Registration Rights Agreement
 
This Registration Rights Agreement (the “Agreement”) is made as of the date set
forth below between PerfectEnergy International Limited, a Nevada corporation
(the “Company”), and the purchasers of its Common Stock (as defined below)
pursuant to a Securities Purchase Agreement dated as of the date hereof (each an
“Investor” and, collectively, the “Investors”). Capitalized terms used and not
defined herein shall have the respective meanings ascribed to them in the
Securities Purchase Agreement.
 
RECITALS
 
WHEREAS, the Company has sold up to [___________] shares (the “Shares”) of the
common stock of the Company, par value $0.001 per share (the “Common Stock”),
and warrants (the “Warrants”) to purchase up to [______________] shares of
Common Stock at an exercise price of $[____] per share (the “Warrant Shares,”
and together with the Shares, the “Securities”) to certain investors in a
private placement (the “Offering”); and
 
WHEREAS, the execution and delivery of this Agreement by the Company is a
condition to the completion of the Offering.
 
NOW, THEREFORE, the parties hereto agree as follows:
 
1.  Registration Procedures and Expenses. The Company shall:
 
(a)  subject to receipt of necessary information from the Investors, use its
commercially reasonable efforts to cause a Registration Statement on Form S-3,
or on such other form as is available to the Company (the “Initial Registration
Statement”), to be filed with the Securities and Exchange Commission (“SEC”),
within thirty (30) calendar days following the Closing Date (the “Required
Filing Date”), to enable the resale of the Securities by the Investors from time
to time. Notwithstanding the registration obligations set forth in the first
sentence of this Section 1(a), in the event the SEC informs the Company that all
of the Securities cannot, as a result of the application of Rule 415, be
registered for resale as a secondary offering on a single registration
statement, the Company agrees to promptly (i) inform each of the holders
thereof, (ii) use its best efforts to file amendments to the Initial
Registration Statement as required by the SEC and/or (iii) withdraw the Initial
Registration Statement and file a new registration statement (a “New
Registration Statement, and together with the Initial Registration Statement,
the “Registration Statement”), in either case covering the maximum number of
Securities permitted to be registered by the SEC on Form S-3 or such other form
available to register for resale the Securities as a secondary offering, with
the number of shares included on such amendment or the New Registration
Statement cut back proportionally for each Investor; provided, however, that
prior to filing such amendment or New Registration Statement, the Company shall
be obligated to use its best efforts to advocate with the SEC for the
registration of all of the Securities in accordance with SEC policies. In the
event the Company amends the Initial Registration Statement or files a New
Registration Statement, as the case may be, under clauses (ii) or (iii) above,
the Company will use its commercially reasonable efforts to file with the SEC,
as promptly as allowed by the SEC, one or more registration statements on Form
S-3 or such other form available to register for resale those Securities that
were not registered for resale on the Initial Registration Statement, as
amended, or the New Registration Statement;
 

 
 

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(b)  subject to receipt of necessary information from the Investors, use its
commercially reasonable efforts to cause the Registration Statement to become
effective no later than the date that is 90 calendar days after the Closing
Date, (or, in the event of a “full review” of the Registration Statement by the
SEC, one hundred fifty (150) calendar days after the Closing Date) (the
“Required Effective Date”). If the Registration Statement (i) has not been filed
by the Required Filing Date or (ii) has not been declared effective by the SEC
on or before the Required Effective Date, the Company shall, on the Business Day
immediately following the Required Filing Date or the Required Effective Date,
as the case may be, and each 30th day thereafter, make a payment to the Investor
as partial compensation for such delay (the “Late Registration Payments”) equal
to two percent (2.0%) of the purchase price paid for the Shares purchased by the
Investor and not previously sold by the Investor until the Registration
Statement is filed or declared effective by the SEC, as the case may be;
provided, however, that in no event shall the payments made pursuant to this
paragraph (b), if any, exceed in the aggregate fifteen percent (15.0%) of such
purchase price. Late Registration Payments will be prorated on a daily basis
during each 30 day period and will be paid to the Investor by wire transfer or
check within five Business Days after the earlier of (i) the end of each thirty
day period following the Required Effective Date or (ii) the effective date of
the Registration Statement;
 
(c)  subject to a Suspension (as defined in Section 2(c)) being in effect, use
its commercially reasonable efforts to prepare and file with the SEC such
amendments and supplements to the Registration Statement and the related
prospectus (the “Prospectus”) as may be necessary to keep the Registration
Statement current and effective for a period ending on the earlier of (i) the
second anniversary of the Closing Date, (ii) the date on which the Investor may
sell Securities pursuant to paragraph (k) of Rule 144 under the Securities Act
or any successor rule (“Rule 144”) or (iii) such time as all Securities
purchased by such Investor in this Offering have been sold (A) pursuant to a
registration statement, (B) to or through a broker, dealer or underwriter in a
public distribution or a public securities transaction and/or (C) in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer restrictions
and restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale, and to notify each Investor promptly upon the
Registration Statement and each post-effective amendment thereto, being declared
effective by the SEC;
 
(d)  furnish to the Investor such number of copies of the Registration Statement
and the Prospectus (including supplemental prospectuses) (collectively, the
“Prospectuses”) as the Investor may reasonably request, in order to facilitate
the public sale or other disposition of all or any of the Securities by the
Investor;
 
(e)  file documents required of the Company for customary blue sky clearance in
states specified in writing by the Investor; provided, however, that the Company
shall not be required to qualify to do business or consent to service of process
in any jurisdiction in which it is not now so qualified or has not so consented;
 
(f)  bear all expenses (other than underwriting discounts and commissions, if
any) in connection with the procedures in paragraph (a) through (e) of this
Section 1 and the registration of the Securities pursuant to the Registration
Statement;
 
(g)  advise the Investors, promptly after it shall receive notice or obtain
knowledge of the issuance of any stop order by the SEC delaying or suspending
the effectiveness of the Registration Statement or of the initiation of any
proceeding for that purpose; and it will promptly use its commercially
reasonable efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued;
and
 

 
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(h)  with a view to making available to the Investor the benefits of Rule 144
and any other rule or regulation of the SEC that may at any time permit the
Investor to sell Securities to the public without registration, the Company
covenants and agrees to use its commercially reasonable efforts to: (i) make and
keep public information available, as those terms are understood and defined in
Rule 144, until the earlier of (A) such date as all of the Investor’s Securities
may be resold pursuant to Rule 144(k) or any other rule of similar effect or (B)
such date as all of the Investor’s Securities shall have been resold; (ii) file
with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”); and (iii) furnish to the Investor upon request,
as long as the Investor owns any Securities, (A) a written statement by the
Company that it has complied with the reporting requirements of the Securities
Act and the Exchange Act, (B) a copy of the Company’s most recent Annual Report
on Form 10-KSB or Quarterly Report on Form 10-QSB, and (C) such other
information as may be reasonably requested in order to avail the Investor of any
rule or regulation of the SEC that permits the selling of any such Securities
without registration.
 
It shall be a condition precedent to the obligations of the Company to take any
action pursuant to this Section 1 that the Investor shall furnish to the Company
such information regarding itself, the Securities to be sold by the Investor,
and the intended method of disposition of such securities as shall be required
to effect the registration of the Securities.
 
The Company understands that the Investor disclaims being an underwriter, but
acknowledges that a determination by the SEC that the Investor is deemed an
underwriter shall not relieve the Company of any obligations it has hereunder.
 
2.  Transfer of Shares After Registration; Suspension.
 
(a)  The Investor agrees that it will not effect any disposition of the
Securities or its right to purchase the Securities that would constitute a sale
within the meaning of the Securities Act other than transactions exempt from the
registration requirements of the Securities Act, as contemplated in the
Registration Statement and as described below, and that it will promptly notify
the Company of any material changes in the information set forth in the
Registration Statement regarding the Investor or its plan of distribution.
 
(b)  Except in the event that paragraph (c) below applies, the Company shall:
(i) if deemed necessary by the Company, prepare and file from time to time with
the SEC a post-effective amendment to the Registration Statement or a supplement
to the related Prospectus or a supplement or amendment to any document
incorporated therein by reference or file any other required document so that
such Registration Statement will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, and so that, as thereafter
delivered to purchasers of the Securities being sold thereunder, such Prospectus
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; (ii) provide the Investor copies of any documents filed pursuant to
Section 2(b)(i); and (iii) upon request, inform each Investor who so requests
that the Company has complied with its obligations in Section 2(b)(i) (or that,
if the Company has filed a post-effective amendment to the Registration
Statement which has not yet been declared effective, the Company will notify the
Investor to that effect, will use its commercially reasonable efforts to secure
the effectiveness of such post-effective amendment as promptly as possible and
will promptly notify the Investor pursuant to Section 2(b)(i) hereof when the
amendment has become effective).
 

 
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(c)  Subject to paragraph (d) below, in the event: (i) of any request by the SEC
or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
Registration Statement or related Prospectus or for additional information; (ii)
of the issuance by the SEC or any other federal or state governmental authority
of any stop order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose; (iii) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose; or (iv) of
any event or circumstance which necessitates the making of any changes in the
Registration Statement or Prospectus, or any document incorporated or deemed to
be incorporated therein by reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the Prospectus, it
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; then the Company shall promptly deliver a certificate in writing to
the Investor (the “Suspension Notice”) to the effect of the foregoing and, upon
receipt of such Suspension Notice, the Investor will refrain from selling any
Securities pursuant to the Registration Statement (a “Suspension”) until the
Investors are advised in writing by the Company that the current Prospectus may
be used, and has received copies of any additional or supplemental filings that
are incorporated or deemed incorporated by reference in any such Prospectus. In
the event of any Suspension, the Company will use its commercially reasonable
efforts to cause the use of the Prospectus so suspended to be resumed as soon as
reasonably practicable after delivery of a Suspension Notice to the Investors.
In addition to and without limiting any other remedies (including, without
limitation, at law or at equity) available to the Investor, the Investor shall
be entitled to specific performance in the event that the Company fails to
comply with the provisions of this Section 2(c). The Investor covenants that
from the date hereof it will maintain in confidence the receipt and content of
any Suspension Notice provided in accordance with this paragraph (c) in
accordance with and subject to Section 4.6 of Annex I to the Securities Purchase
Agreement.
 
(d)  Notwithstanding the foregoing paragraphs of this Section 2, the Company
shall use its commercially reasonable efforts to ensure that (i) a Suspension
shall not exceed sixty (60) days individually and (ii) no more than two (2)
Suspensions shall occur during any twelve month period (each Suspension that
satisfies the foregoing criteria being referred to herein as a “Qualifying
Suspension”). In the event that there occurs a Suspension (or part thereof) that
does not constitute a Qualifying Suspension, the Company shall pay to the
Investor, on the sixtieth (60th) day following the first day of such Suspension
(or the first day of such part), and on each sixtieth (60th) day thereafter, an
amount equal to 2.0% of the purchase price paid for the Shares purchased by the
Investor and not previously sold by the Investor (prorated in each such case for
partial thirty day periods); provided, however, that in no event shall the
payments made pursuant to this paragraph (d), if any, exceed in the aggregate
15.0% of such purchase price. This liquidated damage shall not apply after the
Company is no longer obligated to maintain the effectiveness of the Registration
Statement.
 
(e)  If a Suspension is not then in effect, the Investor may sell Securities
under the Registration Statement, provided that it complies with any applicable
prospectus delivery requirements. Upon receipt of a request therefor, the
Company will provide an adequate number of current Prospectuses to the Investor
and to any other parties requiring such Prospectuses.
 
(f)  In the event of a sale of Securities by the Investor, unless such
requirement is waived by the Company in writing, the Investor must also deliver
to the Company’s transfer agent, with a copy to the Company, a Certificate of
Subsequent Sale substantially in the form attached hereto as Exhibit A, so that
the Securities may be properly transferred.
 

 
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(g)  The Company agrees that it shall, immediately prior to the Registration
Statement being declared effective, deliver to its transfer agent an opinion
letter of counsel, opining that at any time the Registration Statement is
effective, the transfer agent shall issue, in connection with the sale of the
Securities, certificates representing such Securities without restrictive
legend, provided the Securities are to be sold pursuant to the Prospectus
contained in the Registration Statement and the transfer agent receives a
Certificate of Subsequent Sale in the form attached hereto as Exhibit A. Upon
receipt of such opinion, the Company shall cause the transfer agent to confirm,
for the benefit of the Investor, that no further opinion of counsel is required
at the time of transfer in order to issue such Securities without restrictive
legend.
 
The Company shall cause its transfer agent to issue a certificate without any
restrictive legend to a purchaser of any Securities from the Investor, if (a)
the sale of such Securities is registered under the Registration Statement
(including registration pursuant to Rule 415 under the Securities Act) and the
Investor has delivered a Certificate of Subsequent Sale to the Transfer Agent;
(b) the holder has provided the Company with an opinion of counsel, in form,
substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Securities
may be made without registration under the Securities Act; or (c) such
Securities are sold in compliance with Rule 144 under the Securities Act. In
addition, the Company shall, at the request of the Investor, remove the
restrictive legend from any Securities held by the Investor following the
expiration of the holding period required by Rule 144(k) under the Securities
Act (or any successor rule).

3.  Indemnification. For the purpose of this Section 3:
 
(a)  the term “Selling Shareholder” shall mean the Investor and each person, if
any, who controls the Investor within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act;
 
(b)  the term “Registration Statement” shall include any final Prospectus,
exhibit, supplement or amendment included in or relating to, and any document
incorporated by reference in, the Registration Statement (or deemed to be a part
thereof) referred to in Section 1; and
 
(c)  the term “untrue statement” shall mean any untrue statement or alleged
untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, not misleading.
 
(d)  (i)The Company agrees to indemnify and hold harmless each Selling
Shareholder from and against any losses, claims, damages or liabilities to which
such Selling Shareholder may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon (i) any untrue
statement of a material fact contained in the Registration Statement, (ii) any
inaccuracy in the representations and warranties of the Company contained in the
Agreement or the failure of the Company to perform its obligations hereunder or
(iii) any failure by the Company to fulfill any undertaking included in the
Registration Statement, and the Company will reimburse such Selling Shareholder
for any reasonable legal expense or other actual accountable out of pocket
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided, however, that the Company shall
not be liable in any such case to the extent that such loss, claim, damage or
liability arises out of, or is based upon, an untrue statement made in such
Registration Statement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Selling Shareholder
specifically for use in preparation of the Registration Statement, or any
inaccuracy in representations made by such Selling Shareholder in the Investor
Questionnaire or the failure of such Selling Shareholder to comply with its
covenants and agreements contained in Section 4 of Annex I to the Securities
Purchase Agreement or Section 2 hereof or any statement or omission in any
Prospectus that is corrected in any subsequent Prospectus that was delivered to
the Selling Shareholder prior to the pertinent sale or sales by the Selling
Shareholder.
 

 
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(ii)  The Investor agrees to indemnify and hold harmless the Company (and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, each officer of the Company who signs the Registration Statement
and each director of the Company) from and against any losses, claims, damages
or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, (i) any failure
to comply with the covenants and agreements contained in Section 4 of Annex I to
the Securities Purchase Agreement or Section 2 hereof, or (ii) any untrue
statement of a material fact contained in the Registration Statement if, and
only if, such untrue statement was made in reliance upon and in conformity with
written information furnished by or on behalf of the Investor specifically for
use in preparation of the Registration Statement, and the Investor will
reimburse the Company (or such officer, director or controlling person), as the
case may be, for any reasonable legal expense or other actual accountable
out-of-pocket expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim. The obligation to
indemnify shall be limited to the net amount of the proceeds received by the
Investor from the sale of the Securities pursuant to the Registration Statement.
 
(iii)  Promptly after receipt by any indemnified person of a notice of a claim
or the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 3, such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, but the omission to so notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party under this Section 3 (except to the extent that such omission
materially and adversely affects the indemnifying party’s ability to defend such
action) or from any liability otherwise than under this Section 3. Subject to
the provisions hereinafter stated, in case any such action shall be brought
against an indemnified person, the indemnifying person shall be entitled to
participate therein, and, to the extent that it shall elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, shall be entitled to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified person. After notice
from the indemnifying person to such indemnified person of its election to
assume the defense thereof (unless it has failed to assume the defense thereof
and appoint counsel reasonably satisfactory to the indemnified party), such
indemnifying person shall not be liable to such indemnified person for any legal
expenses subsequently incurred by such indemnified person in connection with the
defense thereof; provided, however, that if there exists or shall exist a
conflict of interest that would make it inappropriate, in the reasonable opinion
of counsel to the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel at
the expense of such indemnifying person; provided, however, that no indemnifying
person shall be responsible for the fees and expenses of more than one separate
counsel (together with appropriate local counsel) for all indemnified parties.
In no event shall any indemnifying person be liable in respect of any amounts
paid in settlement of any action unless the indemnifying person shall have
approved the terms of such settlement; provided that such consent shall not be
unreasonably withheld. No indemnifying person shall, without the prior written
consent of the indemnified person, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified person is or could
reasonably have been a party and indemnification could have been sought
hereunder by such indemnified person, unless such settlement includes an
unconditional release of such indemnified person from all liability on claims
that are the subject matter of such proceeding.
 

 
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(iv)  If the indemnification provided for in this Section 3 is unavailable to or
insufficient to hold harmless an indemnified party under paragraphs 3(d)(i) or
3(d)(ii) above in respect of any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and the Investor on the other in
connection with the statements or omissions or other matters which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, in the case of an untrue
statement, whether the untrue statement relates to information supplied by the
Company on the one hand or the Investor on the other and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement. The Company and the Investor agree that it would not be
just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Investors were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), the Investor shall not be required to
contribute any amount in excess of the amount by which the gross amount received
by the Investor from the sale of the Securities to which such loss relates
exceeds the amount of any damages which the Investor has otherwise been required
to pay by reason of such untrue statement. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Investors’ obligations in this subsection to
contribute are several in proportion to their sales of Securities to which such
loss relates and not joint.
 
The parties to this Agreement hereby acknowledge that they are sophisticated
business persons who were represented by counsel during the negotiations
regarding the provisions hereof including, without limitation, the provisions of
this Section 3, and are fully informed regarding said provisions. They further
acknowledge that the provisions of this Section 3 fairly allocate the risks in
light of the ability of the parties to investigate the Company and its business
in order to assure that adequate disclosure is made in the Registration
Statement as required by the Securities Act and the Exchange Act.
 
4.  Termination of Conditions and Obligations. The conditions precedent imposed
by Section 4 of Annex I to the Securities Purchase Agreement or this Agreement
upon the transferability of the Securities shall cease and terminate as to any
particular number of the Securities when such Securities shall have been
effectively registered under the Securities Act and sold or otherwise disposed
of in accordance with the intended method of disposition set forth in the
Registration Statement covering such Securities or at such time as an opinion of
counsel satisfactory to the Company shall have been rendered to the effect that
such conditions are not necessary in order to comply with the Securities Act.
 
5.  Information Available. So long as the Registration Statement is effective
covering the resale of Securities owned by the Investor, the Company will
furnish (or, to the extent such information is available electronically through
the Company’s filings with the SEC, the Company will make available) to the
Investor:
 
(a)  as soon as practicable after it is available, one copy of (i) its most
recent Annual Report to Shareholders (which Annual Report shall contain
financial statements audited in accordance with generally accepted accounting
principles by an independent registered public accounting firm, and (ii) if not
included in substance in the Annual Report to Shareholders, its most recent
Annual Report on Form 10-K (the foregoing, in each case, excluding exhibits);
 

 
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(b)  upon the reasonable request of the Investor, all exhibits excluded by the
parenthetical to subsection (a)(ii) of this Section 5 as filed with the SEC and
all other information that is made available to shareholders; and
 
(c)  upon the reasonable request of the Investor, an adequate number of copies
of the Prospectuses to supply to any other party requiring such Prospectuses;
and the Company, upon the reasonable request of the Investor, will meet with the
Investor or a representative thereof at the Company’s headquarters during the
Company’s normal business hours to discuss all information relevant for
disclosure in the Registration Statement covering the Securities and will
otherwise reasonably cooperate with the Investor conducting an investigation for
the purpose of reducing or eliminating the Investor’s exposure to liability
under the Securities Act, including the reasonable production of information at
the Company’s headquarters; provided, that the Company shall not be required to
disclose any confidential information to or meet at its headquarters with the
Investor until and unless the Investor shall have entered into a confidentiality
agreement, in form and substance reasonably satisfactory to the Company, with
the Company with respect thereto.
 
6.  Limits on Additional Issuances. Except for the issuance of stock options,
restricted stock and stock appreciation rights under the Company’s long term
incentive plans, the issuance of Common Stock purchase warrants, or the issuance
of Common Stock upon the conversion of preferred stock or upon exercise of
outstanding options, warrants and other equity-based rights and the offering
contemplated hereby, the Company will not, for a period of six (6) months
following the Closing Date, offer for sale or sell any securities unless, in the
opinion of the Company’s counsel, such offer or sale does not jeopardize the
availability of exemptions from the registration and qualification requirements
under applicable securities laws with respect to the Offering. The foregoing
shall not apply to securities issued in connection with any acquisition,
including by way of merger, or purchase of stock or all or substantially all of
the assets of any third party. Except for the issuance of stock options,
restricted stock and stock appreciation rights under the Company’s long term
incentive plans, the issuance of Common Stock purchase warrants, or the issuance
of Common Stock upon the conversion of preferred stock or upon exercise of
outstanding options, warrants and other equity-based rights and the offering
contemplated hereby, the Company has not engaged in any such offering during the
six (6) months prior to the date of this agreement.  The foregoing provisions
shall not prevent the Company from filing a “shelf” registration statement
pursuant to Rule 415 under the Securities Act, but the foregoing provisions
shall apply to any sale of securities thereunder.
 
7.  Notices. All notices, requests, consents and other communications hereunder
shall be in writing, shall be delivered (A) if within the United States, by
first-class registered or certified airmail, or nationally recognized overnight
express courier, postage prepaid, or by facsimile, or (B) if from outside the
United States, by International Federal Express (or comparable service) or
facsimile, and shall be deemed given (i) if delivered by first-class registered
or certified mail domestic, upon the Business Day received, (ii) if delivered by
nationally recognized overnight carrier, one (1) Business Day after timely
delivery to such carrier, (iii) if delivered by International Federal Express
(or comparable service), two (2) Business Days after timely delivery to such
carrier, (iv) if delivered by facsimile, upon electric confirmation of receipt
and shall be addressed as follows, or to such other address or addresses as may
have been furnished in writing by a party to another party pursuant to this
paragraph:
 
(a)  if to the Company, to:
 

 
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PerfectEnergy International Limited
7401 Springbank Blvd., Suite 3
Calgary, Alberta T3H 5R2
Attention: [____________]
Telephone:  [____________]

with a copy to:

[__________________]
[__________________]
[__________________]
Attention: [__________]
Telephone: [_________]

(b)  if to the Investor, at its address on the signature page to the Securities
Purchase Agreement.
 
8.  Amendments; Waiver. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the Investor. Any
waiver of a provision of this Agreement must be in writing and executed by the
party against whom enforcement of such waiver is sought.
 
9.  Headings. The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
 
10.  Entire Agreement; Severability. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter hereof
and supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. If any provision contained in this Agreement is
determined to be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
 
11.  Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of [New York], without giving
effect to the principles of conflicts of law.
 
12.  Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument, and shall become effective when
one or more counterparts have been signed by each party hereto and delivered to
the other parties.
 

 
9

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Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.
 

 
Dated as of: ______________, 2007
         
[Investor Name]
       
By:
   
Name:
 
Title:
             
Address:
         

AGREED AND ACCEPTED:

PERFECTENERGY INTERNATIONAL LIMITED
 

By:       Name:     Title:  

 
 

[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]

 
10

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Exhibit A
 
PERFECTENERGY INTERNATIONAL LIMITED
CERTIFICATE OF SUBSEQUENT SALE

[Transfer Agent]
__________________________
__________________________

 

 
RE:
Sale of Shares of Common Stock of Perfectenergy International Limited (the
“Company”) pursuant to the Company’s Prospectus dated _______________, 2007 (the
“Prospectus”)

 
Dear Sir/Madam:
 
The undersigned hereby certifies, in connection with the sale of shares of
Common Stock of the Company included in the table of Selling Shareholders in the
Prospectus, that the undersigned has sold the Shares pursuant to the Prospectus
and in a manner described under the caption “Plan of Distribution” in the
Prospectus and that such sale complies with all applicable securities laws,
including, without limitation, the Prospectus delivery requirements of the
Securities Act of 1933, as amended.
 
Selling Shareholder (the beneficial owner):______________________________
 
Record Holder (e.g., if held in name of nominee):__________________________
 
Restricted Stock Certificate No.(s):____________________________________
 
Number of Shares Sold:____________________________________________
 
Date of Sale:____________________________________________________
 
In the event that you receive a stock certificate(s) representing more shares of
Common Stock than have been sold by the undersigned, then you should return to
the undersigned a newly issued certificate for such excess shares in the name of
the Record Holder and BEARING A RESTRICTIVE LEGEND. Further, you should place a
stop transfer on your records with regard to such certificate.
 
      
 
 

Dated:_____________ Very truly yours,        
By:
   
Print Name:
   
Title:
 

 
 
 
A-1

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