Document:

exv10w5

 

Exhibit 10.5

CONSULTING AGREEMENT

     This Agreement is entered into on December 4, 2006, by and between CHATEAU ENERGY, INC., a
Texas corporation, (“CHATEAU”) and GREENHUNTER ENERGY, INC., a Delaware corporation, (“GREENHUNTER”
or the “Company”), each individually referred to herein as (“Party”) and both collectively referred
to herein as (“Parties”).

     WHEREAS, CHATEAU has vast experience in the energy industry and is a developer in the
renewable energy and the bio-fuels sector.

     WHEREAS, GREENHUNTER is developing a diversified renewable energy and bio-fuels company and is
desirous of engaging the services of CHATEAU to locate and develop on behalf of GREENHUNTER
projects in this area.

     NOW, THEREFORE, the Parties hereby agree to the following Consulting arrangement as follows:

ARTICLE I

BUSINESS DEVELOPMENT

Section 1.1. Purpose. GREENHUNTER agrees to grant CHATEAU the non-exclusive right to
represent GREENHUNTER in the location and development of renewable energy and bio-fuel projects
(the “Projects”) within the scope of a consulting agreement.

Section 1.2. Developer.  CHATEAU shall be responsible for locating, analyzing and
delineating the business viability, as well as providing an adequate development strategy and
executing on this strategy to provide closure for GREENHUNTER of the Projects.

Section 1.3. Provider. Once GREENHUNTER has agreed with CHATEAU to pursue a Project, then
GREENHUNTER shall be responsible for providing personnel and financial support for the developing
efforts of CHATEAU that is to include but not limited to, engineering, permitting, third party
consultants and pre-agreed to out-of-pocket expenses of CHATEAU as Developer.

ARTICLE II

TRANSACTION

Section 2.1. Right to Earn. Pursuant to its performance in this Consulting Agreement,
CHATEAU shall be entitled to receive restricted shares of common stock. For each and every

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transaction that CHATEAU is able to bring to closing for GREENHUNTER, its subsidiaries and/or
affiliates, the Board of Directors of GreenHunter and CHATEAU shall agree to negotiate in good
faith an equitable value for each transaction prior to closing based on the magnitude, type and
potential profitability of each Project. If the parties hereto do not agree on an equitable
arrangement, then GREENHUNTER agrees it will pass on that particular Project.

Section 2.2 Bonus Granted. CHATEAU has been and will continue to be instrumental in
GREENHUNTER’s ability to understand and conduct business in the renewable industry in California
and as an incentive bonus, GREENHUNTER shall pay $1,500,000, such consideration being paid in the
form of 300,000 shares of common stock, par value $.001 per share (the Shares”) to CHATEAU no
later than May 14, 2007. 

Section 2.3 Contractual Fees. GREENHUNTER throughout the term of this Agreement will pay a
quarterly fee of $98,000 to CHATEAU. The first quarterly payment of $98,000 being due and payable
on June 30, 2007 and will continue every quarter thereafter until the last payment of March 31,
2012. This payment is a contractual obligation for the five-year term of this Agreement.

Section 2.4 SCE Approvals. If CHATEAU is unable to secure SCE approval of the transfer of
the Power Purchase Agreement into GREENHUNTER and that sale is terminated, then this Agreement
shall become null and void with no further obligation one to the other.

ARTICLE III

 RESPONSIBILITIES AND OBLIGATIONS

Section 3.1. Cooperation & Exclusivity. The Parties or their assigns agree to cooperate in
all aspects including the exchange of necessary information as required for the fulfillment of the
objectives of this Agreement. As further cooperation, CHATEAU agrees that this Agreement with
GREENHUNTER is on an exclusive basis. This exclusivity is a first right of refusal on Projects
located by CHATEAU. If GREENHUNTER passes on the right to a Project in writing, then CHATEAU has
the right to develop such Project as its own. GREENHUNTER shall supply CHATEAU with a letter of
authority to represent GREENHUNTER in this capacity. If the parties hereto jointly decide to pass
on a Project located by CHATEAU, GREENHUNTER agrees not to pursue such Project without the
inclusion of CHATEAU. This provision shall remain in full force and effect for a period one (1)
year from the date of termination of this Agreement. For purposes of this Section, GREENHUNTER is
deemed to include any and all of its affiliates, subsidiaries, and related third parties.

Section 3.2. Confidentiality. The Parties acknowledge and understand that in the course of
performance under this Agreement, each may be exposed to sensitive commercial and proprietary
information developed by the other Party through great expense over a long period of time and that
the disclosure of such information to a person not a Party to this Agreement could

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cause irreparable harm to the other Party. Accordingly, all Parties agree to exercise reasonable
precautions to safeguard the confidential or proprietary nature of such information. All Parties
shall prevent the unauthorized disclosure or use of such information without the prior written
consent of the other Party. Each Party agrees not to use such information for any purpose not
connected to the Projects. This obligation of confidentiality shall not apply to information (i)
which is in the public domain or enters the public domain other than by breach of this Agreement,
(ii) which is revealed to a Party by a person not bound to an obligation of confidentiality to a
Party to this Agreement, or (iii) which can be shown to have been previously known or independently
developed by a Party. This Section 3.2 shall remain in full force and effect for a period one (1)
year from the date of termination of this Consulting Agreement.

ARTICLE IV

REPRESENTATIONS & WARRANTIES

Section 4.1. Valid Existence. Each Party represents and warrants to the other that it is a
corporation duly organized, validly existing and in good standing under the laws of its place of
organization.

Section 4.2. Qualified. Each Party represents and warrants to the others that it is
qualified to do business and is in good standing in all jurisdictions where such registration might
be required by reason of performance under this Agreement.

Section 4.3. Authority. Each Party represents and warrants to the other that it has full
corporate authority to enter into and perform its obligations under this Agreement; and this
Agreement does not violate, conflict with or constitute a default under any agreement.

Section 4.4. Indemnification. Each Party agrees to indemnify and hold the other Party and
their affiliates, and their respective directors, officers, employees, attorneys and such
affiliates harmless from and against any and all claims, actions, causes of action, liabilities,
damages, losses, costs (including, without limitation, court costs and reasonable attorneys’ fees),
of any kind or character, arising out of or otherwise relating to this Agreement or breach of any
representations of any Party contained herein.

Section 4.5. No Public Sale or Distribution. Chateau is acquiring the Shares for
investment purposes, as principal for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to sales registered or
exempted under the Securities Act of 1933, as amended (the “1933 Act”); provided, however, that by
making the representations herein, Chateau does not agree to hold any of the Shares for any minimum
or other specific term and reserves the right to dispose of the Shares at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933 Act. Chateau is
acquiring the Shares hereunder in the ordinary course of its business. Chateau does not presently
have any agreement or understanding, directly or indirectly, with any person to distribute any of
the Shares.

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Section 4.6. Accredited Investor Status. At the time Chateau was offered the Shares, it
was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) of Regulation
D under the 1933 Act (“Regulation D”). Chateau is not a registered broker-dealer under Section 15
of the 1934 Act.

Section 4.7. Experience of Chateau. Chateau, either alone or together with its
representatives, has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the prospective investment in the
Shares, and has so evaluated the merits and risks of such investment. Chateau is able to bear the
economic risk of an investment in the Shares and, at the present time, is able to afford a complete
loss of such investment.

Section 4.8. Reliance on Exemptions. Chateau understands that the Shares are being offered
and sold to it in reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in part upon the truth and
accuracy of, and Chateau’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Chateau set forth herein in order to determine the
availability of such exemptions and the eligibility of Chateau to acquire the Shares.

Section 4.9. Information. Chateau and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and materials relating
to the offer and sale of the Shares which have been requested by Chateau. Chateau and its advisors,
if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries
nor any other due diligence investigations conducted by Chateau or its advisors, if any, or its
representatives shall modify, amend or affect Chateau’s right to rely on the Company’s
representations and warranties contained herein. Chateau understands that its investment in the
Shares involves a high degree of risk. Chateau has sought such accounting, legal and tax advice as
it has considered necessary to make an informed investment decision with respect to its acquisition
of the Shares.

Section 4.10. No Governmental Review. Chateau understands that no United States federal or
state agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Shares or the fairness or suitability of the investment in the
Shares nor have such authorities passed upon or endorsed the merits of the offering of the Shares.

Section 4.11. Transfer or Resale. Chateau understands that: (i) the Shares have not been
and are not being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B)
sold, assigned or transferred pursuant to an exemption from such registration, provided that upon
the request of the Company, Chateau delivers to the Company an opinion of counsel, in a form
reasonably acceptable to the Company, confirming the availability of such exemption, or (C) Chateau
provides the Company with reasonable assurance that such Shares can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as amended,

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(or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Shares made in
reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the Sharesunder circumstances in which the seller may be
deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and
(iii) neither the Company nor any other person is under any obligation to register the Shares under
the 1933 Act or any state securities laws or to comply with the terms and conditions of any
exemption thereunder.

Section 4.12. Legends. Chateau understands that the certificates or other instruments
representing the Securities, except as set forth below, shall bear any legend as required by the
“blue sky” laws of any state and a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):

THE SHARES BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SHARES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED UNLESS (A) REGISTERED
UNDER AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) PURSUANT TO AVAILABLE EXEMPTIONS
FROM SUCH REGISTRATION, PROVIDED THAT UPON THE REQUEST OF THE COMPANY THE
SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL, IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.

The legend set forth above shall be removed and the Company shall issue a certificate without such
legend to the holder of the Shares upon which it is stamped, if, unless otherwise required by state
securities laws, (i) such Shares are registered for resale under the 1933 Act , or (ii) in
connection with a sale, assignment or other transfer, such holder provides the Company with an
opinion of counsel, in a form reasonably acceptable to the Company, to the effect that such sale or
transfer of the Shares may be made without registration under the applicable requirements of the
1933 Act, or (iii) following a sale of transfer of such Securities pursuant to Rule 144 (assuming
the transferor is not an affiliate of the Company), or (iv) while such Securities are eligible for
sale under Rule 144(k).

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ARTICLE V

MISCELLANEOUS

Section 5.1. Choice of Law. The validity, interpretation and performance of this Agreement
shall be governed by the laws of the State of Texas applicable to contracts made and to be
performed entirely with such state and laws of the United States of America.

Section 5.2. Severance. Should one or more provisions of this Agreement be held invalid,
illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected.

Section 5.3. Counterparts. This Agreement may be executed in counterparts, all of which
are identical, and all such counterparts, when taken together, shall constitute one and the same
document.

Section 5.4. Notice. Any notice, request, consent, approval or other document, instrument
or communication required or which may be given hereunder shall be in writing and deemed delivered
upon notice if delivered personally, upon confirming advice of transmission and the notice if a
facsimile copy is delivered by telecopy, upon notice if delivered by registered mailed or by
courier. Each such notice, request, consent, approval or other document shall be addressed as
follows:

If to CHATEAU:

Mr. Dana M. Dutcher

Chateau Energy, Inc.

10440 North Central Expressway

Suite 1475

Dallas, Texas 75231

Phone: 214-891-3360

Fax: 214-891-3366

If to GREENHUNTER:

Mr. Michael K. Studer, President

GreenHunter Energy, Inc.

3129 Bass Pro Drive

Grapevine, Texas 76051

Phone: 469-293-4397

Fax: 972-550-7464

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The Parties may change the address to which such notices may be sent by sending notice of such
change in the manner set forth above.

Section 5.5. Successors and Assigns. This Agreement shall be binding on and inure to the
benefit of the Parties hereto and their respective heirs, devisees, personal representatives,
successors, and assigns.

Section 5.6. Term of Agreement. This Agreement shall remain in full force and effect for
five (5) years from the date set forth above.

     IN WITNESS WHEREOF, the Parties have executed this Consulting Agreement effective the date
set forth above.

	 	 	 	 	 	 	 	 	 	 	 
	CHATEAU ENERGY, INC.	 	 	 	GREENHUNTER ENERGY, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	Name:

	 	 

Dana M. Dutcher
	 	 	 	Name:
	 	 

	 	 
	Title:

	 	President
	 	 	 	Title:
	 	 

	 	 
	 

	 	 	 	 	 	 	 	 

	 	 

7exv10w6

 

Exhibit 10.6

EXECUTION COPY

REGISTRATION RIGHTS AGREEMENT

     REGISTRATION RIGHTS AGREEMENT (the “Agreement”) made as of this 9th day of March, 2007 by and
between GreenHunter Energy, Inc., a Delaware corporation (the “Company”), West Coast Opportunity
Fund, LLC (“WCOF”), Centaur Value Fund, LP and United Centaur Master Fund (“Centaur” and together
with WCOF, each an “Investor” and together the “Investors”).

W
I T N E S S E
T H:

     WHEREAS, in connection with the Securities Purchase Agreement by and among the parties hereto
of even date herewith (the “Purchase Agreement”), the Company has agreed, upon the terms and
subject to the conditions of the Purchase Agreement, to issue and sell to the Investors an
aggregate (i) 12,500 shares of 2007 Series A 8% Convertible Preferred Stock, par value $.001 per
share (“Series A 8% Preferred”), (ii) 500,000 shares of common stock (the “Common Stock”), par
value $.001 per share (the “Closing Shares”) and (iii) Common Stock Purchase Warrants (“Warrants”)
exercisable into 1,500,000 shares of Common Stock of the Company, for a total Purchase Price of
$15,000,000 (the “Purchase Price”).

     WHEREAS, the parties hereto desire to promote the interests of the Company and the interests
of the Investors by establishing herein certain terms and conditions upon which the Company will
register the Closing Shares and shares of Common Stock underlying the Series A 8% Preferred (the
“Conversion Shares”), shares of Common Stock underlying the Warrants (the “Warrant Shares”) and
shares of Common Stock paid as dividends on the Series A 8% Preferred (the “Dividend Shares”).

     NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements herein
contained, and for other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:

     1. Certain Definitions. As used herein, the following terms shall have the following
respective meanings:

          “Commission” or “SEC” shall mean the Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act of 1933, as amended (the “Securities Act”).

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

          “Holder” shall mean each Investor (together with any other investor, referred to as
“Holders”).

          “Restricted Securities” shall mean the securities of the Company required to bear or bearing
the legend set forth in Section 2 hereof.

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          “Registrable Securities” shall mean (i) the Closing Shares held by the Investors, (ii) the
Common Stock issued to the Holders upon any stock split, stock dividend, merger, consolidation,
recapitalization or similar event, excluding all such shares which (x) have been registered under
the Securities Act and disposed of in accordance with the registration statement covering them, (y)
have been publicly sold pursuant to Rule 144 (or any successor rule) under the Securities Act or
(z) are eligible for sale without restriction under Rule 144(k) (or any successor rule) under the
Securities Act, (iii) the Conversion Shares, (iv) the Warrant Shares, and (v) the Dividend Shares.

          The terms “register,” “registered” and “registration” shall refer to a registration effected
by preparing and filing a registration statement in compliance with the Securities Act and
applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness
of such registration statement.

          “Registration Expenses” shall mean all expenses incurred by the Company in compliance with
Section 2 hereof, including, without limitation, all registration, qualification and filing fees,
exchange listing fees, printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any special audits incident to or required
by any such registration.

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

          “Required Registration Amount” means 120% of (i) the Closing Shares, (ii) the number of shares
of Common Stock issued and issuable upon conversion pursuant to the Series A 8% Preferred as of the
trading day immediately preceding the applicable date of determination, (iii) the number of shares
of Common Stock issued and issuable upon exercise pursuant to the Warrants as of the trading day
immediately preceding the applicable date of determination, without regard to any limitation on
conversion or redemptions of the Series A 8% Preferred or exercises of the Warrants, and (iv) the
number of Dividend Shares issued and issuable pursuant to the terms of the Certificate of
Designations as of the trading day immediately preceeding the applicable date of the determination,
without regard to any limitation on conversion or redemptions of the Series A 8% Preferred or
exercises of the Warrants.

          “Selling Expenses” shall mean all underwriting discounts and selling commissions applicable to
the sale of Registrable Securities.

          “Subscription Date” shall mean the date of this Agreement.

     2. Registration Rights.

     2.1. (a) Mandatory Registration. The Company will, as soon as practicable, but in
any event no later than the earlier of (I) the date which is the one-year anniversary of the date
on which the Company’s Form 10 or Form 10-SB, as applicable, is declared effective by the
Commission, and (II) the date which is the one-year anniversary of the date which is 150 days
following the Subscription Date (the “Filing Deadline”), use its reasonable best efforts to effect

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a registration covering the resale of all of the Registrable Securities. The Registration
Statement prepared pursuant hereto shall register for resale at least the number of shares of
Common Stock equal to the Required Registration Amount as of date the Registration Statement is
initially filed with the SEC. The Registration Statement shall contain (except if otherwise
directed by the Required Holders) the “Selling Shareholders” and “Plan of
Distribution” sections in substantially the form attached hereto as Exhibit B. The
Company shall use its best efforts to have the registration statement declared effective by the
Commission as soon as practicable, but in no event later than the date which is sixty (60) days
after the Filing Deadline (the “Effectiveness Deadline”). Each Investor agrees to furnish to the
Company a completed questionnaire in the form of Exhibit C within three trading days after
receiving the Company’s written request therefor.

     2.2. Allocation of Registrable Securities. The number of Registrable Securities
included in any Registration Statement shall be allocated pro rata among the Investors based on the
number of Registrable Securities held by each Investor at the time the Registration Statement
covering such initial number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such Investor’s
Registrable Securities other than pursuant to the Plan of Distribution contained in the
Registration Statement, each transferee shall be allocated a pro rata portion of the then remaining
number of Registrable Securities included in such Registration Statement for such transferor. Any
shares of Common Stock included in a Registration Statement and which remain allocated to any
Person which ceases to hold any Registrable Securities covered by such Registration Statement shall
be allocated to the remaining Investors, pro rata based on the number of Registrable Securities
then held by such Investors which are covered by such Registration Statement. Except as provided in
Section 2.4, in no event shall the Company include any securities other than Registrable Securities
on any Registration Statement without the prior written consent of the Holders.

     2.3. Effect of Failure to File and Obtain and Maintain Effectiveness of Registration
Statement. If (i) a Registration Statement covering all of the Registrable Securities required
to be covered thereby and required to be filed by the Company pursuant to this Agreement is (A) not
filed with the SEC on or before the respective Filing Deadline (a “Filing Failure”) or (B) not
declared effective by the SEC on or before the respective Effectiveness Deadline (an “Effectiveness
Failure”) or (ii) on any day after the Effective Date sales of all of the Registrable Securities
required to be included on such Registration Statement cannot be made (other than during an
Allowable Grace Period (as defined in Section 2.5) pursuant to such Registration Statement
(including, without limitation, because of a failure to keep such Registration Statement effective,
to disclose such information as is necessary for sales to be made pursuant to such Registration
Statement or to register a sufficient number of shares of Common Stock) (a “Maintenance Failure”)
then, as partial relief for the damages to any holder by reason of any such delay in or reduction
of its ability to sell the Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to each holder of Registrable
Securities relating to such Registration Statement an amount in cash equal to two percent (2.0%) of
the pro-rata portion of the Purchase Price of such Investor’s Registrable Securities included in
such Registration Statement on each of the following dates: (i) the
thirtieth day (pro rated for periods totaling less than thirty days) after a Filing Failure
until such

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Filing Failure is cured; (ii) the thirtieth day (pro rated for periods totaling less
than thirty days) after an Effectiveness Failure until such Effectiveness Failure is cured; and
(iii) the thirtieth day (pro rated for periods totaling less than thirty days) after a Maintenance
Failure until such Maintenance Failure is cured. The payments to which a holder shall be entitled
pursuant to this Section 2.3 are referred to herein as “Registration Delay Payments.” Registration
Delay Payments shall be capped at 10% of the total Purchase Price outstanding in any 12 month
period. Registration Delay Payments shall be paid on the day of the Filing Failure, Effectiveness
Failure and the initial day of a Maintenance Failure, as applicable, and thereafter on the earlier
of (I) the thirtieth day after the event or failure giving rise to the Registration Delay Payments
has occurred and (II) the third Business Day after the event or failure giving rise to the
Registration Delay Payments is cured. In the event the Company fails to make Registration Delay
Payments in a timely manner, such Registration Delay Payments shall bear interest at the rate of
one percent (1.0%) of the total amount of the Registration Delay Payments per month (prorated for
partial months) until paid in full. Notwithstanding the foregoing, no Registration Delay Payments
shall be due or payable if any delay or failure to file a Registration Statement or Maintenance
Failure is directly caused by statements, omissions, action or inaction solely on the part of the
Buyer.

     2.4. Underwritten Offering.

          (a) Underwriting. If a Holder intends to distribute the Registrable Securities by
means of an underwritten offering, it shall so advise the Company and shall include any information
that it shall have received as to the nature of the underwriting, including the name of the
underwriter or representative thereof selected for such underwriting. A Holder may elect to
include in such underwriting all or a part of the Registrable Securities held by it. Any
underwriter selected by such Holder shall be subject to the Company’s consent (which consent shall
not be unreasonable withheld).

          (b) Other Stockholders. If the Registrable Securities are distributed by means of an
underwritten offering, the Registration Statement may, subject to the provisions of Section 2.4(d)
below, include other securities of the Company which are held by persons who, by virtue of
agreements with the Company now or hereinafter in effect are entitled to include their securities
in any such registration (collectively, “Other Stockholders”) and may include securities of the
Company being sold for the account of the Company.

          (c) Notification. The Company shall notify all Other Stockholders no later than 30
days prior to the Filing Deadline and such Other Stockholders shall have 10 days from receipt of
such notice from the Company to notify the Company of their desire to participate in the
registration. The Company shall use its commercially reasonable efforts to register under the
Securities Act, for public sale in accordance with the method of distribution specified in such
notices, the number of Registrable Securities specified in such notices, pursuant to the terms
hereof.

          (d)
Limitations. If, in an underwritten offering, the Company wishes to include in a
Registration Statement securities being sold for its own account, or if the Other Stockholders
shall request inclusion in a Registration Statement, the Company may offer to

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include the securities of the Company and such Other Stockholders in the underwriting and (in
the case of Other Stockholders) may condition such offer on their acceptance of the further
applicable provisions of this Agreement. The Company shall (together with the Holders and Other
Stockholders proposing to distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or representative of the underwriters
selected for such underwriting. Notwithstanding any other provision of this Section 2.4, if the
representative of the underwriters advises the Company in writing that, in its opinion, marketing
factors require a limitation on the number of shares to be underwritten, the Company shall so
advise the Holder and the number of shares of Registrable Securities and other securities that may
be included in the registration and underwriting shall be allocated in the following manner: (i)
the securities being sold for the account of the Company shall be excluded from such registration
and underwriting to the extent required by such limitation (ii) if a limitation on the number of
shares is still required, the securities held by the Other Stockholders of the Company shall be
excluded from such registration and underwriting to the extent required by such limitation in
proportion, as nearly practicable, to the respective amounts of securities requested to be
registered by such Other Stockholders or otherwise as their rights may appear and (iii) if a
limitation on the number of shares is still required, the securities held by the Holders of the
Company shall be excluded from such registration and underwriting to the extent required by such
limitation in proportion, as nearly practicable, to the respective amounts of securities requested
to be registered by the Holders or otherwise as their rights may appear. If the Company or a
Holder or any Other Stockholder who has requested inclusion in such registration as provided above
disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company. The securities so withdrawn shall also be withdrawn from
registration. If, pursuant to this paragraph, any of the securities being sold for the account of
such Holder are to be excluded from such registration and underwriting, such Holder may withdraw
its request for such registration or underwriting and such request will not be counted as the
registration permitted under Section 2.1 of this Agreement, or such Holder may have such securities
registered as a non-underwritten “shelf” registration pursuant to Rule 415.

     2.5. Grace Period. Notwithstanding anything to the contrary contained herein, at any
time after the Registration Statement has been declared effective by the SEC, the Company may delay
the disclosure of material, non-public information concerning the Company the disclosure of which
at the time is not, in the good faith opinion of the Board of Directors of the Company and its
counsel, in the best interest of the Company and, in the opinion of counsel to the Company,
otherwise required (a “Grace Period”); provided, that the Company shall promptly (i) notify the
Investors in writing of the existence of material, non-public information giving rise to a Grace
Period (provided that in each notice the Company will not disclose the content of such material,
non-public information to the Investors) and the date on which the Grace Period will begin, and
(ii) notify the Investors in writing of the date on which the Grace Period ends; and, provided
further, that no Grace Period shall exceed 20 consecutive days and during any 365-day period such
Grace Periods shall not exceed an aggregate of 30 days and the first day of any Grace Period must
be at least two trading days after the last day of any prior Grace Period (each, an “Allowable
Grace Period”). For purposes of determining the length of a Grace Period above, the Grace Period
shall begin on and include the date the Investors receive the notice referred to in clause (i) and
shall end on and include the later of the date the Investors receive the notice
referred to in clause (ii) and the date referred to in such notice. The provisions of Section

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

     2.6. Expenses of Registration.

     The Company shall bear all Registration Expenses and the Holders’ reasonable counsel fees and
disbursements and each Holder shall bear its own Selling Expenses relating to the securities being
included by such Holder in the registration incurred in connection with any registration,
qualification or compliance pursuant to the provisions of Section 2.1. The Holders shall have the
right to select one legal counsel to review and oversee any registration pursuant to this Section 2
(“Legal Counsel”), which shall be McDermott Will & Emery LLP or such other counsel as thereafter
designated by the Holders. The Company and Legal Counsel shall reasonably cooperate with each
other in performing the Company’s obligations under this Agreement

     2.7. Registration Obligations. In the case of the registration effected by the
Company pursuant to this Agreement, the Company will keep the Holders advised in writing as to the
initiation of the registration and as to the completion thereof. At its expense, the Company will:

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

          (b) Promptly prepare and file with the SEC a Registration Statement with respect to the
Registrable Securities and use commercially reasonable efforts to cause such Registration Statement
relating to the Registrable Securities to become effective as soon as practicable after such filing
(but in no event later than the Effectiveness Deadline) (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws (except that the Company shall not be required
to qualify the offering under the blue sky laws of any jurisdiction in which the Company would be
required to execute a general consent to service of process unless the Company is already subject
to service in such jurisdiction) and appropriate
 

6

 

compliance with applicable regulations issued under the Securities Act) as would permit or facilitate the
sale and distribution of all such Registrable Securities.

          (c) Keep such registration effective pursuant to Rule 415 at all times until the earlier of
(i) the date as of which the Investors may sell all of the Registrable Securities covered by such
Registration Statement without restriction pursuant to Rule 144(k) (or any successor thereto)
promulgated under the 1933 Act or (ii) the date on which the Investors shall have sold all of the
Registrable Securities covered by such Registration Statement (the “Registration Period”).

          (d) Ensure that each Registration Statement (including any amendments or supplements thereto
and prospectuses contained therein) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein, or necessary to make the statements
therein (in the case of prospectuses, in the light of the circumstances in which they were made)
not misleading. The term “commercially reasonable efforts” shall mean, among other things, that
the Company shall submit to the SEC, within two Business Days after the later of the date (i) that
the Company learns that no review of a particular Registration Statement will be made by the staff
of the SEC or that the staff has no further comments on a particular Registration Statement, as the
case may be, and (ii) of the approval of Legal Counsel pursuant to Section 2.7(f) (which approval
is immediately sought), a request for acceleration of effectiveness of such Registration Statement
to a time and date not later than 48 hours after the submission of such request.

          (e) Prepare and file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the
1933 Act, as may be necessary to keep such Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities shall have been
disposed of in accordance with the intended methods of disposition by the seller or sellers thereof
as set forth in such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement (including
pursuant to this Section 2.7(e)) by reason of the Company filing a report on Form 10-Q, Form 10-K
or any analogous report under the Securities Exchange Act of 1934, as amended (the “1934 Act”), the
Company shall have incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to amend or supplement such
Registration Statement.

          (f) (1) permit Legal Counsel to review and comment upon (i) a Registration Statement at least
five Business Days prior to its filing with the SEC and (ii) all amendments and supplements to all
Registration Statements (except for Annual Reports on Form 10-K, and Reports on Form 10-Q and any
similar or successor reports) within a reasonable number of days prior to their filing with the
SEC, and (2) not file any Registration Statement or amendment or supplement thereto in a form to
which Legal Counsel reasonably objects. The Company shall
 

7

 

not submit a request for acceleration of the effectiveness of a Registration Statement or any
amendment or supplement thereto without the prior approval of Legal Counsel, which consent shall
not be unreasonably withheld or delayed. The Company shall furnish to Legal Counsel, without
charge, (i) copies of any correspondence from the SEC or the staff of the SEC to the Company or its
representatives relating to any Registration Statement, (ii) promptly after the same is prepared
and filed with the SEC, one copy of any Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein by reference, if
requested by an Investor, and all exhibits and (iii) upon the effectiveness of any Registration
Statement, one copy of the prospectus included in such Registration Statement and all amendments
and supplements thereto. The Company and Legal Counsel shall reasonably cooperate with each other
in performing the Company’s obligations pursuant to this Section 2.7(f).

          (g) Furnish to each Investor whose Registrable Securities are included in any Registration
Statement, without charge, (i) promptly after the same is prepared and filed with the SEC, at least
one copy of such Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, if requested by an
Investor, all exhibits and each preliminary prospectus, (ii) upon the effectiveness of any
Registration Statement, five (5) copies of the prospectus included in such Registration Statement
and all amendments and supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.

          (h) Notify Legal Counsel and each Investor in writing of the happening of any event, as
promptly as practicable after becoming aware of such event, as a result of which the prospectus
included in a Registration Statement, as then in effect, includes an untrue statement of a material
fact or omission to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading
(provided, that in no event shall such notice contain any material, nonpublic information), and,
subject to Section 2.7(s), promptly prepare a supplement or amendment to such Registration
Statement to correct such untrue statement or omission, and deliver five (5) copies of such
supplement or amendment to Legal Counsel and each Investor (or such other number of copies as Legal
Counsel or such Investor may reasonably request). The Company shall also promptly notify Legal
Counsel and each Investor in writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement or any post-effective
amendment has become effective (notification of such effectiveness shall be delivered to Legal
Counsel and each Investor by facsimile or e-mail on the same day of such effectiveness and by
overnight mail), (ii) of any request by the SEC for amendments or supplements to a Registration
Statement or related prospectus or related information, and (iii) of the Company’s reasonable
determination that a post-effective amendment to a Registration Statement would be appropriate.

          (i) Use commercially reasonable efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, or the suspension of the qualification of
any of the Registrable Securities for sale in any jurisdiction and, if such an order
 

8

 

or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest
possible moment and to notify Legal Counsel and each Investor who holds Registrable Securities
being sold of the issuance of such order or suspension and the resolution thereof or its receipt of
actual notice of the initiation or threat of any proceeding for such purpose.

          (j) Make available for inspection by (i) any Investor, (ii) Legal Counsel and (iii) one firm
of accountants or other agents retained by the Investors (collectively, the “Inspectors”), all
pertinent financial and other records, and pertinent corporate documents and properties of the
Company (collectively, the “Records”), as shall be reasonably deemed necessary by each Inspector,
and cause the Company’s officers, directors and employees, counsel and the Company’s independent
certified public accountants to supply all information which may be necessary and any Inspector may
reasonably request; provided, however, that each Inspector shall agree to hold in strict confidence
and shall not make any disclosure (except to an Investor) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise required under the
1933 Act, (b) the release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure in violation of
this or any other agreement of which the Inspector has knowledge. Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and any Investor) shall be deemed to limit the
Investors’ ability to sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.

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

          (l) Cooperate with the Investors who hold Registrable Securities being offered and, to the
extent applicable, facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations or amounts,

9

 

as the case may be, as the Investors may reasonably request and registered in such names as
the Investors may request.

          (m) Cause all such Registrable Securities to be listed on each, if any, securities exchange on
which similar securities issued by the Company are then listed and pay all fees and expenses in
connection with satisfying its obligation under this Section 2.7(m).

          (n) Provide a transfer agent and registrar for all Registrable Securities and a CUSIP number
for all such Registrable Securities, in each case not later than the effective date of such
registration.

          (o) Furnish to each Holder a signed counterpart, addressed to such Holder, of an opinion of
counsel for the Company, dated the effective date of the registration statement, and in the case of
any underwritten public offering obtain “comfort” letters signed by the Company’s independent
public accountants who have examined and reported on the Company’s financial statements included in
the registration statement, to the extent permitted by the standards of the AICPA or other relevant
authorities.

          (p) If requested by an Investor, within 5 days of receipt of notice from such Investor, (i)
incorporate in a prospectus supplement or post-effective amendment such information as an Investor
reasonably requests to be included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the number of Registrable
Securities being offered or sold, the purchase price being paid therefor and any other terms of the
offering of the Registrable Securities to be sold in such offering; (ii) make all required filings
of such prospectus supplement or post-effective amendment after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or
make amendments to any Registration Statement if reasonably requested by an Investor holding any
Registrable Securities.

          (q) Use commercially reasonable efforts to cause the Registrable Securities covered by the
Registration Statement to be registered with or approved by such other federal or state
governmental agencies or authorities as may be necessary to consummate the disposition of such
Registrable Securities.

          (r) On the date hereof, furnish to the Investors lock-up agreements executed by each Person
listed on Exhibit D hereto pursuant to which each such Person shall agree not to sell,
transfer or dispose any shares of Common Stock owned by such Person during the 360-day period
following the Effective Date.

          (s) otherwise use commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC in connection with any registration hereunder.

          (t) Within 2 Business Days after a Registration Statement which covers Registrable Securities
is ordered effective by the SEC: (i) file a definitive prospectus with the SEC under Rule 424(b) of
the 1933 Act; and (ii) deliver, and cause its legal counsel to deliver, to the transfer agent for
such Registrable Securities (with copies to the Investors whose Registrable

10

 

Securities are included in such Registration Statement) confirmation that such Registration
Statement has been declared effective by the SEC in the form attached hereto as Exhibit A.

     3. Indemnification.

          (a) The Company will indemnify each Holder, each of its officers, directors and partners, and
each person controlling the Holder, with respect to which registration, qualification or compliance
has been effected pursuant to Section 2 hereof, and each underwriter, if any, and each person who
controls any underwriter, against all claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus or other document
(including any related registration statement) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading, and will
reimburse the Holder, each of its officers, directors and partners, and each person controlling the
Holder, each such underwriter and each person who controls any such underwriter, for any legal and
any other expenses as they are reasonably incurred in connection with investigating and defending
any such claim, loss, damage, liability or action; provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability or expense arises out of
or is based on any untrue statement or omission based upon written information furnished to the
Company by the Holder or such underwriter specifically for use therein or to the extent due to the
failure of the Holder or such underwriter to provide an updated prospectus or other document to a
purchaser at a time when the Company has informed the Holder or such underwriter of a material
misstatement or omission in a prospectus or other document and has provided updated prospectuses or
other documents correcting such misstatement or omission.

          (b) Each Holder will indemnify the Company, each of its directors and officers and each
underwriter, if any, of the Company’s securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of the Securities Act and
the rules and regulations thereunder, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement of a material fact
contained in any such registration statement, prospectus or other document, or any omission to
state therein a material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and its directors, officers, partners,
persons, underwriters or control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement or omission is made in
such registration statement, prospectus or other document in reliance upon and in conformity with
written information furnished to the Company by such Holder and stated to be specifically for use
therein; provided, however, that the obligations of such Holder hereunder shall be limited to an
amount equal to the proceeds to the Holder of securities sold as contemplated herein.

11

 

          (c) Each party entitled to indemnification under this Section 3 (the “Indemnified Party”)
shall give notice in writing to the party required to provide indemnification (the “Indemnifying
Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who
shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by
the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such Indemnified Party’s expense. No Indemnifying Party,
in the defense of any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation and no Indemnified Party shall
consent to entry of any judgment or settle such claim or litigation without the prior written
consent of the Indemnifying Party. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and litigation resulting
therefrom.

          (d) If the indemnification provided for in this Section 3 is unavailable to an Indemnified
Party in respect of any losses, claims, damages or liabilities referred to therein, then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault of the Company on
the one hand and the stockholders offering securities in the offering (the “Selling Stockholders”)
on the other in connection with the statements or omissions which resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable considerations. The relative fault
of the Company on the one hand and the Holder on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of material fact or the omission
or alleged omission to state a material fact relates to information supplied by the Company or by
the Holder and the parties’ relevant intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Holders agree that it would
not be just and equitable if contribution pursuant to this Section 3(d) were based solely upon the
number of entities from whom contribution was requested or by any other method of allocation which
does not take account of the equitable considerations referred to above in this Section 3(d). The
amount paid or payable by an Indemnified Party as a result of the losses, claims, damages and
liabilities referred to above in this Section 3(d) shall be deemed to include any legal or other
expenses reasonably incurred by such Indemnified Party in connection with investigating or
defending any such action or claim, subject to the provisions of Section 3(d) hereof.
Notwithstanding the provisions of this Section 3(d), neither Holder shall be required to contribute
any amount or make any other payments under this Agreement which in the aggregate exceed the net
proceeds received by such Holder. No person guilty of fraudulent misrepresentation (within the
meaning of the Securities Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.

     4. Information by Holder. Each Holder shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the Company

12

 

may request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.

     5. Rule 144 Reporting. With a view to making available the benefits of certain rules
and regulations of the Commission which may permit the sale of the Restricted Securities to the
public without registration, the Company agrees to:

          (a) use its reasonable best efforts to make and keep public information available as those
terms are understood and defined in Rule 144 under the Securities Act at all times;

          (b) use its reasonable best efforts to file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the Exchange Act; and

          (c) so long as any Holder owns any Restricted Securities, furnish to such Holder or Holders
forthwith upon request a written statement by the Company as to its compliance with the reporting
requirements of Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents so filed as such
Holder or Holders may reasonably request in availing itself of any rule or regulation of the
Commission allowing such Holder or Holders to sell any such securities without registration.

     6. Transfer or Assignment of Registration Rights. The rights to cause the Company to
register the Registrable Securities held by the Holders under Section 4 may be transferred or
assigned, provided that the Company is given written notice at the time of or within a reasonable
time after said transfer or assignment, stating the name and address of said transferee or assignee
and identifying the Registrable Securities with respect to which such registration rights are being
transferred or assigned, and provided further that the transferee or assignee of such rights
assumes the obligations of a Holder under this Agreement.

     7. Termination. The provisions of Section 2.1 of this Agreement shall terminate at
such time as the Registrable Securities owned by such Holder are eligible for resale under Rule
144(k) (without regard to any volume limitations).

     8. Amendment; Waiver. No amendment, alteration or modification of this Agreement
shall be valid unless in each instance such amendment, alteration or modification is expressed in a
written instrument executed by each Holder (so long as a Holder is a holder of Registrable
Securities) and the Company. No waiver of any provision of this Agreement shall be valid unless it
is expressed in a written instrument duly executed by the party or parties making such waiver. The
failure of any party to insist, in any one or more instances, on performance of any of the terms
and conditions of this Agreement shall not be construed as a waiver or relinquishment of any rights
granted hereunder or of the future performance of any such term, covenant or condition but the
obligation of any party with respect thereto shall continue in full force and effect.

13

 

     9. Specific Performance. The parties hereby declare that it is impossible to measure
in money the damages which will accrue to a party hereto by reason of a failure to perform any of
the obligations under this Agreement. Therefore, all parties hereto shall have the right to
specific performance of the obligations of the other parties under this Agreement, and if any party
hereto shall institute an action or proceeding to enforce the provisions hereof, any person
(including the Company) against whom such action or proceeding is brought hereby waives the claim
or defense therein that such party has an adequate remedy at law, and such person shall not urge in
any such action or proceeding the claim or defense that such remedy at law exists.

     10. Notices. All notices and other communications required or permitted hereunder
shall be in writing and shall be mailed by first-class mail, postage prepaid, or transmitted by
facsimile or delivered by nationally recognized overnight courier, addressed:

     (a) if to a Holders, to the addresses set forth in the Purchase Agreement with copies
to counsel,

     and:

     (b) if to the Company, to the following address, or at such other address as the
Company shall have furnished to the Holders,

	 	 	 	 	 	 	 
	 	 	GreenHunter Energy, Inc.
	 	 
	 
	 	 	3129 Bass Pro Drive	 	 
	 	 	Grapevine, Texas 76051	 	 
	 	 	Attn: Secretary	 	 
	 	 	Phone: 469-293-4389	 	 
	 

	 	Facsimile:	 	 	 	 
	 

	 	 	 	 

	 	 

     Alternatively, to such other address as a party hereto supplies to each other party in
writing.

     11. Successors and Assigns. All the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective permitted
transferees, successors and assigns of the parties hereto, whether so expressed or not.

     12. Governing Law. This Agreement is to be governed by and interpreted under the laws
of the State of Delaware without giving effect to the principles of conflicts of laws thereof.

     13. Titles and Subtitles. The titles of the sections of this Agreement are for the
convenience of reference only and are not to be considered in construing this Agreement.

     14. Severability. The invalidity or unenforceability of any provisions of this
Agreement shall not be deemed to affect the validity or enforceability of any other provision of
this Agreement.

14

 

     15. Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which together shall constitute one instrument.

     16. Entire Agreement. This Agreement constitutes the full and entire understanding
and agreement between the parties with respect to the subject matter hereof and supersedes all
previous agreements, arrangements and understandings, whether written or oral, with respect to the
subject matter hereof.

15

 

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

	 	 	 	 	 
	 	West Coast Opportunity Fund, LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	Centaur Value Fund, LP

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	United Centaur Master Fund

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	GreenHunter Energy, Inc.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

16

 

	 	 	 	 	 

EXECUTION COPY

EXHIBIT A

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

                    , 200___

[Transfer Agent]

[Address]

Attention: [                    ]

          Re: GreenHunter Energy, Inc.

     Ladies and Gentlemen:

     [We are][I am] counsel to GreenHunter Energy, Inc., a Delaware corporation (the “Company”),
and have represented the Company in connection with that certain Securities Purchase Agreement (the
“Securities Purchase Agreement”) entered into by and among the Company and the buyers named therein
(collectively, the “Holders”) pursuant to which the Company issued to the Holders (i) Series A 8%
Preferred Stock, convertible into the Company’s common stock, $0.001 par value (“Common Stock”),
(ii) Warrants exercisable for shares of Common Stock (the “Warrants”) and (iii) shares of Common
Stock, of the Company. Pursuant to the Securities Purchase Agreement, the Company also has entered
into a Registration Rights Agreement with the Holders (the “Registration Rights Agreement”)
pursuant to which the Company agreed, among other things, to register the Registrable Securities
(as defined in the Registration Rights Agreement), under the Securities Act of 1933, as amended
(the “1933 Act”). In connection with the Company’s obligations under the Registration Rights
Agreement, on                      ___, 200_, the Company filed a Registration Statement on Form S-3 (File
No. 333-                    ) (the “Registration Statement”) with the Securities and Exchange Commission
(the “SEC”) relating to the Registrable Securities which names each of the Holders as a selling
shareholder thereunder.

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

          This letter shall serve as our notice to you that the shares of Common Stock registered
pursuant to the Registration Statement are currently freely transferable by the Holders pursuant to
the Registration Statement.

	 	 	 	 	 
	 	Very truly yours,

[ISSUER’S COUNSEL]

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

cc: [LIST NAMES OF HOLDERS]

1

 

EXECUTION COPY

EXHIBIT B

SELLING SHAREHOLDERS

     The shares of Common Stock being offered by the selling shareholders were originally issued by
the Company to investors in a private placement transaction. For additional information regarding
the issuance of those shares of Common Stock, see “Private Placement of Series A 8% Preferred
Stock, Warrants and Shares of Common Stock” above. We are registering the shares underlying the
Series A 8% Preferred Stock, the Warrants, the Dividend Shares and the shares of Common Stock in
order to permit the selling shareholders to offer the shares for resale from time to time. Except
for the ownership of the Series A 8% Preferred Stock, the Warrants, the Dividend Shares and shares
of Common Stock issued pursuant to the Securities Purchase Agreement, the selling shareholders have
not had any material relationship with us within the past three years.

     The table below lists the selling shareholders and other information regarding the beneficial
ownership of the shares of Common Stock by each of the selling shareholders. The second column
lists the shares of Common Stock being offered by this prospectus by the selling shareholders as of
the date hereof assuming conversion of all of the Series A 8% Preferred Stock and exercise of the
Warrants held by the selling shareholders on that date, without regard to any limitations on
conversions or exercise.

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

     In accordance with the terms of registration rights agreements with the selling shareholders,
this prospectus generally covers the resale of at least 120% of the sum of (i) the number of shares
of Common Stock issued and issuable upon conversion of the Series A 8% Preferred Stock (and the
interest accrued and payable thereunder) as of the trading day immediately preceding the date the
registration statement is initially filed with the SEC, (ii) the number of shares of Common Stock
issued and issuable upon exercise of the Warrants as of the trading day immediately preceding the
date the registration statement is initially filed with the SEC, (iii) the number of shares of
Common Stock issued and issuable upon the payment of dividends on the Series A 8% Preferred Stock
as of the trading day immediately preceding the date the registration statement is initially filed
with the SEC, and (iv) the shares of Common Stock issued by the by the Company pursuant to the
Securities Purchase Agreement. Because the conversion price of the Series A 8% Preferred Stock and
the exercise price of the Warrants may be adjusted, the number of shares that will actually be
issued may be more or less than the number of shares being offered by this prospectus. The fourth
column assumes the sale of all of the shares offered by the selling shareholders pursuant to this
prospectus.

     Under the terms of the Series A 8% Preferred Stock and the Warrants, a selling shareholder may
not convert the Series A 8% Preferred Stock or exercise the Warrants to the extent such conversion
or exercise would cause such selling shareholder, together with its affiliates, to beneficially own
a number of shares of Common Stock which would exceed 9.99%
of our then outstanding shares of Common Stock following such conversion or exercise,

1

 

excluding for purposes of such determination shares of Common Stock issuable upon conversion of the
Series A 8% Preferred Stock which have not been converted and upon exercise of the Warrants which
have not been exercised. The number of shares in the second column does not reflect this
limitation. The selling shareholders may sell all, some or none of their shares in this offering.
See “Plan of Distribution.”

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Maximum Number of	 	 
	 	 	 	 	 	 	Shares of Common	 	 
	 	 	Number of Shares of	 	Stock to be Sold	 	Number of Shares of
	 	 	Common Stock Owned	 	Pursuant to this	 	Common Stock Owned
	Name of Selling Shareholder	 	Prior to Offering	 	Prospectus	 	After Offering
	West Coast Opportunity Fund,
LLC (1)
	 	 	 	 	 	 	 	 	 	 	0	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Centaur Value Fund, LP (2)
	 	 	 	 	 	 	 	 	 	 	0	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	United Centaur Master Fund (3)
	 	 	 	 	 	 	 	 	 	 	0	 

 

			
	(1)	 	 
	 
	(2)	 	 
	 
	(3)	 	 

2

 

PLAN OF DISTRIBUTION

     We are registering the shares of Common Stock issuable upon the conversion of the Series A 8%
Preferred Stock and the Warrants and additional Common Stock issued to investors pursuant to the
Securities Purchase Agreement to permit the resale of these shares of Common Stock by the selling
shareholders from time to time after the date of this prospectus. We will not receive any of the
proceeds from the sale by the selling shareholders 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 shareholders 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 shareholders will be responsible for underwriting discounts and
commissions and brokers’ or agents’ commissions or selling commissions. The shares of Common Stock
may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of
the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales
may be effected in transactions, which may involve crosses or block transactions,

	 	•	 	on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale;
	 
	 	•	 	in the over-the-counter market;
	 
	 	•	 	in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
	 
	 	•	 	through the writing of options, whether such options are listed on an options
exchange or otherwise;
	 
	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
	 
	 	•	 	block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to facilitate the
transaction;
	 
	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;
	 
	 	•	 	an exchange distribution in accordance with the rules of the applicable exchange;
	 
	 	•	 	privately negotiated transactions;
	 
	 	•	 	short sales;
	 
	 	•	 	sales pursuant to Rule 144;

 

 

	 	•	 	broker-dealers may agree with the selling shareholders to sell a specified
number of such shares at a stipulated price per share;
	 
	 	•	 	a combination of any such methods of sale; and
	 
	 	•	 	any other method permitted pursuant to applicable law.

     If the selling shareholders 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
shareholders 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 shareholders 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 shareholders may also sell shares of Common Stock short and deliver shares of
Common Stock covered by this prospectus to close out short positions and to return borrowed shares
in connection with such short sales. The selling shareholders may also loan or pledge shares of
Common Stock to broker-dealers that in turn may sell such shares.

     The selling shareholders may pledge or grant a security interest in some or all of the Series
A 8% Preferred Stock, Warrants or shares of Common Stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may offer and sell such
shares of Series A 8% Preferred Stock, Warrants or 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 shareholders
to include the pledgee, transferee or other successors in interest as selling shareholders under
this prospectus. The selling shareholders also may transfer and donate the shares of Series A 8%
Preferred Stock, Warrants or 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 shareholders 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 shareholders
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

2

 

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 shareholder 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.

     The selling shareholders 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
shareholders 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 shareholder will pay all underwriting discounts,
commissions and concessions and brokers’ or agents’ commissions and concessions or selling
commissions and concessions, if any. We will indemnify the selling shareholders against
liabilities, including some liabilities under the Securities Act, in accordance with the
registration rights agreement, or the selling shareholders will be entitled to contribution. We
may be indemnified by the selling shareholders against civil liabilities, including liabilities
under the Securities Act, that may arise from any written information furnished to us by the
selling shareholder specifically for use in this prospectus, in accordance with the related
registration rights agreement, or we may be entitled to contribution.

     Once sold under the shelf 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.

3

 

EXHIBIT C

INVESTOR QUESTIONNAIRE

     The information contained in this questionnaire will be relied upon by GreenHunter Energy,
Inc. (the “Company”) and its advisors. Accordingly, by signing this questionnaire, you represent
as follows:

     (i) The information contained herein is complete and accurate and may be relied upon by the
Company and its advisors; and

     (ii) You will notify the Company immediately of any material change in any information
provided herein.

     Although the Company will use commercially reasonable efforts to keep the information provided
in the answers to this questionnaire strictly confidential, the Company may present this
questionnaire and the information provided in it to such parties as the Company reasonably deems
advisable if called upon to establish the availability under any federal or state securities laws
of an exemption from registration or if the contents thereof are relevant to any issue in any
action, suit, or proceeding to which the Company is a party or by which it is or may be bound.

     This questionnaire does not constitute an offer by the Company, but rather is a request for
information.

     Thank you for taking the time to complete this questionnaire.

 

 

Investor Information

INSTRUCTIONS: Please print or type all answers. If the answer to any question is “none” or
“not applicable,” please so state.

     Part A – General

	 	 	 	 	 	 	 
	 	 	For Entities:	 	 
	 
	 	 	 	 	 	 
	 

	 	1. Name:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	 2. Taxpayer Identification No.:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	   3. Jurisdiction and Year of Organization:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	4. Nature of Business:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	5. Business Address:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	6. Business Telephone Number:	 	 	 	 
	 

	 	 	 	 

	 	 

     Part B — Type of Investor

	 	1.	 	Are you:

	 	(i)	 	A bank as defined in Section 3(a)(2) of the Securities Act of
1933 (the “Securities Act”) or a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities Act whether
acting in its individual or fiduciary capacity?

Yes o No o
	 
	 	(ii)	 	A broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934? Yes o No o
	 
	 	(iii)	 	An insurance company as defined in Section 2(a)(13) of the
Securities Act?
Yes o No o
	 
	 	(iv)	 	An investment company registered under the Investment Company
Act of 1940 (the “Company Act”) or a business development company as defined in
Section 2(a)(48) of the Company Act? Yes o No o
	 
	 	(v)	 	A small business investment company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958? Yes o No o
	 
	 	(vi)	 	A plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets
in excess of $5,000,000? Yes o No o

2

 

	 	(vii)	 	An employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974 (“ERISA”) whose the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or that has total assets in excess of $5,000,000?
Yes o No o
	 
	 	(viii)	 	A private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940?

 Yes o No o
	 
	 	(ix)	 	An organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, a corporation, Massachusetts or similar
business trust, or partnership with total assets in excess of $5,000,000, which
was not formed for the specific purpose of acquiring the securities of a
particular issuer? Yes o No o
	 
	 	(x)	 	An entity in which all of the equity owners are “accredited
investors,” as such term is defined under the Securities Act of 1933? Yes o No o
	 
	 	(xi)	 	A self-directed plan with investment decisions made solely by
persons who are accredited investors? Yes o No o Please attach a
separate sheet setting forth the basis for the representation that they are
“accredited investors.”
	 
	 	(xii)	 	A natural person whose individual net worth, or joint net
worth with your spouse, exceeds $1,000,000? (In calculating your net worth, you
may include all assets, such as your home, home furnishings and automobiles,
less your liabilities.) Yes o No o
	 
	 	(xiii)	 	A natural person who had an individual income in excess of $200,000 in each
of the two most recent years or joint income with your spouse in excess of
$300,000 in each of those years, and has a reasonable expectation of reaching
the same income level in the current year? Yes o No o
	 
	 	(xiv)	 	A trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the securities of a particular issuer,
whose investments are directed by a sophisticated person with sufficient
knowledge and experience in financial and business matters to evaluate the
merits and risks of the trust’s investments? Yes o No o

Part C – Financial and Other Data

     1. If you are an entity, please indicate the range of your total amount of assets.

                          $0
– $5,000,000

                          Over $5,000,000

     2. Do you have adequate liquid assets (defined as cash, cash equivalents and freely
marketable securities) to meet your current needs and personal contingencies? Yes o No o

3. Please indicate your other investment experience (e.g., stocks, real estate, etc.)

 

 

 

3

 

4. Do you or the persons who make investment decisions on your behalf have sufficient
knowledge and experience in financial and business matters to evaluate the merits and risks
of your investments?
Yes o No o

5. Do you typically use a purchaser representative in connection with your investments
(i.e., someone who has such knowledge and experience in financial and business matters that
he or she is capable of evaluating the merits and risks of your investments and whom you
acknowledge in writing during the course of your investment to be your purchaser
representative)? Yes o No o

If so, please provide the name, address and telephone number of your purchaser
representative.

 

 

 

     IN WITNESS WHEREOF, the undersigned has executed this questionnaire as of                     , 200___,
and declared that it is truthful and correct.

	 	 	 	 	 
	 

	 	 

	 	 

	 	 	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

4

 

	 	 	 	 	 

EXHIBIT D

PERSONS EXECUTING LOCK-UP AGREEMENTS PURSUANT TO

SECTION 2.7(r) OF THE AGREEMENT

Gary C. Evans

Michael K. Studer

David S. Krueger

Howard Lee

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