Document:

Form of Senior 8% Convertible Note

     

    Exhibit
      4.1

     

    
      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
        UNLESS (A) REGISTERED UNDER AN EFFECTIVE REGISTRATION STATEMENT FOR THE
        SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) PURSUANT
        TO
        AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT UPON THE REQUEST
        OF
        THE COMPANY THE SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL, IN
        A FORM
        REASONABLY ACCEPTABLE TO THE COMPANY, CONFIRMING THE AVAILABILITY OF SUCH
        EXEMPTION 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.

       

      ORION
        ETHANOL, INC.

       

      CONVERTIBLE
        SENIOR
        NOTE

       

       

      
        	
                $_____________

              	
                November
                  __, 2006

                 

              
	 	
                Pratt,
                  Kansas

              

      

      

      

      FOR
        VALUE
        RECEIVED, Orion Ethanol, Inc. (formerly, RTO Holdings, Inc.) ("Company")
        promises to pay to [______________________] or its registered assigns
        ("Holder")
        the
        principal sum of ______________ ($__________), or such lesser amount as shall
        equal the outstanding principal amount hereof, together with interest from
        the
        date of this Note on the unpaid principal balance at an initial rate equal
        to
        eight percent (8.0%) per annum, computed on the basis of the actual number
        of
        days elapsed and a year of 365 days. The per annum interest rate shall increase
        by one percent (1.0%) to nine percent (9%) on April 1, 2007 and by an additional
        one percent (1.0%) on each Interest Payment Date thereafter. All unpaid
        principal, together with any then unpaid and accrued interest and other amounts
        payable hereunder, shall be due and payable on the earlier of (i) the
        Maturity Date (as defined below), or (ii) when, upon or after the
        occurrence of an Event of Default (as defined below), such amounts are declared
        due and payable by Holder or made automatically due and payable in accordance
        with the terms hereof. This Note is one of the "Notes"
        issued
        pursuant to the Subscription Agreement, as amended, modified or supplemented
        (the "Subscription
        Agreement"),
        between Company and Holder. Accrued and unpaid interest on the unpaid principal
        balance hereof shall be payable quarterly on each January 1, April 1, July
        1 and
        October 1 (each, an “Interest Payment Date”), commencing January 1, 2007, to the
        Person who is the registered holder at the close of business on such Interest
        Payment Date. Capitalized terms used herein that are not defined, shall have
        the
        meaning set forth in the Subscription Agreement.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      The
        following is a statement of the rights of Holder and the conditions to which
        this Note is subject, and to which Holder, by the acceptance of this Note,
        agrees:

       

      
        	
                1.

              	
                Definitions.
                  As used in this Note, the following capitalized terms have the
                  following
                  meanings:

              

      

       

      (a)   “Automatic Conversion
        Date”
        shall
        mean the closing date of a Qualified Financing (as defined in Section 5
        hereto).

       

      (b)   “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.

       

      (c)   “Common
        Stock”
        means
        the common stock of the Company.

       

      (d)   “Company”
        includes
        the corporation initially executing this Note and any Person which shall
        succeed
        to or assume the obligations of Company under this Note.

       

      (e)   “Event
        of Default”
        has the
        meaning given in Section 3 hereof.

       

      (f)    “Holder”
        shall
        mean the Person specified in the introductory paragraph of this Note or any
        Person who shall at the time be the registered holder of this Note.

       

      (g)   “Maturity
        Date”
        shall
        mean October 31, 2008.

       

      (h)   “Obligations”
        shall
        mean and include all loans, advances, debts, liabilities and obligations,
        howsoever arising, owed by Company to Holder of every kind and description,
        now
        existing or hereafter arising under Transaction Documents, including, all
        interest, fees, charges, expenses, attorneys' fees and costs and accountants'
        fees and costs chargeable to and payable by Company hereunder and thereunder,
        in
        each case, whether direct or indirect, absolute or contingent, due or to
        become
        due, and whether or not arising after the commencement of a proceeding under
        Title 11 of the United States Code (11 U.S.C. Section 101 et seq.)
        (including post-petition interest) and whether or not allowed or allowable
        as a
        claim in any such proceeding.

       

      (i)   "Person"
        shall
        mean and include an individual, a partnership, a corporation (including a
        business trust), a joint stock company, a limited liability company, an
        unincorporated association, a joint venture or other entity or a governmental
        authority.

       

      (j)   “Registration
        Rights Agreement”
        means
        the Registration Rights Agreement dated as of November 1, 2006 among the
        Company
        and the initial purchasers of the Notes.

       

      (k)   "Transaction
        Documents"
        shall
        mean this Note, the Subscription Agreement, each of the other Notes issued
        under
        the Subscription Agreement and such other documents included in the definition
        of Transaction Documents set forth in the Subscription Agreement.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      
        	
                2.

              	
                Prepayment.
                  The Company may not prepay this Note in whole or in part without
                  the
                  consent of the Holders of a majority in principal amount of the
                  Notes.

              

      

       

      
        	
                3.

              	
                Events
                  of Default.
                  The occurrence of any of the following shall constitute an "Event
                  of Default"
                  under this Note and the other Transaction
                  Documents:

              

      

       

      (a)   Failure
        to Pay.
        Company
        shall fail to pay (i) when due any principal payment on the due date
        hereunder or (ii) any interest or other payment required under the terms of
        this Note or any other Transaction Document (including the Registration Delay
        Payments under the Registration Rights Agreement) within three (3) days of
        the
        date due;

       

      (b)   Representations
        and Warranties.
        Any
        representation, warranty, certificate, or other statement (financial or
        otherwise) made or furnished by or on behalf of Company to Holder in writing
        in
        connection with this Note or any of the other Transaction Documents, or as
        an
        inducement to Holder to enter into this Note and the other Transaction
        Documents, shall be false, incorrect, or misleading in any material respect
        when
        made or furnished;

       

      (c)   Voluntary
        Bankruptcy or Insolvency Proceedings.
        Pursuant to or within the meaning of the United States Bankruptcy Code or
        any
        other federal or state law relating to insolvency or relief of debtors
        ("Bankruptcy
        Law"),
        Company or any of its subsidiaries shall (i) apply for or consent to the
        appointment of a receiver, trustee, liquidator or similar official for itself
        or
        for all or a substantial part of its property, (ii) make a general
        assignment for the benefit of its or any of its creditors, (iii) be
        dissolved or liquidated, (iv) commence a voluntary case or other
        proceeding, consent to the entry of an order for relief against the Company,
        or
        in an involuntary case consent to the appointment of or taking possession
        of its
        property by any official, or (v) take any action for the purpose of effecting
        any of the foregoing; and

       

      (d)   Involuntary
        Bankruptcy or Insolvency Proceedings.
        Pursuant to or within the meaning of any Bankruptcy Law, proceedings shall
        be
        commenced against the Company or any of its subsidiaries or property for
        (i) the
        appointment of a receiver, trustee, liquidator or similar official, (ii)
        relief
        in an involuntary case, or (iii) liquidation or reorganization and, in each
        case
        an order for relief entered or such proceeding shall not be dismissed or
        discharged within sixty (60) days of commencement.

       

      (e)   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 (other than days during an Allowable Grace Period (as
        defined in the Registration Rights Agreement) or for more than an aggregate
        of
        thirty (30) days in any 365 day period (other than days during an Allowable
        Grace Period);

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      (f)   The
        Company’s (A) failure to deliver the required number of shares of Common Stock
        within ten (10) Business Days after the applicable Conversion Date or (B)
        notice, written or oral, to any holder of the Notes, including by way of
        public
        announcement, 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.

       

      
        	
                4.

              	
                Rights
                  of Holder upon Default.
                  Upon the occurrence or existence of any Event of Default (other
                  than an
                  Event of Default referred to in Sections 3(c) and 3(d)) and at
                  any time
                  thereafter during the continuance of such Event of Default, Holder
                  may, by
                  written notice to Company, declare all outstanding Obligations
                  of the
                  Company hereunder to be immediately due and payable without presentment,
                  demand, protest or any other notice of any kind, all of which are
                  hereby
                  expressly waived, anything contained herein or in the other Transaction
                  Documents to the contrary notwithstanding. Upon the occurrence
                  or
                  existence of any Event of Default described in Sections 3(c) and
                  3(d),
                  immediately and without notice, all outstanding Obligations payable
                  by
                  Company hereunder shall automatically become immediately due and
                  payable,
                  without presentment, demand, protest or any other notice of any
                  kind, all
                  of which are hereby expressly waived, anything contained herein
                  or in the
                  other Transaction Documents to the contrary notwithstanding. In
                  addition
                  to the foregoing remedies, upon the occurrence or existence of
                  any Event
                  of Default, Holder may exercise any other right power or remedy
                  granted to
                  it by the Transaction Documents or otherwise permitted to it by
                  law,
                  either by suit in equity or by action at law, or both.
                  

              

      

       

      
        	
                5.

              	
                Conversion.

              

      

       

      (a)   Automatic
        Conversion.
        Upon
        the closing of an equity financing consisting of Common Stock, preferred
        stock,
        warrants to purchase Common Stock or preferred stock, or any combination
        thereof, resulting in at least one hundred million dollars ($100,000,000)
        of
        gross cash proceeds to the Company, including the gross proceeds from the
        Notes
        (a "Qualified
        Financing"),
        the
        outstanding balance under the Note will automatically be converted in accordance
        with the provisions of Section 5(c)(i) hereof, into fully paid and nonassessable
        securities of the Company sold in such Qualified Financing (the "Conversion
        Securities").
        If
        more than one type of security is issued in the Qualified Financing, the
        Notes
        shall be converted into each of such securities in the same proportion of
        such
        securities as are issued in the aggregate in the Qualified Financing.

       

      (i)   The
        number of Conversion Securities into which this Note may be converted shall
        be
        determined by (A) multiplying the outstanding balance of principal and
        accumulated interest by a fraction, the numerator of which is the aggregate
        gross cash proceeds received by the Company in the Qualified Financing
        attributable to a particular security issued in the Qualified Financing and
        the
        denominator of which is the total gross cash proceeds received by the Company
        in
        the Qualified Financing (the “Proportionate Amount”) and (B) dividing the
        Proportionate Amount by the Conversion Price for such security. A Proportionate
        Amount shall be calculated in respect of each security issued in the Qualified
        Financing. The "Conversion
        Price"
        for a
        particular security issued in the Qualified Financing shall be equal to one
        hundred percent (100%) of the price per such security paid by the investors
        participating in the Qualified Financing; provided that if any options, warrants
        or other rights to purchase securities

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      (collectively,
        “Warrants”) are granted or issued in the Qualified Financing, the Conversion
        Price for such Warrants shall be fifty percent (50%) of the price per Warrant
        paid by the investors participating in the Qualified Financing; provided
        further
        that if no value is attributable to the Warrants issued in the Qualified
        Financing, the Holders shall receive twice as many Warrants as the investors
        in
        the Qualified Financing.

       

      (b)   Optional
        Conversion.
        At any
        time on or after May 1, 2007, the outstanding balance under the Note may
        be
        converted, at the option of the Holder, in whole or in part from time to
        time,
        into fully paid and nonassessable shares of Common Stock (where appropriate,
        the
        "Conversion
        Securities.")

       

      (i)   The
        number of shares of Common Stock into which this Note may be converted shall
        be
        determined by dividing (A) the outstanding balance of principal and accumulated
        interest by (B) $1.00 (as adjusted for any stock splits, recapitalizations
        or
        similar transactions effected after the date hereof).

       

      (c)   Conversion
        Procedure.

       

      (i)   Conversion
        Pursuant to Section 5(a).
        In the
        event of conversion pursuant to Section 5(a) hereof, Holder shall surrender
        the
        Note, duly endorsed, at the office of the Company and shall also provide
        Company
        with the name or names in which the certificate or certificates for the
        Conversion Securities are to be issued. Company shall, as soon as practicable
        thereafter, issue and deliver at such office to Holder of this Note a
        certificate or certificates for the number of Conversion Securities to which
        Holder shall be entitled upon conversion (bearing such legends as are required
        by the Purchase Agreement and applicable state and federal securities laws
        in
        the opinion of counsel to Company), together with a check payable to Holder
        for
        any cash amounts payable as described in Section 5(c)(iii) below. The conversion
        shall be deemed to have been made as of the close of business on the date
        of
        such closing of the Qualified Financing, and the Person or Persons entitled
        to
        receive the Conversion Securities upon such conversion shall be treated for
        all
        purposes as the record holder or holders of such Conversion Securities as
        of the
        Automatic Conversion Date.

       

      (ii)   Conversion
        Pursuant to Section 5(b).
        To
        convert any Notes or portions thereof pursuant to Section 5(b) hereof 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 5(c)(v), surrender this Note to a
        nationally recognized overnight delivery service for delivery to the Company
        (or
        an indemnification undertaking with respect to this Note in the case of loss,
        theft or destruction). On or before the first (1st)
        Business Day following the date of receipt of a Conversion Notice, the Company
        shall transmit by a 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 second Business Day following the date of receipt of a Conversion
        Notice (the “Share
        Delivery Date”),
        the
        Company shall (1) (X) if legends are not required to be placed on certificates
        of Common Stock pursuant to the Securities Purchase Agreement and provided
        that
        the Transfer Agent is participating in the Depository Trust Company’s
        (“DTC”)
        Fast
        Automated Securities Transfer Program, credit such aggregate

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      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 which certificates shall not bear any restrictive
        legends unless required pursuant to the Subscription Agreement and (2) pay
        to
        the Holder in cash the amount, if any, required by Section 5(c)(iii). If
        this
        Note is physically surrendered for conversion as required by Section 5(c)(v)
        and
        the outstanding balance of principal and interest of this Note is not being
        converted in full, 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 representing the outstanding
        principal not converted. The Person or Persons entitled to receive the share
        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.

       

      (iii)   Fractional
        Shares; Interest; Effect of Conversion.
        No
        fractional shares shall be issued upon conversion of this Note. In lieu of
        Company issuing any fractional shares to Holder upon the conversion of this
        Note, Company shall either round up to the nearest full share or pay to Holder
        an amount equal to the product obtained by multiplying the conversion price
        by
        the fraction of a share not issued pursuant to the previous sentence. The
        Company shall pay any and all transfer, stamp and similar taxes that may
        be
        payable with respect to the issuance and delivery of Common Stock upon
        conversion. Upon conversion of this Note in full and the payment of the amounts
        specified in this Section 5(c)(iii), Company shall be forever released from
        all
        its obligations and liabilities under this Note.

       

      (iv)   In
        the
        event of Automatic Conversion, Holder shall become a party to any subscription
        agreement, purchase agreement, registration rights agreement or other document
        entered into by or for the benefit of the investors in the Qualified Financing
        and shall be entitled to all of the rights of such investors
        thereunder.

       

      (v)    Notwithstanding
        anything to the contrary set forth herein, upon conversion of any portion
        of
        this Note in accordance with the terms hereof (other than an automatic
        conversion) the Holder shall not be required to physically surrender this
        Note
        to the Company unless (A) the full balance of principal and interest 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 and interest
        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.

       

      
        	
                6.

              	
                Reservation
                  of Stock Issuable Upon Conversion.
                  In connection with any conversion of Notes, the Company shall reserve
                  and
                  keep available out of its authorized but unissued shares of Common
                  Stock
                  such number of its shares of Common Stock as shall be sufficient
                  to effect
                  the conversion of the Note.

              

      

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      
        	
                7.

              	
                Successors
                  and Assigns.
                  Subject to the restrictions on transfer described in Sections 9
                  and 10
                  below, the rights and obligations of Company and Holder of this
                  Note shall
                  be binding upon and benefit the successors, assigns, heirs, administrators
                  and transferees of the parties.

              

      

       

      
        	
                8.

              	
                Waiver
                  and Amendment.
                  Any provision of this Note may be amended, waived or modified only
                  upon
                  the written consent of Company and Holders of a majority in aggregate
                  principal amount of the Notes then
                  outstanding.

              

      

       

      
        	
                9.

              	
                Transfer
                  of this Note or Securities Issuable on Conversion
                  Hereof.
                  With respect to any offer, sale or other disposition of this Note
                  or
                  securities into which such Note may be converted, Holder will give
                  written
                  notice to Company prior thereto, describing briefly the manner
                  thereof, to
                  the effect that such offer, sale or other distribution may be effected
                  without registration or qualification (under any federal or state
                  law then
                  in effect). Each Note thus transferred and each certificate representing
                  the securities thus transferred shall bear a legend as to the applicable
                  restrictions on transferability in order to ensure compliance with
                  the
                  Securities Act of 1933, as amended (the "Act"),
                  unless such legend is not required in order to ensure compliance
                  with the
                  Act. Company may issue stop transfer instructions to its transfer
                  agent in
                  connection with such restrictions. Subject to the foregoing, transfers
                  of
                  this Note shall be registered upon registration books maintained
                  for such
                  purpose by or on behalf of Company. Prior to presentation of this
                  Note for
                  registration of transfer, Company shall treat the registered holder
                  hereof
                  as the owner and holder of this Note for the purpose of receiving
                  all
                  payments of principal and interest hereon and for all other purposes
                  whatsoever, whether or not this Note shall be overdue and Company
                  shall
                  not be affected by notice to the
                  contrary.

              

      

       

      
        	
                10.

              	
                Assignment
                  by Company.
                  Neither this Note nor any of the rights, interests or obligations
                  hereunder may be assigned, by operation of law or otherwise, in
                  whole or
                  in part, by Company without the prior written consent of
                  Holder.

              

      

       

      
        	
                11.

              	
                Notices.
                  Any notice, request or other communication required or permitted
                  hereunder
                  shall be in writing and shall be deemed to have been duly given
                  if
                  delivered in the manner set forth in the Purchase Agreement.
                  

              

      

       

      
        	
                12.

              	
                Usury.
                  In the event any interest is paid on this Note which is deemed
                  to be in
                  excess of the then legal maximum rate, then that portion of the
                  interest
                  payment representing an amount in excess of the then legal maximum
                  rate
                  shall be deemed a payment of principal and applied against the
                  principal
                  of this Note.

              

      

       

      
        	
                13.

              	
                Expenses;
                  Waivers.
                  If action is instituted to collect this Note, Company promises
                  to pay all
                  costs and expenses, including, without limitation, reasonable attorneys'
                  fees and costs, incurred in connection with such action. Company
                  hereby
                  waives notice of default, presentment or demand for payment, protest
                  or
                  notice of nonpayment or dishonor and all other notices or demands
                  relative
                  to this instrument.

              

      

       

      
        	
                14.

              	
                Governing
                  Law.
                  This Note and all actions arising out of or in connection with
                  this Note
                  shall be governed by and construed in accordance with the laws
                  of the
                  State of New

              

      

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      
        	
                 

              	
                York,
                  without regard to the conflicts of law provisions of the State
                  of New
                  York, or of any other state.

              

      

       

      
        	
                15.

              	
                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 Buyers, shall initially be as set forth on the signature
                  page attached to the Subscription 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.
                  

              

      

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF,
        Company
        has caused this Note to be issued as of the date first written
        above.

      

       

      
        	 	
                ORION
                  ETHANOL, INC.

                 

                 

              
	 	
                By:

              	 
	 	 	
                Name:

                Title:

              

      

      

      
        
          SIGNATURE
            PAGE TO CONVERTIBLE PROMISSORY NOTE

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      EXHIBIT
        I

       

      ORION
        ETHANOL, INC.

       

      CONVERSION
        NOTICE

       

      Reference
        is made to the Convertible Senior Note (the “Note”)
        issued
        to the undersigned by Orion Ethanol, Inc. (the “Company”).
        In
        accordance with and pursuant to this Note, the undersigned hereby elects
        to
        convert the Note or a portion thereof in the amount indicated below into
        shares
        of Common Stock, par value $0.001 per share (the “Common
        Stock”),
        of the
        Company, as of the date specified below:

      

      Date
        of
        Conversion: _________________________________________________________________________________________

      Aggregate
        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)

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      ACKNOWLEDGMENT

       

      The
        Company hereby acknowledges this Conversion Notice and hereby directs [Transfer
        Agent] to issue the above indicated number of shares of Common
        Stock.

       

      
        	 	
                ORION
                  ETHANOL, INC.

                 

                 

              
	 	
                By:

              	 
	 	 	
                Name:

                Title:

              

      

      

      
        
          
          

        

        
          11Form of Subscription Agreement

     

    Exhibit
      10.1

     

    
      SUBSCRIPTION
        AGREEMENT

       

       

      Orion
        Ethanol, Inc.

      307
        South
        Main Street

      Pratt,
        Kansas

       

      Ladies
        and Gentlemen:.

       

      The
        undersigned subscriber (“Subscriber”
        or “Buyer”)
        hereby
        tenders this Subscription Agreement (this “Agreement”)
        in
        accordance with and subject to the terms and conditions set forth
        herein:

       

      
        	
                1.

              	
                Subscription:

              

      

       

      (a)   Subscriber
        hereby subscribes for and agrees to purchase the aggregate principal amount
        of
        8% Convertible Senior Notes (the “Convertible
        Notes”)
        of
        Orion Ethanol, Inc. (formerly, RTO Holdings, Inc.) (the “Company”),
        indicated on the signature page attached hereto at the purchase price set
        forth
        on such signature page (the “Purchase
        Price”).
        Subscriber has made payment by check or wire transfer of funds in accordance
        with instructions from the Company in the full amount of the Purchase Price
        of
        the Convertible Notes for which Subscriber is subscribing (the “Payment”).
        The
        Convertible Notes shall be convertible at the option of the holder thereof
        into
        the Company’s common stock, par value $0.001 per share (the “Common
        Stock,”
or
        as
        converted, the “Conversion
        Shares”)
        unless
        automatically converted into other securities of the Company in accordance
        with
        the terms set forth in the Convertible Notes. The Convertible Notes and the
        Conversion Shares collectively are referred to herein as the “Securities”.

       

      (b)   This
        Agreement is part of an offering being conducted by the Company (the
“Offering”).
        Under
        the terms of the Offering, the Company seeks to raise up to $15,000,000
        aggregate gross proceeds from the Offering (the “Gross
        Offering Proceeds”)
        based
        on an Offering price of $1,000 per $1,000 principal amount of Convertible
        Notes.

       

      (c)   Subscriber
        understands that it will not earn interest on any funds held by the Escrow
        Agent
        pursuant to the escrow defined below. The funds will be held in escrow pending
        the closing of the Offering. Attached as Exhibit “A” hereto is the form of
        Escrow Agreement (the “Escrow
        Agreement”)
        that
        will govern the maintenance of funds until the sooner of the closing of the
        Offering (the “Closing”)
        or the
        termination of the Offering. The Closing shall occur on or before November
        15,
        2006. If the Offering is not closed by November 15, 2006 all Gross Offering
        Proceeds paid by Subscriber then in escrow shall be returned to the Subscriber,
        without interest or deduction. The closing shall be deemed to have occurred
        on
        the date the conditions set forth in Sections 6 and 7 below are satisfied
        (the
“Closing
        Date”).

       

      (d)   Subscriber
        hereby agrees to be bound hereby upon (i) execution and delivery to the Company
        of the signature page to this Agreement and (ii) written acceptance by
        the

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      Company
        of Subscriber’s subscription, which shall be confirmed by faxing to the
        Subscriber the signature page to this Agreement that has been executed by
        the
        Company (the “Subscription”).

       

      
        	
                2.

              	
                BUYER’S
                  REPRESENTATIONS AND
                  WARRANTIES.

              

      

       

      Each
        Buyer represents and warrants to the Company with respect to only itself
        that:

       

      (a)   No
        Public Sale or Distribution.
        Such
        Buyer is (i) acquiring the Convertible Notes, and (ii) upon conversion of
        the
        Convertible Notes will acquire the Conversion Shares issuable upon conversion
        of
        the Convertible Notes, for investment purposes, 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 Securities Act of 1933, as amended (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.
        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.
        At the
        time such Buyer was offered the Securities, it was, and at the date hereof
        it
        is, and on each date on which it converts the Convertible Notes it will be,
        an
“accredited
        investor”
as
        defined in Rule 501(a) of Regulation D under the 1933 Act (“Regulation
        D”).
        Such
        Buyer is not a registered broker-dealer under Section 15 of the 1934
        Act.

       

      (c)   Experience
        of Buyer.
        Such
        Buyer, either alone or together with its representatives, has such knowledge,
        sophistication and experience in business and financial matters so as to
        be
        capable of evaluating the merits and risks of the prospective investment
        in the
        Securities, and has so evaluated the merits and risks of such investment.
        Such
        Buyer is able to bear the economic risk of an investment in the Securities
        and,
        at the present time, is able to afford a complete loss of such
        investment.

       

      (d)   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.

       

      (e)   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 which 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

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      Company’s
        representations and warranties contained herein. Such Buyer understands that
        its
        investment in the Securities involves a high degree of risk. 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.

       

      (f)   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.

       

      (g)   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) sold, assigned
        or
        transferred pursuant to an exemption from such registration, provided that
        upon
        the request of the Company, the Buyer delivers to the Company an opinion
        of
        counsel, in a form reasonably acceptable to the Company, confirming the
        availability of such exemption, 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”);
        (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).

       

      (h)   Legends.
        Such
        Buyer understands that the certificates or other instruments representing
        the
        Convertible Notes and, until such time as the resale of the Conversion Shares
        have been registered under the 1933 Act as contemplated by the Registration
        Rights Agreement, the stock certificates representing the Conversion 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 HAVE

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      
         

        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 UNLESS
          (A)
          REGISTERED UNDER AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
          UNDER
          THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) PURSUANT TO AVAILABLE EXEMPTIONS
          FROM SUCH REGISTRATION, PROVIDED THAT UPON THE REQUEST OF THE COMPANY THE
          SELLER
          DELIVERS TO THE COMPANY AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE
          TO THE COMPANY, CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION 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 (a “Registration
        Event”),
        or
        (ii) in connection with a sale, assignment or other transfer, such holder
        provides the Company with an opinion of counsel, in a form reasonably acceptable
        to the Company, to the effect that such sale or transfer of the Securities
        may
        be made without registration under the applicable requirements of the 1933
        Act,
        or (iii) following a sale of transfer of such Securities pursuant to Rule
        144
        (assuming the transferor is not an affiliate of the Company), or (iv) while
        such
        Securities are eligible for sale under Rule 144(k).

       

      (i)   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 by such Buyer
        and
        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.

       

      (j)   No
        Conflicts.
        The
        execution, delivery and performance by such Buyer of this Agreement and the
        Registration Rights Agreement to which such Buyer is a party 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,

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      reasonably
        be expected to have a material adverse effect on the ability of such Buyer
        to
        perform its obligations hereunder.

       

      (k)   Residency.
        Such
        Buyer is a resident of that jurisdiction specified below its address on the
        signature page hereto.

       

      (l)   Independent
        Investment Decision.
        Such
        Buyer has independently evaluated the merits of its decision to purchase
        Securities pursuant to the Transaction Documents, and such Buyer confirms
        that
        it has not relied on the advice of the Company nor any other Buyer’s business
        and/or legal counsel in making such decision.

       

      (m)   Certain
        Trading Activities.
        Other
        than the acquisition of the Bridge Notes, such Buyer has not directly or
        indirectly, nor has any Person acting on behalf of or pursuant to any
        understanding with such Buyer, engaged in any transactions in the securities
        of
        the Company (including, without limitations, any Short Sales (defined below)
        involving the Company’s securities) since the time that such Buyer was first
        contacted by the Company regarding the transactions contemplated hereby.
        Such
        Buyer covenants that neither it nor any Person acting on its behalf or pursuant
        to any understanding with it will engage in any transactions in the securities
        of the Company (including Short Sales) prior to the time that the transactions
        contemplated by this Agreement are publicly disclosed. For the purpose of
        this
        Agreement, “Short
        Sales”
        include, without limitation, all “short sales” as defined in Rule 200
        promulgated under Regulation SHO under the 1934 Act and all types of direct
        and
        indirect stock pledges, forward sale contracts, options, puts, calls, swaps
        and
        similar arrangements (including on a total return basis), and sales and other
        transactions through non US broker dealers or foreign regulated
        brokers.

       

      (n)   General
        Solicitation.
        Such
        Buyer is not purchasing the Securities as a result of any advertisement,
        article, notice or other communication regarding the Securities published
        in any
        newspaper, magazine or similar media or broadcast over television or radio
        or
        presented at any seminar.

       

      (o)   Organization.
        Such
        Buyer is an entity duly organized, validly existing and in good standing
        under
        the laws of the jurisdiction of its organization with the requisite corporate
        or
        partnership power and authority to enter into and to consummate the transactions
        contemplated by the applicable Transaction Documents (as defined below) and
        otherwise to carry out its obligations thereunder.

       

      (p)   Certain
        Fees.
        Such
        Buyer has not entered into an agreement whereby brokerage or finder’s fees or
        commissions are or will be payable by the Company to any broker, financial
        advisor or consultant, finder, placement agent, investment banker, bank or
        other
        person with respect to the transactions contemplated by this
        Agreement.

       

      
        	
                3.

              	
                REPRESENTATIONS
                  AND WARRANTIES OF THE
                  COMPANY.

              

      

       

      The
        Company represents and warrants to each of the Buyers that:

       

      (a)   Organization
        and Qualification.
        The
        Company and its “Subsidiaries”
(which
        for purposes of this Agreement means any joint venture or any entity (i)
        in
        which the Company,

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      directly
        or indirectly, owns 50% or more of the outstanding capital stock or holds
        an
        equity or similar interest representing 50% or more of the outstanding equity
        or
        similar interest of such entity, (ii) that is a significant subsidiary of
        the
        Company as defined under Regulation S X of the 1934 Act or (iii) in which
        the
        Company controls or operates all or part of the business, operations or
        administration of such entity) are entities duly organized and validly existing
        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, taken as a whole, or on the transactions
        contemplated hereby and 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 power and authority to enter into and perform its
        obligations under this Agreement, the Convertible Notes, the Registration
        Rights
        Agreement 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 Convertible Notes, the
        reservation for issuance and the issuance of the Conversion Shares issuable
        upon
        conversion of the Convertible Notes have been duly authorized by the Company’s
        Board of Directors and other than (i) the filing of a Form D under Regulation
        D
        of the 1933 Act, (ii) the filing with the SEC of one or more Registration
        Statements in accordance with the requirements of the Registration Rights
        Agreement, (iii) such filings as are required by the Principal Market (as
        defined below) and (iv) such filings required under applicable securities
        or
“Blue Sky” laws of the states of the United States, 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 when delivered by the Company will
        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 Convertible Notes is duly authorized and is free from all
        liens
        and charges with respect to the issue thereof. As of the Closing, a number
        of
        shares of Common Stock shall have been duly authorized and reserved for issuance
        which equals 100% of the maximum number of shares of Common Stock issuable
        upon
        conversion of the Convertible Notes (assuming such conversion occurred at
        Closing). Upon conversion in accordance with the Convertible Notes, the
        Conversion Shares when issued, will

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      be
        validly issued, fully paid and nonassessable and free from all preemptive
        or
        similar rights, liens and charges with respect to the issue thereof, with
        the
        holders being entitled to all rights accorded to a holder of Common Stock.
        Based
        in part upon the accuracy of the representations and warranties of the Buyers’
set forth in Article 2, issuance by the Company of the Securities is, or
        will be
        upon issuance, exempt from registration under the 1933 Act.

       

      (d)   No
        Conflicts.
        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 Convertible Notes,
        and reservation for issuance and issuance of the Conversion Shares) will
        not (i)
        result in a violation of any certificate of incorporation, certificate of
        formation, any certificate of designations or other constituent documents
        of the
        Company or any of its Subsidiaries, or the 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 as reported on Bloomberg Financial Markets LP (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; except
        in
        the case of each of clauses (ii) and (iii), such as could not, individually
        or
        in the aggregate, have or reasonably be expected to result in a Material
        Adverse
        Effect.

       

      (e)   Consents.
        Other
        than as contemplated in Section 3(b), the Company is not 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. All consents, authorizations,
        orders, filings and registrations which the Company is required to obtain
        pursuant to the preceding sentence have been obtained or effected on or prior
        to
        the Closing Date (other than those which the Company is not required to obtain
        in accordance with the Transaction Documents until after the Closing Date)
        and
        the Company and its Subsidiaries are unaware of any facts or circumstances
        which
        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 which would reasonably lead to delisting or suspension
        of
        the Common Stock in the foreseeable future.

       

      (f)   Acknowledgment
        Regarding Buyer’s Purchase of Securities.
        The
        Company has been informed by the Buyer and hereby acknowledges that except
        as
        set forth on Schedule 3(f), 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) to the Company’s knowledge, an “affiliate” of
        the Company (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

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      Company
        has been informed by the Buyer and hereby further acknowledges that, except
        as
        set forth on Schedule 3(f), 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 Agents’ Fees.
        Neither
        the Company, nor any of its 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 shall pay, and hold
        each Buyer harmless against, any liability, loss or expense (including, without
        limitation, attorney’s fees and out-of-pocket expenses) arising in connection
        with any such claim. The Company acknowledges that it has engaged, Global
        Hunter
        Securities, LLC, as placement agent (the “Placement
        Agent”)
        in
        connection with the sale of the Securities. Other than the Placement Agent,
        the
        Company has not engaged any placement agent or other agent in connection
        with
        the sale of the Securities.

       

      (h)   No
        Integrated Offering.
        Except
        as set forth on Schedule 3(h), 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 Convertible Notes will increase in certain
        circumstances. The Company further acknowledges that its obligation to issue
        Conversion Shares upon conversion of the Convertible Notes in accordance
        with
        this Agreement and the Convertible Notes, in each case, is absolute and
        unconditional 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.
        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 Certificate of
        Incorporation

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      or
        the
        laws of the jurisdiction of its formation 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 has not adopted a stockholder
        rights plan or similar arrangement relating to accumulations of beneficial
        ownership of Common Stock or a change in control of the Company.

       

      (k)   SEC
        Documents; Financial Statements.
        Except
        as disclosed in Schedule 3(k), since August 29, 2006, 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 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 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). The SEC Documents
        do not contain any untrue statement of a material fact or omit 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 and not
        misleading.

       

      (l)   Absence
        of Certain Changes.
        Except
        as disclosed in Schedule
        3(l),
        since
        June 30, 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(1),
        since
        June 30, 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 $100,000. The Company has not 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 which would
        reasonably lead a creditor to do so. The Company and its Subsidiaries,
        individually and on a consolidated basis, will not, after giving effect to
        the
        transactions contemplated hereby to occur at the Closing, 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

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      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 as they 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.

       

      (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 its Subsidiaries is in violation of any term of or in default
        under its Articles of Incorporation, any certificate of designations of any
        outstanding series of preferred stock of the Company or 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. The Common
        Stock
        is designated for quotation on the Principal Market. Since August 29, 2006,
        (i)
        trading in the Common Stock has not been suspended by the SEC or the Principal
        Market and (ii) 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. 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.

       

      (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

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      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 or as 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, 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
        (i)
        100,000,000 shares of Common Stock, of which as of the date hereof, 32,661,025
        are issued and outstanding and (ii) 10,000,000 shares of preferred stock,
        of
        which as of the date hereof, no shares are issued and outstanding. 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

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      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. Schedule
        3(r)
        sets
        forth the shares of Common Stock owned beneficially or of record and Common
        Stock Equivalents (as defined below) held by each director and executive
        officer.

       

      (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

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      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.

       

      (t)   Absence
        of Litigation.
        Except
        as set forth on Schedule 3(t), there is no action, suit, proceeding 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, the Preferred Stock or any of the Company’s
        Subsidiaries or any of the Company’s or its Subsidiaries’ officers or directors,
        whether of a civil or criminal nature or otherwise.

       

      (u)   Insurance.
        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.

       

      (ii)   The
        Company and its Subsidiaries 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.
        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

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      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 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, licenses, approvals, governmental authorizations, trade secrets
        and
        other intellectual property rights (“Intellectual
        Property Rights”)
        necessary to conduct their respective businesses as now conducted, except
        where
        the failure to own or possess Intellectual Property Rights would not result
        in a
        Material Adverse Effect. None of the Company’s registered, or applied for,
        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 any
        of its Subsidiaries regarding its Intellectual Property Rights. The Company
        is
        unaware 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.
        The
        Company and its Subsidiaries (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 and (iii) are in compliance with all
        terms and conditions of any such permit, license or approval where, in each
        of
        the foregoing clauses (i), (ii) and (iii), the failure to so comply could
        be
        reasonably expected to have, individually or in the aggregate, a Material
        Adverse Effect. 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.

       

      (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.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      (aa)   Investment
        Company.
        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.

       

      (bb)   Tax
        Status.
        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.

       

      (cc)   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. Since January 1, 2006, neither the
        Company nor any of its Subsidiaries have received any notice or correspondence
        from any accountant identifying a material weakness in any part of the system
        of
        internal accounting controls of the Company or any of its Subsidiaries which
        is
        not specified in the Company’s Annual Report on Form 10 KSB for the fiscal year
        ended December 31, 2005.

       

      (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)   Form
        SB-2 Eligibility.
        The
        Company is eligible to register the Conversion Shares for resale by the Buyers
        using Form SB-2 promulgated under the 1933 Act.

       

      
        
          
          

        

        
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      (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
        Placement Agent, sold, bid for, purchased, or paid any compensation for
        soliciting purchases of, any of the Securities, or (iii) other than the
        Placement Agent, paid or agreed to pay to any person any compensation for
        soliciting another to purchase any other securities of the Company.

       

      (hh)   Acknowledgement
        Regarding Buyers’ Trading Activity.
        It is
        understood and acknowledged by the Company (i) that following the public
        disclosure of the transactions contemplated by the Transaction Documents
        in
        accordance with the terms hereof, none of the Buyers have been asked to agree,
        nor has any Buyer agreed, to desist from purchasing or selling, long and/or
        short, securities of the Company, or “derivative” securities based on securities
        issued by the Company or to hold the Securities for any specified term, (ii)
        that any Buyer, and counter parties in “derivative” transactions to which any
        such Buyer is a party, directly or indirectly, which were established prior
        to
        their learning of the transactions contemplated by the Transaction Documents,
        presently may have a “short” position in the Common Stock, and (iii) that each
        Buyer shall not be deemed to have any affiliation with or control over any
        arm’s
        length counter-party in any “derivative” transaction. The Company further
        understands and acknowledges that, following the public disclosure of the
        transactions contemplated by the Transaction Documents in accordance with
        the
        terms hereof, (a) one or more Buyers may engage in hedging and/or trading
        activities at various times during the period that the Securities are
        outstanding, including, without limitation, during the periods that the value
        of
        the Conversion Shares deliverable with respect to Securities are being
        determined and (b) such hedging and/or trading activities, if any, can reduce
        the value of the existing stockholders’ equity interest in the Company both at
        and after the time the hedging and/or trading activities are being conducted.
        The Company acknowledges that such aforementioned hedging and/or trading
        activities do not constitute a breach of this Agreement, any of the Securities
        or any of the documents executed in connection herewith.

       

      (ii)   U.S.
        Real Property Holding Corporation.
        The
        Company is not, nor has ever been, a U.S. real property holding corporation
        within the meaning of Section 897 of the Internal Revenue Code of 1986, as
        amended, and the Company shall so certify upon Buyer’s request.

       

      (jj)   Disclosure.
        The
        Company confirms that neither it nor any other Person acting on its behalf
        has
        provided any of the Buyers or their agents or counsel with any information
        that
        constitutes material, nonpublic information concerning the Company or its
        Subsidiaries other than the existence of the transactions contemplated by
        this
        Agreement or the other Transaction Documents. The Company understands and
        confirms that each of the Buyers will rely on the foregoing representations
        in
        effecting transactions in securities of the Company. All disclosure provided
        to
        the Buyers pursuant to this Agreement regarding the Company, its business
        and
        the

       

      
        
          
          

        

        
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      transactions
        contemplated hereby, including the Schedules to this Agreement, furnished
        by or
        on behalf of the Company 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 since August 29, 2006 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.

       

      
        	
                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 the Placement Agent 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 (the “Reporting
        Period”),
        the
        Company shall 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 otherwise permit such termination.

       

      (d)   Use
        of
        Proceeds.
        The
        Company will use the proceeds from the sale of the Securities for general
        corporate and for working capital purposes, provided, however, that the Company
        may not use the proceeds from the sale of the Securities for the redemption
        or
        repurchase of any of its or its Subsidiaries’ equity securities.

       

      (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 on Form 10 K or 10 KSB, any interim
        reports or any consolidated balance sheets, income statements, stockholders’
equity statements and/or cash flow statements for any period

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      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 and
        (ii)
        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 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 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. 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. The Company shall pay all fees and expenses in connection with
        satisfying its obligations under this Section 4(f).

       

      (g)   Fees.
        The
        Company shall be responsible for the payment of any placement agent’s fees,
        financial advisory fees, or broker’s commissions (other than for Persons engaged
        by any Buyer) relating to or arising out of the transactions contemplated
        hereby, including, without limitation, any fees or commissions payable to
        the
        Placement Agent. 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
        against a Buyer relating to any such payment. Except as otherwise set forth
        in
        the Transaction Documents, each party to this Agreement shall bear its own
        expenses in connection with the sale of the Securities to the
        Buyers.

       

      (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 reasonable 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 8:30 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 (and all schedules to this Agreement), and the form of the
        Registration Rights

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      Agreement)
        as exhibits to such filing (including all attachments, the “8
        K Filing”).
        From
        and after the filing of the 8 K Filing with the SEC, no Buyer shall be in
        possession of any material, nonpublic information received from the Company,
        any
        of its Subsidiaries or any of its respective officers, directors, employees
        or
        agents, that is not disclosed in the 8 K Filing. 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 or as may be required under the terms of the
        Transaction Documents. 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) Business Days 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 (provided that
        in the
        case of clause (i) each Buyer shall be consulted by the Company in connection
        with any such press release or other public disclosure prior to its release).
        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, unless such disclosure
        is
        required by law, regulation or the Principal Market.

       

      (j)   Restriction
        on Redemption and Cash Dividends.
        So long
        as any Convertible Notes are outstanding, the Company shall not, directly
        or
        indirectly, redeem, or declare or pay any dividend or distribution on, the
        Common Stock or any other equity security without the prior express written
        consent of the Required Holders.

       

      (k)   Reservation
        of Shares.
        So long
        as any Convertible Notes remain outstanding, the Company shall take all action
        necessary to at all times have authorized, and reserved for the purpose of
        issuance, no less than 100% of the number of shares of Common Stock issuable
        upon conversion of all of the Convertible Notes then outstanding.

       

      (l)   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.

       

      (m)   Additional
        Issuances of Securities.
        

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      (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.

       

      (4)   “Qualified
        Financing”
        shall
        have the meaning set forth in the Convertible Notes.

       

      (ii)   Other
        than a Qualified Financing, for a period of 180 days following the Closing
        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”).

       

      (iii)   Other
        than a Qualified Financing, for a period commencing 180 days after the Closing
        Date and ending 12 months following the Closing Date hereof, the Company
        will
        not, directly or indirectly, effect any Subsequent Placement unless the Company
        shall have first complied with this Section 4(m)(iii).

       

      (1)   The
        Company shall deliver to each Buyer who purchased at least $250,000 aggregate
        principal amount of Convertible Notes hereunder (each, an “Eligible
        Buyer”)
        a
        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 (w) identify and describe
        the
        Offered Securities, (x) 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, (y) identify the persons or entities
        (if known) to which or with which the Offered Securities are to be offered,
        issued, sold or exchanged and (z) offer to issue and sell to or exchange
        with
        such Eligible Buyers at least 50% of the Offered Securities, allocated among
        such Eligible Buyers (a) based on such Eligible Buyer’s pro rata portion of the
        total aggregate principal amount of Convertible Notes purchased hereunder
        by
        Eligible Buyers (the “Basic
        Amount”),
        and
        (b) with respect to each Eligible Buyer that elects to purchase its Basic
        Amount, any additional portion of the Offered Securities attributable to
        the
        Basic Amounts of other Eligible Buyers as such Eligible Buyer shall indicate
        it
        will purchase or acquire should the other Eligible 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.

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      (2)   To
        accept
        an Offer, in whole or in part, such Eligible Buyer must deliver a written
        notice
        to the Company prior to the end of the seventh (7th) Business Day after such
        Eligible Buyer’s receipt of the Offer Notice (the “Offer
        Period”),
        setting forth the portion of such Eligible Buyer’s Basic Amount that such
        Eligible Buyer elects to purchase and, if such Eligible Buyer shall elect
        to
        purchase all of its Basic Amount, the Undersubscription Amount, if any, that
        such Eligible Buyer elects to purchase (in either case, the “Notice
        of Acceptance”).
        If
        the Basic Amounts subscribed for by all Eligible Buyers are less than the
        total
        of all of the Basic Amounts, then each Eligible 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
        Eligible 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 Eligible Buyer bears to the total Basic Amounts
        of
        all Eligible 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 sixty (60) days from the expiration of the Offer Period
        above
        to (i) 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 Eligible 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 (the
“Offer
        8-K”).
        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.

       

      (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(m)(iii)(3) above), then each Eligible 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 Eligible Buyer elected to purchase
        pursuant to Section

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      4(m)(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 Eligible Buyers
        pursuant to Section 4(m)(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 Eligible 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
        Eligible Buyers in accordance with Section 4(m)(iii)(1) above.

       

      (5)   Upon
        the
        closing of the issuance, sale or exchange of all or less than all of the
        Refused
        Securities, the Eligible Buyers shall acquire from the Company, and the Company
        shall issue to the Eligible Buyers, the number or amount of Offered Securities
        specified in the Notices of Acceptance, as reduced pursuant to Section
        4(m)(iii)(3) above if the Eligible Buyers have so elected, upon the terms
        and
        conditions specified in the Offer. The purchase by the Eligible Buyers of
        any
        Offered Securities is subject in all cases to the preparation, execution
        and
        delivery by the Company and the Eligible Buyers of a purchase agreement relating
        to such Offered Securities reasonably satisfactory in form and substance
        to the
        Eligible Buyers and their respective counsel.

       

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

       

      (iv)   In
        exchange for the Company’s willingness to agree to these procedures, each
        Eligible Buyer hereby irrevocably agrees that it will hold in strict confidence
        any and all Offer Notices, the information contained therein, and the fact
        that
        the Company is contemplating a Subsequent Placement, from the date such Eligible
        Buyer receives such Offer Notice until the earlier to occur of (1) the date
        the
        Offer 8 K is filed with the SEC and (2) the date such information is disclosed
        to the public by any Eligible Buyer in accordance with Section 4(m)(iii)(3)
        above. Notwithstanding anything in this Section 4(m) to the contrary, at
        any
        time any Eligible Buyer may elect, by delivering written notice to the Company,
        not to receive any Offer Notices hereunder and, until such time as such Eligible
        Buyer or its successor elects, by delivering written notice to the Company,
        to
        receive Offer Notices hereunder, the Company shall not be obligated to deliver
        any Offer Notices to such Eligible Buyer.

       

      (n)   Additional
        Registration Statements.
        Until
        the Effective Date (as defined in the Registration Rights Agreement), the
        Company will not file a registration statement under the 1933 Act relating
        to
        securities that are not the Securities or securities issued in the Qualified
        Financing.

       

      
        	
                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 Convertible Notes in which the Company shall
        record the name and

       

      
        
          
          

        

        
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      address
        of the Person in whose name the Convertible Notes have been issued (including
        the name and address of each transferee), the aggregate principal amount
        of
        Convertible Notes and the number of Conversion Shares issuable upon conversion
        of the Convertible Notes 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 upon reasonable notice.

       

      (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 issued upon conversion of the Convertible Notes in such
        amounts as specified from time to time by each Buyer to the Company upon
        conversion of the Convertible Notes. The Company warrants that no instruction
        other than the transfer agent instruction 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. Upon a
        Registration Event or if a Buyer effects a sale, assignment or transfer of
        the
        Securities in accordance with Section 2(f), the Company 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 and,
        with
        respect to any transfer, shall permit the transfer. In the event that a
        Registration Event has occurred or such sale, assignment or transfer involves
        Conversion 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.

       

      
        	
                6.

              	
                CONDITIONS
                  TO THE COMPANY’S OBLIGATION TO
                  SELL.

              

      

       

      The
        obligation of the Company hereunder to issue and sell the Convertible Notes
        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:

       

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

       

      (b)   Such
        Buyer and each other Buyer shall have delivered to the Company or the Escrow
        Agent the Purchase Price for the Convertible Notes being purchased by such
        Buyer
        at

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      the
        Closing by check or wire transfer of immediately available funds pursuant
        to the
        wire instructions provided by the Company.

       

      (c)   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 specific
        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 Convertible Notes 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:

       

      (a)   The
        Company shall have duly executed and delivered to such Buyer (i) each of
        the
        Transaction Documents, including the Company’s acceptance of this Agreement and
        (ii) certificates representing the aggregate principal amount of Convertible
        Notes being purchased by such Buyer at the Closing pursuant to this
        Agreement.

       

      (b)   Such
        Buyer shall have received the opinion of Thelen Reid & Priest, LLP, the
        Company’s outside counsel, dated as of the Closing Date, in substantially the
        form of Exhibit D attached hereto.

       

      (c)   The
        Company shall have delivered to such Buyer a true copy of certificates
        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.

       

      (d)   The
        Company shall have delivered to such Buyer a true copy of certificates
        evidencing the Company’s and its subsidiaries’ qualification as a foreign
        corporation and good standing issued by the Secretary of State (or comparable
        office) of each jurisdiction in which the Company or its Subsidiaries conducts
        business, as of a date within 10 days of the Closing Date.

       

      (e)   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.

       

      (f)   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 Certificate
        of
        Incorporation and (iii) the Bylaws, each as in effect at the Closing, in
        the
        form attached hereto as Exhibit E.

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      (g)   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 specific
        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 F.

       

      (h)   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.

       

      (i)   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.

       

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

       

      (k)   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.

       

      (l)   The
        Company or the Escrow Agent shall have received in the aggregate at least
        ten
        million dollars ($10,000,000) from Buyers of the Convertible Notes by November
        15, 2006.

       

      
        	
                8.

              	
                TERMINATION.
                  

              

      

       

      In
        the
        event that the Closing shall not have occurred with respect to a Buyer on
        or
        before November 15, 2006, then Buyer may terminate this Agreement by giving
        written notice to the Company.

       

      
        	
                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

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      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.

       

      (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 or waived other than by an instrument in writing
        signed by the Company and the Required Holders, and any amendment to this
        Agreement or any waiver of any provision of 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 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, or holders of Convertible
        Notes, as the case may be. The Company has not, directly or indirectly, made
        any
        agreements with any Buyers relating

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      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.

       

      (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:

      Orion
        Ethanol, Inc.

      307
        South
        Main St.

      Pratt,
        Kansas 67124

      Telephone:  (620)
        672-2814

      Facsimile:        
        (620)
        672-3142

      Attention:       
        Chief
        Financial Officer

      

      Copy
        to
        (for informational purposes only):

      Thelen
        Reid & Priest, LLP

      701
        8th
        Street NW

      Washington,
        D.C. 20001

      Telephone:  (202)
        508-4281

      Facsimile:        
        (202)
        654-1804

      Attention:       
        Louis
        A.
        Bevilacqua

      

      If
        to the
        Transfer Agent:

      Standard
        Registrar & Transfer Company, Inc.,

      12528
        South 1840 Street

      Draper,
        Utah 84020

      Telephone:  (801)
        571-8844

      Facsimile:        
        _______________  

      Attention:       
        _______________

      

      If
        to a
        Buyer, to its address and facsimile number set forth on the signature page
        hereto, with copies to such Buyer’s representatives as set forth on the
        signature page hereto,

       

      with
        a
        copy (for informational purposes only) to:

      [Add]

      

      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

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

      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 Securities.
        The Company shall not assign this Agreement or any rights or obligations
        hereunder without the prior written consent of the Required Holders. 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
        and the
        delivery and exercise of Securities, as applicable. Each Buyer shall be
        responsible only for its own representations, warranties, agreements and
        covenants hereunder. Notwithstanding the foregoing, the representations and
        warranties of the parties contained herein shall only survive for a period
        of
        twenty four (24) months.

       

      (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 if, but only if, the Indemnitee makes
        such claim prior to the expiration of the applicable survival period provided
        for in Section 9(i), (b) any breach of any covenant, agreement or obligation
        of
        the Company contained in the Transaction Documents

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

      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. 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 which 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.

       

      (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 temporary and permanent injunctive relief in any such
        case
        without the necessity of proving actual damages and without posting a bond
        or
        other security.

       

      (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

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      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 a partnership, an association, a joint
        venture or any other kind of entity, or create a presumption that the Buyers
        are
        in any way acting in concert or as a group with respect to such obligations
        or
        the transactions contemplated by the Transaction Documents and the Company
        acknowledges that the Buyers are not 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. 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)   Subscriber
        hereby acknowledges and agrees that upon written notice of acceptance from
        the
        Company, the Subscription hereunder is irrevocable by Subscriber, that, except
        as required by law or as permitted under Section 8 above, Subscriber is not
        entitled to cancel, terminate or revoke this Agreement or any agreements
        of
        Subscriber hereunder and that this Agreement and such other agreements shall
        survive the death or disability of Subscriber and shall be binding upon and
        inure to the benefit of the parties hereto and their respective heirs,
        executors, administrators, successors, legal representatives and permitted
        assigns. If Subscriber is more than one person, the obligations of Subscriber
        hereunder shall be joint and several and the agreements, representations,
        warranties and acknowledgments herein contained shall be deemed to be made
        by
        and be binding upon each such person and his or her heirs, executors,
        administrators, successors, legal representatives and permitted
        assigns.

       

      
        	
                10.

              	
                Signature.
                  

              

      

       

      The
        signature page of this Agreement is contained as part of the applicable
        subscription package, entitled “Signature
        Page.”

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      EXHIBITS

      

      Exhibit
        A    Form
        of
        Convertible Notes

      Exhibit
        B    Registration
        Rights Agreement

      Exhibit
        C    Escrow
        Agreement

      Exhibit
        D    Form
        of
        Outside Company Counsel Opinion

      Exhibit
        E    Form
        of
        Secretary’s Certificate

      Exhibit
        F    Form
        of
        Officer’s Certificate

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

    

     

    
       

      IN
        WITNESS WHEREOF, the
        Parties have executed this Subscription Agreement as of the 3rd
        day of November, 2006.

       

      

        
          	 	
                  ORION
                    ETHANOL, INC.

                   

                   

                   

                
	 	
                  By:

                	
                  /s/Timothy
                    C. Barker

                
	 	 	
                  Name:
                    Timothy C. Barker

                  Title:
                    EVP-Development

                

        

      

       

       

       

       

       

      [Signature
        Page to the Subscription Agreement]

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    
      SUBSCRIPTION
        AGREEMENT SIGNATURE PAGE

       

      The
        undersigned investor hereby certifies that he or she (i) has received and
        relied
        solely upon information provided by the Company, (ii) agrees to all the terms
        and conditions of this Subscription Agreement, (iii) meets the suitability
        standards set forth in this Subscription Agreement and (iv) is a resident
        of the
        state indicated below.

       

      
        	 	
                (a)

              	
                The
                  undersigned subscribes for $______________ aggregate principal
                  amount of
                  Convertible Notes.

              

      

       

      
        	 	
                (b)

              	
                The
                  total cost of the Convertible Notes subscribed for, at $1,000 per
                  $1,000
                  aggregate principal amount Convertible Notes, is $______________
                  (the
                  “Purchase Price”).

              

      

       

      
        
          	 	 	 If
                  other than Individual check one and indicate capacity of signatory
                  under
                  the signature:
                   

                
	
                  Name
                    of Subscriber (Print)

                   

                	 	
                  
                    o
                      Trust

                    o
                      Estate

                    
                      o
Uniform
                        Gifts to Minors Act of State of
                        _________

                      o
                        Attorney-in-fact

                    

                  

                
	 Name
                  of Joint Subscriber (if any) (Print)	 	
                  o
Corporation

                  o
Other
                    __________________________

                   

                
	
                   Signature
                    of Subscriber

                	 	
                   

                   

                   

                
	
                  
                    Signature
                      of Joint Subscriber (if any)

                     

                  

                	 	
                  
                    If
                      Joint Ownership, check one:

                     

                  

                
	
                  
                    Capacity
                      of Signatory (if applicable)

                  

                   

                	 	
                  
                    o
Joint
                      Tenants with Right of
                      Survivorship

                    o
Tenants
                      in Common

                    o
Tenants
                      by Entirety

                    o
Community
                      Property

                     

                  

                
	
                  Social
                    Security or Taxpayer Identification Number

                   

                	 	
                  
                    Backup
                      Withholding Statement:

                    Please
                      check this box only of the investor is subject to:

                     

                  

                
	
                  Residence
                    Address

                   

                	 	
                  o
backup
                    withholding

                   

                
	
                  City             State           Zip
                    Code

                   

                	 	
                  
                    Foreign
                      Person:

                    Please
                      check this box only if the investor is a:

                  

                   

                
	
                  Telephone
                    ____________________________

                  Telecopy
                    No. __________________________

                   

                	 	 

                  o
non-resident
                    alien, foreign corporation, foreign
                    partnership, foreign trust or foreign
                    estate.

                

        

      

       

      The
        investor agrees to the terms of this Subscription Agreement and, as required
        by
        the Regulations pursuant to the Internal Revenue Code, certifies under penalty
        of perjury that (1) the Social Security Number or Taxpayer Identification
        Number
        and address provided above is correct, (2) the investor is not subject to
        backup
        withholding (unless the Backup Withholding Statement box is checked) either
        because he has not been notified that he is subject to backup withholding
        as a
        result of a failure to report all interest or dividends or because the Internal
        Revenue Service has notified him that he is no longer subject to backup
        withholding and (3) the investor (unless the Foreign Person box above is
        checked) is not a nonresident alien, foreign partnership, foreign trust or
        foreign estate.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00112-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00112-of-00352.parquet"}]]