Exhibit 4.18


 


AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT


AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (as amended,
restated or otherwise modified from time to time, this “Agreement”), dated as of October 31, 2007,
by and among Wentworth Energy, Inc., an Oklahoma corporation, with headquarters
located at 112 E. Oak Street, Suite 200, Palestine, Texas 75801 (the “Company”), and the undersigned buyers
(each, a “Buyer”, and
collectively, the “Buyers”).


WHEREAS:


A.            The Company and the Buyers are parties to that certain
Securities Purchase Agreement, dated as of July 24, 2006 (as amended, restated
or otherwise modified prior to the date hereof, the “Existing
Securities Purchase Agreement”),
pursuant to which, among other things, the Buyers purchased from the Company
(i) senior secured convertible notes (the “Existing
Notes”), which are convertible into shares of the Company’s common
stock, $0.001 par value per share (the “Common
Stock”, as converted, the “Existing
Conversion Shares”), in accordance with the terms of the Existing
Notes, (ii) Series A Warrants (the “Existing
Series A Warrants”), which are exercisable into shares of Common
Stock (the “Existing Series A Warrant Shares”),
and (iii) Series B Warrants (the “Existing
Series B Warrants”, and together with the Existing Series A
Warrants, the “Existing Warrants”), which are
exercisable into shares of Common Stock (the “Existing
Series B Warrant Shares”, and together with the Existing Series A
Warrant Shares, the “Existing Warrant Shares”).


 


B.            The Company and the Buyers, severally, are entering into
those certain Amendment Agreements, each dated as of the date hereof (the “Amendment Agreements”), pursuant to which (among other
things) the Company and the Buyers have agreed to amend the Existing Securities
Purchase Agreement (as so amended, and as thereafter amended, restated or
otherwise modified from time to time, the “Securities Purchase
Agreement”) to provide for, among other things, the following:  (i) the amendment and restatement of all of
the Existing Notes for the Amended and Restated Notes (as such term is defined
in the Amendment Agreements) which shall be convertible into Common Stock (as
converted, the “Amended and Restated Conversion Shares”); (ii) the amendment and restatement
of all of the Existing Warrants for the Amended and Restated Warrants (as such
term is defined in the Amendment Agreements); (iii) the Company’s issuance and
sale to one of the Buyers of the New Note (as such term is defined in the
Amendment Agreements; and together with the Amended and Restated Notes, the “Notes”) which shall be convertible into Common Stock (as
converted, the “New Conversion Shares”, and
together with the Amended and Restated Conversion Shares, the “Conversion Shares”); (iv) the Company’s issuance and sale to
the Buyer of the New Note of the New Series A Warrant and the New Series B
Warrant (as each such term is defined in the Amendment Agreements); and (v) the
Company’s issuance and sale to each of the Buyers of the Other New Series A
Warrants (as such term is defined in the Amendment Agreements).


 


C.            The Notes bear interest, which at the option of the
Company, subject to certain conditions, may be paid in shares of Common Stock
(the “Interest Shares”).


D.            To induce each of the Buyers to
execute and deliver its respective Amendment Agreement, the Company has agreed
to execute and deliver this Agreement which 


 

















 


amends, restates and supersedes that certain Registration Rights
Agreement, by and among the Company and the Buyers, dated as of July 25, 2006
(as amended, restated or otherwise modified prior to the date hereof, the “Existing Registration Rights Agreement”), whereby the
Company agreed to provide certain registration rights under the Securities Act
of 1933, as amended, and the rules and regulations thereunder, or any similar
successor statute (collectively, the “1933 Act”), and
applicable state securities laws.


NOW, THEREFORE, in consideration of the
premises and the mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Company and each of the Buyers hereby agree as follows:


1.             Definitions.


Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement.  As used in this Agreement, the following
terms shall have the following meanings:


a.             “Additional
Effective Date” means the date that the applicable Additional
Registration Statement is declared effective by the SEC.


b.             “Additional
Effectiveness Deadline” means the date which is (i) in the event
that an Additional Registration Statement is not subject to a full review by
the SEC, eighty (80) calendar days after the date of the applicable Investor
Demand or (ii) in the event that an Additional Registration Statement is
subject to a full review by the SEC, one hundred forty (140) calendar days
after the date of the applicable Investor Demand.


c.             “Additional
Filing Deadline” means the date
fifty (50) calendar days from the date of the applicable Investor Demand; provided,
that if the date of such Investor Demand is within fifty (50) calendar days
from the date that the Company’s quarterly report on Form 10-Q or annual report
on Form 10-K is required to be filed with the SEC (the “Report Due
Date”), then such Additional Filing Date shall be later of (i) the
date fifty (50) calendar days from the date of the applicable Investor Demand
and (ii) the date ten (10) calendar days from such Report Due Date.


d.             “Additional
Registrable Securities” means, to the extent not already covered by
a Registration Statement that has been declared effective, (i) the Conversion
Shares issued or issuable upon conversion or redemption of the Notes, (ii) the
Interest Shares issued or issuable with respect to the Notes and (iii) any
share capital of the Company issued or issuable with respect to the Conversion
Shares, the Notes, or the Interest Shares as a result of any stock split, stock
dividend, recapitalization, exchange or similar event or otherwise, without
regard to any limitations on conversions of the Notes.


e.             “Additional
Registration Statement” a registration statement or registration
statements of the Company filed under the 1933 Act covering any Additional
Registrable Securities.


f.              “Additional
Required Registration Amount”
means the Maximum Allowable Amount of the Additional Registrable Securities as
of the Trading Day (as 


 


2

















 


defined in the Notes) immediately preceding the applicable date of
determination, all subject to adjustment as provided in Section 2(f) (without
regard to any limitations on conversion of the Notes).


 


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


h.             “Closing
Date” means the 2007 Closing Date as defined in the Securities
Purchase Agreement.


i.              “Effective
Date” means the Initial Effective Date or an Additional Effective
Date, as applicable.


j.              “Effectiveness
Deadline” means the Initial Effectiveness Deadline or an Additional
Effectiveness Deadline, as applicable.


k.             “Filing
Deadline” means the Initial Filing Deadline or an Additional Filing
Deadline, as applicable.


l.              “Initial
Effective Date” means the date that the Initial Registration
Statement is declared effective by the SEC.


m.            “Initial
Effectiveness Deadline” means the date which is (i) in the event
that the Initial Registration Statement is not subject to a full review by the
SEC, eighty (80) calendar days after the Closing Date or (ii) in the event that
the Initial Registration Statement is subject to a full review by the SEC,
April 30, 2008.


n.             “Initial
Filing Deadline” means the date
fifty (50) calendar days after the Closing Date.


o.             “Initial
Registrable Securities” means (i)
the Conversion Shares issued or issuable upon conversion or redemption of the
Notes, (ii) the Interest Shares issued or issuable with respect to the Notes
and (iii) any share capital of the Company issued or issuable with respect to
the Conversion Shares, the Notes, or the Interest Shares as a result of any
stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, without regard to any limitations on conversions of the Notes.


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


q.             “Initial
Required Registration Amount”
means the Maximum Allowable Amount of Initial Registrable Securities as of the Trading Day immediately
preceding the applicable date of determination.


r.              “Investor”
means a Buyer or any transferee or assignee thereof to whom a Buyer assigns its
rights under this Agreement and who agrees to become bound by the 


3





















 


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


s.             “Investor
Demand” means a written request by an Investor to the Company that
the Company prepare and file an Additional Registration Statement to register
Additional Registrable Securities.


t.              “Maximum
Allowable Amount” means a number of shares of Common Stock equal to
33.33% (or such greater or lesser percentage or amount as is permitted by the
SEC) of the issued and outstanding Common Stock of the Company that is not
beneficially owned by an affiliate of the Company.


u.             “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.


v.             “register,”
“registered,” and “registration” refer to a registration
effected by preparing and filing one or more Registration Statements (as
defined below) in compliance with the 1933 Act and pursuant to Rule 415 and the
declaration or ordering of effectiveness of such Registration Statement(s) by
the SEC.


w.            “Registrable
Securities” means the Initial Registrable Securities and the
Additional Registrable Securities.


x.             “Registration
Statement” means the Initial Registration Statement or an Additional
Registration Statement, as applicable.


y.             “Required
Holders” means the holders of at least a majority of the Registrable
Securities.


z.             “Required
Registration Amount” means with respect to the Initial Registration
Statement, the Initial Required Registration Amount or with respect to an
Additional Registration Statement, the Additional Required Registration Amount,
as applicable.


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


bb.          “SEC”
means the United States Securities and Exchange Commission.


2.             Registration.


a.             Initial Mandatory
Registration.  The Company
shall prepare and, as soon as practicable but in no event later than the
Initial Filing Deadline, file with the SEC the Initial Registration Statement
on Form SB-2 covering the resale of the Maximum Allowable Amount of the Initial
Registrable Securities.  In the event
that Form SB-2 is unavailable for such a registration, the Company shall use
such other form as is available for such a registration on 


4





















another appropriate form
reasonably acceptable to the Required Holders, subject to the provisions of
Section 2(e).  The Initial Registration
Statement prepared pursuant hereto shall register for resale at least the
number of shares of Common Stock equal to the Initial Required Registration
Amount determined as of date the Initial Registration Statement is initially
filed with the SEC.  The Initial Registration
Statement shall contain (except if otherwise directed by the Required Holders)
the “Selling Stockholders” and “Plan of Distribution” sections in
substantially the form attached hereto as Exhibit B.  The Company shall use its
best efforts to have the Initial Registration Statement declared effective by
the SEC as soon as practicable, but in no event later than the Initial
Effectiveness Deadline.  By 9:30 am on
the Business Day following the Initial Effective Date, the Company shall file
with the SEC in accordance with Rule 424 under the 1933 Act the final
prospectus to be used in connection with sales pursuant to the Initial
Registration Statement.


b.             Additional Mandatory
Registration. An Investor successively may request in writing that the
Company prepare and file with the SEC an Additional Registration Statement to
register any Additional Registrable Securities beginning on the date which is
the later of (i) six (6) months following the Initial Effective Date and (ii)
ten (10) days after the date substantially all of the Registrable Securities registered under the Initial Registration Statement are
sold and thereafter on the date which is the later of (i) six (6) months
following the Additional Effective Date of the immediately preceding Additional
Registration Statement and (ii) ten (10) days after the date substantially all
of the Registrable Securities registered
under the immediately preceding Additional Registration Statement are sold until the
earlier date of when (x) all Additional Registrable Securities have been
registered on Additional Registration Statements and (y) all Additional
Registrable Securities not previously registered on an Additional Registration
Statement may be sold by the Investors without restriction under Rule 144(k)
promulgated under the 1933 Act.  Upon
receipt of an Investor Demand, the Company shall (x) promptly send a copy of
such Investor Demand to all other Investors and (y) prepare and as soon as
practicable but in no event later than the Additional Filing Deadline, file
with the SEC such Additional Registration Statement on Form SB-2 covering the
resale of the Maximum Allowable Amount of the Additional Registrable Securities
set forth on an Investor Demand and in any additional Investor Demand received
at least five (5) Business Days prior to the applicable Additional Filing
Deadline.  In the event that Form SB-2 is
unavailable for such a registration, the Company shall use such other form as
is available for such a registration on another appropriate form reasonably acceptable
to the Required Holders, subject to the provisions of Section 2(e).  The Additional Registration Statement
prepared pursuant hereto shall register for resale at least the number of
shares of Common Stock equal to the Additional Required Registration Amount
determined as of date the Additional Registration Statement is initially filed
with the SEC.  The Additional
Registration Statement shall contain (except if otherwise directed by the
Required Holders) the “Selling Stockholders” and “Plan of
Distribution” sections in substantially the form attached hereto as Exhibit
B.  The Company shall use its
best efforts to have the Additional Registration Statement declared effective
by the SEC as soon as practicable, but in no event later than the Additional
Effectiveness Deadline.  By 9:30 am on the
Business Day following the Additional Effective Date of the applicable
Additional Registration Statement, the Company shall file with the SEC in
accordance with Rule 424 under the 1933 Act the final prospectus to be used in
connection with sales pursuant to such Additional Registration Statement.


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c.             Allocation of Registrable
Securities.  The initial number of
Registrable Securities included in any Registration Statement and any increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC.  In the event that an Investor
sells or otherwise transfers any of such Investor’s Registrable Securities,
each transferee shall be allocated a pro rata portion of the then remaining
number of Registrable Securities included in such Registration Statement for
such transferor.  Any shares of Common
Stock included in a Registration Statement and which remain allocated to any
Person which ceases to hold any Registrable Securities covered by such
Registration Statement shall be allocated to the remaining Investors, pro rata
based on the number of Registrable Securities then held by such Investors which
are covered by such Registration Statement. 
Except for the shares of Common Stock described on Exhibit C (the
“Other Securities”), the Company shall
not include any securities other than Registrable Securities on any
Registration Statement without the prior written consent of the Required
Holders.  If the SEC requires that the
Company register less than 33.33% of the issued and outstanding Common Stock of
the Company that is not beneficially owned by affiliates of the Company on any
Registration Statement, the amount of Other Securities on such Registration
Statement shall be removed from such Registration Statement if to do so would
permit additional Registrable Securities to be included in such Registration
Statement.


d.             Legal Counsel.  Subject to Section 5 hereof, the Required
Holders shall have the right to select one legal counsel to review and oversee
any registration pursuant to this Section 2 (“Legal
Counsel”), which shall be Schulte Roth & Zabel LLP or such other
counsel as thereafter designated by the Required Holders.  The Company and Legal Counsel shall
reasonably cooperate with each other in performing the Company’s obligations
under this Agreement.


e.             Ineligibility for Form S-3.  In the event that Form S-3 is not  available for the registration of the resale
of Registrable Securities hereunder, the Company shall (i) register the resale
of the Registrable Securities on another appropriate form reasonably acceptable
to the Required Holders and (ii) undertake to register the Registrable
Securities on Form S-3 as soon as such form is available, provided that the
Company shall maintain the effectiveness of the Registration Statement then in
effect until such time as a Registration Statement on Form S-3 covering the
Registrable Securities has been declared effective by the SEC.


f.              Sufficient Number of Shares
Registered.  In the event the number
of shares available under a Registration Statement filed pursuant to Section
2(a) or Section 2(b) is insufficient to cover all of the Registrable Securities
required to be covered by such Registration Statement or an Investor’s
allocated portion of the Registrable Securities pursuant to Section 2(c), the
Company shall amend the applicable Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable),
or both, so as to cover at least the Required Registration Amount as of the Trading
Day immediately preceding the date of the filing of such amendment or new
Registration Statement, in each case, as soon as practicable, but in any event
not later than fifty (50) days after the necessity therefor arises.  The Company shall use its best efforts to
cause such amendment and/or new Registration Statement 


6





















to become effective as soon
as practicable following the filing thereof. 
For purposes of the foregoing provision, the number of shares available
under a Registration Statement shall be deemed “insufficient to cover all of
the Registrable Securities” if at any time the number of shares of Common Stock
available for resale under the Registration Statement is less than the product
determined by multiplying (i) the Required Registration Amount as of such time
by (ii) 0.90.  The calculation set forth
in the foregoing sentence shall be made without regard to any limitations on
the conversion of the Notes and such calculation shall assume that the Notes
are then convertible into shares of Common Stock at the then prevailing
Conversion Rate (as defined in the Notes).


g.             Effect of Failure to File and
Obtain and Maintain Effectiveness of Registration Statement.  If (i) a Registration Statement covering all
of the Registrable Securities required to be covered thereby and required to be
filed by the Company pursuant to this Agreement is (A) not filed with the SEC
on or before the respective Filing Deadline (a “Filing Failure”) or (B) not declared effective by the SEC on
or before the respective Effectiveness Deadline (an “Effectiveness Failure”) or (ii) on any day after the
applicable Effective Date sales of all of the Registrable Securities required
to be included on such Registration Statement cannot be made (other than during
an Allowable Grace Period (as defined in Section 3(r)) pursuant to such
Registration Statement (including, without limitation, because of a failure to
keep such Registration Statement effective, to disclose such information as is
necessary for sales to be made pursuant to such Registration Statement, to
register a sufficient number of shares of Common Stock or to maintain the
listing of the Common Stock) (a “Maintenance
Failure”) then, as partial relief for the damages to any holder by
reason of any such delay in or reduction of its ability to sell the underlying
shares of Common Stock (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to each holder
of Registrable Securities relating to such Registration Statement an amount in
cash equal to one percent (1.0%) of the product of (a) the number of
Registrable Securities included in such Registration Statement and (b) the
greater of (I) the arithmetic average of the Weighted Average Price (as defined
in the Notes) of the Common Stock during the twenty (20) consecutive Trading
Day (as defined in the Notes) period immediately preceding such Payment Date
(as defined below), and (II) the Conversion Price (as such term is defined in
the Notes) of such Investor’s Notes relating to the Registrable Securities
included in such Registration Statement on each of the following dates: (i) the
day of a Filing Failure and on every thirtieth day (pro rated for periods
totaling less than thirty days) thereafter until such Filing Failure is cured;
(ii) the day of an Effectiveness Failure and on every thirtieth day (pro rated
for periods totaling less than thirty days) thereafter until such Effectiveness
Failure is cured; and (iii) the initial day of a Maintenance Failure and on
every thirtieth day (pro rated for periods totaling less than thirty days)
thereafter until such Maintenance Failure is cured (each of the foregoing, a “Payment Date”); provided, however, that in the
case of an Effectiveness Failure relating to the failure of the Initial
Registration Statement to be declared effective by the SEC on or prior to the
Initial Effectiveness Deadline where the Initial Registration Statement is
subject to a full review by the SEC, then the Registration Delay Payments (as
defined below) relating to such failure shall be deemed to have occurred and
begun accruing on the date that is one-hundred and forty (140) calendar days
following the Closing Date).  For the
avoidance of doubt, if any Filing Deadline or Effectiveness Deadline falls on a
date that is not a Business Day, then such Filing or Effectiveness Deadline
shall be the next Business Day.  The
payments to which a holder shall be entitled pursuant to this Section 2(g) are
referred to herein as “Registration Delay
Payments”.  


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Registration Delay Payments
shall be paid on the day of the Filing Failure, Effectiveness Failure and the
initial day of a Maintenance Failure, as applicable, and thereafter on the
earlier of (I) the thirtieth day after the event or failure giving rise to the
Registration Delay Payments has occurred and (II) the third Business Day after
the event or failure giving rise to the Registration Delay Payments is cured.  In the event the Company fails to make
Registration Delay Payments in a timely manner, such Registration Delay
Payments shall bear interest at the rate of one and one-half percent (1.5%) per
month (prorated for partial months) until paid in full.  Notwithstanding anything herein to the
contrary, in no event shall the aggregate of all Registration Delay Payments
for all holders of Registrable Securities exceed twelve and one-half percent
(12.5%) of the aggregate Purchase Price for all Investors (the “Registration Delay Payments Cap”).  All Registration Delay Payments shall be made
to the Investors in proportion to the respective amounts of each Investor’s
Registrable Securities on the date such payment becomes due.  With respect to each Investor that is subject
to the Registration Delay Payments Cap, any amount in excess of the
Registration Delay Payments Cap (the “Excess Registration Delay
Payments”) shall cause the Conversion Price of that Investor’s Notes
to be lowered by an amount equal to the quotient of the amount of that
Investor’s Excess Registration Delay Payments divided by the then outstanding
amount of that Investor’s Notes. 
Notwithstanding anything to the contrary contained herein, no
Registration Delay Payments shall be payable (i) with respect to any Registrable
Securities excluded from a Registration Statement by election of an Investor or
(ii) to the extent such Effectiveness Failure or Filing Failure for which such
Registration Delay Payments are due is caused by the Company’s inability to
file a Registration Statement or have a Registration Statement declared
effective, as applicable, due to comments from the SEC relating to the number
of shares being registered on such Registration Statement or the Investors
being deemed affiliates or control persons of the Company under Rule 415.


h.             Neither the Company nor any
Subsidiary (as defined in the Securities Purchase Agreement) or affiliate
thereof shall identify any Buyer as an underwriter in any public disclosure or
filing with the SEC or any Principal Market (as defined in the Securities
Purchase Agreement) or any New Principal Market (as defined in the Securities
Purchase Agreement) and any Buyer being deemed an underwriter by the SEC shall
not relieve the Company of any obligations it has under this Agreement or any
other Transaction Document (as defined in the
Securities Purchase Agreement); provided, however, that the
foregoing shall not prohibit the Company from including the disclosure found in
the “Plan of Distribution” section attached hereto as Exhibit B in the
Registration Statement.


3.             Related Obligations.


At
such time as the Company is obligated to file a Registration Statement with the
SEC pursuant to Section 2(a), 2(b), 2(e) or 2(f), the Company will use its best
efforts to effect the registration of the Registrable Securities in accordance
with the intended method of disposition thereof and, pursuant thereto, the
Company shall have the following obligations:


a.     The Company shall promptly
prepare and file with the SEC a Registration Statement with respect to the
Registrable Securities and use its best efforts to cause such Registration
Statement relating to the Registrable Securities to become effective as soon as
practicable after such filing (but in no event later than the Effectiveness
Deadline).  The Company shall keep each
Registration Statement effective pursuant to Rule 415 at all times until 


8





















the
earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or any successor thereto) promulgated
under the 1933 Act or (ii) the date on which the Investors shall have sold all
of the Registrable Securities covered by such Registration Statement (the “Registration Period”).  The Company shall ensure that each
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein,
or necessary to make the statements therein (in the case of prospectuses, in
the light of the circumstances in which they were made) not misleading.  The term “best efforts” shall mean, among
other things, that the Company shall submit to the SEC, within two (2) Business
Days after the later of the date that (i) the Company learns that no review of
a particular Registration Statement will be made by the staff of the SEC or
that the staff has no further comments on a particular Registration Statement,
as the case may be, and (ii) the approval of Legal Counsel pursuant to Section
3(c) (which approval is immediately sought), a request for acceleration of
effectiveness of such Registration Statement to a time and date not later than
two (2) Business Days after the submission of such request.


b.             The Company shall prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with such Registration Statement, which prospectus is to be filed pursuant to
Rule 424 promulgated under the 1933 Act, as may be necessary to keep such
Registration Statement effective at all times during the Registration Period,
and, during such period, comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable Securities of the Company covered
by such Registration Statement until such time as all of such Registrable
Securities shall have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof as set forth in such
Registration Statement.  In the case of
amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this Section 3(b)) by
reason of the Company filing a report on Form 10-Q, Form 10-QSB, Form 10-K,
Form 10-KSB or any analogous report under the Securities Exchange Act of 1934,
as amended (the “1934 Act”), the
Company shall have incorporated such report by reference into such Registration
Statement, if applicable, or shall file such amendments or supplements with the
SEC on the same day on which the 1934 Act report is filed which created the
requirement for the Company to amend or supplement such Registration Statement.


c.             The Company shall (A) permit Legal
Counsel to review and comment upon (i) a Registration Statement at least three
(3) Business Days prior to its filing with the SEC and (ii) all amendments and
supplements to all Registration Statements (except for Annual Reports on Form
10-K and Form 10-KSB, and Reports on Form 10-Q and 10-QSB or any similar or
successor reports) within a reasonable number of days prior to their filing
with the SEC, and (B) not file any Registration Statement or amendment or
supplement thereto (except for Annual Reports on Form 10-K and Form 10-KSB, and
Reports on Form 10-Q and 10-QSB or any similar or successor reports) in a form
to which Legal Counsel reasonably objects. 
The Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement or any amendment or supplement
thereto without the prior approval of Legal Counsel, which consent shall not be
unreasonably withheld.  The Company shall
furnish to Legal Counsel, without charge, (i) copies of any correspondence from
the SEC or the staff of the SEC to the 


9





















Company or its
representatives relating to any Registration Statement, (ii) promptly after the
same is prepared and filed with the SEC, one copy of any Registration Statement
and any amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, if requested by an Investor, and
all exhibits and (iii) upon the effectiveness of any Registration Statement,
one copy of the prospectus included in such Registration Statement and all
amendments and supplements thereto.  The
Company shall reasonably cooperate with Legal Counsel in performing the
Company’s obligations pursuant to this Section 3.


d.             The Company shall furnish to each
Investor whose Registrable Securities are included in any Registration
Statement, without charge,  (i) promptly
after the same is prepared and filed with the SEC, at least one copy of such
Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, if
requested by an Investor, all exhibits and each preliminary prospectus, (ii)
upon the effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including copies of any
preliminary or final prospectus, as such Investor may reasonably request from
time to time in order to facilitate the disposition of the Registrable
Securities owned by such Investor.


e.             The Company shall use its best
efforts to (i) register and qualify, unless an exemption from registration and
qualification applies, the resale by Investors of the Registrable Securities
covered by a Registration Statement under such other securities or “blue sky”
laws of all applicable jurisdictions in the United States, (ii) prepare and
file in those jurisdictions, such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the Registration Period,
(iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all other actions reasonably necessary or advisable to
qualify the Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection therewith or as a
condition thereto to (w) make any change to its certificate of incorporation or
bylaws, (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(e), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. 
The Company shall promptly notify Legal Counsel and each Investor who
holds Registrable Securities of the receipt by the Company of any notification
with respect to the suspension of the registration or qualification of any of
the Registrable Securities for sale under the securities or “blue sky” laws of
any jurisdiction in the United States or its receipt of notice of the
initiation or threatening of any proceeding for such purpose.


f.              The Company shall notify Legal
Counsel and each Investor in writing of the happening of any event, as promptly
as practicable after becoming aware of such event, as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading
(provided that in no event shall such notice contain any


10






 


 


 












 


material, nonpublic
information), and, subject to Section 3(r), promptly prepare a supplement or
amendment to such Registration Statement to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to Legal
Counsel and each Investor (or such other number of copies as Legal Counsel or
such Investor may reasonably request). 
The Company shall also promptly notify Legal Counsel and each Investor
in writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or any
post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by
facsimile or e-mail on the same day of such effectiveness and by overnight
mail), (ii) of any request by the SEC for amendments or supplements to a
Registration Statement or related prospectus or related information, and (iii)
of the Company’s reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.


g.             The Company shall use its best
efforts to prevent the issuance of any stop order or other suspension of
effectiveness of a Registration Statement, or the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
and, if such an order or suspension is issued, to obtain the withdrawal of such
order or suspension at the earliest possible moment and to notify Legal Counsel
and each Investor who holds Registrable Securities being sold of the issuance
of such order and the resolution thereof or its receipt of notice of the
initiation or threat of any proceeding for such purpose.


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


i.              Upon the written request of any
Investor in connection with such Investor’s due diligence requirements, if any,
the Company shall make available for inspection by (i) any Investor, (ii) Legal
Counsel and (iii) one firm of accountants or other agents retained by the
Investors (collectively, the “Inspectors”),
all pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by each Inspector,
and cause the Company’s officers, directors and employees to supply all
information which any Inspector may reasonably request; provided, however, that
each Inspector shall agree to hold in strict confidence and shall not make any
disclosure (except to an Investor) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of 


11





















 


this Agreement or any other
agreement.  Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.  Nothing herein shall be deemed to limit the
Investors’ ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations.


j.              The Company shall hold in
confidence and not make any disclosure of information concerning an Investor
provided to the Company unless (i) disclosure of such information is necessary
to comply with federal or state securities laws, (ii) the disclosure of such
information is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other final, non-appealable order from a court or
governmental body of competent jurisdiction, or (iv) such information has been
made generally available to the public other than by disclosure in violation of
this Agreement or any other agreement. 
The Company agrees that it shall, upon learning that disclosure of such
information concerning an Investor is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Investor and allow such Investor, at the Investor’s expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, such information.


k.             The Company shall use its best
efforts either to (i) cause all of the Registrable Securities covered by a
Registration Statement to be listed or quoted on each securities exchange,
bulletin board or quotation system on which securities of the same class or
series issued by the Company are then listed or quoted, if any, if the listing
of such Registrable Securities is then permitted under the rules of such exchange,
bulletin board or quotation system or (ii) secure the designation and quotation
of all of the Registrable Securities covered by a Registration Statement on The
Nasdaq National Market or (iii) if, despite the Company’s best efforts, the
Company is unsuccessful in satisfying the preceding clauses (i) and (ii), to
secure the inclusion for quotation on the Nasdaq Capital Market or the American
Stock Exchange for such Registrable Securities and, without limiting the
generality of the foregoing, to use its best efforts to arrange for at least
two market makers to register with the National Association of Securities
Dealers, Inc. (“NASD”) as such
with respect to such Registrable Securities. 
The Company shall pay all fees and expenses in connection with satisfying
its obligation under this Section 3(k).


l.              The Company shall cooperate with
the Investors who hold Registrable Securities being offered and, to the extent
applicable and permissible under applicable law, facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the Investors may reasonably request and
registered in such names as the Investors may request.


m.            If requested by an Investor, the
Company shall (i) as soon as practicable incorporate in a prospectus supplement
or post-effective amendment such information as an Investor reasonably requests
to be included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to 


12





















 


the number of Registrable
Securities being offered or sold, the purchase price being paid therefor and
any other terms of the offering of the Registrable Securities to be sold in
such offering; (ii) as soon as practicable make all required filings of such
prospectus supplement or post-effective amendment after being notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) as soon as practicable, supplement or make amendments to
any Registration Statement if reasonably requested by an Investor holding any
Registrable Securities.


n.             The Company shall use its best
efforts to cause the Registrable Securities covered by a Registration Statement
to be registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such
Registrable Securities.


o.             The Company shall make generally
available to its security holders as soon as practical, but not later than
ninety (90) days after the close of the period covered thereby, an earnings
statement (in form complying with, and in the manner provided by, the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company’s fiscal quarter next
following the Effective Date of an applicable Registration Statement.


p.             The Company shall otherwise use its
best efforts to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.


q.             Within two (2) Business Days after
a Registration Statement which covers Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) confirmation that such Registration
Statement has been declared effective by the SEC in the form attached hereto as
Exhibit A.


r.              Notwithstanding anything to the
contrary herein, at any time after the Effective Date of an applicable
Registration Statement, the Company may delay the disclosure of material,
non-public information concerning the Company the disclosure of which at the
time is not, in the good faith opinion of the Board of Directors of the Company
and its counsel, in the best interest of the Company and, in the opinion of
counsel to the Company otherwise required (a “Grace
Period”); provided, that the Company shall promptly (i) notify the
Investors in writing of the existence of material, non-public information
giving rise to a Grace Period (provided that in each notice the Company will
not disclose the content of such material, non-public information to the
Investors) and the date on which the Grace Period will begin, and (ii) notify
the Investors in writing of the date on which the Grace Period ends; and,
provided further, that no Grace Period shall exceed ten (10) consecutive days
and during any three hundred sixty five (365) day period such Grace Periods
shall not exceed an aggregate of twenty-five (25) days and the first day of any
Grace Period must be at least five (5) Trading Days after the last day of any
prior Grace Period (each, an “Allowable Grace
Period”).  For purposes of
determining the length of a Grace Period above, the Grace Period shall begin on
and include the date the Investors receive the notice referred to in clause (i)
and shall end on and include the later of the date the Investors receive the
notice referred to in clause (ii) and the date referred to in 


13





















 


such notice.  The provisions of Section 3(g) hereof shall
not be applicable during the period of any Allowable Grace Period.  Upon expiration of the Grace Period, the
Company shall again be bound by the first sentence of Section 3(f) with respect
to the information giving rise thereto unless such material, non-public
information is no longer applicable. 
Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Securities Purchase Agreement
in connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale and delivered a copy of the
prospectus included as part of the Registration Statement (unless an exemption
from such prospectus delivery requirement exists) prior to the Investor’s
receipt of the notice of a Grace Period and for which the Investor has not yet
settled.


4.             Obligations of the Investors.


a.             At least five (5) Business Days
prior to the first anticipated filing date of a Registration Statement, the
Company shall notify each Investor in writing of the information the Company
requires from each such Investor if such Investor elects to have any of such
Investor’s Registrable Securities included in such Registration Statement.  It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the effectiveness of the registration of such Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.


b.             Each Investor, by such Investor’s
acceptance of the Registrable Securities, agrees to cooperate with the Company
as reasonably requested by the Company in connection with the preparation and
filing of any Registration Statement hereunder, unless such Investor has
notified the Company in writing of such Investor’s election to exclude all of
such Investor’s Registrable Securities from such Registration Statement.


c.             Each Investor agrees that, upon
receipt of any notice from the Company of the happening of any event of the
kind described in Section 3(g) or the first sentence of 3(f), such Investor
will immediately discontinue disposition of Registrable Securities pursuant to
any Registration Statement(s) covering such Registrable Securities until such
Investor’s receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(g) or the first sentence of 3(f) or receipt of notice
that no supplement or amendment is required. 
Notwithstanding anything to the contrary, the Company shall cause its transfer
agent to deliver unlegended (except as otherwise required by applicable law)
shares of Common Stock to a transferee of an Investor in accordance with the
terms of the Securities Purchase Agreement in connection with any sale of
Registrable Securities with respect to which an Investor has entered into a
contract for sale prior to the Investor’s receipt of a notice from the Company
of the happening of any event of the kind described in Section 3(g) or the
first sentence of 3(f) and for which the Investor has not yet settled.


14





















d.             Each Investor covenants and agrees
that it will comply with the prospectus delivery requirements of the 1933 Act
as applicable to it or an exemption therefrom in connection with sales of
Registrable Securities pursuant to the applicable Registration Statement.


5.             Expenses of Registration.


All
reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant
to Sections 2 and 3, including, without limitation, all registration, listing
and qualifications fees, printers and accounting fees, and fees and
disbursements of counsel for the Company shall be paid by the Company.  The Company shall also reimburse the
Investors for the fees and disbursements of Legal Counsel in connection with
registration, filing or qualification pursuant to Sections 2 and 3 of this
Agreement which amount shall be limited to $15,000.


6.             Indemnification.


In
the event any Registrable Securities are included in a Registration Statement
under this Agreement:


a.             To the fullest extent permitted by
law, the Company will, and hereby does, indemnify, hold harmless and defend
each Investor, the directors, officers, members, partners, employees, agents,
representatives of, and each Person, if any, who controls any Investor within
the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges, costs,
reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or
several, (collectively, “Claims”)
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto (“Indemnified
Damages”), to which any of them may become subject insofar as such
Claims (or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon: 
(i) any untrue statement or alleged untrue statement of a material fact
in a Registration Statement or any post-effective amendment thereto or in any
filing made in connection with the qualification of the offering under the
securities or other “blue sky” laws of any jurisdiction in which Registrable
Securities are offered (“Blue Sky Filing”),
or the omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained
in any preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary
to make the statements made therein, in the light of the circumstances under
which the statements therein were made, not misleading, (iii) any violation or
alleged violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any violation of this
Agreement (the matters in the foregoing clauses (i) through (iv) being, 


15





















collectively, “Violations”).  Subject to Section 6(c), the Company shall
reimburse the Indemnified Persons, promptly as such expenses are incurred and
are due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such
Claim.  Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a):  (i) shall not apply to a
Claim by an Indemnified Person arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished in writing
to the Company by such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(d) and (ii) shall not apply to amounts paid in settlement
of any Claim if such settlement is effected without the prior written consent
of the Company, which consent shall not be unreasonably withheld or
delayed.  Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.


b.             In connection with any Registration
Statement in which an Investor is participating, each such Investor agrees to
severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the Company,
each of its directors, each of its officers who signs the Registration
Statement and each Person, if any, who controls the Company within the meaning
of the 1933 Act or the 1934 Act (each, an “Indemnified
Party”), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(c), such Investor will
reimburse any reasonable legal or other reasonable expenses incurred by an
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that the Investor
shall be liable under this Section 6(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement.  Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf
of such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.  Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of
any Indemnified Party if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented.


c.             Promptly after receipt by an Indemnified
Person or Indemnified Party under this Section 6 of notice of the commencement
of any action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or 


16





















Indemnified Party shall, if
a Claim in respect thereof is to be made against any indemnifying party under
this Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses of not more than
one counsel for such Indemnified Person or Indemnified Party to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding.  In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least a majority  in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates.  The Indemnified Party or Indemnified Person
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or Claim by the indemnifying party
and shall furnish to the indemnifying party all information reasonably
available to the Indemnified Party or Indemnified Person which relates to such
action or Claim.  The indemnifying party
shall keep the Indemnified Party or Indemnified Person reasonably apprised at
all times as to the status of the defense or any settlement negotiations with
respect thereto.  No indemnifying party
shall be liable for any settlement of any action, claim or proceeding effected
without its prior written consent, provided, however, that the indemnifying
party shall not unreasonably withhold, delay or condition its consent.  No indemnifying party shall, without the
prior written consent of the Indemnified Party or Indemnified Person, consent
to entry of any judgment or enter into any settlement or other compromise which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party or Indemnified Person of a release from all
liability in respect to such Claim or litigation, and such settlement shall not
include any admission as to fault on the part of the Indemnified Party.  Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties,
firms or corporations relating to the matter for which indemnification has been
made.  The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement
of any such action shall not relieve such indemnifying party of any liability
to the Indemnified Person or Indemnified Party under this Section 6, except to
the extent that the indemnifying party is prejudiced in its ability to defend
such action.


d.             The indemnification required by
this Section 6 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.


e.             The indemnity agreements contained
herein shall be in addition to  (i) any
cause of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.


17





















7.             Contribution.


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


8.             Reports Under the 1934 Act.


With
a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the Company
to the public without registration (“Rule 144”),
the Company agrees to:


a.             make and keep public information
available, as those terms are understood and defined in Rule 144;


b.             file with the SEC in a timely
manner all reports and other documents required of the Company under the 1933
Act and the 1934 Act so long as the Company remains subject to such
requirements and the filing of such reports and other documents is required for
the applicable provisions of Rule 144; and


c.             furnish to each Investor so long as
such Investor owns Registrable Securities, promptly upon request, (i) a written
statement by the Company, if true, that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.


9.             Assignment of Registration
Rights.


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


18

















contained herein; and (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement.


10.           Amendment of Registration Rights.


Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Required
Holders.  Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.  No such amendment shall
be effective to the extent that it applies to less than all of the holders of
the Registrable Securities.  No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of this Agreement unless the
same consideration also is offered to all of the parties to this Agreement.


11.           Miscellaneous.


a.             A Person is deemed to be a holder
of Registrable Securities whenever such Person owns or is deemed to own of
record such Registrable Securities.  If
the Company receives conflicting instructions, notices or elections from two or
more Persons with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from the such
record owner of such Registrable Securities.


b.             Any notices, consents, waivers or
other communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same.  The addresses
and facsimile numbers for such communications shall be:


                If to the Company:


 


                                Wentworth
Energy, Inc.
                                 112 E. Oak
Street, Suite 200
                                 Palestine,
TX 75801
                                 Telephone:            (903) 723-0395
                                 Facsimile:               (903) 723-5368
                                 Attention:              Chief Executive Officer


 


                                and


 


                                Wentworth
Energy, Inc.
                                 Suite
306A, 15252 - 32nd Avenue
                                 Surrey,
British Columbia, V3S 0R7
                                 Canada
                                 Telephone (604)
536-6055
                                 Facsimile:
(604) 536-6077
                                 Attention:              Chief Financial Officer


 


19

















 


                With copies (for
informational purposes only) to:


 


                                Troutman
Sanders LLP
                                 401 9th
St., N.W.
                                 Suite 1000
                                 Washington,
DC 20004-2134
                                 Telephone:            (202) 274-2810
                                 Facsimile:               (202) 654-5649
                                 Attention:              Todd R. Coles, Esq.


 


                                Dieterich
& Associates
                                 11300 W.
Olympic, Suite 800
                                 Los
Angeles, California 90064
                                 Telephone:
(310) 312-6888
                                 Facsimile:
(310) 312-6680
                                 Attention:
Chris Dieterich


 


                If to Legal
Counsel:


 


                                Schulte
Roth & Zabel LLP 
                                 919 Third
Avenue
                                 New York,
New York 10022
                                 Telephone:            (212) 756-2000
                                 Facsimile:               (212) 593-5955
                                 Attention:              Eleazer N. Klein, Esq.


 


If to a Buyer, to its
address and facsimile number set forth on the Schedule of Buyers attached
hereto, with copies to such Buyer’s representatives, if any, as set forth on
the Schedule of Buyers, or to such other address and/or facsimile number and/or
to the attention of such other Person as the recipient party has specified by
written notice given to each other party five (5) days prior to the
effectiveness of such change.  Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by a
courier or overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.


c.             Failure of any party to exercise
any right or remedy under this Agreement or otherwise, or delay by a party in
exercising such right or remedy, shall not operate as a waiver thereof.


d.             All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of


20






 












 


the State of New York or any
other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. 
Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper.  Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner
permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.


e.             If any provision of this Agreement
is prohibited by law or otherwise determined to be invalid or unenforceable by
a court of competent jurisdiction, the provision that would otherwise be
prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or
unenforceability of such provision shall not affect the validity of the
remaining provisions of this Agreement so long as this Agreement as so modified
continues to express, without material change, the original intentions of the parties
as to the subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not substantially impair
the respective expectations or reciprocal obligations of the parties or the
practical realization of the benefits that would otherwise be conferred upon
the parties.  The parties will endeavor
in good faith negotiations to replace the prohibited, invalid or unenforceable
provision(s) with a valid provision(s), the effect of which comes as close as
possible to that of the prohibited, invalid or unenforceable provision(s).


f.              This Agreement and the other
Transaction Documents (as defined in the Securities Purchase Agreement)
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof.  There
are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. 
This Agreement and the other Transaction Documents supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof. 
Without limiting the generality of the foregoing, this Agreement amends
and restates in its entirety, and replaces, the Existing Registration Rights
Agreement, which shall have no further force or effect.


g.             Subject to the requirements of
Section 9, this Agreement shall inure to the benefit of and be binding upon the
permitted successors and assigns of each of the parties hereto.


21





















h.             The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.


i.              This Agreement may be executed in
identical counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement.  This Agreement, once executed by a party, may
be delivered to the other party hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.


j.              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.             All consents and other
determinations required to be made by the Investors pursuant to this Agreement
shall be made, unless otherwise specified in this Agreement, by the Required
Holders.


l.      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.            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.


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


[Signature Page Follows]


 


22

















 


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


	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  WENTWORTH
  ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  John Punzo

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John Punzo

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
					



 


 

















 


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


	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  CASTLERIGG MASTER INVESTMENTS LTD.

  
	
   

  	
  By:
  SANDELL ASSET MANAGEMENT CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Patrick T. Burke 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Patrick T. Burke  

  
	
   

  	
   

  	
  Title:

  	
  Senior Managing Director

  
					



 


 

















 


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


	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  YA GLOBAL
  INVESTMENTS, L.P. 

  
	
   

  	
  (f/k/a
  Cornell Capital Partners, LP)

  
	
   

  	
   

  
	
   

  	
  By: Yorkville Advisors,
  LLC, its Investment Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ David Gonzales

  	
   

  
	
   

  	
  Name:

  	
  David Gonzales 

  
	
   

  	
  Title:

  	
  Managing Member

  
					



 


 

















 


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


	
   

  	
  BUYERS:

  
	
   

  	
  HIGHBRIDGE INTERNATIONAL LLC

  
	
   

  	
   

  
	
   

  	
  By: HIGHBRIDGE CAPITAL
  MANAGEMENT, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Adam J. Chill

  	
   

  
	
   

  	
  Name:

  	
  Adam J. Chill

  
	
   

  	
  Title:

  	
  Managing Director

  
					



 


 

















 


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


	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  CAMOFI MASTER LDC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Richard Smithline

  	
   

  
	
   

  	
  Name: 

  	
  Richard
  Smithline   

  
	
   

  	
  Title:

  	
  Director

  
					



 


 

















 


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


 


	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  GUNNALLEN
  FINANCIAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ James J. DiCesaro

  	
   

  
	
   

  	
  Name:

  	
  James J. DiCesaro

  
	
   

  	
  Title:

  	
  SVP, Capital Markets

  
					



 


 

















 


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


	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    /s/ Sam DelPresto

  	
   

  
	
   

  	
  Name:  Sam DelPresto

  
				



 


 

















 


SCHEDULE
OF BUYERS


 


	
  Buyer

  	
   

  	
  Buyer’s Address and Facsimile Number

  	
   

  	
  Buyer’s Representative’s Address

  and Facsimile Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Castlerigg Master Investments Ltd

  	
   

  	
  c/o
  Sandell Asset Management Corp.

  40 West 57th Street

  26th Floor

  New York, New York 10019

  Attention: Cem
  Hacioglu/Matthew Pliskin

  Facsimile: (212) 603-5710

  Telephone: (212) 603-5775

  Residence: British Virgin
  Islands



  	
   

  	
  Schulte
  Roth & Zabel LLP

  919 Third Avenue

  New York, New York 10022

  Attn: Eleazer Klein, Esq.

  Facsimile: (212) 593-5955

  Telephone: (212) 756-2000

  
	
  YA Global Investments, L.P.

  (f/k/a Cornell Capital Partners, LP)

  	
   

  	
  101
  Hudson Street

  Suite 3700

  Jersey City, NJ 07303

  Attention: Mark Angelo

  Facsimile: (201) 985-8266

  Telephone: (201) 985-8300

  Residence: Delaware



  	
   

  	
  Troy
  Rillo, Esq.

  101 Hudson Street — Suite 3700

  Jersey City, New Jersey 07302 

  Telephone:(201) 985-8300

  Facsimile: (201) 985-8266

  
	
  Highbridge
  International LLC

  	
   

  	
  c/o
  Highbridge Capital Management, LLC

  9 West 57th Street, 27th
  Floor

  New York, New York 10019

  Attention:   Ari J. Storch

                     Adam
  J. Chill

  Facsimile: (212) 751-0755

  Telephone: (212) 287-4720

  Residence: Cayman Islands



  	
   

  	
   

  
	
  CAMOFI
  Master LDC

  	
   

  	
  c/o
  Centrecourt Asset Management

  350 Madison Avenue, 8th
  Floor

  New York. NY 10017

  Telephone: 646-758-6750

  Facsimile: 646-758-6751

  Residence: Cayman Islands



  	
   

  	
   

  
	
  GunnAllen Financial, Inc.

  	
   

  	
  5002
  West Waters Avenue

  Tampa, FL 33634

  Attention: James DiCesaro

  Fax: 813-569-2553

  Telephone: 813-282-0808

  Residence: Tampa, FL



  	
   

  	
  David
  Jarvis

  5002 West Waters Avenue

  Tampa, FL 33634

  Attention: David Jarvis

  Facsimile: (813) 217-7038

  Telephone: (813) 282-0808

  
	
  Sam
  DelPresto

  	
   

  	
  9
  Ryan Lane

  Lincroft, NJ 07738

  Telephone: 732.224.0060

  Facsimile: 732.741.7885

  Residence: New Jersey



  	
   

  	
   

  



 






 












EXHIBIT
A


 


FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT


Empire Stock Transfer Inc.

7251 West Lake Mead Blvd.

Suite 300

Las Vegas, NV 89128

Facsimile:               (702) 562-4091

Attention:              [                ]


 


 


Re:          WENTWORTH ENERGY, INC.


Ladies and Gentlemen:


[We
are][I am] counsel to Wentworth Energy, Inc., an Oklahoma corporation (the “Company”), and have represented the Company
in connection with that certain Securities Purchase Agreement, dated as of July
24, 2006 (as currently in effect, the “Securities Purchase Agreement”), entered into
by and among the Company and the buyers named therein (collectively, the “Buyers”). 
We have also represented the Company in connection with that certain
Amended and Restated Registration Rights Agreement, dated as of October 31,
2007 (as currently in effect, the “Registration
Rights Agreement”) entered into by and among the Company and Buyers,
pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement) under
the Securities Act of 1933, as amended (the “1933
Act”).  In connection with the
Company’s obligations under the Registration Rights Agreement, on                
    , 200  , the Company filed a Registration
Statement on Form SB-2 (File No. 333-             )
(the “Registration Statement”)
with the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names each
of the Holders (as defined in the Registration Rights Agreement) as a selling
stockholder thereunder.


 


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


This
letter shall serve as our standing instruction to you that such Registrable
Securities are freely transferable by the Holders pursuant to the Registration
Statement.  You 

















 


need not require further letters from us to effect any future
legend-free issuance or reissuance of such Registrable Securities to the
Holders as contemplated by the Company’s Irrevocable Transfer Agent
Instructions dated July 24, 2006, as amended.


Very truly yours,


[ISSUER’S COUNSEL]


By:                     


CC:         
[LIST NAMES OF HOLDERS]


 

















 


EXHIBIT B


 


SELLING STOCKHOLDERS


The
shares of Common Stock being offered by the selling stockholders are issuable
upon conversion of the convertible notes or as interest shares pursuant to the
terms of the convertible notes.  For
additional information regarding the issuance of those convertible notes, see “Private
Placement of Convertible Notes and Warrants” above.  We are registering the shares of Common Stock
in order to permit the selling stockholders to offer the shares for resale from
time to time.  Except for the ownership
of the convertible notes and the warrants issued pursuant to the Securities
Purchase Agreement, the selling stockholders have not had any material
relationship with us within the past three years, except for a secured convertible debt financing that we have with YA
Global Investments, L.P. (f/k/a Cornell Capital Partners, LP).


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


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


In
accordance with the terms of a registration rights agreement among the Company
and the selling stockholders, this prospectus generally covers the resale of
the 33.33% (or such greater or lesser percentage or amount as is permitted by
the SEC) of the issued and outstanding Common Stock of the Company that is not
beneficially owned by an affiliate of the Company.  Because the
conversion price of the convertible notes may be adjusted, the number of shares
that will actually be issued may be more or less than the number of shares
being offered by this prospectus.  The
fourth column assumes the sale of all of the shares offered by the selling
stockholders pursuant to this prospectus.


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

















	
  Name of Selling Stockholder

  	
   

  	
  Number of Shares Owned Prior to Offering

  	
   

  	
  Maximum Number of Shares to be Sold Pursuant to this Prospectus

  	
   

  	
  Number of Shares Owned After Offering

  	
   

  
	
  Castlerigg Master Investments Ltd. (1)



  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  YA Global Investments L.P. (f/k/a Cornell
  Capital Partners, LP) (2)



  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  HighBridge International LLC (3)



  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CAMOFI Master LDC (4)



  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GunnAllen Financial, Inc. (5)



  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sam DelPresto (6)



  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  







                (1)           Sandell Asset Management Corp. is the
investment manager of Castlerigg Master Investment Ltd. (“Castlerigg”) and has
shared voting and dispositive power over the securities owned by Castlerigg.
Sandell Asset Management Corp. and Thomas E. Sandell, its sole shareholder,
disclaim beneficial ownership of the securities owned by Castlerigg.


 


                (2)


 


                (3)           Highbridge
Capital Management, LLC is the trading manager of Highbridge International LLC
and has voting control and investment direction over securities held by
Highbridge International LLC.  Glenn
Dubin and Henry Swieca control Highbridge Capital Management, LLC.  Each of Highbridge Capital Management, LLC,
Glenn Dubin and Henry Swieca disclaim beneficial ownership of the securities
held by Highbridge International LLC.


                (4)


 


                (5)


 


                (6)


 

















 


PLAN OF
DISTRIBUTION


We
are registering the shares of Common Stock issuable upon conversion of the
convertible notes and as interest shares pursuant to the terms of the
convertible notes to permit the resale of these shares of Common Stock by the
holders of the convertible notes from time to time after the date of this
prospectus.  We will not receive any of
the proceeds from the sale by the selling stockholders of the shares of Common
Stock.  We will bear all fees and
expenses incident to our obligation to register the shares of Common Stock.


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


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


•                  in the over-the-counter
market;


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


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


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


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


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


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


•                  privately negotiated
transactions;


•                  short sales;


•                  sales pursuant to Rule 144;

















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


•                  a combination of any such
methods of sale; and


•                  any other method permitted
pursuant to applicable law.


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


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


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


Under
the securities laws of some states, the shares of Common Stock may be sold in
such states only through registered or licensed brokers or dealers.  In addition, in some states the shares of
Common Stock may not be sold unless such shares have been registered or
qualified 

















for
sale in such state or an exemption from registration or qualification is
available and is complied with.


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


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


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


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

















EXHIBIT
C


 


ADDITIONAL
SHARES OF COMMON STOCK


TO BE
INCLUDED IN


REGISTRATION
STATEMENT


 


	
  Name

  	
   

  	
  Number(9)

  	
   

  
	
  Bentley Corporation shares(1)

  	
   

  	
  414,000

  	
   

  
	
  Bradley Johnson shares and warrant shares(1)

  	
   

  	
  20,000

  	
   

  
	
  Coach Capital LLC shares(1)

  	
   

  	
  1,167,048

  	
   

  
	
  Kelburn Corporation shares(1)

  	
   

  	
  800,000

  	
   

  
	
  Will Kells shares and warrant shares(1)

  	
   

  	
  22,000

  	
   

  
	
  Dick Leung shares and warrant shares(1)

  	
   

  	
  20,000

  	
   

  
	
  James O’Callaghan shares and warrant shares(1)

  	
   

  	
  92,460

  	
   

  
	
  Steve Sanders shares and warrant shares(1)

  	
   

  	
  40,000

  	
   

  
	
  Ravdeep Sidhu shares and warrant shares(1)

  	
   

  	
  20,000

  	
   

  
	
  Kevin Spence shares and warrant shares(1)

  	
   

  	
  20,000

  	
   

  
	
  Karen M. Thiessen shares and warrant shares(1)

  	
   

  	
  82,000

  	
   

  
	
  Michael Yannacopoulos shares and warrant shares(1)

  	
   

  	
  20,000

  	
   

  
	
  Paul Bornstein shares(2)

  	
   

  	
  49,231

  	
   

  
	
  Paul Bornstein warrant shares(2)

  	
   

  	
  25,000

  	
   

  
	
  GunnAllen Financial, Inc. warrant shares(3)

  	
   

  	
  1,071,429

  	
   

  
	
  Sam Del Presto warrant shares(4)

  	
   

  	
  400,000

  	
   

  
	
  Cole Business Development LLC warrant shares(5)

  	
   

  	
  380,000

  	
   

  
	
  KM Ward Inc. warrant shares(5)

  	
   

  	
  350,000

  	
   

  
	
  Marc Lederer warrant shares(5)

  	
   

  	
  20,000

  	
   

  
	
  Ehrenkrantz King Nussbaum, Inc. in trust for MFN LLC warrant
  shares(6)

  	
   

  	
  650,000

  	
   

  
	
  Ehrenkrantz King Nussbaum, Inc. in trust for J. O’Brien shares(6)

  	
   

  	
  103,049

  	
   

  
	
  Ehrenkrantz King Nussbaum, Inc. in trust for R. Nathan shares(6)

  	
   

  	
  103,049

  	
   

  
	
  Prophetic Limited shares and warrant shares(7)

  	
   

  	
  250,000

  	
   

  
	
  Prophetic Limited shares and warrant shares to be issued(8)

  	
   

  	
  1,103,572

  	
   

  
	
  Total

  	
   

  	
  7,222,838

  	
   

  







	
  1.

  	
   

  	
  Pursuant to registration rights contained in subscription agreements
  accepted by the Company on December 30, 2005.

  
	
  2.

  	
   

  	
  Pursuant to a verbal agreement in or about February 2006 between the
  Company and Paul Bornstein.

  
	
  3.

  	
   

  	
  Pursuant to an investment banking agreement dated April 7, 2006, as
  amended, between the Company and GunnAllen Financial, Inc.

  
	
  4.

  	
   

  	
  Pursuant to a letter agreement dated April 12, 2006, as amended,
  between the Company and Sam Del Presto.

  
	
  5.

  	
   

  	
  Pursuant to a professional services agreement dated June 7, 2006
  between the Company and Cole Business Development, LLC.

  
	
  6.

  	
   

  	
  Pursuant to a placement agent agreement dated April 5, 2006, as
  amended, between the Company and Ehrenkrantz King Nussbaum, Inc.

  
	
  7.

  	
   

  	
  Pursuant to registration rights contained in subscription agreements accepted
  by the Company on June 20, 2006.

  
	
  8.

  	
   

  	
  Pursuant to registration rights contained in subscription agreements
  accepted by the Company on July 21, 2006.

  
	
  9.

  	
   

  	
  The Company shall also be entitled to include up to an aggregate of
  not more than 1,250,000 additional shares of Common Stock to the extent the
  Company determines that it is required to issue these shares as compensation
  related to the transactions contemplated by the Amendment Agreements.