exv4w1



 






Exhibit 4.1




REGISTRATION RIGHTS AGREEMENT




     REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of November 21, 2007, by and among
TXCO Resources Inc., a Delaware corporation, with headquarters located at 777 E. Sonterra Blvd.,
Suite 350, San Antonio, Texas 78258 (the “Company”), and the undersigned buyers (each, a “Buyer”,
and collectively, the “Buyers”).



     WHEREAS:



     A. In connection with the Securities Purchase Agreement by and among the parties hereto, dated
November 20, 2007 (the “Securities Purchase Agreement”), the Company has agreed, upon the terms and
subject to the conditions set forth in the Securities Purchase Agreement, to issue and sell to each
Buyer shares of the Company’s Series C Convertible Preferred Stock, par value $0.01 per share (the
“Preferred Shares”), which will, among other things, be convertible into a certain number of shares
of the Company’s common stock, $0.01 par value per share (the “Common Stock”, as converted, the
“Conversion Shares”) in accordance with the terms of the Certificate of Designations, Preferences
and Rights of Series C Convertible Preferred Stock, dated as of November 21, 2007 (the “Certificate
of Designations”).



     B. The Preferred Shares may be entitled to dividends, which at the option of the Company,
subject to certain conditions, may be paid in shares of Common Stock (the “Dividend Shares”).



     C. To induce the Buyers to execute and deliver the Securities Purchase Agreement, the Company
has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder, or any similar successor statute (collectively,
the “1933 Act”), and applicable state securities or “blue sky” laws and regulations.



     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 Closing Date” shall have the meaning set forth in the Securities Purchase
Agreement.




          b. “Additional Effectiveness Date” means the date the Additional Registration Statement is
declared effective by the SEC.




 









 





          c. “Additional Effectiveness Deadline” means the earlier of the date which is (i) in the event
that the Additional Registration Statement is not subject to a full review by the SEC, ninety (90)
calendar days after the earlier of (x) the Additional Filing Date and (y) the Additional Filing
Deadline or (ii) in the event that the Additional Registration Statement is subject to a full
review by the SEC, one hundred and twenty (120) calendar days after the earlier of (x) the
Additional Filing Date and (y) the Additional Filing Deadline.




          d. “Additional Filing Date” means the date on which any Additional Registration Statement is
filed with the SEC.




          e. “Additional Filing Deadline” means if Cutback Shares are required to be included in any
Additional Registration Statement, the later of (i) the date sixty (60) days after the date
substantially all of the Registrable Securities registered under the immediately preceding
Registration Statement are sold and (ii) the date six (6) months from the Initial Effective Date or
the last Additional Effective Date, as applicable.




          f. “Additional Registrable Securities” means any (i) any Cutback Shares not previously
included on a Registration Statement and (ii) any capital stock of the Company issued or issuable
with respect to the Preferred Shares, the Conversion Shares, the Dividend Shares or Cutback Shares,
as applicable, as a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, without regard to any limitations on conversions of the Preferred
Shares.




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




          h. “Additional Required Registration Amount” means any Cutback Shares not previously included
on a Registration Statement, all subject to adjustment as provided in Section 2(f), without regard
to any limitations on conversions of Preferred Shares.




          i. “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.




          j. “Closing Date” shall mean either the Initial Closing Date or the Additional Closing Date,
as applicable.




          k. “Cutback Shares” means any of the Initial Required Registration Amount (without regard to
clause (II) in the definition thereof) of Registrable Securities not included in all Registration
Statements previously declared effective hereunder as a result of (x) a limitation on the maximum
number of shares of Common Stock of the Company permitted to be registered by the staff of the SEC
pursuant to Rule 415 or (y) an election of an Investor in accordance with Section 2(h) hereof.




          l. “Effective Date” means the Initial Effective Date and the Additional Effective Date, as
applicable.




 









 





          m. “Effectiveness Deadline” means the Initial Effectiveness Deadline and the Additional
Effectiveness Deadline, as applicable.




          n. “Filing Date” means the Initial Filing Date and the Additional Filing Date, as applicable.




          o. “Filing Deadline” means the Initial Filing Deadline and the Additional Filing Deadline, as
applicable.




          p. “Initial Closing Date” shall have the meaning set forth in the Securities Purchase
Agreement.




          q. “Initial Effective Date” means the date the Initial Registration Statement has been
declared effective by the SEC.




          r. “Initial Effectiveness Deadline” means the earlier of the date which is (i) in the event
that the Initial Registration Statement is not subject to a full review by the SEC, the earlier of
(x) ninety (90) calendar days after the Initial Filing Date and (y) one hundred five (105) days
after the Additional Closing Expiration Date or (ii) in the event that the Registration Statement
is subject to a full review by the SEC, the earlier of (x) one hundred and twenty (120) calendar
days after the Initial Filing Date and (y) one hundred thirty five (135) days after the Additional
Closing Expiration Date.




          s. “Initial Filing Date” means the date on which the Initial Registration Statement is filed
with the SEC.




          t. “Initial Filing Deadline” means the first Business Day on or after the earlier of (x)
fifteen (15) calendar days immediately following the Additional Closing Expiration Date (as defined
in the Securities Purchase Agreement) and (x) fifteen (15) calendar days immediately following such
Additional Closing Date whereafter the Company shall have issued the maximum amount of Additional
Preferred Shares issuable pursuant to the Securities Purchase Agreement.




          u. “Initial Registration Statement” means the registration statement of the Company filed
under the 1933 Act covering the Initial Required Registration Amount.




          v. “Initial Required Registration Amount” means (I) the sum of (i) the number of Conversion
Shares issued and issuable pursuant to the Preferred Shares as of the Trading Day (as defined in
the Certificate of Designations) immediately preceding the applicable date of determination and
(ii) the number of Dividend Shares issued or issuable with respect to the Preferred Shares as of
the Trading Day immediately preceding the applicable date of determination assuming that the
Preferred Shares remain outstanding through the third (3rd) anniversary of the Initial
Closing Date, each subject to adjustment as provided in Section 2(f), without regard to any
limitations on conversions or redemptions of the Preferred Shares or (II) such other amount as may
be required by the staff of the SEC pursuant to Rule 415 with any cutback applied pro rata to all
Registrable Securities.




 









 





          w. .“Investor” means a Buyer or any transferee or assignee thereof to whom a Buyer assigns its
rights as a holder of Registrable Securities under this Agreement and who agrees to become bound by
the provisions of this Agreement in accordance with Section 9 and any transferee or assignee
thereof to whom a transferee or assignee assigns its rights as a holder of Registrable Securities
under this Agreement and who agrees to become bound by the provisions of this Agreement in
accordance with Section 9.




          x. “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.




          y. “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.




          z. “Registrable Securities” means the Securities; provided, however, that a Security shall
cease to be a Registrable Security upon the earliest to occur of the following: (i) a Registration
Statement registering such Security under the 1933 Act has been declared or becomes effective and
such Security has been sold or otherwise transferred by the holder thereof pursuant to and in a
manner contemplated by such effective Registration Statement; (ii) such Security is sold pursuant
to Rule 144 under circumstances in which any legend borne by such Security relating to restrictions
on transferability thereof, under the 1933 Act or otherwise, is removed by the Company; (iii) such
Security is eligible to be sold pursuant to paragraph (k) of Rule 144; or (iv) such Security shall
cease to be outstanding.




          aa. “Registration Statement” means the Initial Registration Statement and the Additional
Registration Statements, as applicable.




          bb. “Required Holders” means Investors that hold at least two-thirds of the Registrable
Securities.




          cc. “Securities” means (i) the Conversion Shares issued or issuable upon conversion of the
Preferred Shares, (ii) the Dividend Shares issued or issuable with respect to the Preferred Shares
and (iii) any capital stock of the Company issued or issuable with respect to the Conversion
Shares, the Preferred Shares and the Dividend 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 Preferred Shares.




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




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




     2. Registration.



          a. Initial Mandatory Registration. The Company shall prepare, and, as soon as
practicable but in no event later than the Initial Filing Deadline, file with the SEC the




 









 




Initial Registration Statement on Form S-3 covering the resale of at least the number of
shares of Common Stock equal to the Initial Required Registration Amount determined as of date the
Registration Statement is initially filed with the SEC. In the event that Form S-3 is unavailable
for such a registration, the Company shall use such other form as is available for such a
registration on another 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 that number of shares of Common Stock equal to the Initial Required
Registration Amount determined as of the date such 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 for the Investors in substantially the form attached hereto as Exhibit B. The
Company shall use its reasonable 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 a.m., New York time, 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 such Initial Registration Statement.




          b. Additional Mandatory Registrations. The Company shall prepare, and, as soon as
practicable but in no event later than the Additional Filing Deadline, file with the SEC an
Additional Registration Statement on Form S-3 covering the resale of all of the Additional
Registrable Securities not previously registered on a Registration Statement hereunder. To the
extent the staff of the SEC does not permit the Additional Required Registration Amount to be
registered on an Additional Registration Statement, the Company shall file Additional Registration
Statements successively trying to register on each such Additional Registration Statement the
maximum number of remaining Additional Registrable Securities until the Additional Required
Registration Amount has been registered with the SEC. In the event that Form S-3 is unavailable
for such a registration, the Company shall use such other form as is available for such a
registration on another form reasonably acceptable to the Required Holders, subject to the
provisions of Section 2(e). Each Additional Registration Statement prepared pursuant hereto shall
register for resale that number of shares of Common Stock equal to the Additional Required
Registration Amount determined as of the date such Additional Registration Statement is initially
filed with the SEC. Each Additional Registration Statement shall contain (except if otherwise
directed by the Required Holders) the “Selling Stockholders” and “Plan of
Distribution” sections in substantially the form attached hereto as Exhibit B. The
Company shall use its reasonable best efforts to have each Additional Registration Statement
declared effective by the SEC as soon as practicable, but in no event later than the Additional
Effectiveness Deadline. By 9:30 am on the Business Day following the Additional Effective Date,
the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final
prospectus to be used in connection with sales pursuant to such Additional Registration Statement.




          c. Allocation of Registrable Securities. The initial number of Registrable Securities
included in any Registration Statement and any increase or decrease 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 or decrease thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such




 









 




Investor’s Registrable Securities, each transferee shall be allocated a pro rata portion of
the then remaining number of Registrable Securities included in such Registration Statement for
such transferor. Any shares of Common Stock included in a Registration Statement and which remain
allocated to any Person which ceases to hold any Registrable Securities covered by such
Registration Statement shall be allocated to the remaining Investors, pro rata based on the number
of Registrable Securities then held by such Investors which are covered by such Registration
Statement. In no event shall the Company include any securities other than Registrable Securities
on any Registration Statement without the prior written consent of the Required Holders; provided,
however, that the Company shall be permitted to include on any Registration Statement securities
issued pursuant to the transactions described on Schedule 2(e) to the Securities Purchase
Agreement; provided, further, that any such securities issued to an Investor that are to be
included in a Registration Statement shall be included as Registrable Securities of such Investor
for the purpose of allocating securities in such Registration Statement pursuant to this Section
2(c).




          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 form reasonably acceptable to the Required Holders
and (ii) undertake to register the Registrable Securities on Form S-3 as soon as the use of such
form for such purpose is permitted, 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 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(b), the Company
shall, if the Registration Statement has not been declared effective, amend the applicable
Registration Statement, or, in all other cases, file a new Registration Statement (on the short
form available therefor, if applicable), so as to cover at least the Initial Required Registration
Amount or the Additional Required Registration Amount, as applicable, 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 thirty (30) Business Days after
the necessity therefor arises. The Company shall use its reasonable best efforts to cause such
amendment or new Registration Statement to become effective as soon as practicable following the
filing thereof. For purposes of the foregoing provision, the number of shares available under a
Registration Statement shall be deemed “insufficient to cover all of the Registrable Securities” if
at any time the number of shares of Common Stock available for resale under the Registration
Statement is less than the product determined by multiplying (i) the Initial




 









 




Required Registration Amount or Additional Required Registration Amount, as applicable, 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 Preferred Shares and such calculation shall
assume that the Preferred Shares are then convertible into shares of Common Stock at the then
prevailing Conversion Rate (as defined in the Certificate of Designations).




          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 Effectiveness Deadline (an “Effectiveness Failure”)
or (ii) on any day after the Effective Date sales of all of the Registrable Securities required to
be included on such Registration Statement cannot be made (other than during an Allowable Grace
Period (as defined in Section 3(q)) pursuant to such Registration Statement or otherwise
(including, without limitation, because of a failure to keep such Registration Statement effective,
to disclose such information as is necessary for sales to be made pursuant to such Registration
Statement or to register a sufficient number of shares of Common Stock or to maintain the listing
of the shares of Common Stock) (a “Maintenance Failure”) then, as partial relief for the damages to
any Investor 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 Investor relating to such Registration Statement an
amount in cash equal to (A) one percent (1.0%) of the aggregate Purchase Price (as such term is
defined in the Securities Purchase Agreement) of such Investor’s Registrable Securities included in
such Registration Statement on each of the following dates: (i) the day of a Filing Failure and on
every thirtieth day (pro rated for periods totaling less than thirty (30) days) thereafter until
the date 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 (30) days) thereafter until the date
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 (30) days) thereafter until
the date such Maintenance Failure is cured. The payments to which an Investor shall be entitled to
pursuant to this Section 2(g) are referred to herein “Registration Delay Payments.” Registration
Delay Payments shall be paid on the earlier of (I) the last day of the calendar month during which
such Registration Delay Payments are incurred and (II) the third Business Day after the event or
failure giving rise to the Registration Delay Payments is cured. 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 percent (1.0%) per month (prorated for partial months) until paid in
full. The parties agree that the maximum aggregate Registration Delay Payments payable to an
Investor under this Agreement shall be 10% of the aggregate purchase price paid by such Investor
pursuant to the Purchase Agreement.




          h. Neither the Company nor any Subsidiary (as defined in the Securities Purchase Agreement)
nor 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
Trading Market (as defined in the Securities Purchase Agreement) without the prior written consent
of such Investor. If the Company is required by law to identify an Investor as an underwriter in
any public disclosure or filing with the Commission or any




 









 




Trading Market, it must notify such Investor in writing in advance (the “Identification
Notice”) and such Investor shall have the option, in its sole discretion, to consent to such
identification as an underwriter or to elect to have its Registrable Securities be deemed Cutback
Shares solely for the purposes of such Registration Statement and removed from such Registration
Statement. If the Investor does not make such election within five (5) Business Days of such
Investor receipt of the Identification Notice, such Investor shall be deemed to have elected to
have its Registrable Securities be deemed to be Cutback Shares.




     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 reasonable best efforts to
effect the registration of the Registrable Securities in accordance with the intended method of
disposition thereof and, pursuant thereto, the Company shall have the following obligations:



          a. The Company shall submit to the SEC, within two (2) Business Days after the Company learns
that no review of a particular Registration Statement will be made by the staff of the SEC or that
the staff has no further comments on a particular Registration Statement, as the case may be, a
request for acceleration of effectiveness of such Registration Statement to a time and date not
later than 48 hours after the submission of such request. The Company shall keep each Registration
Statement effective pursuant to Rule 415 at all times until the earlier of (i) the date when the
securities covered by the Registration Statement are no longer Registrable Securities as defined
herein, or (ii) the date on which the Investors shall have sold all of the Registrable Securities
covered by such Registration Statement (the “Registration Period”). The Company shall ensure that
each Registration Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the statements therein (in the
case of prospectuses, in the light of the circumstances in which they were made) not misleading.




          b. The Company shall prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus used in connection with
such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under
the 1933 Act, as may be necessary to keep such Registration Statement effective at all times during
the Registration Period, and, during such period, comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities shall have been
disposed of in accordance with the intended methods of disposition by the seller or sellers thereof
as set forth in such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement (including
pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-Q, Form 10-K 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 furnish to Legal Counsel and 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 (unless such
Registration Statement is available on EDGAR), (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 (unless such amendments and supplements are available on EDGAR)
and (iii) such other documents, including copies of the foregoing (regardless of whether such
documents are available upon EDGAR) and 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.




          d. The Company shall use its reasonable 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 reasonably necessary to maintain such registrations
and qualifications in effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to service of process
in any such jurisdiction. The Company shall promptly notify Legal Counsel and each Investor who
holds Registrable Securities of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Registrable Securities for sale under
the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of notice
of the initiation or threatening of any proceeding for such purpose.




          e. The Company shall notify Legal Counsel and each Investor in writing of the happening of any
event, as promptly as practicable after becoming aware of such event, as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an untrue statement of
a material fact or omission to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they were made, not
misleading (provided that in no event shall such notice contain any material, nonpublic
information), and, subject to Section 3(r), promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver ten (10) copies of
such supplement or amendment to Legal Counsel and each Investor (or such other number of copies as
Legal Counsel or such Investor may reasonably request) (unless such supplements or amendments are
available on EDGAR). 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 no later than the next Business 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.




          f. The Company shall use its reasonable 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 of any proceeding for such purpose.




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




          h. If any Investor is deemed to be, alleged to be or reasonably believes it may be deemed or
alleged to be, an underwriter or is required under applicable securities law to be described in the
Registration Statement as an underwriter of Registrable Securities, upon the request of such
Investor, the Company shall make available for inspection by (i) any Investor, (ii) Legal Counsel
and (iii) one firm of accountants or other agents retained by the Investors (collectively, the
“Inspectors”), all pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by
each Inspector, and cause the Company’s officers, directors and employees to supply all information
which any Inspector may reasonably request; provided, however, that each Inspector shall agree to
hold in strict confidence and shall not make any disclosure (except to an Investor) or use of any
Record or other information which the Company determines in good faith to be confidential, and of
which determination the Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration Statement or is
otherwise required under the 1933 Act, (b) the release of such Records is ordered pursuant to a
final, non-appealable subpoena or order from a court or government body of competent jurisdiction,
or (c) the information in such Records has been made generally available to the public other than
by disclosure in violation of this or any other Transaction Document. Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the




 









 




Records deemed confidential. Nothing herein (or in any other confidentiality agreement
between the Company and any Investor) shall be deemed to limit the Investors’ ability to sell
Registrable Securities in a manner which is otherwise consistent with applicable laws and
regulations.




          i. 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 or the rules of any exchange or other market in which
the Company’s securities are then traded, listed or quoted, (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, any
other agreement to which the Company is a party, or, to the Company’s knowledge, 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.




          j. The Company shall use its reasonable best efforts either to (i) cause all of the
Registrable Securities covered by a Registration Statement to be listed on each securities exchange
on which securities of the same class or series issued by the Company are then listed, if any, if
the listing of such Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all of the Registrable Securities covered by a
Registration Statement on The NASDAQ Capital Market or (iii) if, despite the Company’s reasonable
best efforts to satisfy, the preceding clauses (i) and (ii) the Company is unsuccessful in
satisfying the preceding clauses (i) and (ii), to secure the inclusion for quotation on the The New
York Stock Exchange, The NASDAQ Global Market or the American Stock Exchange for such Registrable
Securities and, without limiting the generality of the foregoing, to use its reasonable best
efforts to arrange for at least two market makers to register with the Financial Industry
Regulatory Authority 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).




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




          l. If reasonably 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 in the Plan of Distribution or Selling Stockholder sections
relating to the sale and distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being offered or sold, the
purchase price being paid therefor and any other terms of the offering




 









 




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




          m. The Company shall use its reasonable 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.




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




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




          p. Within five (5) 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 (which may be the General Counsel of 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.




          q. Notwithstanding anything to the contrary herein, at any time after the Effective Date, the
Company may delay the disclosure of material, non-public information concerning the Company the
disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the
Company, in the best interest of the Company otherwise required or otherwise render the
Registration Statement unavailable for sales to be effected thereunder (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 on the first day that the effectiveness of the
Registration Statement is suspended, 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 twenty-five (25)
consecutive days and during any three hundred sixty five (365) day period such Grace Periods shall
not exceed an aggregate of sixty (60) days and the first day of any Grace Period must be at least
five (5) Trading Days after the last day of any prior Grace Period (each, an “Allowable Grace
Period”). For purposes of determining the length of a Grace Period above, the Grace Period shall
begin on and include the date the Investors receive the notice referred to in clause (i) and shall
end on and include the later of the date the Investors receive the notice referred to in clause
(ii) and the date referred to in such notice. The provisions




 









 




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




          r. 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.




     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 and maintain the effectiveness of the registration of such Registrable
Securities within five (5) Business Days and such Investor 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 Section 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 Section 3(f) or receipt of notice that no supplement or amendment is required. Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares
of Common Stock to a transferee of an Investor in accordance with the terms of the Securities
Purchase Agreement in connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior




 









 




to the Investor’s receipt of a notice from the Company of the happening of any event of the
kind described in Section 3(g) or the first sentence of Section 3(f) and for which the Investor has
not yet settled.




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




     5. Expenses of Registration.



     All reasonable expenses, other than underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including,
without limitation, all registration, listing and qualifications fees, printers and accounting
fees, and fees and disbursements of counsel for the Company, shall be paid by the Company.



     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 breach by the Company of a representation, warranty or covenant contained in this
Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively,
“Violations”). Subject to Section 6(c), the Company shall reimburse the Indemnified Persons,
promptly as such expenses are incurred and are due and payable, for any 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 (A) 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 (including any amendment thereto, any
related prospectus, or any prospectus supplement) (which information provided by the Investors
includes Exhibits B and C to this Agreement), (B) failure by the Investor to comply with prospectus
delivery requirements, if such prospectus, or any such amendment thereof or supplement thereto, was
timely made available by the Company pursuant to Section 3(d), or (C) the use by such Investor of
an outdated or defective prospectus after the Company has notified such Investor in writing that
the prospectus is outdated or defective and prior to the receipt by such Investor of an amended or
supplemented prospectus, 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 arises from
the circumstances described in clauses (A) through (C) of Section 6(a) above; and, subject to
Section 6(c), such Investor shall reimburse the Indemnified Party, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable expenses incurred by it in
connection with investigating or defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 6(b) and the agreement with respect to contribution contained
in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that the Investor shall be liable
under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed
the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to
such Registration Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.




 









 





          c. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6
of notice of the commencement of any action or proceeding (including any governmental action or
proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the defense thereof with
counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the
Indemnified Party, who shall not, except with the consent of the Indemnifying Party, be counsel to
the Indemnified Person as the case may be; and after notice from the indemnifying party of its
election to assume the defense thereof, the indemnifying party shall not be liable to the
Indemnified party or Indemnified Person for any legal expenses of other counsel or other expenses
incurred in connection with the defense thereof; 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 likely represent a conflict of interest that would legally
preclude such representation. 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 80% in
interest of the Registrable Securities included in the Registration Statement to which the Claim
relates. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or Claim by the indemnifying
party and shall furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or Claim. The indemnifying
party shall keep the Indemnified Party or Indemnified Person reasonably apprised at all times as to
the status of the defense or any settlement negotiations with respect thereto. No indemnifying
party shall be liable for any settlement of any action, claim or proceeding effected without its
prior written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the
prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any
judgment or enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such Claim or litigation, and such
settlement shall not include any admission as to fault on the part of the Indemnified Party.
Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to
all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to the Indemnified
Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party
is prejudiced in its ability to defend such action.




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




 









 





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




     7. Contribution.



     To the extent any indemnification by an Indemnified Party is prohibited or limited by law, the
indemnifying party agrees, in lieu of providing such indemnification, to contribute to the amount
paid or payable by such Indemnified Party or Indemnifying Person as a result of such Claims or
Indemnified Damages, in such proportion as is appropriate to reflect the relative fault of the
Company, on the one hand, and the Investors, on the other hand, in connection with the statements
or omissions which resulted in such Claims or Indemnified Damages, as well as any other relevant
equitable considerations; provided, however, that (i) no Person involved in the
sale of Registrable Securities which 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 who was not guilty of fraudulent misrepresentation and (ii) contribution by any
seller of Registrable Securities shall be limited in amount of net proceeds received by such seller
from the sale of such Registrable Securities subject to the Claim. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one hand, or the Investors, on the other hand, and the parties’
relative intent, knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Investors agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the
Investors were treated as one entity for such purpose) or by any other method of allocation which
does not take account of the equitable considerations referred to above in this Section 7. The
amount paid or payable by an indemnified party as a result of the Claims or Indemnified Damages
referred to above in this Section 7 shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating or defending any
such action or claim. The Investors’ obligations in this Section 7 to contribute are several in
proportion to their respective underwriting obligations and not joint.



     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, as soon as
reasonably practicable 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
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 Investors. 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. For the purposes of this Agreement, 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 or electronic mail (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one (1) 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:
	 
	 	 	 	 	 	 
	 	 	 	 	TXCO Resources, Inc.
	 	 	 	 	777 E. Sonterra Blvd., Suite 350
	 	 	 	 	San Antonio, Texas 78258
	 

	 	 	 	Telephone:
	 	(210) 679-2429
	 

	 	 	 	Facsimile:
	 	(210) 496-3232
	 

	 	 	 	Attention:
	 	M. Frank Russell, Vice President and General Counsel
	 
	 	 	 	 	 	 
	 	 	Copy to:
	 
	 	 	 	 	 	 
	 	 	 	 	Winstead PC
	 	 	 	 	401 Congress Avenue, Suite 2100
	 	 	 	 	Austin, TX 78701
	 

	 	 	 	Telephone:
	 	(512) 370-2800
	 

	 	 	 	Facsimile:
	 	(512) 370-2850
	 

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




 









 





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




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




          e. This Agreement, the other Transaction Documents and the instruments referenced herein and
therein constitute the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement, the other Transaction Documents
and the instruments referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.




          f. 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).




 









 





          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.




          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.




* * * * * *




 









 





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



	 	 	 	 	 
	 	COMPANY:


TXCO RESOURCES INC.

 	 
	 	By:  	 	 
	 	 	Name:  	   	 
	 	 	Title:  	     	 
	 




 









 





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



	 	 	 	 	 
	 	BUYERS:


CAPITAL VENTURES INTERNATIONAL

 	 
	 	By:  	 	 
	 	 	Name:  	   	 
	 	 	Title:  	     	 
	 




 









 





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



	 	 	 	 	 
	 	BUYERS:


 	 
	 	By:  	 	 
	 	 	Name:  	   	 
	 	 	Title:  	     	 
	 




 









 





SCHEDULE OF BUYERS





 









 





EXHIBIT A




FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT




American Stock Transfer & Trust Company

59 Maiden Lane

New York, NY 10038

Attention: Carlos Pinto, Vice President




     Re:      TXCO Resources Inc.



Ladies and Gentlemen:




     [We are][I am] counsel to TXCO Resources Inc., a Delaware corporation, (the “Company”), and
have represented the Company in connection with that certain Securities Purchase Agreement (the
“Securities Purchase Agreement”) entered into by and among the Company and the buyers named therein
(collectively, the “Holders”) pursuant to which the Company issued to the Holders senior
convertible Preferred Shares (the “Preferred Shares”) convertible into the Company’s common stock,
$0.01 par value per share (the “Common Stock”). Pursuant to the Securities Purchase Agreement, the
Company also has entered into a Registration Rights Agreement with the Holders (the “Registration
Rights Agreement”) pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement), including the shares of
Common Stock issuable upon conversion of the Preferred Shares, under the Securities Act of 1933, as
amended (the “1933 Act”). In connection with the Company’s obligations under the Registration
Rights Agreement, on [          ], the Company filed a Registration Statement on Form S-3 (File
No. 333-                    ) (the “Registration Statement”) with the Securities and Exchange Commission
(the “SEC”) relating to the Registrable Securities which names each of the Holders as a selling
stockholder thereunder.



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



     This letter shall serve as our standing instruction to you that the shares of Common Stock are
freely transferable by the Holders pursuant to the Registration Statement. You need not require
further letters from us to effect any future legend-free issuance or reissuance of shares of Common
Stock to the Holders as contemplated by the Company’s Irrevocable Transfer Agent Instructions dated
November ___, 2007, provided at the time of



 









 







such reissuance, the Company has not otherwise notified you that the Registration Statement is
unavailable for the resale of the Registrable Securities.



	 	 	 	 	 	 	 
	 	 	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 Preferred Shares and in payment of interest on the convertible
Preferred Shares. For additional information regarding the issuance of those convertible Preferred
Shares, see “Private Placement of Convertible Preferred Shares” 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 Preferred Shares issued pursuant to
the Securities Purchase Agreement, the selling stockholders have not had any material relationship
with us within the past three years.



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



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



     In accordance with the terms of a registration rights agreement among the Company and the
selling stockholders, this prospectus generally covers the resale of at least 110% of the sum of
the aggregate number of shares of Common Stock issued or issuable (i) upon conversion of the
convertible Preferred Shares as of the trading day immediately preceding the date the registration
statement is initially filed with the SEC and (ii) as Dividend Shares pursuant to the terms of the
Preferred Shares as of the trading day immediately preceding the date the registration statement is
initially filed with the SEC. Because the conversion price of the convertible Preferred Shares 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 Preferred Shares, a selling stockholder may not convert the
convertible Preferred Shares 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 Preferred Shares 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.”



 









 





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Maximum Number of	 	 
	 	 	Number of Shares	 	Shares to be Sold	 	Number of Shares
	 	 	Owned Prior to	 	Pursuant to this	 	Owned After
	Name of Selling Stockholder	 	Offering	 	Prospectus	 	Offering
	(1) Capital Ventures International
	 	 	 	 	 	 	 	 	 	 	0	 





 
 




(1) Heights Capital Management, Inc., the authorized agent of Capital Ventures International,
has discretionary authority to vote and dispose of the shares held by Capital Ventures
International and may be deemed to be the beneficial owner of these shares. Capital Ventures
International is affiliated with one or more registered broker-dealers. Capital Ventures
International purchased the shares being registered hereunder in the ordinary course of business
and at the time of purchase, had no agreements or understandings, directly or indirectly, with any
other person to distribute such shares.



 









 





Exhibit C




PLAN OF DISTRIBUTION




     We are registering the shares of Common Stock issuable upon conversion of the convertible
Preferred Shares and as interest on the convertible Preferred Shares to permit the resale of these
shares of Common Stock by the holders of the convertible Preferred Shares 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 paying any 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 or any combination of the foregoing.
These sales may be effected in transactions, which may involve:




	 	•	 	crosses or block transactions or other transaction
	 
	 	•	 	on any national securities exchange or quotation service on which the securities may
be listed or quoted at the time of sale;
	 
	 	•	 	transactions in the over-the-counter market;
	 
	 	•	 	transactions otherwise than on these exchanges or systems or in the over-the-counter
market;
	 
	 	•	 	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;





 









 






	 	•	 	transactions where 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 Preferred Shares 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, subject to any requirement of the SEC that we
amend this prospectus to include the name of such transferee, donee, pledge or other
successor-in-interest in 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.



C-2




 









 





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



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



     The selling stockholders and any other person participating in such distribution will be
subject to applicable provisions of the 1934 Act and the rules and regulations thereunder,
including, without limitation, Regulation M of the 1934 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, SEC
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.



C-3