              

            
	 	 

    

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      OF BUYERS

     

    
      	
               

              Buyer

            	 	
              Buyer's
                Address

              and
                Facsimile Number

            	 	
              Buyer's
                Representative's Address 

              and
                Facsimile Number

            
	 	 	 	 	 
	
              [                              
                 ]

            	 	 	 	
              Schulte
                Roth & Zabel LLP

              919
                Third Avenue

              New
                York, New York 10022

              Attn:
                Eleazer Klein, Esq. 

              Facsimile:
                (212) 593-5955

              Telephone:
                (212) 756-2000

            
	
               

               

              [Other
                Buyers]

            	 	 	 	 

    

    

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

    

    FORM
      OF NOTICE OF EFFECTIVENESS

    OF
      REGISTRATION STATEMENT

     

    [Transfer
      Agent]

    [Address]

    Attention:
      

    

    Re: Rancher
      Energy Corp.

     

    Ladies
      and Gentlemen:

     

     

    [We
      are][I am] counsel to Rancher Energy Corp., a Nevada corporation (the
      "Company"),
      and
      have represented the Company in connection with that certain Securities Purchase
      Agreement (the "Securities
      Purchase Agreement")
      entered into by and among the Company and the buyers named therein
      (collectively, the "Holders")
      pursuant to which the Company issued to the Holders (i) senior convertible
      notes
      (the "Notes")
      convertible into the Company's common stock, par value $0.00001 per share
      (the "Common
      Stock), (ii)
      shares (the "Common
      Shares")
      of
      Common Stock and (iii) warrants exercisable for shares of Common Stock (the
      "Warrants").
      Pursuant to the Securities Purchase Agreement, the Company also has entered
      into
      a Registration Rights Agreement with the Holders (the "Registration
      Rights Agreement")
      pursuant to which the Company agreed, among other things, to register the
      Registrable Securities (as defined in the Registration Rights Agreement),
      including the Common Shares, the shares of Common Stock issuable upon conversion
      of the Notes and the shares of Common Stock issuable upon exercise of the
      Warrants, under the Securities Act of 1933, as amended (the "1933
      Act").
      In
      connection with the Company's obligations under the Registration Rights
      Agreement, on ____________ ___, 200_, the Company filed a Registration Statement
      on Form SB-2 (File No. 333-_____________) (the "Registration
      Statement")
      with
      the Securities and Exchange Commission (the "SEC")
      relating to the Registrable Securities which names each of the Holders as a
      selling stockholder thereunder.

     

    In
      connection with the foregoing, [we][I] advise you that a member of the SEC's
      staff has advised [us][me] by telephone that the SEC has entered an order
      declaring the Registration Statement effective under the 1933 Act at
[ENTER
      TIME OF EFFECTIVENESS]
      on
[ENTER
      DATE OF EFFECTIVENESS]
      and
      [we][I] have no knowledge, after telephonic inquiry of a member of the SEC's
      staff, that any stop order suspending its effectiveness has been issued or
      that
      any proceedings for that purpose are pending before, or threatened by, the
      SEC
      and the Registrable Securities are available for resale under the 1933 Act
      pursuant to the Registration Statement.

     

    This
      letter shall serve as our standing instruction to you that the shares of Common
      Stock are freely transferable by the Holders pursuant to the Registration
      Statement. You need not require further letters from us to effect any future
      legend-free issuance or reissuance of shares of Common Stock to the Holders
      as
      contemplated by the Company's Transfer Agent Instructions dated December __,
      2006.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	
              Very
                truly yours,

               

              [ISSUER'S
                COUNSEL]

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

            
	
              CC: [LIST
                NAMES OF HOLDERS]

            	
            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      B

    

    SELLING
      STOCKHOLDERS

     

    The
      shares of Common Stock being offered by the selling stockholders are common
      stock previously issued and shares of common stock issuable upon conversion
      of
      the convertible notes and upon exercise of the warrants. For additional
      information regarding the issuance of those convertible notes and warrants,
      see
      "Private Placement of Convertible Notes Common Shares and Warrants" above.
      We
      are registering the shares of Common Stock in order to permit the selling
      stockholders to offer the shares for resale from time to time. Except for the
      ownership of the Common Shares, Convertible Notes and Warrants issued pursuant
      to the Securities Purchase Agreement, the selling stockholders have not had
      any
      material relationship with us within the past three years.

     

    The
      table
      below lists the selling stockholders and other information regarding the
      beneficial ownership of the shares of Common Stock by each of the selling
      stockholders. The second column lists the number of shares of Common Stock
      beneficially owned by each selling stockholder, based on its ownership of the
      shares of common stock previously, the convertible notes and warrants, as of
      ________, 200_, assuming conversion of all convertible notes and exercise of
      the
      warrants held by the selling stockholders on that date, without regard to any
      limitations on conversions or exercise.

     

    The
      third
      column lists the shares of Common Stock being offered by this prospectus by
      each
      selling stockholder.

     

    In
      accordance with the terms of a registration rights agreement among the Company
      and the selling stockholders, this prospectus generally covers the resale of
      at
      least 130% of the sum of (i) the number of shares of Common Stock issuable
      upon
      conversion of the convertible notes as of the trading day immediately preceding
      the date the registration statement is initially filed with the SEC, (ii) the
      shares of common stock previously issued and (iii) the number of shares of
      Common Stock issuable upon exercise of the related warrants as of the trading
      day immediately preceding the date the registration statement is initially
      filed
      with the SEC.
      Because
      the conversion price of the convertible notes and the exercise price of the
      warrants may be adjusted, the number of shares that will actually be issued
      may
      be more or less than the number of shares being offered by this prospectus.
      The
      fourth column assumes the sale of all of the shares offered by the selling
      stockholders pursuant to this prospectus.

     

    Under
      the
      terms of the convertible notes and the warrants, a selling stockholder may
      not
      convert the convertible notes or exercise the warrants to the extent such
      conversion or exercise would cause such selling stockholder, together with
      its
      affiliates, to beneficially own a number of shares of Common Stock which would
      exceed [9.99][4.99]% of our then outstanding shares of Common Stock following
      such conversion or exercise, excluding for purposes of such determination shares
      of Common Stock issuable upon conversion of the convertible notes which have
      not
      been converted and upon exercise of the warrants which have not been exercised.
      The number of shares in the second column does not reflect this limitation.
      The
      selling stockholders may sell all, some or none of their shares in this
      offering. See "Plan of Distribution."

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      	
              Name
                of Selling Stockholder

            	 	
              Number
                of Shares Owned Prior to Offering

            	 	
              Maximum
                Number of
Shares to be Sold Pursuant to this
                Prospectus

            	 	
              Number
                of Shares Owned 

              After
                Offering

            
	 	 	 	 	 	 	 
	
              [                         
                ] (1) 

            	 	 	 	 	 	
              0

            
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	
              (1) 

            	 	 	 	 	 	 

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    PLAN
      OF DISTRIBUTION

     

    We
      are
      registering the shares of Common Stock previously issued and the shares of
      common stock issuable upon conversion of the convertible notes and upon exercise
      of the warrants to permit the resale of these shares of Common Stock by the
      holders of the shares of common stock, the convertible notes and warrants from
      time to time after the date of this prospectus. We will not receive any of
      the
      proceeds from the sale by the selling stockholders of the shares of Common
      Stock. We will bear all fees and expenses incident to our obligation to register
      the shares of Common Stock.

     

    The
      selling stockholders may sell all or a portion of the shares of Common Stock
      beneficially owned by them and offered hereby from time to time directly or
      through one or more underwriters, broker-dealers or agents. If the shares of
      Common Stock are sold through underwriters or broker-dealers, the selling
      stockholders will be responsible for underwriting discounts or commissions
      or
      agent's commissions. The shares of Common Stock may be sold in one or more
      transactions at fixed prices, at prevailing market prices at the time of the
      sale, at varying prices determined at the time of sale, or at negotiated prices.
      These sales may be effected in transactions, which may involve crosses or block
      transactions, 

     

    
      	·  	
              on
                any national securities exchange or quotation service on which the
                securities may be listed or quoted at the time of
                sale;

            

    

     

    
      	·  	
              in
                the over-the-counter market;

            

    

     

    
      	·  	
              in
                transactions otherwise than on these exchanges or systems or in the
                over-the-counter market;

            

    

     

    
      	·  	
              through
                the writing of options, whether such options are listed on an options
                exchange or otherwise;

            

    

     

    
      	·  	
              ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits purchasers;

            

    

     

    
      	·  	
              block
                trades in which the broker-dealer will attempt to sell the shares
                as agent
                but may position and resell a portion of the block as principal to
                facilitate the transaction;

            

    

     

    
      	·  	
              purchases
                by a broker-dealer as principal and resale by the broker-dealer for
                its
                account;

            

    

     

    
      	·  	
              an
                exchange distribution in accordance with the rules of the applicable
                exchange;

            

    

     

    
      	·  	
              privately
                negotiated transactions;

            

    

     

    
      	·  	
              short
                sales;

            

    

     

    
      	·  	
              sales
                pursuant to Rule 144;

            

    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      	·  	
              broker-dealers
                may agree with the selling securityholders to sell a specified number
                of
                such shares at a stipulated price per
                share;

            

    

     

    
      	·  	
              a
                combination of any such methods of sale;
                and

            

    

     

    
      	·  	
              any
                other method permitted pursuant to applicable
                law.

            

    

     

    If
      the
      selling stockholders effect such transactions by selling shares of Common Stock
      to or through underwriters, broker-dealers or agents, such underwriters,
      broker-dealers or agents may receive commissions in the form of discounts,
      concessions or commissions from the selling stockholders or commissions from
      purchasers of the shares of Common Stock for whom they may act as agent or
      to
      whom they may sell as principal (which discounts, concessions or commissions
      as
      to particular underwriters, broker-dealers or agents may be in excess of those
      customary in the types of transactions involved). In connection with sales
      of
      the shares of Common Stock or otherwise, the selling stockholders may enter
      into
      hedging transactions with broker-dealers, which may in turn engage in short
      sales of the shares of Common Stock in the course of hedging in positions they
      assume. The selling stockholders may also sell shares of Common Stock short
      and
      deliver shares of Common Stock covered by this prospectus to close out short
      positions and to return borrowed shares in connection with such short sales.
      The
      selling stockholders may also loan or pledge shares of Common Stock to
      broker-dealers that in turn may sell such shares.

     

    The
      selling stockholders may pledge or grant a security interest in some or all
      of
      the shares of common stock, convertible notes or warrants or shares of Common
      Stock owned by them and, if they default in the performance of their secured
      obligations, the pledgees or secured parties may offer and sell the shares
      of
      Common Stock from time to time pursuant to this prospectus or any amendment
      to
      this prospectus under Rule 424(b)(3) or other applicable provision of the
      Securities Act of 1933, as amended, amending, if necessary, the list of selling
      stockholders to include the pledgee, transferee or other successors in interest
      as selling stockholders under this prospectus. The selling stockholders also
      may
      transfer and donate the shares of Common Stock in other circumstances in which
      case the transferees, donees, pledgees or other successors in interest will
      be
      the selling beneficial owners for purposes of this prospectus.

     

    The
      selling stockholders and any broker-dealer participating in the distribution
      of
      the shares of Common Stock may be deemed to be "underwriters" within the meaning
      of the Securities Act, and any commission paid, or any discounts or concessions
      allowed to, any such broker-dealer may be deemed to be underwriting commissions
      or discounts under the Securities Act. At the time a particular offering of
      the
      shares of Common Stock is made, a prospectus supplement, if required, will
      be
      distributed which will set forth the aggregate amount of shares of Common Stock
      being offered and the terms of the offering, including the name or names of
      any
      broker-dealers or agents, any discounts, commissions and other terms
      constituting compensation from the selling stockholders and any discounts,
      commissions or concessions allowed or reallowed or paid to
      broker-dealers.

     

    Under
      the
      securities laws of some states, the shares of Common Stock may be sold in such
      states only through registered or licensed brokers or dealers. In addition,
      in
      some states the shares of Common Stock may not be sold unless such shares have
      been registered or qualified for sale in such state or an exemption from
      registration or qualification is available and is complied with.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    There
      can
      be no assurance that any selling stockholder will sell any or all of the shares
      of Common Stock registered pursuant to the registration statement, of which
      this
      prospectus forms a part.

     

    The
      selling stockholders and any other person participating in such distribution
      will be subject to applicable provisions of the Securities Exchange Act of
      1934,
      as amended, and the rules and regulations thereunder, including, without
      limitation, Regulation M of the Exchange Act, which may limit the timing of
      purchases and sales of any of the shares of Common Stock by the selling
      stockholders and any other participating person. Regulation M may also restrict
      the ability of any person engaged in the distribution of the shares of Common
      Stock to engage in market-making activities with respect to the shares of Common
      Stock. All of the foregoing may affect the marketability of the shares of Common
      Stock and the ability of any person or entity to engage in market-making
      activities with respect to the shares of Common Stock.

     

    We
      will
      pay all expenses of the registration of the shares of Common Stock pursuant
      to
      the registration rights agreement, estimated to be
      $[     ] in total, including, without limitation,
      Securities and Exchange Commission filing fees and expenses of compliance with
      state securities or "blue sky" laws; provided, however, that a selling
      stockholder will pay all underwriting discounts and selling commissions, if
      any.
      We will indemnify the selling stockholders against liabilities, including some
      liabilities under the Securities Act, in accordance with the registration rights
      agreements, or the selling stockholders will be entitled to contribution. We
      may
      be indemnified by the selling stockholders against civil liabilities, including
      liabilities under the Securities Act, that may arise from any written
      information furnished to us by the selling stockholder specifically for use
      in
      this prospectus, in accordance with the related registration rights agreement,
      or we may be entitled to contribution.

     

    Once
      sold
      under the registration statement, of which this prospectus forms a part, the
      shares of Common Stock will be freely tradable in the hands of persons other
      than our affiliates.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

    

    TRANSFER
      AGENT INSTRUCTIONS

     

    RANCHER
      ENERGY CORP.

     

    December
      __, 2006

     

    Pacific
      Stock Transfer Company

    Las
      Vegas, Nevada

    

    Ladies
      and Gentlemen:

     

    Reference
      is made to that certain Securities Purchase Agreement, dated as of December
      __,
      2006
      (the "Agreement"),
      by
      and among Rancher Energy Corp., a Nevada corporation (the "Company"),
      and
      the investors named on the Schedule of Buyers attached thereto (collectively,
      the "Holders"),
      pursuant to which the Company is issuing to the Holders (i) convertible notes
      of
      the Company (the "Notes"),
      which
      will be convertible into shares of the Company's common stock, $0.00001 par
      value per share (the "Common
      Stock"),
      (i)
      share (the "Common
      Shares")
      of
      Common Stock and (iii) warrants (the "Warrants"),
      which
      are exercisable to purchase shares of Common Stock.

     

    This
      letter shall serve as our authorization and direction to you (provided that
      you
      are the transfer agent of the Company at such time), subject
      to any stop transfer instructions that we may issue to you from time to time,
      if
      at all:

     

    (i)  to
      issue
      shares of Common Stock upon transfer or resale of the Common Shares;
      and

     

    (ii)  to
      issue
      shares of Common Stock upon conversion of the Notes (the "Conversion
      Shares")
      to or
      upon the order of a Holder from time to time upon delivery to you of a properly
      completed and duly executed Conversion Notice, in the form attached hereto
      as
Exhibit
      I,
      which
      has been acknowledged by the Company as indicated by the signature of a duly
      authorized officer of the Company thereon;

     

    (iii)  to
      issue
      shares of Common Stock upon exercise of the Warrants (the "Warrant
      Shares")
      to or
      upon the order of a Holder from time to time upon delivery to you of a properly
      completed and duly executed Exercise Notice, in the form attached hereto as
      Exhibit
      II,
      which
      has been acknowledged by the Company as indicated by the signature of a duly
      authorized officer of the Company thereon.

     

    You
      acknowledge and agree that so long as you have previously received (a) written
      confirmation from the General Counsel of the Company (or its outside legal
      counsel) that either (i) a registration statement covering resales of the Common
      Shares, the Conversion Shares or the Warrant Shares has been declared effective
      by the Securities and Exchange Commission (the "SEC")
      under
      the Securities Act of 1933, as amended (the "1933
      Act"),
      or
      (ii) that sales of the Common
      Shares, the Conversion
      Shares and the Warrant Shares may be made in conformity with Rule 144 under
      the
      1933 Act, and (b) if applicable, a copy of such registration statement, then,
      within
      three (3) business days after
      your receipt of a notice of transfer, Conversion Notice or the Exercise Notice,
      you shall issue the certificates representing the Common Shares, Conversion
      Shares and/or the Warrant Shares, as applicable, and such certificates shall
      not
      bear any legend restricting transfer of the Common Shares, Conversion Shares
      or
      the Warrant Shares thereby and should not be subject to any stop-transfer
      restriction; provided,
      however,
      that if
      such Common Shares, Conversion Shares and Warrant Shares are not registered
      for
      resale under the 1933 Act or able to be sold under Rule 144, then the
      certificates for such Common Shares, Conversion Shares and/or Warrant Shares
      shall bear the following legend:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      THE
        SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
        THE
        SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
        THE
        SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I)
        IN THE
        ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
        THE
        SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM
        REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
        SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
        ACT.
        NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
        WITH
        A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
        BY THE
        SECURITIES.

    

     

    A
      form of
      written confirmation from the General Counsel of the Company or the Company's
      outside legal counsel that a registration statement covering resales of the
      Common Shares, Conversion Shares and the Warrant Shares has been declared
      effective by the SEC under the 1933 Act is attached hereto as Exhibit
      III.

    Please
      execute this letter in the space indicated to acknowledge your agreement to
      act
      in accordance with these instructions. Should you have any questions concerning
      this matter, please contact me at (866)
      375-7624.

    
      	 	 	 
	 	
              Very
                truly yours,

               

              RANCHER ENERGY CORP.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              
                

              

              Name: 

              Title: 

            

    

     

    Enclosures

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      I

     

    RANCHER
      ENERGY CORP.

     

    CONVERSION
      NOTICE

     

    Reference
      is made to the Convertible Note (the "Note")
      issued
      to the undersigned by Rancher Energy Corp. (the "Company").
      In
      accordance with and pursuant to the Note, the undersigned hereby elects to
      convert the Conversion Amount (as defined in the Note) of the Note indicated
      below into shares of Common Stock par value $0.00001 per share (the
      "Common
      Stock")
      of the
      Company, as of the date specified below.

     

    

    
      	
              Date
                of Conversion:
                __________________________________________________________________________________

            
	
              Aggregate
                Conversion Amount to be converted:
                ____________________________________________________________

            
	
              Please
                confirm the following information:

            
	
              Conversion
                Price:
                ____________________________________________________________________________________

            
	
              Number
                of shares of Common Stock to be issued:
                ____________________________________________________________

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

            
	
              Issue
                to:
                ___________________________________________________________________________________________

            
	
                       
                ________________________________________________________________________________

            
	
               ________________________________________________________________________________

            
	
              Facsimile
                Number: 
                ____________________________________________________________________________________

            
	
              Authorization:
                _______________________________________________________________________________________

            
	
              By:
                _________________________________________________________________________________________

            
	
              Title:
                ___________________________________________________________________________________

            
	
              Dated:
                _____________________________________________________________________________________________________

            
	
              Account
                Number:
                ______________________________________________________________________________________

            
	
                (if
                electronic book entry transfer)

            
	
              Transaction
                Code Number:
                _______________________________________________________________________________

            
	
                (if
                electronic book entry transfer)

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    ACKNOWLEDGMENT

     

    The
      Company hereby acknowledges this Conversion Notice and hereby directs
Pacific
      Stock Transfer Company
      to issue
      the above indicated number of shares of Common Stock in accordance with the
      Transfer Agent Instructions dated December 20, 2006 from the Company and
      acknowledged and agreed to by Pacific
      Stock Transfer Company.

    
      	 	 	 
	 	
              RANCHER
                ENERGY CORP.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:

              
                Title:

              

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    EXHIBIT
      II

    EXERCISE
      NOTICE

     

    TO
      BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
      TO PURCHASE COMMON STOCK

    

    RANCHER
      ENERGY CORP.

     

    The
      undersigned holder hereby exercises the right to purchase _________________
      of
      the shares of Common Stock ("Warrant
      Shares")
      of
      Rancher Energy Corp., a Nevada corporation (the "Company"),
      evidenced by the attached Warrant to Purchase Common Stock (the "Warrant").
      Capitalized terms used herein and not otherwise defined shall have the
      respective meanings set forth in the Warrant.

    

    1.
      Form
      of Exercise Price. The Holder intends that payment of the Exercise Price shall
      be made as:

    

    ____________ a
      "Cash
      Exercise"
      with
      respect to _________________ Warrant Shares; and/or

    

    ____________ a
      "Cashless
      Exercise"
      with
      respect to _______________ Warrant Shares.

    

    2.
      Payment of Exercise Price. In the event that the holder has elected a Cash
      Exercise with respect to some or all of the Warrant Shares to be issued pursuant
      hereto, the holder shall pay the Aggregate Exercise Price in the sum of
      $___________________ to the Company in accordance with the terms of the
      Warrant.

    

    3.
      Delivery of Warrant Shares. The Company shall deliver to the holder __________
      Warrant Shares in accordance with the terms of the Warrant.

    

    Date:
      _______________ __, ______

     

    _____________________________

    Name
      of
      Registered Holder

     

    
      	 	 	 	 	 
	By:	 	 	 	 
	 	
              
                

              

              Name:

              Title:

            	 	 	
            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    ACKNOWLEDGMENT

    

    The
      Company hereby acknowledges this Exercise Notice and hereby directs Pacific
      Stock Transfer Company to
      issue
      the above indicated number of shares of Common Stock in accordance with the
      Transfer Agent Instructions dated December 20, 2006 from the Company and
      acknowledged and agreed to by Pacific
      Stock Transfer Company.

    
      	 	 	 
	 	RANCHER
              ENERGY CORP.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
                

              

              Name:

              Title:

            

      
        
          
          

        

        
          
          

          
            

          

        

         

      

    

     

    EXHIBIT
      III

     

    FORM
      OF NOTICE OF EFFECTIVENESS

    OF
      REGISTRATION STATEMENT

     

    Pacific
      Stock Transfer Company 

    Las
      Vegas, Nevada 

    

    Re: Rancher
      Energy Corp.

     

    Ladies
      and Gentlemen:

     

    [We
      are][I am] counsel to Rancher Energy Corp., a Nevada corporation (the
      "Company"),
      and
      have represented the Company in connection with that certain Securities Purchase
      Agreement (the "Securities
      Purchase Agreement")
      entered into by and among the Company and the buyers named therein
      (collectively, the "Holders")
      pursuant to which the Company issued to the Holders (i) senior convertible
      notes
      (the "Notes")
      convertible into the Company's common stock, par value $0.00001 per share
      (the "Common
      Stock), (ii)
      shares (the "Common
      Shares")
      of
      Common Stock and (iii) warrants exercisable for shares of Common Stock (the
      "Warrants").
      Pursuant to the Securities Purchase Agreement, the Company also has entered
      into
      a Registration Rights Agreement with the Holders (the "Registration
      Rights Agreement")
      pursuant to which the Company agreed, among other things, to register the
      Registrable Securities (as defined in the Registration Rights Agreement),
      including the Common Shares, the shares of Common Stock issuable upon conversion
      of the Notes and the shares of Common Stock issuable upon exercise of the
      Warrants, under the Securities Act of 1933, as amended (the "1933
      Act").
      In
      connection with the Company's obligations under the Registration Rights
      Agreement, on ____________ ___, 200_, the Company filed a Registration Statement
      on Form SB-2 (File No. 333-_____________) (the "Registration
      Statement")
      with
      the Securities and Exchange Commission (the "SEC")
      relating to the Registrable Securities which names each of the Holders as a
      selling stockholder thereunder.

     

    In
      connection with the foregoing, [we][I] advise you that a member of the SEC's
      staff has advised [us][me] by telephone that the SEC has entered an order
      declaring the Registration Statement effective under the 1933 Act at
[ENTER
      TIME OF EFFECTIVENESS]
      on
[ENTER
      DATE OF EFFECTIVENESS]
      and
      [we][I] have no knowledge, after telephonic inquiry of a member of the SEC's
      staff, that any stop order suspending its effectiveness has been issued or
      that
      any proceedings for that purpose are pending before, or threatened by, the
      SEC
      and the Registrable Securities are available for resale under the 1933 Act
      pursuant to the Registration Statement.

     

    This
      letter shall serve as our standing instruction to you that the shares of Common
      Stock are freely transferable by the Holders pursuant to the Registration
      Statement. You need not require further letters from us to effect any future
      legend-free issuance or reissuance of shares of Common Stock to the Holders
      as
      contemplated by the Company's Irrevocable Transfer Agent Instructions dated
      December 20, 2006. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	
              Very
                truly yours,

               

              [ISSUER'S
                COUNSEL]

               

            
	 	By:	 
	 	
              

            
	CC: [LIST
              NAMES OF HOLDERS]	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    FORM
      OF LEGAL OPINION

     

    1.  The
      Company and each of its Subsidiaries is a corporation duly incorporated, validly
      existing and in good standing under the laws of the state of its incorporation.
      The Company has the requisite corporate power to own, lease and operate its
      properties and to conduct its business as
      presently conducted. The Company and each of its Subsidiaries is duly qualified
      as a foreign corporation to do business and is in good standing in each
      jurisdiction in which such qualification is necessary to conduct its
      business.

     

    2.  The
      Company has the requisite corporate power and authority to execute, deliver
      and
      perform all of its obligations under the Transaction Documents, including the
      issuance of the Common Shares, the Notes, the Conversion Shares, the Warrants
      and the Warrant Shares in accordance with the terms thereof. The execution
      and
      delivery of the Transaction Documents by the Company and the consummation of
      the
      transactions contemplated therein (including without limitation, the issuance
      and sale of the Common Shares, Notes and Warrants) have been duly authorized
      by
      the Company's Board of Directors, and no further consent or authorization of
      the
      Company, its Board of Directors or its stockholders is required therefor. The
      Transaction Documents have been duly executed and delivered by the Company.
      The
      Transaction Documents constitute valid and binding obligations of the Company,
      enforceable against the Company in accordance with their respective
      terms.

     

    3.  The
      execution, delivery and performance by the Company of the Transaction Documents,
      including without limitation, the issuance of the Common Shares, the Notes,
      the
      Warrants, the Conversion Shares, and the Warrant Shares, and the consummation
      by
      the Company of the transactions contemplated by the Transaction Documents and
      the compliance by the Company with the terms thereof (a) do not and will not
      violate, conflict with or constitute a default (or an event which, with the
      giving of notice or lapse of time or both, constitutes or would constitute
      a
      default) under, give rise to any right of termination, cancellation or
      acceleration under, (i) the Certificate of Incorporation or By-laws of the
      Company; (ii) any agreement, note, lease, mortgage, deed or other instrument
      to
      which the Company is a party or by which the Company is bound or affected that
      has been publicly filed (the "Publicly
      Filed Documents");
      or
      (iii) any statute, law, rule or regulation of the United States, the Principal
      Market or the State of Nevada applicable to the Company or any order, writ,
      injunction or decree; and (b) do not and will not result in or require the
      creation of any lien, security interest or other charge or encumbrance (other
      than pursuant to the Transactions Documents) upon or with respect to any of
      its
      respective properties.

     

    4.  When
      so
      issued, Common Shares, the Notes, the Warrants, the Conversion Shares and the
      Warrant Shares will be duly authorized and validly issued, fully paid and
      nonassessable, and free of any all liens and charges and preemptive or similar
      rights contained in the Company's Certificate of Incorporation or Bylaws or
      any
      agreement, note, lease, publicly filed mortgage deed or other instrument to
      which the Company is a party or by which the Company is bound that are Publicly
      Filed Documents. Subject to obtaining the Stockholder Approval, the Common
      Shares, the Conversion Shares and the Warrant Shares have been duly and validly
      authorized and reserved for issuance by all proper corporate
      action.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5.  As
      of the
      date hereof, the authorized capital stock of the Company consists of (i)
      100,000,000 shares of Common Stock, of which as of the date hereof,
      [            ] are issued
      and outstanding,
      [                       
 ] shares are reserved for issuance pursuant to the Company's stock option
      and purchase plans and
      [            ] shares are
      reserved for issuance pursuant to securities (other than the aforementioned
      options, the Common Shares, the Notes and the Warrants) exercisable or
      exchangeable for, or convertible into, shares of Common Stock. None of such
      Common Stock is subject to preemptive rights or other rights of the stockholders
      of the Company pursuant to the Certificate of Incorporation or the By-laws
      or
      under the Nevada Corporation Law or pursuant to any agreement, note, lease,
      mortgage deed or other instrument to which the Company is a party or by which
      the Company is bound. There are no securities or instruments of the Company
      containing anti-dilution or similar provisions that will be triggered by the
      issuance of the Common Shares, the Notes, the Conversion Shares, the Warrants
      or
      the Warrant Shares.

     

    6.  The
      offer
      and sale of the Common Shares, the Notes and the Warrants in accordance with
      the
      Securities Purchase Agreement and the issuance of the Conversion Shares and
      the
      Warrant Shares in accordance with the Transaction Documents constitute
      transactions exempt from the registration requirements of the Securities Act
      of
      1933, as amended.

     

    7.  No
      authorization, approval, consent, filing, or other order of any federal or
      state
      governmental body, regulatory agency, self-regulatory organization or stock
      exchange or market, or the stockholders of the Company, or any court, or to
      our
      knowledge, any third party is required to be obtained by the Company to enter
      into and perform its obligations under the Transaction Documents or for the
      issuance and sale of the Common Shares, the Notes, the Conversion Shares, the
      Warrants or the Warrant Shares in accordance with the Transaction Documents,
      or
      for the exercise of any rights and remedies under any Transaction Documents
      except (i) the filing of a Form D under Regulation D of the Securities
      Act of 1933, as amended, (ii) obtaining the Stockholder Approval, and
      (iii) the filing of a Form 8-K pursuant to the Securities Exchange Act of
      1934, as amended.

     

    8.  To
      our
      knowledge, no action, suit, proceeding, inquiry or investigation before or
      by
      any court, public board or body or any governmental agency or self-regulatory
      organization is pending or threatened against the Company or any of its
      Subsidiaries or any of the properties or assets of the Company or any of its
      Subsidiaries.

     

    9.  The
      Company is not an "investment company" or any entity controlled by an
      "investment company," as such term is defined in the Investment Company Act
      of
      1940, as amended.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    RANCHER
      ENERGY CORP.

    

    SECRETARY’S
      CERTIFICATE

    

    The
      undersigned hereby certifies that he is the duly elected, qualified and acting
      Secretary of Rancher Energy Corp., a Nevada corporation (the "Company"),
      and
      that as such he is authorized to execute and deliver this certificate in the
      name and on behalf of the Company and in connection with the Securities Purchase
      Agreement, dated as of December 21, 2006, by and among the Company and the
      investors listed on the Schedule of Buyers attached thereto (the "Securities
      Purchase Agreement"),
      and
      further certifies in his official capacity, in the name and on behalf of the
      Company, the items set forth below. Capitalized terms used but not otherwise
      defined herein shall have the meaning set forth in the Securities Purchase
      Agreement.

     

    
      	1.  	
              Attached
                hereto as Exhibit
                A
                is
                a true, correct and complete copy of the resolutions duly adopted
                by the
                Board of Directors of the Company at a meeting of the Board of Directors
                held on December 20, 2006. Such resolutions have not in any way been
                amended, modified, revoked or rescinded, have been in full force
                and
                effect since their adoption to and including the date hereof and
                are now
                in full force and effect. 

            

    

     

    
      	2.  	
              Attached
                hereto as Exhibit
                B
                is
                a true, correct and complete copy of the Certificate of Incorporation
                of
                the Company, together with any and all amendments thereto currently
                in
                effect, and no action has been taken to further amend, modify or
                repeal
                such Certificate of Incorporation, the same being in full force and
                effect
                in the attached form as of the date hereof.

            

    

     

    
      	3.  	
              Attached
                hereto as Exhibit
                C
                is
                a true, correct and complete copy of the Bylaws of the Company and
                any and
                all amendments thereto currently in effect, and no action has been
                taken
                to further amend, modify or repeal such Bylaws, the same being in
                full
                force and effect in the attached form as of the date
                hereof.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	4.  	
              Each
                person listed below has been duly elected or appointed to the position(s)
                indicated opposite his name and is duly authorized to sign the Securities
                Purchase Agreement and each of the Transaction Documents on behalf
                of the
                Company, and the signature appearing opposite such person’s name below is
                such person’s genuine signature.

            

    

     

    
      	
              Name

            	
              Position

            	
              Signature

            
	
              John
                Works

            	
              Chief
                Executive Officer

            	
              _________________________

            
	
              Andrew
                Casazza

            	
              Chief
                Operating Officer

            	 

    

     

    IN
      WITNESS WHEREOF, the undersigned has hereunto set his hand as of this 21 day
      of
      December, 2006.

     

    
      	 	 	 	 
	
            	 	 	
              
                

              

              John Works

              Secretary, Chief Executive
                Officer

            

    

     

    I,
      Andrew
      Casazza, Chief Operating Officer, hereby certify that [Name] is the duly
      elected, qualified and acting Secretary of the Company and that the signature
      set forth above is his true signature.

     

      	 	 	 	 
	
            	 	 	
              
                

              

              Andrew Casazza

              Chief Operating
                Officer

            

    

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    EXHIBIT
      A

     

    Resolutions

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    EXHIBIT
      B

     

    Certificate
      of Incorporation

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      C

     

    Bylaws

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    RANCHER
      ENERGY CORPORATION

     

    OFFICER'S
      CERTIFICATE

    

    The
      undersigned, the Chief Executive Officer of Rancher Energy Corporation, a Nevada
      corporation (the "Company"),
      pursuant to Section 7(viii) of the Securities Purchase Agreement, dated as
      of
      December 20, 2006, by and among the Company and the investors identified on
      the
      Schedule of Buyers attached thereto (the "Securities
      Purchase Agreement"),
      hereby represents, warrants and certifies to the Buyers as follows (capitalized
      terms used but not otherwise defined herein shall have the meaning set forth
      in
      the Securities Purchase Agreement):

    

    
      	 	
              1.

            	
              The
                representations and warranties made by the Company as set forth in
                Section
                3 of the Securities Purchase Agreement are true and correct in all
                material respects (except for those representations and warranties
                that
                are qualified by materiality or Material Adverse Effect, which shall
                be
                true and correct in all respects) as of the date hereof (except for
                representations and warranties that speak as of a specific date,
                which
                shall be true and correct as of such specified date which shall be
                true
                and correct as of such specified
                date).

            

    

    

    
      	 	
              2.

            	
              The
                Company has, in all respects, performed or complied with all covenants,
                agreements and conditions required to be performed or complied with
                by it
                at or prior to the date hereof under the Transaction
                Documents.

            

    

     

    IN
      WITNESS WHEREOF,
      the
      undersigned has executed this certificate this 21 day of December,
      2006.

    

    
      	 	 	 
	 	
            
	
            	
            	
            
	 	
              

              John
                Works

            
	 	
              Chief
                Executive Officer

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    RANCHER
      ENERGY CORP.

     

    Form
      of Lock-Up Agreement

     

    December
      __, 2006

     

    Rancher
      Energy Corp.

    999-18th
      Street,
      Suite 1740

    Denver,
      Colorado 80202

     

    Re:
      Rancher
      Energy Corp. - Lock-Up Agreement

     

    Dear
      Sirs:

     

    This
      Lock-Up Agreement is being delivered to you in connection with the Securities
      Purchase Agreement (the "Purchase
      Agreement"),
      dated
      as of December __, 2006 by and among Rancher Energy Corp. (the "Company")
      and
      the investors party thereto (the "Buyers"),
      with
      respect to the issuance of (i) convertible notes of the Company (the
      "Notes")
      which
      Notes shall be convertible into the common stock, par value $0.00001 per share,
      of the Company (the "Common
      Stock")
      (ii)
      shares of Common Stock and (iii) warrants to acquire additional shares of Common
      Stock.
      Capitalized
      terms used herein and not otherwise defined herein shall have the respective
      meanings set forth in the Purchase Agreement.

     

    In
      order
      to induce you to enter into the Purchase Agreement, the undersigned agrees
      that
commencing
      on the date hereof and ending on the later of (i) the date 180 days from the
      Closing Date (as defined in the Purchase Agreement) and (ii) the
      date
      the
      Initial Registration Statement (as defined in the Registration Rights Agreement)
      filed by the Company pursuant to the Registration Rights Agreement is declared
      effective by the United States Securities and Exchange Commission,
      but in
      no event later than the one year anniversary of the Closing Date (the
      "Lock-Up
      Period"),
      the
      undersigned will not, without the written consent of the Required Holders (as
      defined in the Registration Rights Agreement), (i)
      sell,
      offer to sell, contract or agree to sell, hypothecate, hedge, pledge, grant
      any
      option to purchase,
      make any
      short sale
      or
      otherwise dispose of or agree to dispose of, directly or indirectly,
      any
      shares
      of Common Stock, owned directly by the undersigned (including holding as a
      custodian) or with respect to which the undersigned has beneficial ownership
      within the rules and regulations of the Securities and Exchange
      Commission,
      or (ii)
      enter into any swap or other arrangement that transfers to another, in whole
      or
      in part, any of the economic consequences of ownership of any
      shares of Common Stock, owned directly by the undersigned (including holding
      as
      a custodian) or with respect to which the undersigned has beneficial ownership
      within the rules and regulations of the Securities and Exchange
      Commission,
      whether
      any such transaction is to be settled by delivery of such securities, in cash
      or
      otherwise, (collectively, the "Undersigned’s
      Shares").
      This
      Lock-Up Agreement shall not apply to any shares of Common Stock acquired by
      the
      undersigned on the open market or otherwise after the Closing Date.

     

    The
      foregoing restriction is expressly agreed to preclude the undersigned or any
      affiliate of the undersigned from engaging in, without the written consent
      of
      the Required Holders, any hedging or other transaction which is designed to
      or
      which reasonably could be expected to lead to or result in a sale or disposition
      of the Undersigned’s Shares even if the Undersigned’s Shares would be disposed
      of by someone other than the undersigned. Such prohibited hedging or other
      transactions would include, without limitation, any short sale or any purchase,
      sale or grant of any right (including, without limitation, any put or call
      option) with respect to any of the Undersigned’s Shares or with respect to any
      security that includes, relates to, or derives any significant part of its
      value
      from the Undersigned’s Shares.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Notwithstanding
      the foregoing, the undersigned may transfer the Undersigned’s Shares (i) as a
bona
      fide
      gift or
      gifts, provided that the donee or donees thereof agree to be bound in writing
      by
      the restrictions set forth herein or (ii) to any trust for the direct or
      indirect benefit of the undersigned or the immediate family of the undersigned,
      provided that the trustee of the trust agrees to be bound in writing by the
      restrictions set forth herein, and provided further that any such transfer
      shall
      not involve a disposition for value. For purposes of this Lock-Up Agreement,
      “immediate family” shall mean any relationship by blood, marriage or adoption,
      not more remote than first cousin. The undersigned now has, and, except as
      contemplated by clauses (i) and (ii) above, for the duration of this Lock-Up
      Agreement will have, good and marketable title to the Undersigned’s Shares, free
      and clear of all liens, encumbrances, and claims whatsoever. The undersigned
      also agrees and consents to the entry of stop transfer instructions with the
      Company’s transfer agent and registrar against the transfer of the Undersigned’s
      Shares except in compliance with the foregoing restrictions.

     

    The
      undersigned understands and agrees that this Lock-Up Agreement is irrevocable
      and shall be binding upon the undersigned’s heirs, legal representatives,
      successors, and assigns.

     

    This
      Lock-Up Agreement may be executed in two counterparts, each of which shall
      be
      deemed an original but both of which shall be considered one and the same
      instrument.

     

    This
      Lock-Up Agreement will be governed by and construed in accordance with the
      laws
      of the State of New York, without giving effect to any choice of law or
      conflicting provision or rule (whether of the State of New York, or any other
      jurisdiction) that would cause the laws of any jurisdiction other than the
      State
      of New York to be applied. In furtherance of the foregoing, the internal laws
      of
      the State of New York will control the interpretation and construction of this
      Lock-Up Agreement, even if under such jurisdiction's choice of law or conflict
      of law analysis, the substantive law of some other jurisdiction would ordinarily
      apply.

     

    The
      Buyers shall be intended third party beneficiaries of this Agreement to the
      same
      extent as if they were parties hereto, and shall be entitled to enforce the
      provisions hereof. No provision of this Agreement may be amended or waived
      without the written consent of the Required Holders.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	
                Very
                truly yours,

            
	 
 	 
 	 
 
	 	
              

              Exact
                Name of Stockholder

            
	 	
               

              
                

              

              Authorized
                Signature

            
	 	
               

              
                

              

              Title

            

      	 	 	 	 
	Agreed
              to and Acknowledged:	 	 	 
	 	 	 	 
	
              RANCHER
                ENERGY CORP.

            	 	 	 
	 	 	 	 
	By:	 	 	 
	
              
                

              

              Name:
                

              Title:

            	 	 	
            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    VOTING
      AGREEMENT

     

    VOTING
      AGREEMENT, dated as of December __, 2006 (this "Agreement"),
      by
      and among Rancher Energy Corp., a Nevada corporation (the "Company"),
      and
      the stockholders listed on the signature pages hereto under the heading
      "Stockholders"
      (each a
      "Stockholder"
      and
      collectively, the "Stockholders").
      

     

    WHEREAS,
      the
      Company and certain investors (each, an "Investor",
      and
      collectively, the "Investors")
      have
      entered into a Securities Purchase Agreement, dated as December __, 2006 (the
      "Securities
      Purchase Agreement"),
      pursuant to which, among other things, the Company has agreed to issue and
      sell
      to the Investors and the Investors have agreed to purchase, (i) convertible
      notes of the Company (the "Notes")
      which
      will, among other things, be convertible into shares of the Company's common
      stock, par value $.00001 value per share (the "Common
      Stock")
      in
      accordance with the terms of the Notes, (ii) shares of Common Stock and (iii)
      warrants which will be exercisable to purchase shares of Common
      Stock.

     

    WHEREAS,
      as of the date hereof, the Stockholders own collectively __________ shares
      of
      Common Stock, which represent in the aggregate approximately ___% of the total
      issued and outstanding capital stock of the Company; and 

     

    WHEREAS,
      as a condition to the willingness of the Investors to enter into the Securities
      Purchase Agreement and to consummate the transactions contemplated thereby
      (collectively, the "Transaction"),
      the
      Investors have required that each Stockholder agree, and in order to induce
      the
      Investors to enter into the Securities Purchase Agreement, each Stockholder
      has
      agreed, to enter into this Agreement with respect to all the Common Stock now
      owned and which may hereafter be acquired by the Stockholder and any other
      securities, if any, which such Stockholder is currently entitled to vote, or
      after the date hererof becomes entitled to vote, at any meeting of stockholders
      of the Company (the "Other
      Securities").

     

    NOW,
      THEREFORE, in consideration of the foregoing and the mutual covenants and
      agreements contained herein, and intending to be legally bound hereby, the
      parties hereto hereby agree as follows:

     

    ARTICLE
      I

     

    VOTING
      AGREEMENT OF THE STOCKHOLDER

     

    SECTION
      1.01.  Voting
      Agreement.
      Subject
      to the last sentence of this Section 1.01, each Stockholder hereby agrees
      that at any meeting of the stockholders of the Company, however called, and
      in
      any action by written consent of the Company's stockholders, each of the
      Stockholders shall vote the Common Stock and the Other Securities: (a) in favor
      of the Stockholder Approval (as defined in the Securities Purchase Agreement)
      as
      described in Section 4(p) of the Securities Purchase Agreement; and (b)
      against any proposal or any other corporate action or agreement that would
      result in a breach of any covenant, representation or warranty or any other
      obligation or agreement of the Company under the Securities Purchase Agreement
      or which could result in any of the conditions to the Company's obligations
      under the Securities Purchase Agreement not being fulfilled. Each Stockholder
      acknowledges receipt and review of a copy of the Securities Purchase Agreement
      and the other Transaction Documents (as defined in the Securities Purchase
      Agreement). The obligations of the Stockholders under this Section 1.01 shall
      terminate immediately following the occurrence of the Stockholder Approval.
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      II

     

    REPRESENTATIONS
      AND WARRANTIES OF THE STOCKHOLDER

     

    Each
      Stockholder hereby represents and warrants, severally but not jointly, to each
      of the Investors as follows:

     

    SECTION
      2.01.  Authority
      Relative to This Agreement.
      Each
      Stockholder has all necessary power and authority to execute and deliver this
      Agreement, to perform his or its obligations hereunder and to consummate the
      transactions contemplated hereby. This Agreement has been duly executed and
      delivered by such Stockholder and constitutes a legal, valid and binding
      obligation of such Stockholder, enforceable against such Stockholder in
      accordance with its terms, except (a) as such enforceability may be limited
      by
      applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
      moratorium or similar laws now or hereafter in effect relating to, or affecting
      generally the enforcement of creditors' and other obligees' rights, (b) where
      the remedy of specific performance or other forms of equitable relief may be
      subject to certain equitable defenses and principles and to the discretion
      of
      the court before which the proceeding may be brought, and (c) where rights
      to
      indemnity and contribution thereunder may be limited by applicable law and
      public policy.

     

    SECTION
      2.02.  No
      Conflict.
      (a)
      The
      execution and delivery of this Agreement by such Stockholder does not, and
      the
      performance of this Agreement by such Stockholder shall not, (i) conflict with
      or violate any federal, state or local law, statute, ordinance, rule,
      regulation, order, judgment or decree applicable to any Stockholder or by which
      the Common Stock or the Other Securities owned by such Stockholder are bound
      or
      affected or (ii) result in any breach of or constitute a default (or an event
      that with notice or lapse of time or both would become a default) under, or
      give
      to others any rights of termination, amendment, acceleration or cancellation
      of,
      or result in the creation of a lien or encumbrance on any of the Common Stock
      or
      the Other Securities owned by such Stockholder pursuant to, any note, bond,
      mortgage, indenture, contract, agreement, lease, license, permit, franchise
      or
      other instrument or obligation to which such Stockholder is a party or by which
      such Stockholder or the Common Stock or Other Securities owned by such
      Stockholder are bound.

     

    (b)  The
      execution and delivery of this Agreement by such Stockholder does not, and
      the
      performance of this Agreement by such Stockholder shall not, require any
      consent, approval, authorization or permit of, or filing with or notification
      to, any governmental entity or other third party by such
      Stockholder.

     

    SECTION
      2.03.  Title
      to the Stock.
      As of
      the date hereof, each Stockholder is the owner of the number of shares of Common
      Stock set forth opposite its name on Appendix
      A
      attached
      hereto, entitled to vote, without restriction, on all matters brought before
      holders of capital stock of the Company, which Common Stock represent on the
      date hereof the percentage of the outstanding stock and voting power of the
      Company set forth on such Appendix. Such Common Stock are all the securities
      of
      the Company owned, either of record or beneficially, by such Stockholder. Such
      Common Stock are owned free and clear of all security interests, liens, claims,
      pledges, options, rights of first refusal, agreements, limitations on such
      Stockholder's voting rights, charges and other encumbrances of any nature
      whatsoever. No Stockholder has appointed or granted any proxy, which appointment
      or grant is still effective, with respect to the Common Stock or Other
      Securities owned by such Stockholder.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      III

     

    COVENANTS

     

    SECTION
      3.01.  No
      Disposition or Encumbrance of Stock.
      Each
      Stockholder hereby covenants and agrees that, until the Stockholder Approval
      has
      been obtained, except as contemplated by this Agreement, such Stockholder shall
      not offer or agree to sell, transfer, tender, assign, hypothecate or otherwise
      dispose of, grant a proxy or power of attorney with respect to, or create or
      permit to exist any security interest, lien, claim, pledge, option, right of
      first refusal, agreement, limitation on such Stockholder's voting rights, charge
      or other encumbrance of any nature whatsoever ("Encumbrance")
      with
      respect to the Common Stock or Other Securities, or directly or indirectly,
      initiate, solicit or encourage any person to take actions which could reasonably
      be expected to lead to the occurrence of any of the foregoing; provided,
      however,
      that
      any such Stockholder may assign, sell or transfer any Common Stock or Other
      Securities provided that any such recipient of the Common Stock or Other
      Securities has delivered to the Company and each Investor a written agreement
      in
      a form reasonably satisfactory to the Investors that the recipient shall be
      bound by, and the Common Stock and/or Other Securities so transferred, assigned
      or sold shall remain subject to this Agreement.

     

    SECTION
      3.02.  Company
      Cooperation.
      The
      Company hereby covenants and agrees that it will not, and each Stockholder
      irrevocably and unconditionally acknowledges and agrees that the Company will
      not (and waives any rights against the Company in relation thereto), recognize
      any Encumbrance or agreement on any of the Common Stock or Other Securities
      subject to this Agreement unless the provisions of Section 3.01 have been
      complied with.

     

    ARTICLE
      IV

     

    MISCELLANEOUS

     

    SECTION
      4.01.  Further
      Assurances.
      Each
      Stockholder will execute and deliver such further documents and instruments
      and
      take all further action as may be reasonably necessary in order to consummate
      the transactions contemplated hereby.

     

    SECTION
      4.02.  Specific
      Performance.
      The
      parties hereto agree that irreparable damage would occur in the event any
      provision of this Agreement was not performed in accordance with the terms
      hereof and that any Investor (without being joined by any other Investor) shall
      be entitled to specific performance of the terms hereof, in addition to any
      other remedy at law or in equity. Any Investor shall be entitled to its
      reasonable attorneys' fees in any action brought to enforce this Agreement
      in
      which it is the prevailing party.

     

    SECTION
      4.03.  Entire
      Agreement.
      This
      Agreement constitutes the entire agreement among the Company and the
      Stockholders (other than the Securities Purchase Agreement and the other
      Transaction Documents) with respect to the subject matter hereof and supersedes
      all prior agreements and understandings, both written and oral, among the
      Company and the Stockholders with respect to the subject matter
      hereof.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    SECTION
      4.04.  Amendment.
      This
      Agreement may not be amended except by an instrument in writing signed by the
      parties hereto.

     

    SECTION
      4.05.  Severability.
      If any
      term or other provision of this Agreement is invalid, illegal or incapable
      of
      being enforced by any rule of law, or public policy, all other conditions and
      provisions of this Agreement shall nevertheless remain in full force and effect
      so long as the economic or legal substance of this Agreement is not affected
      in
      any manner materially adverse to any party. Upon such determination that any
      term or other provision is invalid, illegal or incapable of being enforced,
      the
      parties hereto shall negotiate in good faith to modify this Agreement so as
      to
      effect the original intent of the parties as closely as possible in a mutually
      acceptable manner in order that the terms of this Agreement remain as originally
      contemplated to the fullest extent possible.

     

    SECTION
      4.06.  Governing
      Law.
      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. The parties hereby agree that all actions or proceedings arising
      directly or indirectly from or in connection with this Agreement shall be
      litigated only in the Supreme Court of the State of New York or the United
      States District Court for the Southern District of New York located in New
      York
      County, New York. The parties consent to the jurisdiction and venue of the
      foregoing courts and consent that any process or notice of motion or other
      application to any of said courts or a judge thereof may be served inside or
      outside the State of New York or the Southern District of New York by registered
      mail, return receipt requested, directed to the party being served at its
      address set forth on the signature ages to this Agreement (and service so made
      shall be deemed complete three (3) days after the same has been posted as
      aforesaid) or by personal service or in such other manner as may be permissible
      under the rules of said courts. Each of the Company and each Stockholder
      irrevocably waives, to the fullest extent permitted by law, any objection which
      it may now or hereafter have to the laying of the venue of any such suit,
      action, or proceeding brought in such a court and any claim that suit, action,
      or proceeding has been brought in an inconvenient forum. EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
      HEREBY.

     

    SECTION
      4.07.  Third-Party
      Beneficiaries.
      The
      Investors shall be intended third party beneficiaries of this Agreement to
      the
      same extent as if they were parties hereto, and shall be entitled to enforce
      the
      provisions hereof.

     

    SECTION
      4.08.  Termination.
      This
      Agreement shall terminate immediately following the occurrence of the
      Stockholder Approval or upon the mutual consent of each Stockholder and the
      Investors.

     

    [Signature
      Page Follows]

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, each Stockholder and the Company has duly executed this
      Agreement.

     

    
      	 	 	
              THE
                COMPANY:

            
	 	 	 
	 	 	
              RANCHER
                ENERGY CORP.

            
	 	 	 
	 	 	 
	 	 	
              By:

            	 
	 	 	 	
              Name:
                

            
	 	 	 	
              Title:
                

            
	
              Dated:
                December __, 2006

            	 	 	 
	 	 	
              Address:

            	
              999-18th
                Street, Suite 1740

              Denver,
                Colorado 80202

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    

    

    
      	 	 	
              STOCKHOLDER:

            
	 	 	
              [                                            
                 ]

            
	 	 	 
	 	 	 
	 	 	
              

            
	 	 	 
	
              Dated:
                December __, 2006

            	 	 
	 	 	 
	 	 	
              Address:

            	 
	 	 	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

     

    APPENDIX
      A

     

    
      	
              Stockholder

            	 	
              Common
                Stock 

              Owned

            	 	
              Percentage
                of Stock Outstanding

            	 	
              Voting
                Percentage 

              of
                Stock

              Outstanding

            
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
       

      
        	
                 

                  

                

                 

              	
                 

                 

              	
                 

                  

                

                 

              

      

       

    

    08
      December 2006

    

    
      	
              To:

            	
              The
                holders of units (individually a “Unit
                Holder”
                and collectively the “Unit
                Holders”)
                consisting of shares (the “Shares”)
                of common stock, $.0001 par value (the “Common
                Stock”),
                and warrants (the “Warrants”)
                to purchase shares of Common Stock (the Shares and Warrants together
                are
                collectively the “Units”
                and each a “Unit”)
                of Rancher Energy Corp. (the “Company”)

            

    

     

    Dear
      Unit
      Holder:

    

    This
      letter agreement (the “Agreement”)
      sets
      forth the terms and conditions under which certain of the Unit Holders who
      participated in the Company’s Regulation S offering from approximately 10 July
      2006 through 02 November 2006 (the “Unit
      Offering”)
      agree
      to (i) waive temporarily the ability to exercise Warrants received as part
      of
      the Unit Offering, and (ii) to modify the registration rights concerning the
      Warrants and Shares received in the Unit Offering. Capitalized terms used herein
      and not defined herein shall have the meanings set forth in the Warrant
      Certificate (as defined below) or the Unit Purchase Agreement (as defined
      below).

    

    As
      you
      may be aware, the Company has entered into agreements to (i) acquire certain
      property located in Big Muddy Field (located in the Powder River Basin in
      Wyoming), and (ii) acquire working interests in Cole Creek South Field and
      South
      Glenrock B Field (both of which are located in the Powder River Basin) and
      is in
      the process of obtaining funds through one or more financings (each a
“Financing”)
      sufficient to consummate one or more acquisitions (the “Acquisitions”).

    

    The
      Company currently has 100,000,000 shares of Common Stock, $.0001 par value
      (“Common
      Stock”),
      authorized under its Articles of Incorporation, as amended (the “Articles”),
      and
      such amount of authorized shares is insufficient to accomplish the Financing(s)
      required to obtain funds sufficient to consummate the Acquisitions. The Company
      intends to amend the Articles to increase its authorized shares of Common Stock
      to 225,000,000 shares of Common Stock as promptly as practicable after the
      closing of the Financing(s).

    

    Each
      of
      the Unit Holders is a party to (i) a Warrant Certificate from the Company (the
      “Warrant
      Certificate”),
      which
      states that (A) the Unit Holder, pursuant to Section 2 thereof, may exercise
      the
      Warrants at any time prior to the Expiration Date, and (B) the Company, pursuant
      to Section 4 of the Warrant Certificate, shall keep available out of its
      authorized stock a sufficient number of shares as shall then be issuable upon
      the exercise of all outstanding Warrants, and (ii) a Unit Purchase Agreement
      with the Company (the “Unit
      Purchase Agreement”)
      which
      provides for certain registration rights, pursuant to Section 3 thereof (the
      “Registration
      Rights”),
      concerning certain securities (the “Securities”).

    

    To
      facilitate the Company’s ability to accomplish the Financing(s) and to raise
      funds sufficient to consummate the Acquisitions, the undersigned Unit Holder
      agrees to waive certain rights under the Warrant Certificate and Unit Purchase
      Agreement and enter into certain other agreements as further described below.
      

     

    
      
        

      

    

    Address
      999-18th
      Street, Suite 1740, Denver, Colorado 80202 USA ● Phone
      +1.303.629.1122

    Fax
      +1.720.904.5698 ● Email--johnworks@rancherenergy.com●
      Web--www.rancherenergy.com

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    

    In
      consideration of the foregoing, and for other good and valuable consideration,
      the receipt and sufficiency of which are hereby acknowledged, the undersigned
      agrees as follows:

    

    1.
      Waiver
      and Agreement.
      Each of
      the undersigned Unit Holders, severally and not jointly with the other Unit
      Holders, hereby waives certain rights and makes certain agreements as described
      as follows:

    

    (a)
      Warrant
      Exercise.
      Such
      Unit Holder (i) hereby waives its right and ability to exercise its Warrants,
      pursuant to Section 2 of the Warrant Certificate, until such time as the Company
      has amended its Articles to increase its authorized shares of Common Stock
      to at
      least 225,000,000 shares; and (ii) hereby waives its rights under Section 4
      of
      the Warrant Certificate, which requires the Company to reserve and keep
      available out of its authorized stock such number of shares of Common Stock
      as
      shall be issuable upon the exercise of all outstanding Warrants, until such
      time
      as the Company has amended its Articles to increase its authorized shares of
      Common Stock to at least 225,000,000 shares.

    

    (b)
      Registration
      Rights.
      

    

    (i)
      Each
      of the undersigned Unit Holders, severally and not jointly with the other Unit
      Holders, hereby waives, any claims against the Company for failing to register
      such Unit Holder’s Securities within the 90 day period specified in Section 3 of
      the Unit Purchase Agreement.

    

    (ii)
      Each
      of the undersigned Unit Holders hereby agrees, severally and not jointly with
      the other Unit Holders, with the Company that the Registration Rights set forth
      in the Unit Purchase Agreement are hereby terminated and superseded by the
      registration rights set forth in this subsection 1(b)(ii). The Company shall
      register (A) the shares of Common Stock issued to the Unit Holder as part of
      the
      Unit, and (B) the shares of Common Stock issued or issuable upon exercise of
      the
      Warrants issued to the Unit Holder as part of the Unit (collectively, the
“Registrable
      Securities”)
      by
      filing (unless at such time the Registrable Securities may be resold pursuant
      to
      Rule 144(k) of the Securities Act of 1933, as amended, or
      any
      other rule of similar effect) with the Securities and Exchange Commission (the
      “SEC”)
      and
      using the Company’s best efforts to cause to become effective one or more
      registration statements beginning 12 months following the closing of the
      Financing. If the SEC requires that the Company reduce the number of shares
      so
      registered, then the Registrable Securities shall be decreased pro rata with
      the
      other shares included in any such registration, based on the number of
      Registrable Securities held by the Unit Holders and the number of other
      registrable securities held by the other participants in such registration.
      Each
      of the Unit Holders acknowledges that the foregoing registration rights may
      be
      amended, or compliance by the Company with the terms thereof waived, with the
      written consent of two-thirds in interest of the undersigned Unit
      Holders.

    

    2.
      Governing
      Law.
      THIS
      AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
      AND DECISIONS OF THE STATE OF COLORADO, WITHOUT REGARD TO THE CONFLICT OF LAWS
      PROVISIONS THEREOF.

    

    3.
      Captions.
      Section
      captions and headings used in this Agreement are for convenience only, and
      shall
      not affect the construction of this Agreement.

    

    4.
      Severability. 
      Whenever
      possible, each provision of this Agreement shall be interpreted in such manner
      as to be effective and valid under applicable law, but if any provision of
      this
      Agreement shall be prohibited by or invalid under such law, such provision
      shall
      be ineffective to the extent of such prohibition or invalidity, without
      invalidating the remainder of such provision or the remaining provisions of
      this
      Agreement.

    

    5.
      Counterparts
      & Execution of Agreement.
      This
      Agreement may be executed in any number of counterparts and by the different
      parties hereto on separate counterparts, and each such counterpart shall be
      deemed to be an original, but all such counterparts shall together constitute
      one and the same agreement. The exchange of copies of this Agreement and of
      signature pages by facsimile transmission shall constitute effective execution
      and delivery of this Agreement as to the parties and may be used in lieu of
      the
      original Agreement for all purposes. Signatures of the parties transmitted
      by
      facsimile shall be deemed to be their original signatures of all
      purposes.

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    

    6.
      Successors
      & Assigns.
      This
      Agreement shall be binding upon the parties hereto and their respective
      successors and assigns, and shall inure to the benefit of such parties and
      their
      respective successors and assigns.

     

    7.
      Enforceability.
      The
      parties further acknowledge and agree that the enforceability of this Agreement
      as it pertains to the undersigned Unit Holder shall not be dependent upon
      obtaining an executed Agreement from any other Unit Holder or any other holder
      of the Company’s securities. 

    

    8.
      Full
      Force & Effect.
      Except
      as specifically stated in this Agreement (i) this Agreement shall not
      limit, diminish or waive the obligations of the parties under the Warrant
      Certificate or Unit Purchase Agreement, and (ii) the parties reaffirm their
      obligations under the Warrant Certificate and Unit Purchase Agreement to which
      they are a party and agree that the Warrant Certificate and Unit Purchase
      Agreement remain in full force.

    

    9.
      Information.
      The
      Unit Holder acknowledges that it has all information needed to enter into the
      agreements and make the waivers contemplated by this Agreement and if it has
      requested any information from the Company it acknowledges receiving the
      same.

    

    [Remainder
      of Page Intentionally Left Blank]

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    

    If
      you
      accept the foregoing terms, please execute in the space provided below and
      return one copy to the Company at the above fax number. 

    

    Sincerely,

    

    RANCHER
      ENERGY CORP.

    

    By: 
      __________________________ 

    Name:
      John Works

    Title:
      President & Chief Executive Officer

    

    AGREED
      & ACCEPTED effective as of the date set forth above:

    

    UNIT
      HOLDER:

    

    Signature
      of Individual Unit Holder: ________________________________________

           

    Printed
      Name of Individual Unit Holder:
      _____________________________________

    

    ______________________________________

    Printed
      Name of Entity (if applicable)

    

    By
      (Signature): _____________________________________      

    

    Name
      (printed) _____________________________________      

    

    Title:
      _______________________________        

    

    __________________________________________________

    Address

    

    __________________________________________________

    City,
      State, Postal or Zip Code, Country

    

    [Signature
      Page to Unit Holder Letter Agreement]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}]]