exv10w2



 





Exhibit 10.2




REGISTRATION RIGHTS AGREEMENT




          This Registration Rights Agreement (this “Agreement”) is made and entered into as of
November 9, 2007, among Panda Ethanol, Inc., a Delaware corporation (the “Company”), and
Panda Energy International, Inc. (“Panda Energy”).




          This Agreement is made pursuant to the Services Agreement, which was effective September 1,
2007 and signed between the Company and Panda Energy (the “Services Agreement”).




          The Company and Panda Energy hereby agree as follows:




     1. Definitions. Capitalized terms used and not otherwise defined herein that are
defined in the Services Agreement shall have the meanings given such terms in the Services
Agreement. As used in this Agreement, the following terms shall have the following meanings:




     “Advice” shall have the meaning set forth in Section 6(d).




     “Effectiveness Date” means the date on which the Commission declares the
initial Registration Statement filed hereunder to be effective.




     “Effectiveness Period” shall have the meaning set forth in Section 2(a).




     “Event” shall have the meaning set forth in Section 2(b).




     “Event Date” shall have the meaning set forth in Section 2(b).




     “Filing Date” means, with respect to the initial Registration Statement
required hereunder, before or on March 31, 2009 and, with respect to any additional
Registration Statement(s) that may be required pursuant to Section 3(c), the 30th
day following the date on which the Company first becomes aware that such additional
Registration Statement(s) is or are required hereunder.




     “Holder” or “Holders” means the holder or holders, as the case may be,
from time to time of Registrable Securities.




     “Indemnified Party” shall have the meaning set forth in Section 5(c).




     “Indemnifying Party” shall have the meaning set forth in Section 5(c).




     “Losses” shall have the meaning set forth in Section 5(a).




     “Participating Holders” means the Holders offering Registrable Securities for
sale pursuant to an Underwritten Offering.




     “PIPE I Registrable Securities” means the “Registrable Securities” (as defined
in the PIPE I Registration Rights Agreement).




 









 









     “PIPE I Registration Rights Agreement” means that certain Registration Rights
Agreement dated June 7, 2006 among the Company and the several purchasers signatory thereto.




     “PIPE II Registrable Securities” means the “Registrable Securities” (as defined
in the PIPE II Registration Rights Agreement).




     “PIPE II Registration Rights Agreement” means that certain Registration Rights
Agreement dated November 28, 2006 among the Company and several purchasers signatory
thereto.




     “Plan of Distribution” shall have the meaning set forth in Section 2(a).




     “Prospectus” means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such Prospectus.




     “Registrable Securities” means all of (i) the Shares issued to Panda Energy
from time to time pursuant to the Services Agreement and (ii) any shares of Common Stock,
par value $0.001 per share, of the Company issued or issuable upon any stock split, dividend
or other distribution, recapitalization or similar event with respect to the Shares.




     “Registration Statement” means the registration statements required to be filed
hereunder and any additional registration statements contemplated by Section 3(c), including
(in each case) the Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in such
registration statement.




     “Rule 415” means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule.




     “Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule.




     “Selling Stockholder Questionnaire” shall have the meaning set forth in Section
3(a).




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          “Shares” means the shares of Common Stock, par value $0.001 per share, issued
by the Company pursuant to the Services Agreement.




          “Total Registrable Securities” means all of (i) the Registrable Securities and
(ii) the PIPE I Registrable Securities and the PIPE II Registrable Securities.




          “Underwritten Offering” means an offering in which securities of the Company
are offered and sold on a firm commitment basis through one or more underwriters, all
pursuant to an underwriting agreement between the Company and one or more Holders and such
underwriter(s); provided, however, that it is contemplated that the
aggregate gross proceeds from such Underwritten Offering will exceed $50 million.



     2. Shelf Registration.



     (a) On or prior to the Filing Date, the Company shall use its reasonable best efforts to
prepare and file as promptly as possible with the Commission a universal “Shelf” Registration
Statement or Statements covering, among such other securities as may be offered from time to time
by the Company, the resale of the Registrable Securities on or prior to such Filing Date for an
offering to be made on a continuous basis pursuant to Rule 415. Each such Registration Statement
shall be on Form S-1 (except if the Company is then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration may be on Form S-3 in accordance herewith)
and shall contain (unless otherwise required in response to a written comment from the Commission)
the “Plan of Distribution” section substantially in the form attached hereto as Annex
A, with such changes as are reasonably required to comply with then applicable securities laws.
If, for any reason, the Commission refuses to permit all of the Registrable Securities to be
registered on a single registration statement or at the same time on multiple registration
statements, then all of the Registrable Securities shall be registered as the Commission will
permit to be registered in such initial registration statement or statements, and the balance of
Registrable Securities shall be registered on another registration statement or statements filed
only after the effective date of the registration statement(s) registering the Registrable
Securities. Subject to the terms of this Agreement, the Company shall use its reasonable best
efforts to cause each such Registration Statement to be declared effective under the Securities Act
as promptly as possible after the filing thereof, and shall use its reasonable best efforts to keep
each such Registration Statement continuously effective under the Securities Act until the earlier
of (A) the date on which there ceases to be outstanding any Registrable Securities, and (B) the
date on which all Registrable Securities have been sold, or may be sold without volume restrictions
pursuant to Rule 144(k), as determined by counsel to the Company pursuant to a written opinion
letter to such effect, addressed and reasonably acceptable to the Company’s transfer agent and the
affected Holders (the “Effectiveness Period”). The Company shall telephonically request
effectiveness of each such Registration Statement as of 5:00 p.m. Eastern Time on a Trading Day.
The Company shall promptly notify the Holders (via electronic message or facsimile) of the
effectiveness of each such Registration Statement no later than the next Trading Day following the
date such Registration Statement is declared effective by the Commission. The Company shall, by
5:00 p.m. Central Time on the Trading Day after the
Effective Date (as defined in the Services Agreement), file a final Prospectus with the
Commission as required by Rule 424. Notwithstanding anything in this Agreement to the contrary, in
the event that any Holder is required by applicable law to be named as an





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underwriter in a
Registration Statement, or in any Prospectus contained therein, in order to have any Registrable
Securities then held by such Holder included in such Registration Statement, such Holder may elect
by written notice to the Company not to have such Registrable Securities so included, and upon
receipt of such notice, the Company shall remove such specified Registrable Securities from
inclusion in the Registration Statement.




     (b) If: (i) any Registration Statement is not filed on or prior to its Filing Date, or (ii)
the Company fails to file with the Commission a request for acceleration in accordance with Rule
461 promulgated under the Securities Act, within five Trading Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission that any Registration
Statement will not be “reviewed,” or not subject to further review, or (iii) after the
Effectiveness Date, a Registration Statement or Statements, as the case may be, ceases or cease for
any reason to remain continuously effective as to all Registrable Securities for which it or they
is or are required to be effective, or the Holders are otherwise not permitted to utilize the
Prospectus therein to resell such Registrable Securities for more than 10 consecutive calendar days
or more than an aggregate of 30 calendar days during any 12-month period (which need not be
consecutive calendar days) (any such failure or breach being referred to as an “Event”, and
for purposes of clause (i) the date on which such Event occurs, or for purposes of clause (ii) the
date on which such five Trading Day period is exceeded, or for purposes of clause (iii) the date on
which such 10 or 30 calendar day period, as applicable, is exceeded, in any case, being referred to
as “Event Date”), then in addition to any other rights the Holders may have hereunder or
under applicable law, on each such Event Date and on each monthly anniversary of each such Event
Date (if the applicable Event shall not have been cured by such date) until the applicable Event is
cured, the Company shall pay to each Holder an amount in cash, as partial liquidated damages and
not as a penalty, equal to 1.00% of the aggregate value paid to such Holder pursuant to the
Services Agreement for any Registrable Securities then held by such Holder; provided, that in no
event shall such partial liquidated damages accrue for a period in excess of 24 months. If the
Company fails to pay any partial liquidated damages pursuant to this Section in full within seven
days after the date payable, the Company will pay interest thereon at a rate of 10.0% per annum (or
such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing
daily from the date such partial liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full. The partial liquidated damages pursuant to the terms hereof
shall apply on a daily pro-rata basis for any portion of a month prior to the cure of an Event.



     (c) At any time after the Effectiveness Date and prior to the expiration of the Effectiveness
Period, if and only if a holder or group of holders holding in the aggregate at least 22.5% of the
PIPE I Registrable Securities has requested in writing that the Company commence an Underwritten
Offering under the Registration Statement or any separate registration statement to the extent
required by any then applicable rules and regulations or at the direction of the Commission, then a
Holder or group of Holders holding in the aggregate at least 22.5% of the Registrable Securities
may request in writing that any such Underwritten Offering shall include the proposed sale or
resale, as the case may be, of Registrable Securities, in addition to PIPE I Registrable Securities
and securities of the Company, in the respective and relative amounts to be determined by a
managing underwriter(s) which shall be selected by the Company and the
requesting Holder or Holders and shall be reasonably acceptable to each (it being understood
that the underwriters specified on Annex A hereto or their respective successors shall be
deemed acceptable to the Company and the Holders). The managing underwriter(s) shall determine in





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good faith based on marketing factors the number of PIPE I Registrable Securities, PIPE II
Registrable Securities, Company securities, and Registrable Securities to be included in such
Underwritten Offering, and any shares included in the Underwritten Offering shall be allocated to
the Participating Holders on a pro rata basis based on the total number of Registrable Securities
requested to be included. In connection with an Underwritten Offering, the Company and the
Participating Holders shall negotiate and enter into an underwriting agreement in customary form
with the managing underwriter(s), which shall include, among other provisions, customary
representations and warranties and customary indemnities by and of the Company and any
Participating Holders; it being understood that neither the Company nor the Participating Holders
shall be required to enter into representations, warranties or agreements that are not customary or
reasonably requested by the underwriters. In connection with any such Underwritten Offering, each
Participating Holder shall, as a condition to inclusion, provide all such information and materials
and take all such action as may be reasonably requested by the Company. The Company and any
Participating Holders shall take all reasonable actions as requested by the managing underwriter(s)
in order to expedite and facilitate the registration and disposition of the Company securities and
Registrable Securities included in such Underwritten Offering; provided, however,
that the Company shall not be required to cause the appropriate officers of the Company or its
Affiliates to participate in a “road show” or similar marketing effort being conducted by such
underwriter with respect to such Underwritten Offering more than once in any six month calendar
period. Additionally, notwithstanding any other provisions of this Agreement, the Company shall
not be obligated to proceed with any such Underwritten Offering if (i) managing underwriter(s)
cannot be selected; (ii) any such Underwritten Offering would materially adversely affect
(including through the premature disclosure thereof) any other financing arrangement or any
proposed acquisition, reorganization, merger, consolidation, disposition, capital expenditure or
other similar transaction then being implemented by the Company or reasonably likely to be
implemented by the Company during or immediately following the pendancy of such Underwritten
Offering; (iii)  commencing an Underwritten Offering would, in the good faith judgment of the Board
of Directors of the Company, be seriously detrimental to the Company by having a material adverse
impact on the Company’s ability to implement its business plan or to perform in any material
respect its obligations under any material agreement; or (iv) prior to such request, the Company
has offered the Holder or Holders of the Registrable Securities a right to include the Registrable
Securities or any portion thereof in an underwritten offering separately commenced by the Company
outside the Registration Statement pursuant to the provisions of Section 6(e) hereof or otherwise
and all Registrable Securities were included in any such prior registration. In the event that the
Company is not obligated to proceed with the Underwritten Offering pursuant to any of (i) through
(iv) above, it shall provide written notice to the Holders of its determination and the reasons
therefor and the Holders shall then be entitled to make an additional request for an Underwritten
Offering prior to the expiration of the Effectiveness Period, so long as no request is made within
a sixty (60) day period after the initial request. If the Company has previously delivered a
notice of its determination not to proceed with an Underwritten Offering, upon receipt of a
subsequent request of the requisite percentage of Holders to proceed with an Underwritten Offering,
it will be obligated to proceed with
respect to an Underwritten Offering
subject only to a right of the Company to delay the Underwritten Offering for a period of up
to one-hundred twenty (120) days because of any of the factors specified in (i) through (iv) above.
In the event of an Underwritten Offering pursuant to this Section 2(c), the parties agree that the







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Company shall amend, to the extent required by applicable rules and regulations, the Plan of
Distribution attached as Annex A to reflect all necessary adjustments for such Underwritten
Offering. In connection with any Underwritten Offering of its Common Stock, the Company also
hereby covenants and agrees to use its reasonable best efforts to seek a listing of its Common
Stock on either the NASDAQ Stock Market, the American Stock Exchange, Inc. or the New York Stock
Exchange, Inc. In no event shall the Company’s failure to obtain such listing entitle the Holders
to any monetary damages; it being understood that the Holders’ sole remedy for failure to obtain
any such listing shall be their right to pursue an action for specific performance.




     3. Registration Procedures.



          In connection with the Company’s registration obligations hereunder, the Company shall (and,
for purposes of Section 3(m), each Holder shall):




     (a) Not less than four Trading Days prior to the filing of each Registration Statement
and not less than one Trading Day prior to the filing of any related Prospectus or any
amendment or supplement thereto (including any document that would be incorporated or deemed
to be incorporated therein by reference), (i) furnish to each Holder copies of the
“Principal and Selling Stockholders” and “Plan of Distribution” sections of such
Registration Statement or other documents proposed to be filed, if such sections have been
revised since the previous filing of such Registration Statement or any amendment or
supplement thereto, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders, and (ii) cause its
officers and directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective counsel to
each Holder, to conduct a reasonable investigation within the meaning of the Securities Act.
The Company shall not file a Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the PIPE I
Registrable Securities, or the holders of a majority of the Total Registrable Securities,
included in such Registration Statement shall reasonably object in good faith, provided that
the Company is notified of such objection in writing no later than two Trading Days after
the Holders have been so furnished copies of such documents. Each Holder agrees to furnish
to the Company a completed Selling Stockholder Questionnaire in the form attached to this
Agreement as Annex B not less than ten days after written request therefore has been
made by the Company. The Company shall not be required to include the Registrable
Securities of a Holder in a Registration Statement and shall not be required to pay any
liquidated or other damages under Section 2(b) to any Holder who fails to furnish to
the Company a fully completed Selling Holder Questionnaire at least three Trading Days prior
to the date the Registration Statement is filed with the Commission (subject to the other
requirements in this Section 3(a)).




     (b) (i) Prepare and file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in connection therewith as
may be necessary to keep a Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and






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prepare and file with the
Commission such additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement (subject to the terms of this
Agreement), and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible to any comments received from the Commission with
respect to a Registration Statement or any amendment thereto and, upon written request by
any Holder, as promptly as reasonably possible provide such Holder with true and complete
copies of all material written correspondence from and to the Commission relating to a
Registration Statement (provided that the Company may excise any information contained
therein which would constitute material non-public information as to any Holder which has
not executed a confidentiality agreement with the Company); and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by a Registration Statement during the
applicable period in accordance (subject to the terms of this Agreement) with the intended
methods of disposition by the Holders thereof set forth in such Registration Statement as so
amended or in such Prospectus as so supplemented.




     (c) If during the Effectiveness Period, the number of Registrable Securities at any
time exceeds 100% of the number of shares of common stock then included in a Registration
Statement, then the Company shall use its reasonable best efforts to file as soon as
reasonably practicable, but in any case prior to the applicable Filing Date, an additional
Registration Statement or post effective amendment to the existing Registration Statement
covering the resale by the Holders of not less than 100% of the number of such Registrable
Securities.




     (d) Use its reasonable best efforts to notify the Holders (which notice shall, pursuant
to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of
the Prospectus until the requisite changes have been made) as promptly as reasonably
possible and confirm such notice in writing (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to a Registration Statement has been filed; (B) when
the Commission notifies the Company whether there will be a “review” of such Registration
Statement and whenever the Commission comments in writing on such Registration Statement;
and (C) with respect to a Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other federal or
state governmental authority for amendments or supplements to a Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the Commission or any
other Federal or state governmental authority of any stop order suspending the effectiveness
of a Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such
purpose; (v) of the occurrence of any event or passage of time that makes the financial
statements included in a Registration Statement ineligible for inclusion therein or any
statement made in a Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or that




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requires any revisions to a Registration Statement, Prospectus or other documents so that,
in the case of a Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and (vi) the occurrence or
existence of any pending corporate development with respect to the Company that the Company
believes may be material and that, in the determination of the Company, makes it not in the
best interest of the Company to allow continued availability of a Registration Statement or
Prospectus; provided that any and all of such information shall be kept confidential by each
Holder until such information otherwise becomes public, unless disclosure by a Holder is
required by law; provided, further, notwithstanding each Holder’s agreement
to keep such information confidential, the Holders make no acknowledgement that any such
information is material, non-public information.




     (e) Use its reasonable best efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or
(ii) any suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.




     (f) Furnish to each Holder, without charge, to the extent requested in writing by such
Holder, at least one conformed copy of each such Registration Statement and each amendment
thereto, including financial statements and schedules, all documents incorporated or deemed
to be incorporated therein by reference, and all exhibits to such Registration Statement
(including those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.




     (g) Promptly deliver to each Holder, without charge, as many copies of the Prospectus
or Prospectuses (including each form of prospectus) and each amendment or supplement thereto
as such Holder may reasonably request in writing in connection with resales by such Holder.
Subject to the terms of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto, except after the giving of any notice
pursuant to Section 3(d).




     (h) If NASDR Rule 2710 requires any broker-dealer to make a filing prior to executing a
sale by a Holder, the Company shall (i) make an Issuer Filing with the NASDR, Inc. Corporate
Financing Department pursuant to proposed NASDR Rule 2710(b)(10)(A)(i), (ii) respond within
five Trading Days to any comments received from NASDR in connection therewith, and (iii) pay
the filing fee required in connection therewith.




     (i) Prior to any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders in
connection with the registration or qualification (or exemption from the registration or
qualification) of such Registrable Securities for the resale by the Holder under the
securities or Blue Sky laws of such jurisdictions within the United States as any





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Holder
reasonably requests in writing, to keep each registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other acts or
things reasonably necessary to enable the disposition in such jurisdictions of the
Registrable Securities covered by each Registration Statement; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction where it is
not then so qualified, subject the Company to any material tax in any such jurisdiction
where it is not then so subject or file a general consent to service of process in any such
jurisdiction.




     (j) If requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to be delivered
to a transferee pursuant to a Registration Statement, which certificates shall be free, to
the extent permitted by the Services Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such names as any
such Holders may request.




     (k) Upon the occurrence of any event contemplated by this Section 3, as promptly as
reasonably possible under the circumstances taking into account the Company’s good faith
assessment of any adverse consequences to the Company and its stockholders of the premature
disclosure of such event, prepare a supplement or amendment, including a post-effective
amendment, to a Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, and file any other
required document so that, as thereafter delivered, neither a Registration Statement nor
such Prospectus will contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. If the Company
notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(d) above to
suspend the use of any Prospectus until the requisite changes to such Prospectus have been
made, then the Holders shall suspend use of such Prospectus. The Company will use its
reasonable best efforts to ensure that the use of the Prospectus may be resumed as promptly
as is practicable. The Company shall be entitled to exercise its right under this Section
3(k) to suspend the availability of a Registration Statement and Prospectus subject to the
payment of partial liquidated damages pursuant to Section 2(b) for a period not to exceed 60
calendar days (which need not be consecutive days) in any 12 month period.




     (l) Comply with all applicable rules and regulations of the Commission.




     (m) If reasonably requested by the Company prior to any filing by the Company with the
Commission in connection with any applicable Registration Statement or Prospectus
requirement of the Commission, each selling Holder agrees to furnish to the Company a
certified statement as to the number of Shares beneficially owned by such
Holder and, if required by the Commission, the natural persons thereof that have voting
and dispositive control over such shares. During any periods that the Company is unable to
meet its obligations hereunder with respect to the registration of the Registrable
Securities solely because any Holder fails to furnish such information within three Trading
Days of the Company’s request, any liquidated damages that are accruing at such





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time as to
such Holder only shall be tolled and any Event that may otherwise occur solely because of
such delay shall be suspended as to such Holder only, until such information is delivered to
the Company.




     (n) Notwithstanding any provision of this Agreement to the contrary, subject to payment
of any accrued liquidated damages otherwise provided for herein, it shall not be a breach or
violation of any obligation of the Company hereunder if the Company fails to take any action
otherwise required hereunder because, in its reasonable determination, such action would
require the Company to disclose material, non-public information that the Company has a bona
fide business or legal reason for not disclosing regardless of whether the Company caused
such material, non-public information to exist.




     (o) In the case of an Underwritten Offering, use its reasonable best efforts to furnish
or caused to be furnished to each Holder of Registrable Securities covered by such
Registration Statement and the underwriters a signed counterpart, addressed to each such
Holder and the underwriters, of: (i) an opinion of counsel for the Company, dated the date
of each closing under the underwriting agreement, reasonably satisfactory to the
underwriters; and (ii) a “comfort” letter, dated the effective date of such Registration
Statement and the date of each closing under the underwriting agreement, signed by the
independent public accountants who have certified the Company’s financial statements
included in such Registration Statement, covering substantially the same matters with
respect to such Registration Statement (and the Prospectus included therein) and with
respect to events subsequent to the date of such financial statements, as are customarily
covered in accountants’ letters delivered to underwriters in underwritten public offerings
of securities, and such other financial matters as the underwriters may reasonably request
and customarily obtained by underwriters in underwritten offerings, provided that, to be an
addressee of the comfort letter, each Holder may be required to confirm that it is in the
category of persons to whom a comfort letter may be delivered in accordance with applicable
accounting literature.




     (p) In the case of an Underwritten Offering, use its reasonable best efforts to make
available for inspection by the representatives of the Holders and the representative of any
underwriters participating in any disposition pursuant to a Registration Statement, and any
special counsel or accountants retained by such Holders or underwriters, during normal
business hours and subject to receipt of executed confidentiality agreement or reasonably
satisfactory form, such financial and other records, corporate documents and properties of
the Company as are necessary in order to conduct a “due diligence investigation.”




     (q) In the case of an Underwritten Offering, make generally available to its
stockholders, as soon as reasonably practicable, earnings statements covering at least 12
months that satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder in the case of an Underwritten Offering.



     4. Registration Expenses. All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses






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referred to in the foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with respect to filings required
to be made with any Trading Market on which the Shares are then listed for trading, and (B) in
compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in
writing (including, without limitation, fees and disbursements of counsel for the Company in
connection with Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as requested in writing by the Holders), and (C) if not previously paid by the
Company in connection with an Issuer Filing, with respect to any filing that may be required to be
made by any broker through which a Holder intends to make sales of Registrable Securities with NASD
Regulation, Inc. pursuant to the NASD Rule 2710, so long as the broker is receiving no more than a
customary brokerage commission in connection with such sale), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is reasonably requested by the Holders of a majority
of the Registrable Securities included in a Registration Statement), (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act
liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all
other Persons retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the transactions contemplated by
this Agreement (including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual audit and the fees and
expenses incurred in connection with the listing of the Registrable Securities on any Trading
Market as required hereunder. In no event shall the Company be responsible for any broker or
similar commissions of any Holder (including any underwriting discounts and selling commissions in
connection with an Underwritten Offering) or, except to the extent provided for in the Transaction
Documents, any legal fees, stock transfer taxes or other costs of the Holders.




     5. Indemnification




     (a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the officers,
directors, members, partners, agents, investment advisers and employees (and any other
Persons with a functionally equivalent role of a Person holding such titles, notwithstanding
a lack of such title or any other title) of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, stockholders, members, partners, agents and employees (and
any other Persons with a functionally equivalent role of a Person holding such titles,
notwithstanding a lack of such title or any other title) of each such controlling Person, to
the fullest extent permitted by applicable law, from and
against any and all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as
incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a
material fact contained in a Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a material fact required
to be stated





- 11 -









 









therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the circumstances under
which they were made) not misleading, or (2) any violation or alleged violation by the
Company of the Securities Act, Exchange Act or any state securities law, or any rule or
regulation thereunder, in connection with the performance of its obligations under this
Agreement, except to the extent, but only to the extent, that (i) such untrue statements or
omissions are based solely upon information regarding such Holder furnished in writing to
the Company by such Holder expressly for use therein, or to the extent that such information
relates to such Holder or such Holder’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved or was not objected to in writing by such
Holder expressly for use in a Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto (it being understood that each Holder
has expressly approved Annex A hereto for this purpose) or (ii) in the case of an occurrence
of an event of the type specified in Section 3(d)(iii)-(vi), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in writing that
the Prospectus is outdated or defective and prior to the receipt by such Holder of the
Advice contemplated in Section 6(d). The Company shall notify the Holders promptly of the
institution, threat or assertion of any Proceeding arising from or in connection with the
transactions contemplated by this Agreement of which the Company is aware.




     (b) Indemnification by Holders. Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and employees (and
any other Persons with a functionally equivalent role of a Person holding such titles,
notwithstanding a lack of such title or any other title), each Person who controls the
Company (within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees (and any other Persons with
a functionally equivalent role of a Person holding such titles, notwithstanding a lack of
such title or any other title) of such controlling Persons, to the fullest extent permitted
by applicable law, from and against all Losses, as incurred, to the extent arising out of or
based solely upon: (x) such Holder’s failure to comply with the prospectus delivery
requirements of the Securities Act, or (y) in the case of an occurrence of an event of the
type specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice contemplated in
Section 6(d) or (z) any untrue or alleged untrue statement of a material fact contained in
any Registration Statement, any Prospectus, or any form of prospectus, or in any amendment
or supplement thereto or in any preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading (i) to the extent, but only to the extent,
that such untrue statement or omission is contained in any information
so furnished in writing by such Holder to the Company specifically for inclusion in
such Registration Statement or such Prospectus or (ii) to the extent that such information
relates to such Holder’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved or was not objected to in writing by such Holder expressly
for use in a Registration Statement (it being understood that each Holder has expressly
approved Annex A hereto for this purpose), such Prospectus or such form of





- 12 -









 









Prospectus or in
any amendment or supplement thereto. In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such indemnification
obligation.




     (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is
sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have
the right to assume the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have prejudiced the Indemnifying Party.




     An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the
Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying
Party shall have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the
named parties to any such Proceeding (including any impleaded parties) include both such
Indemnified Party and the Indemnifying Party, and counsel to such Indemnified Party shall
reasonably believe that a material conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party
shall not have the right to assume the defense thereof and the reasonable fees and expenses
of no more than one separate counsel shall be at the expense of the Indemnifying Party).
The Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably withheld,
conditioned or delayed. No Indemnifying Party shall, without the prior written consent of
the Indemnified Party, effect any settlement of any pending Proceeding in respect of which
any Indemnified Party is a party, unless such settlement includes an unconditional release
of such Indemnified Party from all liability on claims that are the subject matter of such
Proceeding.




     Subject to the terms of this Agreement, all reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within
ten Trading Days following written notice thereof to the Indemnifying Party;
provided, that the Indemnified Party shall promptly reimburse the Indemnifying Party
for that portion of such fees and expenses applicable to such actions for which such
Indemnified Party is judicially determined to be not entitled to indemnification hereunder.





- 13 -









 









     (d) Contribution. If the indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless
for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable
by such Indemnified Party, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such action, statement or omission.
The amount paid or payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other
reasonable fees or expenses incurred by such party in connection with any Proceeding to the
extent such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in accordance with
its terms.




     The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by any other method
of allocation that does not take into account the equitable considerations referred to in
the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, except in the case of fraud by such Holder.




     The indemnity and contribution agreements contained in this Section are in addition to
any liability that the Indemnifying Parties may have to the Indemnified Parties.



     6. Miscellaneous




     (a) Remedies. In the event of a breach by the Company or by a Holder, of any
of their respective obligations under this Agreement, each Holder or the Company, as the
case may be, in addition to being entitled to exercise all rights granted by law and under
this Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each Holder agree that
monetary damages would not provide adequate compensation for any losses incurred by reason
of a breach by it of any of the provisions of this Agreement and hereby further agrees that,
in the event of any action for specific performance in respect of such breach, it shall not
assert or shall waive the defense that a remedy at law would be adequate.





- 14 -









 









     (b) No Piggyback on Initial Registration Statement. Except as set forth on
Schedule 6(b) to this Agreement, no security holders (other than the Holders in such
capacity pursuant hereto) may include securities of the Company in the initial Registration
Statement other than the Registrable Securities.




     (c) Compliance. Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in connection
with sales of Registrable Securities pursuant to a Registration Statement.




     (d) Discontinued Disposition. Each Holder agrees by its acquisition of
Registrable Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(d), such Holder will forthwith discontinue
disposition of such Registrable Securities under a Registration Statement until such
Holder’s receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement or until it is advised in writing (the “Advice”) by the Company that the
use of the applicable Prospectus may be resumed, and, in either case, has received copies of
any additional or supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company will use its reasonable
best efforts to ensure that the use of the Prospectus may be resumed as promptly as it
practicable. The Company agrees and acknowledges that any periods during which the Holder
is required to discontinue the disposition of Registrable Securities hereunder shall be
subject to the provisions of Section 2(b).




     (e) Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable Securities
and the Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with the stock option or other employee benefit
plans, then the Company shall send to each Holder a written notice of such determination
and, if within fifteen days after the date of such notice, any such Holder shall so request
in writing, the Company shall include in such registration statement all or any part of such
Registrable Securities such Holder requests to be registered, subject to customary
underwriter cutbacks applicable to all holders of registration rights if such registration
statement relates to an underwritten public offering; provided, however, that, the Company
shall not be required to register any Registrable Securities pursuant to this Section 6(e)
that are eligible for resale pursuant to Rule 144(k) promulgated under the Securities Act or
that are the subject of a then effective Registration Statement.




     (f) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the same shall be
in writing and signed by the Company and the Holders of at least sixty-six and two-thirds
percent (66-2/3%) of the then outstanding Registrable Securities; provided,
however, that any modification or amendment of this Agreement that is





- 15 -









 









materially
adverse to a Holder relative to any other Holder shall not be effective without the consent
of such adversely affected Holder. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of all of the Registrable Securities to which such waiver or
consent relates; provided, however, that the provisions of this sentence may
not be amended, modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.




     (g) Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or communication
is delivered via electronic message or via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:00 p.m. (Dallas, Texas time) on a Trading
Day, and such communication is electronically confirmed as received, (b) the next Trading
Day after the date of transmission, if such notice or communication is delivered via
electronic message or via facsimile at the facsimile number set forth on the signature pages
attached hereto on a day that is not a Trading Day or later than 5:00 p.m. (Dallas, Texas
time) on any Trading Day, and such communication is electronically confirmed as received,
(c) the 2nd Trading Day following the date of mailing, if such communication is sent by U.S.
nationally recognized overnight courier service and is confirmed as received by such courier
service, or (d) upon actual receipt by the party to whom such notice or communication is
required to be given. The address for such notices and communications shall be as set forth
on the signature pages attached hereto.




     (h) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and shall inure to
the benefit of each Holder. The Company may not assign its rights or obligations hereunder
without the prior written consent of all of the Holders of the then-outstanding Registrable
Securities except in the case of a merger (or similar transaction) in which case the
surviving entity shall succeed to the rights and obligations of the Company. Each Holder
may assign their respective rights hereunder in the manner and to the Persons as permitted
under the Services Agreement; provided, however, that at least 10,000 shares
(subject to adjustment for splits, stock dividends, and recapitalizations) of the
Registrable Securities, are assigned to an assignee who seeks to assert registration rights
under this Agreement.




     (i) No Inconsistent Agreements. Except as set forth on Schedule 6(i),
neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor
shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter
into any agreement with respect to its securities, that would have the effect of impairing
the rights
granted to the Holders in this Agreement or otherwise conflicts with the provisions
hereof. Except as set forth on Schedule 6(i), neither the Company nor any of its
subsidiaries has previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person that have not been satisfied in full. Except
as set forth on Schedule 6(i), the Company hereby agrees that it will not grant
registration rights more favorable than the rights specified herein to any subsequent





- 16 -









 









holder
of its securities without either offering the same rights to all Holders or obtaining the
written consent from Holders beneficially owning in the aggregate at least 50.1% of the
Registrable Securities.




     (j) Execution and Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile transmission or by
e-mail delivery of a “.pdf” format data file, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or “.pdf” signature page were an
original thereof.




     (k) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by and
construed and enforced in accordance with the internal laws of the State of Texas, without
regard to the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether brought against
a party hereto or its respective affiliates, directors, officers, stockholders, employees or
agents) shall be commenced exclusively in the state and federal courts sitting in the City
of Dallas, Texas. Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the City of Dallas, Texas for the adjudication of
any dispute hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the Transaction
Documents), 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 improper or inconvenient venue for such
proceeding. 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 via
registered or certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. If either party shall commence an action or proceeding to enforce
any provisions of the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of such action or
proceeding.




     (l) Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any other remedies provided by law.




     (m) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth





- 17 -









 









herein shall remain in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their commercially reasonable efforts to find
and employ an alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.




     (n) Headings. The headings in this Agreement are for convenience only, do not
constitute a part of this Agreement, and shall not be deemed to limit or affect any of the
provisions hereof.




     (o) Independent Nature of Holders’ Obligations and Rights. The obligations of
each Holder hereunder are several and not joint with the obligations of any other Holder
hereunder, and no Holder shall be responsible in any way for the performance of the
obligations of any other Holder hereunder. Nothing contained herein or in any other
agreement or document delivered at any closing, and no action taken by any Holder pursuant
hereto or thereto, shall be deemed to constitute the Holders as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the
Holders are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be entitled to protect and
enforce its rights, including without limitation the rights arising out of this Agreement,
and it shall not be necessary for any other Holder to be joined as an additional party in
any proceeding for such purpose.




     (p) Holder Cooperation. The Holders shall cooperate with the Company, as
reasonably requested by the Company, in connection with the preparation and filing of any
Registration Statement hereunder. The Company may require a Holder to promptly furnish in
writing to the Company such information as may be required in connection with such
registration including, without limitation, all such information as may be requested by the
Commission or the NASD or any state securities commission and all such information regarding
the Holder, the Registrable Securities held by the Holder and the intended method of
disposition of the Registrable Securities. Each Holder agrees to provide such information
requested in connection with such registration within a reasonable time after receiving such
written request. The Company may exclude from such registration the Registrable Securities
of any such Holder who fails to furnish such information within a reasonable time prior to
the filing of each Registration Statement, supplemented Prospectus and/or amended
Registration Statement. Each Holder shall be responsible for the delivery of the Prospectus
to the Persons to whom the Holder sells the Registrable Securities to the extent required by
applicable law. When selling Registrable Securities pursuant to any Registration Statement,
each Holder agrees to dispose of
Registrable Securities in compliance with the plan of distribution described in such
Registration Statement and otherwise in compliance with applicable federal and state
securities laws.




     (q) Trading Restrictions. Each Holder hereby agrees that it shall not, to the
extent requested by the managing underwriter(s) of securities of the Company in





- 18 -









 









connection
with any Underwritten Offering effected pursuant to this Agreement, directly or indirectly
sell, offer to sell (including without limitation any short sale), grant any option or
otherwise transfer or dispose of any Registrable Securities or other shares of Common Stock
of the Company or any securities convertible into or exchangeable or exercisable for shares
of Common Stock of the Company then owned by such Holder for a period of 60 days following
such Underwritten Offering; provided, however, that the restrictions above
shall not apply to Registrable Securities being sold pursuant to such Underwritten Offering
or to any underwritten offering in which Registrable Securities or any portion thereof are
not included, except to the extent expressly required in writing by the managing underwriter
because of marketing considerations.  In order to enforce the foregoing covenant, the
Company shall have the right to place restrictive legends on the stock certificates
representing the securities subject to this Section and to impose stop transfer instructions
with respect to applicable securities until the end of such period.



[Remainder of Page Intentionally Left Blank.

Signature Pages to Follow]







- 19 -

















 





          IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.




	 	 	 	 	 
	 	PANDA ETHANOL, INC.

 	 
	 	By:  	/s/ Darol Lindloff
 	 
	 	 	Name:  	Darol Lindloff 	 
	 	 	Title:  	Chief Executive Officer 	 
	 



[SIGNATURE PAGE OF HOLDER FOLLOWS]






 









 





Name of Holder: Panda Energy International, Inc.




Signature of Authorized Signatory of Holder:   /s/ Todd W. Carter                    




Name of Authorized Signatory: Todd W. Carter




Title of Authorized Signatory: President





- 21 -









 





ANNEX A




PANDA ETHANOL, INC.




Plan of Distribution




     Each Selling Stockholder (the “Selling Stockholders”) of the common stock and any of their
pledgees, donees, assignees, permitted transferees, and successors-in-interest may, from time to
time, sell any or all of their shares of common stock on the [principal Trading Market] or any
other stock exchange, market or trading facility on which the shares are traded, in the
over-the-counter market, or in private transactions. These sales may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the prevailing market price, at
varying prices determined at the time of sale, or at negotiated prices. A Selling Stockholder may
use any one or more of the following methods when selling shares:




	 	•	 	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;
	 
	 	•	 	settlement of short sales entered into after the effective date of the registration
statement of which this prospectus is a part;
	 
	 	•	 	broker-dealers may agree with the Selling Stockholders to sell a specified number of
such shares at a stipulated price per share;
	 
	 	•	 	through the writing or settlement of options or other hedging transactions, whether
through an options exchange or otherwise;
	 
	 	•	 	a combination of any such methods of sale; or
	 
	 	•	 	any other method permitted pursuant to applicable law.





     The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933,
as amended (the “Securities Act”), if available, rather than under this prospectus.



     The Selling Stockholders may, from time to time, pledge or grant a security interest in some
or all of the 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, under this prospectus, or under an amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending 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 the shares
of common stock in other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this prospectus.




     In connection with the sale of the common stock or interests therein, the Selling Stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the common stock in the course of hedging the positions they
assume. The Selling Stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common stock to broker-dealers
that in turn may sell these securities. The Selling Stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the creation of one or
more derivative securities which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction).



     The Selling Stockholders and any underwriters, broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of Section 2(11) the
Securities Act in connection with such sales. In such event, any discounts, concessions, or
commissions received by such underwriters, broker-dealers or agents and any profit on the resale of
the shares purchased by them may be deemed to be underwriting commissions or discounts under the
Securities Act. Each Selling Stockholder has informed the Company that it does not have any
written or oral agreement or understanding, directly or indirectly, with any person to distribute
the common stock.



     Each of the Selling Stockholders reserves the right to accept and, together with their agents
from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made
directly or through agents. [We will not receive any of the proceeds from this offering.]



     The Company is required to pay certain fees and expenses incurred by the Company incident to
the registration of the shares. The Company has agreed to indemnify the Selling Stockholders
against certain losses, claims, damages and liabilities, including liabilities under the Securities
Act and state securities laws.



     Because Selling Stockholders may be deemed to be “underwriters” within the meaning of the
Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act
including Rule 172 thereunder. In addition, any securities covered by this prospectus which
qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather
than under this prospectus. There is no underwriter or coordinating broker acting in connection
with the proposed sale of the resale shares by the Selling Stockholders.



     We agreed to keep this prospectus effective until the earlier of (i) the date on which the
shares may be resold by the Selling Stockholders without registration and without regard to any




- 23 -









 




volume limitations by reason of Rule 144(k) under the Securities Act or any other rule of
similar effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144
under the Securities Act or any other rule of similar effect. The resale shares will be sold only
through registered or licensed brokers or dealers if required under applicable state securities
laws. In addition, in certain states, the resale shares may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.




     Under applicable rules and regulations under the Exchange Act, any person engaged in the
distribution of the resale shares may not simultaneously engage in market making activities with
respect to the common stock for the applicable restricted period, as defined in Regulation M, prior
to the commencement of the distribution. In addition, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations thereunder, including
Regulation M, which may limit the timing of purchases and sales of shares of the common stock by
the Selling Stockholders or any other person. We will make copies of this prospectus available to
the Selling Stockholders for the purpose of satisfying the prospectus delivery requirements of the
Securities Act.



Acceptable Managing Underwriters:




Citigroup




Smith Barney




Bank of America Securities




Morgan Stanley




Friedman Billings




Bear Stearns




Credit Suisse First Boston




Goldman Sachs




Lehman Brothers




A.G. Edwards & Sons, Inc.




UBS




Wachovia Securities, Inc.





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ANNEX B




PANDA ETHANOL, INC.




Selling Stockholder Notice and Questionnaire




     The undersigned beneficial owner of shares (the “Registrable Securities”) of common
stock (the “Common Stock”), of Panda Ethanol, Inc. (the “Company”), understands
that the Company has filed or intends to file with the Securities and Exchange Commission (the
“Commission”) a registration statement (the “Registration Statement”) for the
registration and resale under Rule 415 of the Securities Act of 1933, as amended (the
“Securities Act”), of the Registrable Securities, in accordance with the terms of the
Registration Rights Agreement, dated as of [                                        ] (the “Registration Rights
Agreement”), among the Company and Panda Energy named therein. A copy of the Registration
Rights Agreement is available from the Company upon request at the address set forth below. All
capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the
Registration Rights Agreement.



     Certain legal consequences arise from being named as a selling stockholder in the Registration
Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable
Securities are advised to consult their own securities law counsel regarding the consequences of
being named or not being named as a selling stockholder in the Registration Statement and the
related prospectus.



NOTICE




     The undersigned beneficial owner (the “Selling Stockholder”) of Registrable Securities hereby
elects to include the Registrable Securities owned by it and listed below in Item 3 (unless
otherwise specified under such Item 3) in the Registration Statement.



QUESTIONNAIRE




The undersigned hereby provides the following information to the Company and represents and
warrants that such information is accurate:



1. Name.





	 	(a)	 	Full Legal Name of Selling Stockholder
	 
	 	 	 	[Panda Energy International, Inc.]
	 
	 	(b)	 	Full Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities Listed in Item 3 below are held:
	 
	 	 	 	 












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	 	(c)	 	Full Legal Name of Natural Control Person (which means a natural person who
directly or indirectly alone or with others has power to vote or dispose of the
securities covered by the questionnaire):
	 
	 	 	 	[Robert W. Carter]





2. Address for Notices to Selling Stockholder:




[4100 Spring Valley, Ste. 1001




Dallas, TX 75244




Telephone:972-980-7159

Fax:972-980-6815

Contact Person: Todd W. Carter]




3. Beneficial Ownership of Registrable Securities:





	 	(a)	 	Type and Number of Registrable Securities beneficially owned (not including the
Registrable Securities that are issuable pursuant to the Services Agreement):
	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	 	 	 






4. Broker-Dealer Status:





	 	(a)	 	Are you a broker-dealer?





Yes o       No o





	 	(b)	 	If “yes” to Item 4(a), did you receive your Registrable Securities as
compensation for investment banking services to the Company.





Yes o       No o





			
	     Note:	 	If your answer to Item 4(b) is “no,” the Commission’s staff has indicated that
you should be identified as an underwriter in the Registration Statement.






	 	(c)	 	Are you an affiliate of a broker-dealer?





Yes o       No o





	 	(d)	 	If you are an affiliate of a broker-dealer, do you certify that you bought the
Registrable Securities in the ordinary course of business, and at the time of the
purchase of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the Registrable
Securities?







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Yes o       No o





			
	     Note:	 	If no, the Commission’s staff has indicated that you should be identified as
an underwriter in the Registration Statement.





5. Beneficial Ownership of Other Securities of the Company Owned by the Selling Stockholder.





Except as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable Securities
listed above in Item 3.




	 	(a)	 	Type and Amount of Other Securities beneficially owned by the Selling
Stockholder:
	 
	 	 	 	 

	 
	 	 	 	 






6. Relationships with the Company:





Except as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.




State any exceptions here:




[Panda Energy International, Inc. owns approximately [ ]% of the outstanding Common
Stock of the Company prior to this transaction. Robert W. Carter is the Chairman of the
Board of both Panda Energy International, Inc. and of Panda Ethanol, Inc. Todd W. Carter is
a member of the Board of Directors of both Panda Energy International, Inc. and Panda
Ethanol, Inc.]



     The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the
information provided herein that may occur subsequent to the date hereof at any time while the
Registration Statement remains effective.



     By signing below, the undersigned consents to the disclosure of the information contained
herein in its answers to Items 1 through 6 and the inclusion of such information in the
Registration Statement and the related prospectus and any amendments or supplements thereto. The
undersigned understands that such information will be relied upon by the Company in connection with
the preparation or amendment of the Registration Statement and the related prospectus.




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     IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and
Questionnaire to be executed and delivered either in person or by its duly authorized agent.



	 	 	 	 	 	 	 
	Dated:                     	 	Beneficial Owner:
[PANDA ENERGY INTERNATIONAL, INC.]
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	[Name: Todd W. Carter]	 	 
	 

	 	 	 	[Title: President]	 	 





PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL
BY OVERNIGHT MAIL, TO:




Panda Ethanol, Inc.

4100 Spring Valley, Suite 1001

Dallas, Texas 75244

Fax (972) 980-6815





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SCHEDULE 6(b)




     The Company has agreed to grant certain piggy-back registration rights to the principal
stockholder of Cirracor pursuant to the terms and conditions of a registration rights agreement in
the form attached as an exhibit to the Merger Agreement.



     The Company has granted certain registration rights to certain parties pursuant to the terms
and conditions of that certain Registration Rights Agreement dated June 7, 2006 among the Company,
PEII, and the parties signatory thereto (the “June 7, 2006 Registration Rights Agreement”); and,
(ii) the terms and conditions of that certain Registration Rights Agreement dated November 28, 2006
among the Company and the parties signatory thereto (the “November 28, 2006 Registration Rights
Agreement”). Security holders that are parties to the June 7, 2006 Registration Rights Agreement
and the November 28, 2006 Registration Rights Agreement may include securities of the Company in
the initial Registration Statement to the extent permitted herein.




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SCHEDULE 6(i)




     The Company has entered into, and has agreed to grant certain registration rights to the
parties to, that certain Registration Rights Agreement dated June 7, 2006 among the Company, PEII,
and the parties signatory thereto (the “June 7, 2006 Registration Rights Agreement”) that certain
Registration Rights Agreement dated November 28, 2006 among the Company and the parties signatory
thereto (the “November 28, 2006 Registration Rights Agreement”). The registration rights under the
June 7, 2006 Registration Rights Agreement and the November 28, 2006 Registration Rights Agreement
have not been satisfied in full.





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