Document:

exv10w12

 

Exhibit 10.12

TARGA LIQUIDS MARKETING AND TRADE

PRODUCTS PURCHASE AGREEMENT

EFFECTIVE DATE: January 1, 2007

	 	 	 
	Seller:

	 	Targa North Texas LP
	 

	 	1000 Louisiana, Suite 4300
	 

	 	Houston, TX 77002-5050
	 

	 	Fax No. (713) 584-1503
	 

	 	Attn: Contracts Administration
	 
	 	 
	Buyer:

	 	Targa Liquids Marketing and Trade
	 

	 	1000 Louisiana, Suite 4300
	 

	 	Houston, TX 77002-5050
	 

	 	Fax No. (713) 584-1503
	 

	 	Attn: Contracts Administration

	1.	 	SALE AND PURCHASE

     Seller agrees to sell and deliver to Buyer, and Buyer agrees to purchase and receive from
Seller, the Products on the terms and conditions set forth in this Products Purchase Agreement (the
“Agreement”).

	2.	 	TERM

     This Agreement shall commence on the Effective Date and shall continue in full force and
effect for one hundred eighty (180) Months thereafter (the “Initial Term”). At the end of the
Initial Term, this Agreement shall automatically be extended for successive sixty (60) Month terms,
unless either Party shall have given the other Party no less than one hundred twenty (120) Days
written notice of its intent to terminate this Agreement prior to the end of (i) the Initial Term,
or (ii) the then-current sixty (60) Month extension term, as applicable (the Initial Term, as
extended by any sixty (60) Month extension terms, the “Term”).

	3.	 	TERMS OF SALE AND PURCHASE

	 	3.1.	 	VOLUMES – COMMITMENT & DEDICATION

     Seller shall commit and dedicate, for sale to Buyer under this Agreement, all volumes of
Products owned or controlled by Seller, including such volumes as are produced at the Originating
Facility; provided, however, with respect to High Pressure Condensate, Seller shall have the right
to retain all or a portion of such Product for sale to third parties at its sole election.

	 	3.2.	 	DELIVERY OF PRODUCTS

     Buyer may elect to receive Product from Seller as follows:

	 	(a)	 	Raw Product:

	 	(i)	 	At the tailgate of the Originating Facility
into a Raw Product Pipeline designated by Buyer.
	 
	 	(ii)	 	At the truck rack of the Originating Facility
onto tank trucks provided by Buyer.

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	 	(b)	 	High Pressure Condensate:

	 	(i)	 	At the tailgate of the Originating Facility
into a Raw Product Pipeline designated by Buyer.
	 
	 	(ii)	 	At the truck rack of the Originating Facility
onto tank trucks provided by Buyer.

	 	(c)	 	For Specification Products:

	 	(i)	 	At the truck rack of the Chico Plant onto tank
trucks provided by Buyer.
	 
	 	(ii)	 	At the tailgate of the Chico Plant into a Raw
Product Pipeline designated by Buyer.
	 
	 	(iii)	 	At the tailgate of the Chico Plant into a
crude oil or NGL Component Pipeline designated by Buyer.

	 	3.3.	 	CHICO FRACTIONATION FEE

     In the event that Buyer elects to take delivery of Specification Products at the Chico Plant
by truck or by injection into a crude oil or NGL Component Pipeline, in addition to the Product
price described at Section 4.1(a), Buyer shall pay Seller the Chico Fractionation Fee or the
Adjusted Chico Fractionation Fee, as applicable. There shall be no fractionation fee paid to
Seller for Specification Products designated by Buyer to be re-injected into a Raw Product Pipeline
at the tailgate of the Chico Plant.

	 	3.4.	 	SHIPMENT

     Buyer shall procure transportation for all Products from the applicable Originating Facility
to the applicable Destination.

	 	3.5.	 	ODORIZATION

     Seller shall odorize all propane delivered by tank truck unless Buyer requests that specific
loads be delivered unodorized. Seller shall not odorize Products delivered via Pipelines or
Specification Products (other than propane) delivered by tank truck, unless Buyer requests that
specific loads to be delivered odorized. With respect to Products delivered unodorized hereunder,
Buyer certifies, pursuant to 49 C.F.R. Sec. 173.315(b)(1), that odorization of such Products will
be harmful in the use or further processing of such Products, and that odorization will serve no
useful purpose as a warning agent in such use or further processing. Buyer agrees to comply with
all legal requirements (including 49 C.F.R. Sec. 173.315(b)(1)) concerning odorization that are
applicable to Buyer’s further use or distribution of Products delivered by Buyer under this
Agreement and any Products derived therefrom by, or on behalf of, Buyer from and after the physical
receipt of same at the Originating Facility by Buyer or Buyer’s designees.

     Seller, its suppliers, and/or the personnel at the Originating Facility where the tank trucks
are to be loaded are hereby authorized to load tank trucks furnished or arranged by Buyer, or its
designees, with unodorized liquefied petroleum gas and/or natural gas liquids.

4. PRICE

     4.1. PRICE DETERMINATION

	 	 	Buyer shall pay to Seller for each Gallon of Product delivered under this Agreement a price
for each Gallon calculated as follows:

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	 	(a)	 	Chico Price: For Specification Products from the Chico
Plant that will not be further fractionated at Mont Belvieu, an amount equal
to:
	 
	 	 	 	Sale Price per Gallon of the applicable Products minus the sum of (i) the
Marketing Fee, (ii) the Transportation Costs, and (iii) the Chico
Fractionation Fee.
	 
	 	(b)	 	Mont Belvieu Price: For all other Products an amount
equal to:
	 
	 	 	 	OPIS Index Price for the applicable Products minus the sum of (i) the
Marketing Fee, (ii) the Transportation Costs, and (iii) the Mont Belvieu
Fractionation Fee.

     In the event that the Chico Price, as calculated above, is less than the Mont Belvieu Price,
then the Chico Price shall be recalculated as follows:

	 	 	 	Sale Price per Gallon of the applicable Products minus the sum of (i) the
Marketing Fee, (ii) the Transportation Costs, and (iii) the Adjusted Chico
Fractionation Fee.

	 	4.2.	 	PRICE-RELATED DEFINITIONS

	 	(a)	 	“Adjusted Chico Fractionation Fee” means Chico Fractionation
Fee minus the difference between (i) the Mont Belvieu Price, and (ii) the Chico
Price, but in no event shall Chico Fractionation Fee be less than zero.
	 
	 	(b)	 	“Chico Fractionation Fee” means those costs, stated in cents
per Gallon, relating to the fractionation of the Products, which costs shall be
calculated as follows:
	 
	 	 	 	
	 
	 	(c)	 	“CPIU” means the latest available Consumer Price Index, All
Urban Consumers – (“CPI U” and/or the “CPI-U Index”), U.S. city average, All
Items (1982-84=100), as published by the United States Bureau of Labor
Statistics or any successor agency thereto (the “BLS”). The CPI-U shall be
taken from the data published by the BLS either electronically at the then
current BLS internet site or in the then current official BLS hardcopy version.
	 
	 	(d)	 	“Electricity” means the average cost of purchased electricity
(in ¢/KWH) at the Cedar Bayou Fractionators fractionation facility in Mont
Belvieu, Texas, for the calendar month that is two calendar months prior to the
Month of Product delivery.
	 
	 	(e)	 	“Gas Price” means the Houston Ship Channel Index published in
the first of the month edition of INSIDE FERC’s GAS MARKET REPORT, for one
MMBtu of natural gas for the Month of Product delivery for which the fee is
being calculated. Should such index be discontinued, the Parties shall
mutually agree upon a comparable successor index and/or publication.
	 
	 	(f)	 	“Marketing Fee” means the greater of (i) two and one-half
percent (2.5%) of the Sale Price or OPIS Index Price, as applicable, per Gallon
of the applicable Product or (ii) one cent ($0.01) per Gallon of the applicable
Product.

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	 	(g)	 	“Mont Belvieu Fractionation Fee” means those costs, stated in
cents per Gallon, relating to the fractionation of the Products, which costs
shall be calculated as follows:
	 
	 	 	 	
	 
	 	(h)	 	“OPIS Index Price” means the monthly average of the daily high
and low prices per Gallon, for the Month in which delivery occurs, as quoted by
the Oil Price Information Service (“OPIS”) in the OPIS LP-Gas Report for “Any
Current Month” volumes in the “Mont Belvieu Spot Gas Liquids Prices” table;
using (i) the Non-TET prices for the propane, isobutane, normal butane and
natural gasoline NGL Components; and (ii) the EP Mix price for the ethane NGL
Component.
	 
	 	(i)	 	“Transportation Costs” means all costs and expenses, stated in
cents per Gallon, reasonably incurred in connection with the transportation of
Products hereunder from the applicable Originating Facility to the applicable
destination, including pipeline costs; railcar costs; truck costs; Product
losses (other than as a result of Buyer’s gross negligence or willful
misconduct); demurrage, and loading, unloading, terminalling, handling and
storage charges. With regard to transportation provided in whole or in part by
third parties, “Transportation Costs” means the actual costs and expenses
incurred by Buyer in connection therewith. With regard to transportation
provided in whole or in part by Buyer or any Affiliate of Buyer,
“Transportation Costs” means the commercially reasonable costs and expenses
charged by Buyer or its Affiliate (excluding any general and administrative
costs and expenses). For all Specification Products transported by truck from
the Chico Plant, an additional loading fee of one and one-half cents ($0.015)
per Gallon shall be assessed. For Specification Products injected into any
crude oil or NGL Component Pipeline at the Chico Plant, an additional injection
fee of one and one-half cents ($0.015) per Gallon shall be assessed.

	 	4.3.	 	ALTERNATIVE INDEX

     If for any reason the OPIS Index for a particular Product should (i) cease to be published or
(ii) be materially changed, the Parties agree promptly and in good faith to negotiate a mutually
satisfactory alternate index or substitute methodology for calculating the price for such Product
(the “Alternate Index”). If, on or before thirty (30) Days after the index used to determine the
price hereunder ceases to be published, the Parties are unable to agree on an Alternate Index upon
which to base the calculation of the price, the Parties shall submit such determination to
arbitration in accordance with the provisions of Article 20, which arbitration procedure will
determine the Alternate Index. From the date on which the index price used to determine the price
for a particular Product ceases to be available until the Alternate Index is determined, the price
for such Product shall be the average of the prices in effect hereunder (or that would have been in
effect hereunder) during the twelve (12) Months preceding the Month in which the index upon which
the price was based ceased to be available, which price shall be effective until the effective date
of the Alternate Index determined as set forth in this Section 4.3. Upon the determination of an
Alternate Index, the price will be adjusted retroactively to the date on which the index upon which
the price previously was based ceased to be available. Any payments hereunder that are delayed
pending the determination of an Alternate Index shall bear interest, at the Base Rate, from the
date that such payment would have been due without such delay until the date of payment.

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	5.	 	REPRESENTATIONS AND WARRANTIES

	 	5.1.	 	SELLER REPRESENTATIONS AND WARRANTIES

     Seller represents and warrants to Buyer that (i) Seller has Good And Marketable Title to the
Products delivered by it to Buyer hereunder and the right to sell and deliver same to Buyer, and
SELLER AGREES TO RELEASE, INDEMNIFY, DEFEND AND HOLD BUYER HARMLESS FROM AND AGAINST ANY CLAIMS
ARISING OUT OF OR RELATED TO ANY FAILURE OF SUCH TITLE OR BREACH OF THIS WARRANTY; and (ii) Seller
shall deliver all Products sold to Buyer hereunder in compliance with all Applicable Laws.

	 	5.2.	 	BUYER REPRESENTATION AND WARRANTY

     Buyer represents and warrants to Seller that Buyer shall receive all Products sold by Seller
hereunder in compliance with all Applicable Laws.

	 	5.3.	 	BUYER ACKNOWLEDGMENT

     Buyer acknowledges that the Product delivered hereunder is hazardous and that Buyer is
knowledgeable of (i) the hazards and risks associated with such Product, and (ii) the handling,
receipt, transportation, storage and use of such Product.

	6.	 	WAIVER OF CONSUMER RIGHTS

     Each of Buyer and Seller hereby waives its respective rights, if any, under the Texas
Deceptive Trade Practices-Consumer Protection Act, Sections 17.41 et seq., except for Section
17.555 Texas Business & Commerce Code, a law that gives consumers special rights and protections.
After consultation with an attorney of its own selection, Buyer and Seller voluntarily consent to
this waiver.

	7.	 	DELIVERY

     Delivery shall be deemed to have been completed when the Product has been delivered to the
Measurement Points. As between the Parties, Seller shall be deemed to be in exclusive possession
and control (and responsible for any damages or injury resulting therefrom or caused thereby) of
the Product prior to and at the Measurement Points and Buyer shall be deemed to be in exclusive
control (and responsible for any damages or injury resulting therefrom or caused thereby) of the
Product from the Measurement Points. The “Measurements Points” are defined as follows:

	 	(a)	 	In the case of deliveries by tank truck: when the Product has
passed the Seller’s loading equipment for open hatch deliveries and when the
Product enters the tank truck’s loading equipment for all other deliveries.
	 
	 	(b)	 	In the case of deliveries by Pipeline: when the Product has
passed the downstream flange of the meter measuring the Product for delivery
into the Pipeline at the Originating Facility.

	8.	 	PASSAGE OF TITLE

     Title to, and risk of loss for, the Products shall pass from Seller to Buyer at the applicable
Measurement Points. Notwithstanding the foregoing, title to, and risk of loss associated with, any
Offspec Product shall remain with Seller.

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	9.	 	MEASUREMENT & ANALYSIS

	 	9.1.	 	MEASUREMENT

     All Products under this Agreement shall be measured as follows:

	 	(a)	 	On all deliveries into/out of transport and tank truck
equipment, quantities shall be determined (in the following order of preference
and based on equipment available at the Delivery Point) by: (i) weighing, (ii)
meter with no vapor return or (iii) slip tube, magnetic gauging or rotary
gauging device and applicable tank capacity tables.
	 
	 	(b)	 	On all deliveries into/out of pipelines, quantity shall be
determined by turbine or positive displacement pipeline meter in accordance
with API Manual of Petroleum Measurement Standards.
	 
	 	(c)	 	Metering systems used for quantity determinations shall not
allow vapor return or shall compensate for any vapor return.
	 
	 	(d)	 	All quantities shall be corrected to 60 degrees Fahrenheit and
equilibrium vapor pressure of the applicable Product at 60 degrees Fahrenheit.
	 
	 	(e)	 	Volume and compressibility correction factors shall be
determined from referenced API tables or computer programs used to generate
these tables.

	 	9.2.	 	PRODUCT SAMPLING & ANALYSIS

	 	(a)	 	Buyer will obtain a sample or samples of the applicable Product
from an appropriate location at the Originating Facility, the tank truck, or
pipeline, as applicable, and/or the loading/unloading facilities connected to
the applicable means of transport; at an appropriate time or times and on a
frequency established by Buyer; with the exact sampling locations, times and
frequencies to be determined by Buyer, in its sole discretion, in order to
obtain representative samples of the Raw Product, High Pressure Condensate and
the Mixed Butanes Specification Product being delivered by Seller under this
Agreement.
	 
	 	(b)	 	Representative samples of the Raw Product, High Pressure
Condensate and the Mixed Butanes Specifications Product shall be analyzed by
Buyer.
	 
	 	(c)	 	Other provisions and standards referenced herein
notwithstanding, the volume of the natural gasoline NGL Component contained in
the Raw Product and High Pressure Condensate shall be calculated using the
component densities of the pentanes and the hexanes plus (C6+).
	 
	 	(d)	 	Buyer reserves the right, but shall not have the obligation, to
similarly obtain samples for other Products being purchased hereunder and to
analyze same to confirm compliance with the Specifications applicable to that
Product.

	 	9.3.	 	STANDARDS

     Measurement, sampling and analysis, pursuant to the above provisions, shall be conducted in
accordance with the GPA Standards applicable to the methodology used; including GPA Standards 8182,
8173, 2177 and all other appropriate GPA, API and ASTM standards, with all such standards being
incorporated herein for all purposes, including all revisions of those standards adopted and in
effect during the term of this Agreement.

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	10.	 	CLAIMS

     All claims by Buyer for deficiencies in Product quantity or quality shall be made to Seller
within one hundred eighty (180) days of delivery of the applicable Product. All notices regarding
Product deficiencies shall be made in accordance with Article 19. Failure by Buyer to timely
notify Seller of any deficiency shall be deemed a waiver by Buyer of any claims with regard to such
Product deficiencies.

	11.	 	QUALITY

     All Products delivered to Buyer under this Agreement shall meet the applicable Specifications
and shall not contain any contaminants that may make it or its components commercially
unacceptable. In addition, any Product transported via any Pipeline shall meet the specifications
governing the applicable Pipeline receipt point. Seller may be required, on Buyer’s behalf as
shipper, to furnish any Pipeline on which Products are transported, with a certificate setting
forth the specifications of each shipment of Product to be transported on such Pipeline. Seller
acknowledges that any such Pipeline shall have the right to: (i) refuse to accept any Product for
transportation which do not meet such Pipeline’s specifications or which are not of good and
merchantable quality suitable for transportation through Pipeline’s existing facilities and (ii)
sample and/or test any shipment of Product prior to acceptance or during receipt of same, and in
the event of variance between Seller’s certificate and Pipeline’s test, the latter shall prevail.

	12.	 	OFFSPEC PRODUCTS

     In the event any of Seller’s Products are contaminated or otherwise fail to conform to the
Specifications (“Offspec Product”), either Party may notify the other Party of any such failure,
and Seller immediately shall undertake and diligently pursue such acts as may be necessary to
correct such failure so as to deliver Product conforming to the applicable Specifications. Buyer
shall have the right, at any time and from time to time, to reject any Product not conforming to
such Specifications and to refuse or suspend receipt until it is established to Buyer’s reasonable
satisfaction that subsequent deliveries of Product will conform to the applicable Specifications,
and nothing contained in this Article 12 or the Agreement is intended or shall be construed to
limit such right. If it is subsequently determined that Buyer unknowingly accepted Offspec
Product, the Parties will mutually agree upon a discounted price for such Offspec Product to
reflect (i) its diminution in value, if any, from Product meeting the applicable Specifications or
(ii) the cost incurred by Buyer in handling such Offspec Product. SELLER AGREES TO RELEASE,
INDEMNIFY, DEFEND AND HOLD HARMLESS BUYER, ITS AFFILIATES, AND ITS AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS AND CONTRACTORS FROM AND AGAINST ANY CLAIMS ARISING OUT OF, OR RELATED
TO, THE DELIVERY OF OFFSPEC PRODUCT TO BUYER WHICH ARE UNKNOWINGLY ACCEPTED BY BUYER.

	13.	 	INSPECTIONS

     Each Party shall be entitled to have its representatives present during all loadings,
unloadings, tests and measurements involving delivery of Product under this Agreement. Either
Party may engage certified independent inspectors to perform gauging, sampling, and testing up to
four (4) times during each twelve (12) Month period during the Term, in which event such
inspector’s determinations shall be conclusive and binding on the Parties. Payments for such
outside inspector’s services will be shared equally among the Parties unless some other arrangement
for payment is mutually agreed upon.

	14.	 	NOMINATIONS

	 	14.1.	 	NOMINATIONS FOR RAW PRODUCTS AND HIGH PRESSURE CONDENSATE

     No later than the third Business Day prior to the end of a calendar month, Buyer will notify
Seller of its requested fractionating and processing schedule and means of taking delivery for Raw
Products and High Pressure Condensate at each Originating Facility for the succeeding Month. In
the event from

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time-to-time during a Month Buyer desires to make a change to such nomination, then Buyer
shall give Seller notice of such change at least one Business Day prior to the day on which the
requested change is to become effective.

	 	14.2.	 	NOMINATIONS TO THE CHICO PLANT FOR SPECIFICATION PRODUCTS

     No later than the first Business Day of each calendar quarter during the Term: (i) Buyer shall
provide to Seller an estimate of the volume of Specification Products that Buyer will designate for
delivery at the Chico Plant during such calendar quarter, and (ii) Seller shall provide to Buyer a
schedule of any planned maintenance and shall notify Buyer of other operational constraints then
known to Seller which might reduce Seller’s fractionation capacity during such calendar quarter.

     No later than the last Business Day of each week during the Term, Buyer shall provide Seller
with a nomination of the volume of Specification Products to be delivered by Seller to Buyer at the
Chico Plant the following week.  Such weekly nomination shall designate the volume of each
Specification Product to be delivered to Buyer at the tailgate of the Chico Plant (i) by truck,
(ii) by re-injection into a Raw Product Pipeline, and (iii) by injection into a crude oil or NGL
Component Pipeline. After the nomination has been provided, Seller and Buyer shall cooperate in
communicating throughout each week regarding any changes effecting such nomination, including as a
result of operational constraints. Seller shall use commercially reasonable efforts to accommodate
any requests of Buyer to (i) change the volumes of Specification Products to be delivered, and (ii)
change the means by which Buyer elects to take delivery of such Specification Products.

	15.	 	DEFAULT; TERMINATION

	 	15.1.	 	EVENTS OF DEFAULT

     It shall be an “Event of Default” if:

	 	(a)	 	Either Party becomes insolvent, makes an assignment for the
benefit of creditors, or a receiver or trustee is appointed for the benefit of
such Party’s creditors, or a Party makes a filing for protection from creditors
under any bankruptcy or insolvency laws, or such filing is made against a
Party;
	 
	 	(b)	 	Buyer fails to make any payment when due and such nonpayment
shall have continued for ten (10) Days or more after notice of same from
Seller;
	 
	 	(c)	 	Either Party fails to perform any of its material obligations
hereunder and such nonperformance shall have continued for thirty (30) Days or
more after notice of same from the other Party.

	 	15.2.	 	TERMINATION FOR DEFAULT

	 	(a)	 	If an Event of Default occurs and is continuing, the
non-defaulting Party may, by written notice to the defaulting Party, designate
a day no earlier than the day such notice is effective as an early termination
date (“Early Termination Date”). On the Early Termination Date, all
obligations due on or after the Early Termination Date under the Agreement
shall be terminated except as provided herein. If an Early Termination Date
has been designated, the non-defaulting Party shall in good faith calculate the
amount due between the parties as of the Early Termination Date. The
non-defaulting party shall notify the defaulting Party in writing of the amount
due and whether it is owed to or from the defaulting Party (the “Termination
Payment”). The party owing the Termination Payment shall pay it to the other
party within two (2) Business Days after the effective date of

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	 	 	 	such notice, with interest at the Base Rate from the Early Termination Date
until paid.
	 
	 	(b)	 	In addition, the defaulting Party hereunder shall reimburse the
non-defaulting Party, on demand, for actual, reasonable out-of-pocket expenses
(with interest at the Base Rate), including, without limitation, reasonable
legal fees and expenses incurred by the other Party in connection with the
enforcement of the Agreement.
	 
	 	(c)	 	If an Early Termination Date is designated, the non-defaulting
party shall be entitled, in its sole discretion, to set-off any amount payable
by the non-defaulting Party or any of its Affiliates to the defaulting Party
under the Agreement or otherwise, against any amounts payable by the defaulting
Party to the non-defaulting Party or any of its Affiliates under this Agreement
or otherwise. This provision shall be in addition to any right of setoff or
other right and remedies to which any party is otherwise entitled (whether by
operation of law, contract or otherwise). If an obligation is unascertained,
the non-defaulting party may in good faith estimate that obligation and set-off
in respect of the estimate, subject to the non-defaulting party accounting to
the defaulting Party when the obligation is ascertained.

	 	15.3.	 	OTHER TERMINATION RIGHTS

     In the event that either Party ceases to be an Affiliate of Targa Resources, Inc., then either
Party may, at its sole discretion, elect to terminate this Agreement upon no less than one hundred
twenty (120) Days written notice to the other Party.

	16.	 	FORCE MAJEURE

	 	16.1.	 	SUSPENSION

     In the event of either Party being rendered unable, wholly or in part, by reason of force
majeure to carry out its obligations under this Agreement, other than to make payments due
hereunder, the obligations of the Party suffering force majeure shall be suspended to the extent
affected by and for the period of such force majeure condition. Such Party suffering force majeure
shall give notice and full particulars of such force majeure in writing or by facsimile to the
other Party as soon as possible after the occurrence of the cause. Such cause shall as far as
possible be remedied with all reasonable dispatch.

	 	16.2.	 	DEFINITION

     The term “force majeure” as employed herein shall mean acts of God, strikes, lockouts or other
industrial disputes or disturbances, acts of the public enemy, wars, blockades, insurrections,
riots, epidemics, landslides, lightning, earthquakes, fires, tornadoes, hurricanes or storms, and
warnings for any of the foregoing which may necessitate the precautionary shut-down of wells,
plants, gathering systems or other related facilities, floods, washouts, arrests and restraints of
governments and people, civil disturbances, explosions, sabotage, breakage or accidents to
equipment, machinery, plants, or lines of pipe, the making of repairs or alterations to lines of
pipe or plants, inability to secure labor or materials, freezing of wells or lines of pipe, partial
or entire failure of the Originating Facility or the facilities used to accept delivery of Product
and/or measure the same, electric power shortages, necessity for compliance with Applicable Laws,
inclement weather that necessitates extraordinary measures and expense to construct facilities
and/or maintain operations and any other causes, whether of the kind enumerated herein or
otherwise, not within the control of the Party claiming suspension and which by the exercise of
reasonable diligence such Party is unable to prevent or overcome. Such term shall likewise
include, in those instances where either Party hereto is required to obtain permits or licenses
from any governmental agency to enable such Party to fulfill its obligations hereunder, the
inability of such Party to acquire, or delays on the part of such Party in acquiring, such permits
or licenses. The term “force majeure” shall

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also include any event of force majeure occurring with respect to the facilities or services
of either Party’s suppliers or customers delivering or receiving any Product, fuel, feedstock, or
other substance necessary to the performance of such Party’s obligations, and shall also include
curtailment or interruption of deliveries or services by such third party suppliers or customers as
a result of an event of force majeure.

	 	16.3.	 	LABOR DISPUTES

     It is understood and agreed that the settlement of strikes or lockouts shall be entirely
within the discretion of the Party having the difficulty, and that the above requirements that any
force majeure shall be remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of an opposing party when such course is inadvisable
in the sole discretion of the Party having difficulty.

	 	16.4.	 	MAINTENANCE

     Either Party and/or its designee may briefly interrupt its performance hereunder for the
purpose of making necessary or desirable inspections, alterations and repairs; and the Party
requiring such relief shall give to the other Party reasonable notice of its intention to suspend
its performance hereunder, except in cases of emergency where such notice is impracticable, in
cases where the operations of the other Party will not be affected, or as to Buyer’s performance,
in cases where the Product is being delivered to a terminal or a fractionation facility operated by
a third party and the operator of such plant fails to give Buyer notice of such plant maintenance.
The Party requiring such relief shall endeavor to arrange such interruptions so as to inconvenience
the other Party as little as possible.

	17.	 	INDEMNITIES

     SELLER SHALL INDEMNIFY, RELEASE, DEFEND AND HOLD HARMLESS BUYER AND ITS AFFILIATES, AND ITS
AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS FROM AND AGAINST ANY CLAIMS ARISING
OUT OF OR IN ANY WAY RELATING TO SELLER’S OWNERSHIP, POSSESSION OR CONTROL OF THE PRODUCT UP TO THE
MEASUREMENT POINTS, AND BUYER SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS SELLER AND ITS AFFILIATES,
AND ITS AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS FROM AND AGAINST ANY CLAIMS
ARISING OUT OF OR IN ANY WAY RELATING TO BUYER’S OWNERSHIP, POSSESSION OR CONTROL OF THE PRODUCT AT
AND AFTER THE MEASUREMENT POINTS.

	18.	 	ASSIGNMENT

     Should the rights of Seller giving rise to its ownership and/or control of the Product
dedicated hereunder be assigned during the term of this Agreement (such as sale of any interest in
an Originating Facility wherein Seller’s ownership and control of Product therefrom arises from
Seller’s ownership interest in the Originating Facility), Seller shall make any such a transfer
expressly subject to the terms and conditions of this Agreement and shall (i) require its successor
in interest to expressly assume and agree to perform Seller’s obligations under this Agreement and
to the extent of such assignment or transfer should Seller transfer less than all of its such
rights. Nothing herein shall be construed to release Seller from its obligations hereunder This
Agreement may be assigned by either Party to any of its Affiliates or any Party that is the
transferee or successor to all or substantially all of the assets of the assigning Party without
the prior written consent of the other Party; provided that the assignee shall expressly agree to
assume and perform all of the assigning Party’s obligations hereunder. Any other assignment of
this Agreement shall require the prior written consent of the non-assigning Party, which consent
shall not be unreasonably withheld or delayed. Any assignment in violation of this Section 18
shall be void ab initio.

10

 

	19.	 	NOTICE

     Any notice, claim, demand or other correspondence hereunder shall be in writing and shall be
delivered personally by courier or overnight delivery service, by certified mail, return receipt
requested, or by fax (promptly followed by a copy sent by mail or personal delivery), to the
Party’s address set forth in this Agreement, unless changed by notice. Such notice, claim, demand
or correspondence shall be deemed to have been given on the date of the actual delivery thereof to
the Party receiving such notice, or, if receipt is refused or rejected, upon attempted delivery.

	20.	 	DISPUTE RESOLUTION

	 	20.1.	 	INITIAL NOTICE

     Either Party may initiate dispute resolution procedures by sending written notice (the
“Initial Notice”) to the other Party specifically stating the complaining Party’s claim and
requesting dispute resolution in accordance with this Article 20. The Parties shall attempt in
good faith to resolve any dispute arising out of or relating to this Agreement promptly by
negotiation between executives who have authority to settle the controversy and who are at a higher
level of management than the persons with direct responsibility for administration of this
contract. Within ten (10) Business Days after delivery of the Initial Notice, the receiving Party
shall submit to the other a written response. The Initial Notice and response shall include (a) a
statement of that Party’s position and a summary of arguments supporting that position, and (b) the
name and title of the executive who will represent that Party and of any other person who will
accompany the executive. Within twenty-five (25) Business Days after delivery of the Initial
Notice, the executives of both Parties shall meet at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute. All
negotiations pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of applicable rules of evidence.

	 	20.2.	 	PROCEEDINGS

     Any dispute arising out of or relating to this Agreement, including the breach, termination or
validity thereof, which has not been resolved by negotiation between executives herein within
forty-five (45) Business Days after delivery of the Initial Notice, shall be finally resolved by
arbitration in accordance with the CPR Rules for Non-Administered Arbitration then currently in
effect by three arbitrators appointed by CPR under the terms of CPR Rule 6; provided, however, that
if one Party fails to participate in negotiation as agreed herein, the other Party can commence
arbitration prior to the expiration of the time periods set forth above. The arbitration shall
commence upon the receipt of a notice of arbitration by either Party. The arbitration shall be
governed by the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. and the Texas Arbitration Act, TEX.
CIV. PRAC. & REM. CODE §§ 171.000 et seq., to the extent applicable and not in conflict with the
Federal Arbitration Act. The arbitrators shall render a reasoned award, and judgment upon the
award may be entered by any court having jurisdiction thereof. The place of the arbitration shall
be Houston, Texas. Unless the Parties to this Agreement agree in writing otherwise, the
arbitrators shall not have the power to award, nor shall they award, any punitive or consequential
damages (however nominated); however, the arbitrators may award specific performance where
appropriate. Each Party shall pay its own attorneys fees and costs, and each Party shall pay
one-half of the arbitrators’ fees and costs, no matter which side prevails. Except as required by
law or necessary to confirm or enforce an award, all proceedings hereunder shall remain
confidential.

	 	20.3.	 	PRELIMINARY INJUNCTIONS; PERFORMANCE PENDING RESOLUTION

     Notwithstanding the foregoing, either Party may request preliminary injunctive and/or
equitable relief from a court of competent jurisdiction at any time before an arbitrator has been
selected in order to protect the rights or property of such Party pending the resolution of the
dispute as provided hereunder. Despite such action the Parties will continue to participate in the
procedures specified in this Agreement. Each Party is required to continue to perform its
obligations under this Agreement pending final resolution

11

 

of any dispute arising out of or relating to the Agreement, unless to do so would be
impossible or impracticable under the circumstances.

	21.	 	STATEMENTS, AUDIT

     On or before the fifteenth (15th) Business Day of the Month following the Month of delivery,
Buyer shall deliver to Seller a statement showing for the Month of delivery the amount and type of
Product delivered for sale hereunder, and the applicable Product price(s). Payment shall be made
by Buyer within ten (10) days after its delivery of the statement. Buyer may net against payments
owed to Seller under this Agreement any outstanding payments owed by Seller to Buyer under this
Agreement. If Seller in good faith disputes all or part of any statement or payment, then Seller
shall provide Buyer with a written notice and explanation of the basis for the dispute, but shall
have no right to suspend performance under this Agreement.

     Subject to the limitations set forth in the following paragraph, if an error is discovered in
any statement or payment, then the Party entitled to receive such payment shall be paid by the
other Party within 10 days after issuance of a corrected invoice, together with interest at the
Base Rate.

     For a period of twenty-four (24) Months from the date of any statement or invoice, each Party
and its duly authorized representatives shall have access to the accounting records and other
documents maintained by the other Party which relate to the Product being delivered under this
Agreement and any other matters covered by this Agreement and shall have the right to audit such
records and other documents once a year in the offices of the Party to be audited at any reasonable
time or times upon at least fifteen (15) Days prior written notice Neither Party shall make any
claim on the other for any adjustment twenty (24) Months after the date of any statement or
invoice.

	22.	 	TAXES

     Seller shall be responsible for any royalties, overriding royalties, and other payments due or
to become due on the hydrocarbons which are subject to this Agreement. Seller shall be liable for
and shall pay, or cause to be paid, or reimburse Buyer if Buyer has paid, all taxes applicable to
the sale of Product by Seller to Buyer hereunder. SELLER SHALL RELEASE, INDEMNIFY, DEFEND AND HOLD
BUYER, ITS DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS
ARISING OUT OF OR RELATING TO THE PAYMENT OF ANY TAXES, ROYALTIES, OVERRIDING ROYALTIES AND OTHER
PAYMENTS DUE OR TO BECOME DUE ON THE PRODUCTS AND WHICH SELLER IS OBLIGATED TO PAY UNDER THIS
AGREEMENT.

	23.	 	LIMITATION OF LIABILITY

     Neither Party shall be liable to the other Party for any indirect, incidental, punitive,
exemplary, consequential or special damages save and except only to the extent such damages are
imposed on a Party entitled to indemnity under the terms of this Agreement in favor of an
unaffiliated third party and such damages arise from an underlying claim, liability or damages
against which such Party entitled to indemnity is indemnified by a Party to this Agreement.

	24.	 	CONFLICTS OF INTEREST

     No director, employee or agent of either Party shall give or receive any commission, fee,
rebate, gift or entertainment of significant cost or value in connection with this Agreement. Any
representative(s) authorized by either Party may, at its sole expense, audit the applicable records
of the other Party solely for the purpose of determining whether there has been compliance with
this Article 24.

12

 

	25.	 	CONDUCT OF PARTIES’ BUSINESS

     Each Party in the performance of this Agreement is engaged in an independent business and
nothing herein contained shall be construed as giving either Party any right to control the other
Party in any way in the performance of the other Party’s business. Neither Party shall have any
right to exercise control over any of the other Party’s employees, representatives, agents or
contractors of any level except to the extent of any safety requirements for delivery of Product
under this Agreement. All employees, representatives, agents or contractors of any level of a
Party shall be entirely under the control and direction of that Party, which shall be entirely
responsible for their actions and omissions.

	26.	 	GOVERNING LAW

     THIS AGREEMENT SHALL BE SUBJECT TO THE JURISDICTION OF, GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, INCLUDING THE UNIFORM COMMERCIAL CODE EXCEPT AS
OTHERWISE SPECIFIED HEREIN, WITHOUT REGARD TO ANY CONFLICT OF LAWS RULES THAT MAY DIRECT THE
APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.

	27.	 	CONFIDENTIALITY

     Each Party agrees that it shall not disclose Confidential Information whether acquired before
or after the Effective Date, to any third party other than each Party’s officers, directors,
employees, advisors or representatives who need to know and agree to maintain the confidentiality
of the Confidential Information (collectively, “Representatives”) during the Term and for a period
of not more than three (3) years after the end of the Term. Each Party shall be responsible for
any breach of this Agreement by its Representatives.

     Notwithstanding anything contained in this Article 27, Confidential Information may be
disclosed to any governmental, judicial or regulatory authority requiring such Confidential
Information, provided that: (i) such Confidential Information is submitted under applicable
provisions if any, for confidential treatment by such governmental, judicial or regulatory
authority; (ii) prior to such disclosure, the Party who supplied the information is given notice of
the disclosure requirement so that it may take whatever action it deems appropriate, including
intervention in any proceeding and the seeking of an injunction to prohibit such disclosure; and
(iii) the Party subject to the governmental, judicial or regulatory authority endeavors to protect
the confidentiality of any Confidential Information to the extent reasonable under the
circumstances and to use its good faith efforts to prevent the further disclosure of any
Confidential Information provided to any governmental, judicial or regulatory authority.

	28.	 	SEVERABILITY

     The invalidity of any one or more covenants or provisions of this Agreement shall not affect
the validity of any other provisions hereof or this Agreement as a whole, and in case of any such
invalidity, this Agreement shall be construed to the maximum extent possible as if such invalid
provision had not been included herein.

	29.	 	NO THIRD PARTY BENEFICIARY

     Nothing in this Agreement shall entitle any Person other than Seller or Buyer, or their
successors or assigns, to any claim, cause of action, remedy or right of any kind relating to the
transaction(s) contemplated by this Agreement.

13

 

	30.	 	WAIVER

     Waiver by either Party of the breach of any provision(s) hereof by the other Party shall not
be deemed to be a waiver of the breach of any other provision(s) hereof or of any subsequent or
continuing breach of such provision(s).

	31.	 	ENTIRE AGREEMENT – ALTERATIONS OR AMENDMENTS

     This Agreement contains the entire agreement of the Parties respecting the matters addressed
herein and no oral promises, agreements or warranties shall be deemed a part hereof, nor shall any
alteration or amendment of this Agreement, or waiver of any of its provisions, be binding upon
either Party hereto unless the same be in writing and signed by both Parties.

	32.	 	COMPLIANCE WITH LAWS

     The Parties shall comply with all Applicable Laws in the performance of their respective
obligations under this Agreement.

	33.	 	HEADINGS

     The headings of the Articles, Sections and Paragraphs of this Agreement are for convenience of
reference only and shall not constitute a part, nor modify, define or limit any of the terms or
provisions, hereof.

	34.	 	SURVIVAL

     The provisions of Articles 15, 15, 20, 23, 26 and 27 shall survive any expiration or
termination of this Agreement.

	35.	 	FURTHER ASSURANCES

     Each Party shall take such acts and execute and deliver such documents as may be reasonably
required to effectuate the purposes of this Agreement.

	36.	 	RULES OF CONSTRUCTION

     In construing this Agreement, the following principles shall be followed:

	 	(a)	 	No consideration shall be given to the fact or presumption that
one Party had a greater or lesser hand in drafting this Agreement.
	 
	 	(b)	 	Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.
	 
	 	(c)	 	The word “includes” and its syntactical variants mean
“includes, but is not limited to” and corresponding syntactical variant
expressions.
	 
	 	(d)	 	The plural shall be deemed to include the singular and vice
versa, as applicable.

14

 

	 	(e)	 	Unless the context otherwise requires, any reference to a
statutory provision (including those contained in subordinate legislation) is a
reference to the provision as amended or re-enacted, or as modified by other
statutory provisions from time to time, and includes subsequent legislation
made under the relevant statute.

	 	 	 	 	 	 	 	 	 
	Accepted and Agreed to:	 	 	 	Accepted and Agreed to:
	 
	 	 	 	 	 	 	 	 
	Targa North Texas LP	 	 	 	Targa Liquids Marketing and Trade
	 
	 	 	 	 	 	 	 	 
	By:

	 	     /s/ Clark White
	 	 	 	By:
	 	     /s/ D.S. Pryor
	 

	 	 
	 	 	 	 	 	 
	Name: Clark White	 	 	 	Name: D.S. Pryor
	Title: Vice President and Region Manager	 	 	 	Title: Vice President

15exv4w1

 

EXHIBIT 4.1

REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) dated as of October 1, 2007, is
entered into by and between Renegy Holdings, Inc., a Delaware corporation (the “Company”),
and the Robert M. Worsley and Christi M. Worsley Revocable Trust (the “Shareholder”).

RECITALS

     WHEREAS, concurrent with the execution hereof, the Shareholder is contributing or causing to
be contributed to the Company all of the membership interests (the “Contribution”) in (i)
Renegy, LLC, an Arizona limited liability company (“Renegy, LLC”), (ii) Renegy Trucking,
LLC, an Arizona limited liability company (“Renegy Trucking”), and (iii) Snowflake White
Mountain Power, LLC, an Arizona limited liability company (together with Renegy LLC and Renegy
Trucking, “Renegy”), all pursuant to the terms and conditions of that certain Contribution
and Merger Agreement, dated May 8, 2007, as amended, by and among the Company, Catalytica Energy
Systems, Inc., a Delaware corporation (“CESI”), Snowflake Acquisition Corporation, a Delaware
corporation, Renegy, the Shareholder, Robert M. Worsley (“Worsley”) and Christi M. Worsley
(the “Contribution Agreement”);

     WHEREAS, pursuant to that certain Assumption Agreement, dated as of the date hereof, by and
among the Company and the parties to the Contribution Agreement (the “Assumption
Agreement”), the Company has agreed to (i) assume and perform the post-Closing (as defined in
the Contribution Agreement) rights and obligations of the Company that are set forth in the
Contribution Agreement and (ii) assume all of the rights and executory obligations of CESI under
that certain Amended and Restated Employment Agreement dated as of March 23, 2007, by and between
CESI and Robert W. Zack.

     WHEREAS, as part of the consideration for the Contribution, the Shareholder will receive
shares of common stock, par value $0.001 per share, of the Company (“Common Stock”) (the
“Contribution Shares”);

     WHEREAS, as part of the consideration for the Contribution, the Shareholder will receive
warrants (“Warrants”) to purchase, subject to certain conditions set forth therein, shares
of Common Stock (the “Warrant Shares”); and

     WHEREAS, in accordance with the terms of the Contribution Agreement and the Assumption
Agreement, the Company has agreed to grant to the Shareholder certain registration rights with
respect to the Contribution Shares and the Warrant Shares.

     NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:

 

 

AGREEMENT

          1. Definitions.

               (a) As used in this Agreement, the following defined terms shall have the following meanings:

          “Affiliate” of any specified person means any other person which, directly or
indirectly, is in control of, is controlled by, or is under common control with such specified
person. For purposes of this definition, control of a person means the power, direct or indirect,
to direct or cause the direction of the management and policies of such person whether by contract
or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the
foregoing.

          “Business Day” means any day other than Saturday, Sunday or any other day which is a
legal holiday under the laws of the state of New York or a day on which national banking
associations in New York are required by law or other governmental action to close.

          “Commission” means the United States Securities and Exchange Commission, or any other
federal agency at the time administering the Exchange Act or the Securities Act, whichever is the
relevant statute for the particular purpose.

          “Common Stock” shall have the meaning set forth in the preamble hereto.

          “Contribution Agreement” shall have the meaning set forth in the preamble hereto.

          “Contribution Shares” shall have the meaning set forth in the preamble hereto.

          “Delay Conditions” means (i) the Company is in possession of material non-public
information the disclosure of which would have a material adverse effect on the business,
operations, prospects, condition (financial or otherwise) of the Company and its subsidiaries,
taken as a whole or (ii) the Board of Directors of the Company determines in good faith that a
delay in the effectiveness of the Registration Statement, or the Registration Statement ceasing to
be effective or a Prospectus thereunder ceasing to be usable, as the case may be, is appropriate
due to the occurrence or existence of any material pending corporate development with respect to
the Company or due to circumstances which would result in the effectiveness of the Registration
Statement otherwise materially and adversely affecting the Company or its business. The Delay
Conditions shall be deemed to no longer exist if (x) in the case of clause (i) above, the Company
is no longer in possession of such material non-public information or the Board of Directors of the
Company determines in good faith that the disclosure of such material information would not be
prejudicial to or contrary to the interest of the Company and (y) in the case of clause (ii) 
above, the Board of Directors of the Company determines in good faith that such delay or cessation
is no longer appropriate.

          “Effectiveness Period” has the meaning assigned thereto in Section 2(c)(i)
hereof.

2

 

          “Effective Time” means the date on which the Commission declares the Registration
Statement effective or on which the Registration Statement otherwise becomes effective.

          “Electing Holder” has the meaning assigned thereto in Section 3(a)(ii) hereof.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          “Indemnified Person” has the meaning assigned thereto in Section 5(a) hereof.

          “Managing Underwriters” means the investment banker or investment bankers and manager
or managers that shall administer an underwritten offering, if any, conducted pursuant to
Section 6 hereof.

          “Maximum Delay Period” means 60 consecutive days in any calendar year (or 120 days in
the aggregate in any calendar year).

          “Notice and Questionnaire” means a Notice of Registration Statement and Selling
Stockholder Questionnaire, substantially in the form attached hereto as Exhibit A.

          “Other Holders” has the meaning assigned thereto in Section 6(a) hereof.

          “Person” means an individual, partnership, corporation, trust or unincorporated
organization, or a government or agency or political subdivision thereof.

          “Plan of Distribution” has the meaning assigned thereto in Section 2(a)
hereof.

          “Prospectus” means the prospectus (including, without limitation, any preliminary
prospectus, any final prospectus and any prospectus that discloses information previously omitted
from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A
under the Securities Act) included in the Registration Statement, 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 the Registration Statement and by all other amendments and supplements to
such prospectus, including all material incorporated by reference in such prospectus and all
documents filed after the date of such prospectus by the Company under the Exchange Act and
incorporated by reference therein.

          “Registration Statement” means a registration statement of the Company filed under the
Securities Act covering the Registrable Securities, including the Prospectus contained therein, any
amendments and supplements to such registration statement, including post-effective amendments, and
all exhibits and all material incorporated by reference in such registration statement, including,
without limitation, a “shelf” registration statement providing for the registration of, and the
sale on a continuous or delayed basis by the holders of, all of the Registrable Securities pursuant
to Rule 415 under the Securities Act and/or any similar rule that may be adopted by the Commission,
filed by the Company pursuant to the provisions of Section 2 of this Agreement.

3

 

          “Registrable Security(ies)” means the Contribution Shares, the Warrant Shares, any
shares of Common Stock issued to the Shareholder pursuant to Article XI of the Contribution
Agreement and any other shares of Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, the Contribution Shares, the
Warrant Shares or any such shares issued pursuant to Article XI of the Contribution Agreement;
provided, however, that a security ceases to be a Registrable Security when it is
no longer a Restricted Security.

          “Restricted Security” means any security except any such security that (A) has been
registered pursuant to an effective Registration Statement under the Securities Act and sold in a
manner contemplated by the Registration Statement, (B) has been sold in compliance with Rule 144
under the Securities Act (or any successor provision thereto) or is transferable pursuant to
paragraph (k) of such Rule 144 (or any successor provision thereto) or, when taken together with
all other Restricted Securities held by such person, may be sold pursuant to Rule 144 in a single
90 day period (without giving any effect to clauses (ii) and (iii) of Rule 144(e)(1)), or (C) has
otherwise been sold and a new security not subject to transfer restrictions under the Securities
Act has been delivered by or on behalf of the Company.

          “Rules and Regulations” means the published rules and regulations of the Commission
promulgated under the Securities Act or the Exchange Act, as in effect at any relevant time.

          “Securities Act” means the Securities Act of 1933, as amended.

          “Underwriter” means any underwriter of Registrable Securities in connection with an
offering thereof under a Registration Statement.

          “Warrants” shall have the meaning set forth in the preamble hereto.

          “Warrant Shares” shall have the meaning set forth in the preamble hereto.

          2. Mandatory Registration.

               (a) At any time from and after two hundred seventy (270) days after the Closing Date (as
defined in the Contribution Agreement) and for so long as the Shareholder or his permitted
assignee(s) hereunder own beneficially or of record any Registrable Securities or Warrants which
have not expired by their terms, the Company shall, upon the written request (hereinafter a
“notice”) of a holder or holders of a majority of the then outstanding Registrable Securities, and
subject to the covenants, terms and conditions of Section 2(b) below, prepare and file a
Registration Statement on Form S-3 under the Securities Act, pursuant to Rule 415 under the
Securities Act, covering the resale from time to time, of all of the shares of Registrable
Securities such holder or holders shall request and the Company shall use commercially reasonable
efforts to have the Registration Statement declared effective as soon as practicable thereafter;
provided, that the Company may, by notice to the requesting holder or holders, as the case
may be, delay such requested registrations for the Maximum Delay Period if and for so long as the
Delay Conditions exist. The Registration Statement shall contain the “Plan of
Distribution” in substantially the form attached hereto as Exhibit B.

4

 

     The Company shall not be obligated pursuant to this Section 2 to effectuate more than
one (1) registration in any twelve (12) month period for the benefit of the holders of Registrable
Securities. In the event that Form S-3 is not available for the registration of the resale of
Registrable Securities hereunder, the Company shall register the resale of the Registrable
Securities on another such other available form of Registration Statement reasonably acceptable to
the requesting holder or holders. Notwithstanding anything to the contrary contained herein, no
request may be made under this Section 2:

                    (i) within one hundred eighty (180) days after the effective date of a
Registration Statement filed by the Company covering a primary underwritten public
offering of securities of the Company under the Securities Act with an aggregate
offering price (before underwriting commissions and expenses) of at least Ten
Million Dollars ($10,000,000); provided that such offering was made in accordance
with Section 6(a) below, or

                    (ii) during the period starting with the date sixty (60) days prior to the
Company’s estimated date of filing of, and ending on the date one hundred (180) days
immediately following the effective date of any Registration Statement pertaining to
securities of the Company (other than a registration of securities in a Rule 145
transaction or with respect to an employee benefit plan), provided that the Company
is actively employing in good faith commercially reasonable efforts to cause such
Registration Statement to become effective and that the Company’s estimate of the
date of filing such Registration Statement is made in good faith.

               (b) Immediately following receipt of any notice pursuant to Section 2(a), the Company
shall promptly notify all holders of Registrable Securities and Warrants from whom such notice has
not been received and, as soon thereafter as practicable, and subject to any Delay Conditions,
shall file a Registration Statement with the Commission and use commercially reasonable efforts to
have such Registration Statement declared effective under the Securities Act as soon as
practicable, so as to permit the public sale in accordance with the method of disposition specified
in such notice from requesting holders (such method of disposition shall be as requested by such
holder or holders of a majority of Registrable Securities included in such notices received by the
Company) of the number of shares of Registrable Securities specified in such notice (and in all
notices received by the Company from other holders within twenty (20) days after the giving of such
notice by the Company). If such method of disposition shall be an underwritten public offering,
subject to the covenants, terms and conditions of Section 6 below, the Company shall
designate the managing underwriter of such offering, following consultation and subject to the
approval of the holders of Registrable Securities from whom notice has been received, which
approval shall not be unreasonably withheld, conditioned or delayed. All holders of Registrable
Securities and/or Warrants providing notice to the Company pursuant to the foregoing, must
participate in such underwriting. The Company’s registration obligation hereunder shall be deemed
satisfied only when a Registration Statement(s) covering all shares of Registrable Securities
specified in notices received as aforesaid, for sale in accordance with the method of disposition
specified by the requesting holders, shall have become effective and, if such method of disposition
is a firm commitment underwritten public offering, all such shares shall have been sold pursuant
thereto.

5

 

               (c) The Company shall use commercially reasonable efforts:

                    (i) to keep the Registration Statement continuously effective in order to
permit the Prospectus to be usable by holders for resales of Registrable Securities
until the earlier of (A) the sale under the Registration Statement of all the
Registrable Securities registered thereunder and (B) all of the securities ceasing
to be Restricted Securities (such period being referred to herein as the
“Effectiveness Period”); and

                    (ii) after the Effective Time and during the Effectiveness Period, promptly
upon the request of any holder of Registrable Securities and/or Warrants that is not
then an Electing Holder, to take any action reasonably necessary to enable such
holder to use the Prospectus for resales of Registrable Securities, including
without limitation any action necessary to identify such holder as a selling
stockholder in the Registration Statement; provided, however, that
nothing in this subparagraph shall relieve such holder of the obligation to return a
completed and signed Notice and Questionnaire to the Company in accordance with
Section 3(a) hereof.

          3. Registration Procedures. In connection with the Registration Statement, the
following provisions shall apply:

               (a) No holder shall be entitled to be named as a selling stockholder in the Registration
Statement as of the Effective Time, and no such holder shall be entitled to use the Prospectus for
resales of Registrable Securities at any time unless such holder has returned a completed and
signed Notice and Questionnaire to the Company by the deadline for response set forth therein;
provided, however, such holders shall have at least ten (10) Business Days from the
date on which the Notice and Questionnaire is first mailed to such holders to return a completed
and signed Notice and Questionnaire to the Company.

                    (i) After the Effective Time, the Company shall, upon the request of any holder
of Registrable Securities or Warrants that is not then an Electing Holder, promptly
send a Notice and Questionnaire to such holder. The Company shall not be required
to take any action to name such holder as a selling stockholder in the Registration
Statement or to enable such holder to use the Prospectus for resales of Registrable
Securities until such holder has returned a completed and signed Notice and
Questionnaire to the Company.

                    (ii) The term “Electing Holder” shall mean any holder of Registrable
Securities and/or Warrants that has returned a completed and signed Notice and
Questionnaire to the Company in accordance with Section 3(a) hereof.

               (b) The Company shall furnish to each Electing Holder, counsel to the Electing Holders
selected in accordance with Section 4(b) hereof, and the Managing Underwriters, if any, no
fewer than five (5) Business Days prior to the initial filing of the Registration Statement, a copy
of such Registration Statement, and shall furnish to such holders, counsel to such holders, and the
Managing Underwriters, if any, no fewer than two (2) Business

6

 

Days prior to the filing of any amendment or supplement to the Prospectus, a copy of such
amendment or supplement and shall use commercially reasonable efforts to reflect in each such
document when so filed with the Commission such comments as such holders and their such counsel
reasonably may propose; provided, however, that the Company shall make the final
decision as to the form and content of each such document. If any such Registration Statement
refers to any Electing Holder by name or otherwise as the holder of any securities of the Company
and such reference is not required by the Securities Act or any similar federal statute, then such
Electing Holder shall have the right to require the deletion of the reference to such Electing
Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to
the time that such reference ceases to be required.

               (c) From the date hereof until the end of the Effectiveness Period, the Company shall (subject
to paragraph (j) below) promptly take such action as may be necessary so that (i) each of the
Registration Statement and any amendment thereto and the Prospectus and any amendment or supplement
thereto (and each report or other document incorporated by reference therein in each case) complies
in all material respects with the Securities Act and the Exchange Act and the respective Rules and
Regulations, (ii) each of the Registration Statement and any amendment thereto does not, when it
becomes effective, 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 and (iii) each of the Prospectus and any
amendment or supplement to the Prospectus does not at any time during the Effectiveness Period
(other than during the pendency of a Delay Condition) include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.

               (d) The Company shall promptly advise each Electing Holder, and shall confirm such advice in
writing if so requested by any such holder (which notice pursuant to clauses (ii) through (iv)
hereof shall be accompanied by an instruction to suspend the use of the Prospectus until the
requisite changes have been made):

                    (i) when the Registration Statement and any amendment thereto has been filed
with the Commission and when the Registration Statement or any post-effective
amendment thereto has become effective;

                    (ii) of the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for such purpose;

                    (iii) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the securities included in the Registration
Statement for sale in any jurisdiction or the initiation of any proceeding for such
purpose; and

                    (iv) if changes in the Registration Statement or the Prospectus are required in
order that the Registration Statement and Prospectus do not contain an untrue
statement of a material fact and do not omit to state a material

7

 

fact required to be stated therein or necessary to make the statements therein
(in the case of the Prospectus, in light of the circumstances under which they were
made) not misleading.

               (e) The Company shall use commercially reasonable efforts to prevent the issuance, and if
issued to obtain the withdrawal, of any order suspending the effectiveness of the Registration
Statement at the earliest possible time.

               (f) The Company shall furnish to each requesting Electing Holder, without charge, at least one
(1) copy of the Registration Statement and all post-effective amendments thereto, including
financial statements and schedules, and, if such holder so requests in writing, all reports, other
documents and exhibits that are filed with or incorporated by reference in the Registration
Statement.

               (g) The Company shall, during the Effectiveness Period, deliver to each Electing Holder,
without charge, as many copies of the Prospectus (including each preliminary Prospectus) and any
amendment or supplement thereto as such Electing Holder may reasonably request; and the Company
consents (except during the continuance of any event described in Section 3(d)(iv) above)
to the use of the Prospectus and any amendment or supplement thereto by each of the Electing
Holders in connection with the offering and sale of the Registrable Securities covered by the
Prospectus and any amendment or supplement thereto during the Effectiveness Period.

               (h) Prior to any offering of Registrable Securities pursuant to the Registration Statement,
the Company shall (i) register or qualify or cooperate with the Electing Holders and a single
counsel for the Electing Holders in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or “blue sky” laws of such
jurisdictions within the United States as any Electing Holder may reasonably request, (ii) keep
such registrations or qualifications in effect and comply with such laws so as to permit the
continuance of offers and sales in such jurisdictions for so long as may be necessary to enable any
Electing Holder or underwriter, if any, to complete its distribution of Registrable Securities
pursuant to the Registration Statement, and (iii) take any and all other actions necessary or
advisable to enable the disposition in such jurisdictions of such Registrable Securities;
provided, however, that in no event shall the Company be obligated to (A) qualify
as a foreign corporation or as a dealer in securities in any jurisdiction where it would not
otherwise be required to so qualify but for this Section 3(h) or (B) file any general
consent to service of process in any jurisdiction where it is not as of the date hereof so subject.

               (i) The Company shall cooperate with the Electing Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold pursuant to the
Registration Statement, which certificates shall, upon sale to a person who is not an affiliate of
the Company pursuant to the Registration Statement, not bear any restrictive legend referring to
the Securities Act and shall meet the requirements of any securities exchange on which the
Company’s Common Stock is then listed and which certificates shall be in such permitted
denominations and registered in such names as Electing Holders may request in connection with the
sale of Registrable Securities pursuant to the Registration Statement. In order to effect the
foregoing, the Company shall use all reasonable efforts to prepare and deliver

8

 

to the Company’s transfer agent, to the extent permitted by such transfer agent, upon
effectiveness of the Registration Statement a “blanket” legal opinion providing that, upon receipt
of certification that a sale of Registrable Securities has been made validly made to a person who
is not an affiliate of the Company pursuant to the Registration Statement, the shares may be issued
to the transferee without a restrictive legend referring to the Securities Act.

               (j) Upon the occurrence of any fact or event contemplated by paragraph 3(d)(iv) above, the
Company shall (subject to the next sentence) promptly prepare a post-effective amendment or
supplement to the Registration Statement or the Prospectus, or any document incorporated therein by
reference, or file any other required document so that, as thereafter delivered to purchasers of
the Registrable Securities included therein, the Prospectus will not include an untrue statement of
a material fact or omit to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading. If the Company notifies the
Electing Holders in accordance with clauses (ii) through (iv) of paragraph 3(d) above to suspend
the use of the Prospectus until the requisite changes to the Prospectus have been made, then each
Electing Holder shall suspend the use of the Prospectus until (i) such Electing Holder has received
copies of the supplemented or amended Prospectus contemplated by the preceding sentence or (ii)
such Electing Holder is advised in writing by the Company that the use of the Prospectus may be
resumed and has received copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus. Notwithstanding the foregoing, but subject to Section 6
hereof, the Company may suspend the use of the Prospectus and shall not be required to amend or
supplement the Registration Statement, any related Prospectus or any document incorporated by
reference, for a period not to exceed the Maximum Delay Period if and so long as the Delay
Conditions exist.

               (k) The Company shall use commercially reasonable efforts to comply with all applicable Rules
and Regulations, and to make generally available to its stockholders as soon as practicable, but in
any event not later than eighteen months after (i) the effective date (as defined in Rule 158(c)
under the Securities Act) of the Registration Statement, (ii) the effective date of each
post-effective amendment to the Registration Statement, and (iii) the date of each filing by the
Company with the Commission of an Annual Report on Form 10-K that is incorporated by reference in
the Registration Statement, an earnings statement of the Company and its subsidiaries complying
with Section 11(a) of the Securities Act and the Rules and Regulations of the Commission thereunder
(including, at the option of the Company, Rule 158).

               (l) In the event of an underwritten offering conducted pursuant to Section 6 hereof,
the Company shall (subject to paragraph 3(j) above), if requested, promptly include or incorporate
in a Prospectus supplement or post-effective amendment to the Registration Statement such
information as the Managing Underwriters reasonably agree should be included therein and to which
the Company does not object and shall (subject to paragraph 3(j) above) make all required filings
of such Prospectus supplement or post-effective amendment as soon as practicable after it is
notified of the matters to be included or incorporated in such Prospectus supplement or
post-effective amendment.

               (m) The Company shall enter into such customary agreements (including an underwriting
agreement in customary form in the event of an underwritten offering

9

 

conducted pursuant to Section 6 hereof) and take all other appropriate action in order
to expedite and facilitate the registration and disposition of the Registrable Securities, and in
connection therewith, if an underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures substantially identical to those set forth in
Section 5 hereof.

               (n) The Company shall:

                    (i) (A) make reasonably available for inspection by requesting Electing
Holders, any underwriter participating in any disposition pursuant to the
Registration Statement, and any attorney selected in accordance with Section
4(b) hereof, one accountant and any other agent retained by such holders or any
such underwriter all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries and (B) cause the
Company’s officers, directors and employees to supply all information reasonably
requested by such holders or any such underwriter, attorney, accountant or agent in
connection with the Registration Statement, in each case, as is customary for
similar due diligence examinations; provided, however, that all
records, information and documents that are designated in writing by the Company, in
good faith, as confidential shall be kept confidential by such holders and any such
underwriter, attorney, accountant or agent, unless such disclosure is made in
connection with a court proceeding or required by law, or such records, information
or documents become available to the public generally or through a third party
without an accompanying obligation of confidentiality; and provided,
further that, if the foregoing inspection and information gathering would
otherwise disrupt the Company’s conduct of its business, such inspection and
information gathering shall, to the greatest extent possible, be coordinated on
behalf of the requesting Electing Holders and the other parties entitled thereto by
one counsel designated by and on behalf of Electing Holders and other parties;

                    (ii) in connection with any underwritten offering conducted pursuant to
Section 6 hereof, make such representations and warranties to the Electing
Holders participating in such underwritten offering and to the Managing
Underwriters, in form, substance and scope as are customarily made by the Company to
underwriters in secondary sale underwritten offerings of equity securities;

                    (iii) in connection with any underwritten offering conducted pursuant to
Section 6 hereof, obtain opinions of counsel to the Company (which counsel
and opinions (in form, scope and substance) shall be reasonably satisfactory to the
Managing Underwriters) addressed to each requesting Electing Holder, covering such
matters as are customarily covered in opinions requested in secondary sale
underwritten offerings of equity securities (it being agreed that the matters to be
covered shall include, without limitation, as of the date of the opinion and as of
the Effective Time or the date of the most recent post-effective amendment thereto,
as the case may be, comment of such counsel as to the absence, to such counsel’s
knowledge, from the Registration Statement and the

10

 

Prospectus, including the documents incorporated by reference therein, of an
untrue statement of a material fact or the omission of a material fact required to
be stated therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading);

                    (iv) in connection with any underwritten offering conducted pursuant to
Section 6 hereof, obtain “comfort” letters and updates thereof from the
independent public accountants of the Company (and, if necessary, from the
independent public accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial data are, or
are required to be, included in the Registration Statement), addressed to each
requesting Electing Holder (if such Electing Holder has provided such letter,
representations or documentation, if any, required for such cold comfort letter to
be so addressed) and the underwriters, in customary form and covering matters of the
type customarily covered in “comfort” letters in connection with secondary sale
underwritten offerings;

                    (v) in connection with any underwritten offering conducted pursuant to
Section 6 hereof, deliver such documents and certificates as may be
reasonably requested by any Electing Holders and the Managing Underwriters, if any,
including without limitation certificates to evidence compliance with Section
3(j) hereof and with any conditions contained in the underwriting agreement or
other agreements entered into by the Company in connection therewith.

               (o) The Company shall use commercially reasonable efforts to take all other steps necessary to
effect the registration of the Registrable Securities covered by the Registration Statement
contemplated hereby.

          4. Registration Expenses. (a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by it whether or not any Registration
Statement is filed or becomes effective and whether or not any securities are issued or sold
pursuant to any Registration Statement. The fees and expenses 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 the National
Association of Securities Dealers, Inc. and (B) in compliance with securities or Blue Sky laws
(including without limitation and in addition to that provided for in (b) below, reasonable fees
and disbursements of counsel for the underwriters or counsel for the holders of Registrable
Securities in connection with Blue Sky qualifications of the Registrable Securities)),
(ii) printing expenses (including without limitation expenses of printing certificates for
Registrable Securities and of printing Prospectuses if the printing of Prospectuses is requested by
the Managing Underwriters, if any), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and one counsel for the holders of Registrable Securities,
in accordance with the provisions of Section 4(b) hereof, (v) fees and disbursements of all
independent certified public accountants referred to in Section 3(n)(iv) hereof (including
without limitation the expenses of any special audit and “comfort” letters required by or incident
to such performance), (vi) Securities Act liability insurance, if the Company desires such

11

 

insurance, and (vii) fees and expenses of all other persons retained by the Company. In
addition, the Company shall pay its internal expenses (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
securities on a securities exchange. Notwithstanding the foregoing or anything in this Agreement
to the contrary, each holder of the Registrable Securities being registered shall pay all
underwriting fees, discounts and commissions with respect to any Registrable Securities sold by it
and the fees and disbursements of any counsel or other advisors or experts retained by such holders
(severally or jointly), other than counsel referred to in clause (iv) above.

               (b) In connection with any registration hereunder, the Company shall reimburse the holders of
the Registrable Securities being registered in such registration for the reasonable fees and
disbursements not to exceed $35,000, of not more than one counsel chosen by the holders of a
majority of the Registrable Securities for whose benefit the applicable Registration Statement is
being prepared.

          5. Indemnification and Contribution.

               (a) Indemnification by the Company.

                    (i) The Company shall indemnify and hold harmless each Electing Holder and each
underwriter, selling agent or other securities professional, if any, which
facilitates the disposition of Registrable Securities, and each of their respective
officers and directors and each person who controls such Electing Holder,
underwriter, selling agent or other securities professional within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act (each such person
being sometimes referred to as an “Indemnified Person”) against any losses,
claims, damages or liabilities, joint or several, to which such Indemnified Person
may become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or any Prospectus contained therein or
furnished by the Company to any Indemnified Person, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading; and

                    (ii) the Company hereby agrees to reimburse such Indemnified Person for any
legal or other expenses reasonably incurred by them in connection with investigating
or defending any such action or claim as such expenses are incurred;
provided, however, that the Company shall not be liable to any such
Indemnified Person in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement or
Prospectus, or amendment or supplement thereto, in reliance upon and in conformity
with written information relating to such Indemnified Person

12

 

furnished to the Company by or on behalf of such Indemnified Person expressly
for use therein; provided, further, however, that the
foregoing indemnity agreement with respect to any Prospectus shall not inure to the
benefit of any Indemnified Person who failed to deliver a final Prospectus or an
amendment or supplement thereto (provided by the Company to the several Indemnified
Persons in the requisite quantity and on a timely basis to permit proper delivery on
or prior to the relevant transaction date) to the person asserting any losses,
claims, damages and liabilities and judgments caused by any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus, or caused
by any omission or alleged omission to state therein 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 such material
misstatement or omission or alleged material misstatement or omission was cured in
the final Prospectus or an amendment or supplement thereto.

               (b) Indemnification by the Holders and any Agents and Underwriters. Each Electing
Holder agrees, as a consequence of the inclusion of any of such holder’s Registrable Securities in
any Registration Statement, and each underwriter, selling agent or other securities professional,
if any, which facilitates the disposition of Registrable Securities shall agree, as a consequence
of facilitating such disposition of Registrable Securities, severally and not jointly, to (i)
indemnify and hold harmless the Company, its directors, officers who sign such Registration
Statement and each person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which the Company or such other persons may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in such Registration Statement or Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance upon and in
conformity with written information relating to such holder, underwriter, selling agent or other
securities professional furnished to the Company by or on behalf of such holder, underwriter,
selling agent or other securities professional expressly for use therein and (ii) reimburse the
Company and its directors and officers who sign such Registration Statement for any legal or other
expenses reasonably incurred by the Company and such directors and officers in connection with
investigating or defending any such action or claim as such expenses are incurred.

               (c) Notices of Claims, Etc. Promptly after receipt by an indemnified party under
subsection (a) or (b) of this Section 5 of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party
under this Section 5, notify such indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise than under this Section 5.
In case any such action shall be brought against any indemnified party and it shall notify an
indemnifying party of the commencement thereof, such indemnifying party shall be entitled to
participate

13

 

therein and, to the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, such indemnifying party shall not be liable to such
indemnified party under this Section 5 for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying party shall, without
the written consent of the indemnified party, which consent will not be unreasonably withheld,
delayed or conditioned, effect the settlement or compromise of, or consent to the entry of any
judgment with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to, or an admission of, fault,
culpability or a failure to act, by or on behalf of any indemnified party.

               (d) Contribution. If the indemnification provided for in this Section 5 is
unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) of
this Section 5 in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection with the
statements or omissions which resulted in such losses, claims, damages or liabilities (or actions
in respect thereof), as well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information about such indemnifying party or
indemnified party supplied by such indemnifying party or by such indemnified party, and the
parties’ relative intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. 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 (even if the Electing Holders or any underwriters, selling agents or other securities
professionals or all of them 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 in this
Section 5(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
The obligations of the Electing Holders and any underwriters, selling agents or other securities
professionals in this Section 5(d) to contribute shall be several in proportion to the
percentage of Registrable Securities registered or underwritten, as the case may be, by them and
not joint.

14

 

               (e) Notwithstanding any other provision of this Section 5, in no event will any
Electing Holder be required to undertake liability to any person under this Section 5 for
any amounts in excess of the dollar amount of the proceeds to be received by such holder from the
sale of such holder’s Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Registration Statement.

               (f) The obligations of the Company under this Section 5 shall be in addition to any
liability that the Company may otherwise have to any Indemnified Person and the obligations of any
Indemnified Person under this Section 5 shall be in addition to any liability that such
Indemnified Person may otherwise have to the Company. The remedies provided in this Section
5 are not exclusive and shall not limit any rights or remedies that may otherwise be available
to an indemnified party at law or in equity.

          6. Underwritten Offerings.

               (a) If at any time the Company proposes to register any of its securities under the Securities
Act in connection with the public offering of such securities for its own account or for the
accounts of stockholders other than the Shareholder (“Other Holders”), solely for cash on a
form that would also permit the registration of the Registrable Securities, the Company shall, each
such time, promptly give each holder of Registrable Securities and/or Warrants written notice of
such determination. Upon the written request of any holder of Registrable Securities and/or
Warrants given within thirty (30) days after the giving of any such notice by the Company, the
Company shall use commercially reasonable efforts to cause to be registered under the Securities
Act all of the Registrable Securities that each such holder of Registrable Securities and/or
Warrants has requested be registered. In connection with any offering under this Section
6(a), the Company shall not be required to include any holder’s of Registrable Securities in
such underwriting unless such holder accepts the terms of the underwriting as agreed upon between
the Company and the Managing Underwriters, and then only in such quantity as will not, in the
reasonable opinion of the Managing Underwriters, jeopardize the success of the offering by the
Company. If the total amount of securities that all holders of Registrable Securities request to
be included in an underwritten offering exceeds the amount of securities that the Managing
Underwriters reasonably believe compatible with the success of the offering, then the number of
shares of Registrable Securities and shares of securities held by Other Holders that may be
included in the offering shall be allocated among the Shareholder and the Other Holders in such
proportion as the respective number of shares the Shareholder and each Other Holder requests to be
included in such registration bears to the total number of shares the Shareholder and Other Holders
request be included. All Registrable Securities or any other securities excluded from the
underwriting by reason of the underwriter’s marketing limitation shall not be included in such
registration. If the Shareholder or Other Holder of other securities entitled upon request to be
included in such registration, disapproves of the terms of the underwriting, such person may elect
to withdraw therefrom by written notice to the Company, the underwriter and the Other Holders of
securities to be included in such registration. The securities so withdrawn shall also be
withdrawn from registration.

               (b) Subject to the terms of this clause (b), any holder of Registrable Securities or Warrants
who desires to do so may sell Registrable Securities (in whole or in part) in an underwritten
offering. In any such underwritten offering, the underwriting arrangements

15

 

with respect thereto (including the size of the offering) will be approved by the holders of a
majority of the Registrable Securities to be included in such offering; provided,
however, that such underwriting arrangements must be reasonably satisfactory to the
Company. No holder may participate in any underwritten offering contemplated hereby unless (a)
such holder agrees to sell such holder’s Registrable Securities to be included in the underwritten
offering in accordance with any approved underwriting arrangements, (b) such holder completes and
executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements,
lock-up letters (which shall be no more onerous than the lock-ups of the management of the Company)
and other documents required under the terms of such approved underwriting arrangements and (c) if
such holder is not then an Electing Holder, such holder returns a completed and signed Notice and
Questionnaire to the Company in accordance with Section 3(a) hereof within a reasonable
amount of time before such underwritten offering. The holders participating in any underwritten
offering shall be responsible for any underwriting fees, discounts and commissions and, subject to
Section 4 hereof, expenses of their own counsel. The Company shall pay all expenses
customarily borne by issuers, including but not limited to filing fees, the fees and disbursements
of its counsel and independent public accountants and any printing expenses incurred in connection
with such underwritten offering. Notwithstanding the foregoing or the provisions of
Section 3(l) hereof, upon receipt of a request from the Managing Underwriter or a
representative of holders of a majority of the Registrable Securities to be included in an
underwritten offering to prepare and file an amendment or supplement to the Registration Statement
and Prospectus in connection with an underwritten offering, the Company may delay the filing of any
such amendment or supplement for up to the Maximum Delay Period if and so long as the Delay
Conditions exist.

          7. Rule 144.

          The Company agrees, for so long as any Registrable Securities or Warrants remain outstanding
and during any period in which the Company is subject to Section 13 or 15(d) of the Exchange Act,
to use commercially reasonable efforts to (i) provide such opinions or other statements of its
legal counsel (subject to receipt of customary factual back-up certificates from the selling
stockholder and its broker) and (ii) make all filings required thereby in a timely manner in order
to permit resales of such Registrable Securities pursuant to Rule 144 of the Securities Act.

          8. Miscellaneous.

               (a) Other Registration Rights. The Company will not, on or after the date of this
Agreement, enter into any agreement with respect to its securities that is superior to the rights
granted to the holders of Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof.

               (b) Amendments and Waivers. The provisions of this Agreement may not be amended,
modified or supplemented, and waivers or consents to or departures from the provisions hereof may
not be given unless the Company has obtained the written consent of holders of a
majority-in-interest of the Registrable Securities (excluding Registrable Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent to departure from
the provisions hereof that relates exclusively to the rights of holders whose

16

 

Registrable Securities are being sold pursuant to a Registration Statement and that does not
affect directly or indirectly the rights of other holders of Registrable Securities may be given by
the holders of a majority of Registrable Securities being sold by such holders pursuant to such
Registration Statement.

               (c) Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been given if delivered to personally or
mailed by registered or certified mail, postage prepaid and return receipt requested, or by
facsimile to the address of the parties set forth on the signature pages of this Agreement. Each
of the addresses for notice on the signature pages of this Agreement may be changed by providing
appropriate notice hereunder. Notice given by personal delivery or registered mail shall be
effective upon actual receipt. Notice given by facsimile shall be effective upon actual receipt if
received during the recipient’s normal business hours, or at the beginning of the recipient’s next
normal business day after receipt if not received during the recipient’s normal business hours.
All Notices by facsimile shall be confirmed by the sender thereof promptly after transmission in
writing by registered mail or personal delivery.

          9. Parties in Interest; Administration by Special Committee. The parties to this
Agreement intend that all holders of Registrable Securities shall be entitled to receive the
benefits of this Agreement and that any Electing Holder shall be bound by the terms and provisions
of this Agreement by reason of such election with respect to the Registrable Securities that are
included in a Registration Statement. All the terms and provisions of this Agreement shall be
binding upon, shall inure to the benefit of and shall be enforceable by the respective successors
and assigns of the parties hereto; provided that Shareholder (or any permitted assignee thereof)
may only assign the rights hereunder in connection with a transfer of Registrable Securities to
Worsley, Worsley’s spouse, the ancestors or descendents of Worsley or his spouse, or any ancestor
or descendant of any such ancestors or descendants, or any trust for the benefit of any of the
foregoing persons, provided such assignee agrees to be bound by and to perform all of the terms and
provisions of this Agreement; any other assignment of rights hereunder shall be null and void.

     Prior to the End Date (as defined in the Company’s Certificate of Incorporation), the Special
Committee (as defined in the Company’s Certificate of Incorporation) of the Company shall have
exclusive authority to administer, interpret and enforce this Agreement on behalf of the Company,
and to make determinations to be made by the Company’s Board of Directors, including with respect
to Delay Conditions. For the avoidance of doubt, no such decision, interpretation or determination
made by the Special Committee in its administration of this Agreement on behalf of the Company
shall be conclusive upon Shareholder, and nothing shall prevent Shareholder from contesting any
such decision, interpretation or determination as not complying with the terms of this Agreement.

               (a) Mergers, Etc. The Company shall not, directly or indirectly, enter into any
merger, consolidation or reorganization in which the Company shall not be the surviving corporation
unless the proposed surviving corporation shall, prior to such merger, consolidation or
reorganization, agree in writing to assume the obligations of the Company under this Agreement, and
for that purpose references hereunder to “Registrable Securities” shall be deemed to be references
to the securities which the holders would be entitled to receive in

17

 

exchange for Registrable Securities under any such merger, consolidation or reorganization;
provided, however, that the provisions of this Agreement shall not apply in the event of any
merger, consolidation or reorganization in which the Company is not the surviving corporation if
the holders of Registrable Securities are entitled to receive in exchange therefor (i) cash, or
(ii) securities of the acquiring corporation which may be immediately sold to the public without
registration under the Securities Act.

               (b) Short Sales. Each Shareholder hereby agrees that it will not, at any time during
the Effectiveness Period, engage in short sales of Registrable Securities, short and deliver
Registrable Securities to close out such short positions, or enter into transactions with
broker-dealers to effect the foregoing.

               (c) Counterparts. This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same agreement.

               (d) Headings. The headings in this agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning, construction or interpretation hereof.

               (e) Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware without giving effect to provisions relating to conflicts of
law to the extent the application of the laws of another jurisdiction would be required thereby.

               (f) Severability. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable
in any respect for any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions hereof shall not be in any way impaired or
affected thereby, it being intended that all of the rights and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.

               (g) Survival. The respective indemnities, agreements, representations, warranties and
other provisions set forth in this Agreement or made pursuant hereto shall remain in full force and
effect, regardless of any investigation (or any statement as to the results thereof) made by or on
behalf of any Electing Holder, any director, officer or partner of such holder, any agent or
underwriter, any director, officer or partner of such agent or underwriter, or any controlling
person of any of the foregoing, and shall survive the transfer and registration of the Registrable
Securities of such holder.

               (h) Entire Agreement. This Agreement is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted with respect to the Registrable Securities.

18

 

This Agreement supersedes all prior agreements and understandings between the parties with
respect to such subject matter.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

19

 

          IN WITNESS WHEREOF, the Company and the Shareholder have executed this Agreement as of the
date first written above.

	 	 	 	 	 
	 	COMPANY:

RENEGY HOLDINGS, INC.

 	 
	 	By:  	/s/ Robert W. Zack
 	 
	 	 	Name:  	Robert W. Zack 	 
	 	 	Title:  	CEO 	 
	 

	 	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	Renegy Holdings, Inc.
	 

	 	To the Company’s Chief Financial Officer at
the address of the Company’s principal
office as set forth in the last filing by
the Company with the Securities and
Exchange Commission
	 
	 	 
	 

	 	Facsimile: (480) 556-5500
	 
	 	 
	 

	 	With a copy to:
	 
	 	 
	 

	 	Donna M. Petkanics, Esq.
	 

	 	Bradley L. Finkelstein, Esq.
	 

	 	Wilson Sonsini Goodrich & Rosati
	 

	 	Professional Corporation
	 

	 	650 Page Mill Road
	 

	 	Palo Alto, California 94304
	 

	 	Facsimile: (650) 493-6811

[Signature Page to Registration Rights Aggreement]

 

 

	 	 	 
	 

	 	SHAREHOLDER:
	 
	 	 
	 

	 	THE ROBERT M. WORSLEY AND CHRISTI M. WORSLEY
REVOCABLE TRUST

	 	 	 	 	 
	 	 	 
	 	By:  	                      /s/ Robert M. Worsley
 	 
	 	 	Name:  	Robert M. Worsley 	 
	 	 	Title:  	Trustee 	 
	 
	 	 	 
	 	By:  	                     /s/ Christi M. Worsley
 	 
	 	 	Name:  	Christi M. Worsley 	 
	 	 	Title:  	Trustee 	 
	 

	 	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	Robert M. Worsley
	 

	 	3418 N.Val Vista Drive
	 

	 	Mesa, AZ 85213
	 

	 	Facsimile: (480) 718-7977
	 
	 	 
	 

	 	With a copy to:
	 
	 	 
	 

	 	Christopher D. Johnson, Esq.
	 

	 	Squire, Sanders & Dempsey L.L.P.
	 

	 	40 North Central Ave., Suite 2700
	 

	 	Phoenix, Arizona 85004
	 

	 	Facsimile: (602) 253-8129

[Signature Page to Registration Rights Agreement]

 

 

Exhibit A

FORM OF NOTICE AND QUESTIONNAIRE

SELLING STOCKHOLDER NOTICE AND QUESTIONNAIRE

     The undersigned beneficial owner of common stock, par value $0.001 per share (the “Common
Stock”), of                                         , a Delaware corporation (the “Company”), (the
“Registrable Securities”) understands that the Company has filed or intends to file with
the Securities and Exchange Commission (the “Commission”) a registration statement on Form
S-1 or Form S-3, as the case may be (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                     , 2007 (the “Registration Rights Agreement”), between the Company and
the Shareholder 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.

A-1

 

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

QUESTIONNAIRE

	1.	 	Name.

	 	(a)	 	Full Legal Name of Selling Stockholder
	 
	 	 	 	 
	 
	 	 	 	 

	 
	 	(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:
	 
	 	 	 	 
	 
	 	 	 	 

	 
	 	(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):
	 
	 	 	 	 
	 
	 	 	 	 

	2.	 	Address for Notices to Selling Stockholder:

	 	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 	 	Telephone:	 	 
	 	 	 	 	 
	 

	 	Fax:	 	 	 	 
	 	 	 	 	 
	 	 	Contact Person:	 	 
	 

	 	 	 	 	 	 

	3.	 	Beneficial Ownership of Registrable Securities:

	 	(a)	 	Type and Principal Amount of Registrable Securities beneficially owned:
	 
	 	 	 	 
	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	 	 	 

A-2

 

	4.	 	Broker-Dealer Status:

	 	(a)	 	Are you a broker-dealer?

Yes            No

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

Yes            No

	 	 	Note: If 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            No

	 	(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?

Yes            No

	 	 	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:
	 
	 	 	 	 
 

 
 

A-3

 

	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:
	 
	 	 	 
 

 
 

     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.

     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:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 

	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

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

A-4

 

Exhibit B

PLAN OF DISTRIBUTION

     We are registering the shares of common stock issued to the selling stockholders and to permit
the resale of these shares of common stock by the holders of the common stock from time to time
after the date of this prospectus. We will not receive any of the proceeds from the sale by the
selling stockholders of the shares of common stock. We will bear all fees and expenses incident to
our obligation to register the shares of common stock.

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

	 	•	 	on any national securities exchange or quotation service on which the securities may
be listed or quoted at the time of sale;
	 
	 	•	 	in the over-the-counter market;
	 
	 	•	 	in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
	 
	 	•	 	through the writing of options, whether such options are listed on an options
exchange or otherwise;
	 
	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers;
	 
	 	•	 	block trades in which the broker-dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;
	 
	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for its
account;
	 
	 	•	 	an exchange distribution in accordance with the rules of the applicable exchange;
	 
	 	•	 	privately negotiated transactions;
	 
	 	•	 	broker-dealers may agree with the selling stockholders to sell a specified number of
such shares at a stipulated price per share;
	 
	 	•	 	a combination of any such methods of sale; and

B-1

 

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

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

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

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

B-2

 

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

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

B-3

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