Document:

gabriel_8k-ex1003.htm

    
      

    
Exhibit 10.3

     

    FORM
OF

    PROMISSORY
NOTE PURCHASE AGREEMENT

     

    THIS
PROMISSORY NOTE PURCHASE AGREEMENT (this “Agreement”) is made effective as of
January ___, 2010 by and among Gabriel Technologies Corporation, a Delaware
corporation (the “Company”), and the investors listed on the Schedule of
Investors attached hereto (each, an “Investor” and collectively, the
“Investors”).

     

    WHEREAS,
the Company desires to raise capital in the amount of up to $500,000.00 pursuant
to this Agreement (the “Bridge Loan”);

     

    WHEREAS,
the Investors desire to purchase, and the Company desires to sell to each
initial Investor (each an “Investor”) who desires to participate in the Closing
(as defined below), a Promissory Note in the form attached hereto as Exhibit “A”
(with all such Promissory Notes issued in the Closing. as defined below,
referred to herein as the “Notes”) in the principal amount set forth opposite
such Investor’s name on Schedule A), upon the terms and conditions set forth in
this Agreement;

     

    WHEREAS,
the Company desires to offer and sell Notes to the Investors that elect to
participate in the Bridge Loan, each of whom will be an Investor pursuant to
this Agreement;

     

    NOW,
THEREFORE, in consideration of the foregoing premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Investors hereby agree as
follows:

     

    1.           Purchase and Sale of Notes;
Closing.

     

    1.1           Sale and Issuance of Notes
to Investors at Closing.  Subject to the terms and conditions
of this Agreement, the purchase and sale of the Notes, which must be in an
aggregate principal amount of not less than $300,000.00, shall take place at the
principal office of the Company (the “Closing Location”), at 3:00 p.m., on
January 20, 2010, or such other date and time as may be mutually acceptable to
the Company and the Investors (which time and place are designated as the
“Closing”).  At the Closing, the Company shall deliver to each
Investor the original Note that such Investor is purchasing at the Closing upon
confirmation of receipt of payment of the purchase price therefore, which
purchase price shall equal the principal amount of the Note purchased (the
“Purchase Price”) and shall be paid in cash by each Initial Investor by wire
transfer to the Company, pursuant to the instructions attached hereto as Exhibit
“B”.  Each Investor shall be subject to the covenants set forth in
Section 1.2 below.

     

    1.2           Investor
Covenants.  The representations and warranties of the Company
set forth in Section 2 hereof shall be reaffirmed and in full force and effect
as of the date of the Closing, and the representations and warranties of each
applicable Investor in Section 3 hereof shall be reaffirmed and in full force
and effect as of the date of the Closing.  At the Closing, the Company
shall deliver to each Investor the original Note that such Investor purchases at
the Closing upon confirmation of receipt of payment of the Purchase Price
therefor, which Purchase Price shall equal the principal amount of the Note
purchased, and shall be paid in cash by wire transfer to the Company, pursuant
to the instructions attached hereto as Exhibit “B”. Any Notes sold pursuant to
this Section 1 shall be deemed to be “Notes” for all purposes under this
Agreement.

     

    1.3           Use of
Proceeds.  The Company will use the proceeds from the sale of
the Notes as follows:

     

    (a)           $80,000.00
to various experts retained in connection with the pending litigation matter of
the Company against Qualcomm.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    (b)           $35,0000.00
to Hughes Hubbard for completion of “Technical and Legal Evidence Binder” to be
delivered to litigation funding sources for Qualcomm case; this includes a
reserve of $15K for expenses for the lawyers of Hughes Hubbard and George Tingo
to travel to meet one or more of our prospective funding sources to present and
close a funding deal;

     

    (c)           $25,000.00
to pay Company Attorneys for past due for work over past several
months;

     

    (d)           $25,000.00
to pay attorneys Haglund and Kelly for their representation in the Munck Carter
arbitration;

     

    (e)           $20,000.00
to pay attorneys Troy Gould for representation of the Company in connection with
the proposed financing transaction between Western Linen and the Company, and
for legal counsel and representation on SEC and other corporate
matters;

     

    (f)           $20,000.00
to retain attorney George E. Barton to assist with the Company insurance claim
and as co-counsel in State Court Action;

     

    (g)           $50,000.00
for a 30-day extension of time to close the pending acquisition of Western Linen
Services, as approved by the Company Board of Directors;

     

    (h)           $50,000.00
to Marshall & Stevens Valuation Consulting for advice and opinion on
financing of Gabriel operations forthwith, and possibly the issuance of a
Fairness Opinion for the proposed structure of the acquisition of Western Linen
Services;

     

    (i)           $80,000.00
for Company Operating Expenses – during the months of January and February,
2010.

     

    (j)           Up
to the sum of $125,000.00 to tender to the law firm Munck Carter – for the
return to the Company of any percentage interest in the outcome of the Company’s
lawsuit against Qualcomm which Munck Carter may have at this time.

     

    2.           Representations and
Warranties of the Company.  The Company represents and warrants
the following:

     

    2.1           Organization, Good Standing
and Qualification.  The Company is a corporation duly
organized, under the laws of the State of Delaware. The Company is currently not
in compliance with Delaware State Law, and/or Federal Law with respect to
various legal requirements, as noted in Exhibit “C” hereto.  Investor
purchases this Note with full knowledge and understanding of these legal
deficiencies as described in Exhibit “C” hereto.  The Company may not
be duly qualified to transact business and is not believed to be in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on its business or properties.

     

    2.2           Authorization.  All
corporate action on the part of the Company, its officers, directors and
stockholders necessary for the authorization, execution and delivery of this
Agreement and the Notes, the performance of all obligations of the Company
hereunder and under the Notes, and the authorization, sale and issuance of the
Notes being sold hereunder, has been taken or will be taken prior to the
Closing.  This Agreement and the Notes constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    2.3           Offering.  Subject
in part to the truth and accuracy of each Investor’s representations set forth
in Section 3 of this Agreement, the issuance and sale of the Notes as
contemplated by this Agreement are intended to be exempt from the registration
requirements of the Securities Act of 1933, as amended (the “Securities
Act”).

     

    2.4           Compliance With Other
Instruments.  The Company is believed to be in material
violation of one or more provisions of its Certificate of Incorporation as
amended to date, and/or the Bylaws of the Company.  The execution and
performance of this Agreement or the Notes may constitute a violation or breach
of one or more other agreements between the Company and other persons or
entities.

     

    3.           Representations and
Warranties of the Investors.  Each Investor, severally and not
jointly, hereby represents, warrants and covenants that:

     

    3.1           Authorization.  Such
Investor has full power and authority to enter into this Agreement, and this
Agreement is a legal, valid and binding agreement of such Investor, enforceable
in accordance with its terms.

     

    3.2           Purchase Entirely For Own
Account.  This Agreement is made with such Investor in reliance
upon such Investor’s representations to the Company, which by such Investor’s
execution of this Agreement such Investor hereby confirms, that the Notes to be
received by such Investor will be acquired for investment for such Investor’s
own account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that such Investor has no present
intention of selling, granting any participation in or otherwise distributing
the same.  By executing this Agreement, such Investor further
represents that such Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to the Note(s).

     

    3.3           Disclosure of
Information.  Such Investor has received all the information it
requested from the Company for deciding whether to purchase the
Notes.  Such Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Notes and the business, properties,
prospects, litigation matters, and financial condition of the Company, including
but not limited to information relating to litigation the Company is currently
engaged in with Qualcomm, Inc.

     

    3.4           Investment
Experience.  Such Investor is an investor in securities of
companies of this type and acknowledges that it is able to fend for itself, can
bear the economic risk of its investment, and has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Notes.  If other than an individual,
such Investor also represents it has not been organized for the purpose of
acquiring the Notes.

     

    3.5           Accredited
Investor.  Such Investor is an “accredited investor” as defined
in Rule 501 of Regulation D promulgated by the Securities and Exchange
Commission (the “SEC”) under the Securities Act.

     

    3.6           Restricted
Securities.  Such Investor understands that the Notes to be
purchased hereunder are characterized as “restricted securities” under the
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such Notes may be resold without registration under the
Securities Act only in certain limited circumstances.  In the absence
of an effective registration statement covering the Notes or an available
exemption from registration under the Securities Act, the Notes must be held
indefinitely.  In this connection, such Investor represents that it is
familiar with SEC Rule 144 promulgated under the Securities Act, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act, including without limitation the Rule 144 condition that current
information about the Company be available to the public. Such information is
not now available.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    3.7           Legends.
Such Investor understands and acknowledges that each Note shall be endorsed with
the legend set forth below:

     

    THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR
ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, OR OTHERWISE
TRANSFERRED OR DISPOSED OF UNLESS AND UNTIL THIS NOTE IS REGISTERED UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH
REGISTRATIONISAVAILABLE.

     

    3.8           True and Correct
Information.  All information that Investor has provided or
caused to be provided to the Company in connection with the purchase of the
Notes hereunder is correct and complete as of the date set forth on the
Investor’s signature page of this Agreement.

     

    3.9           Reliance.  Such
Investor understands that the acceptance of this Agreement by the Company will
be based, in part, on the Investor’s representations, warranties, covenants and
acknowledgements set forth in this Section 3.  The Investor agrees to
indemnify the Company from any and all claims, losses, damages and expenses
(including without limit attorneys’ fees and disbursements) arising out of any
alleged material breach of this Agreement by the Investor or material inaccuracy
of any representation or warranty by the Investor.

     

    3.10           Further Limitations on
Disposition.  Without in any way limiting the representations
set forth above, such Investor further agrees not to make any disposition of all
or any portion of the Notes unless and until:

     

    (a)           Such
transferee has agreed in writing for the benefit of the Company to be bound by
this Agreement, and

     

    (b)           Such
Investor shall have notified the Company in writing of the proposed disposition,
and shall have furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and if requested by the
Company, such Investor shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company that such disposition will not
require registration under the Securities Act.

     

    3.11          Tax
Advisors.  Such Investor has reviewed with such Investor’s own
tax advisors the foreign, federal, state and local tax consequences of this
investment, where applicable, and the transactions contemplated by this
Agreement. Each such Investor is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents and
understands that each such Investor (and not the Company) shall be responsible
for such Investor’s own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.

     

    3.12          Investor
Review.  Such Investor acknowledges that such Investor has had
the opportunity to review this Agreement, and all exhibits attached hereto
including specifically the form of the Note, EXHIBIT “C” hereto,
the GABRIEL TECHNOLOGIES CORPORATION CORPORATE DISCLOSURE DOCUMENT, and
the transactions contemplated by this Agreement and to consult with such
Investor’s own legal counsel and advisors.  Each such Investor is
relying solely on such Investor’s legal counsel, if consulted, and not on any
statements or representations of the Company or any of the Company’s agents for
legal advice with respect to this investment or the transactions contemplated by
this Agreement.

     

    4.           Conditions of Investors’
Obligations at the Closings.  The obligations of each Investor
with respect to each Closing are subject to the fulfillment on or before the
applicable Closing of each of the following conditions, the waiver of which
shall not be effective against any Investor who does not consent in writing
thereto.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    4.1           Representations and
Warranties.  The representations and warranties of the Company
contained in Section 2 shall be true on and as of the applicable Closing with
the same effect as though such representations and warranties had been made on
and as of the date of such Closing.

     

    4.2           Performance.  The
Company shall have performed and complied with all material agreements,
obligations and conditions contained in this Agreement that are required to be
performed or complied with by it on or before the applicable
Closing.

     

    5.           Conditions of the Company’s
Obligations at Closing.  The obligations of the Company to each
Investor under this Agreement are subject to the fulfillment on or before the
applicable Closing of each of the following conditions by that
Investor:

     

    5.1           Representations and
Warranties.  The representations and warranties of the Investor
contained in Section 3 shall be true on and as of the Closing with the same
effect as though such representations and warranties had been made on and as of
such Closing.

     

    5.2           Payment of Purchase
Price.  The Investor shall have delivered the applicable
Purchase Price as provided for in Section 1.

     

    6.           Miscellaneous.

     

    6.1           Survival.  The
warranties, representations and covenants of the Investors contained in or made
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and each Closing.  The warranties, representations and
covenants of the Company shall survive execution and delivery of this Agreement
and each Closing.

     

    6.2           Successors and
Assigns.  Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties (including transferees of
any Notes).  Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

     

    6.3           Choice of Law;
Jurisdiction.  This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.  Any
lawsuit or litigation arising under, out of, in connection with, or in relation
to this Agreement, any amendment hereof, or the breach hereof, shall be brought
in the courts of Los Angeles, California, which courts shall have exclusive
jurisdiction over any such lawsuit or litigation.

     

    6.4           Titles and
Subtitles.  The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

     

    6.5           Notices.  All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (i) upon personal delivery to the party to be notified, (ii)
upon transmission when sent via e-mail; (iii) when sent by confirmed facsimile
if sent during normal business hours of the recipient, if not, then on the next
business day; (iv) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (v) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall be
sent to the address as set forth on the signature page hereof or at such other
address as such party may designate by ten (10) days advance written notice to
the other parties hereto.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    6.6           Finder’s
Fee.  Excepting the Company’s Fee Agreement with Stephen Moore,
which Fee Agreement Investors acknowledge advisement of, each Investor
represents that it neither is nor will be obligated for any finders’ fee or
commission in connection with this transaction.  Each Investor agrees
to indemnify and to hold harmless the Company from any liability for any
commission or compensation in the nature of a finders’ fee (and the costs and
expenses of defending against such liability or asserted liability) for which
such Investor or any of its officers, partners, employees or representatives is
responsible.

     

    6.7           No Joint
Venture.  Nothing in this Agreement shall create or be deemed
to create a joint venture or partnership among the parties.  Each
party agrees not to hold itself out as having any authority or as being in a
relationship contrary to this Section 6.7.

     

    6.8           Expenses; Attorneys’
Fees.  Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement and the Notes.  If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement or the Notes, the
prevailing party shall be entitled to reasonable attorneys’ fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.

     

    6.9           Amendments and
Waivers.  Except as otherwise provided in this Agreement, any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of both the
Company and the holders of Notes representing greater than fifty percent
(50.00%) of the aggregate principal amount of Notes issued hereunder (the
“Majority Noteholders”).  Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any Note
purchased under this Agreement at the time outstanding, and each future holder
of all such Notes and the Company.

     

    6.10          Effect of Amendment or
Waiver.  Each Investor acknowledges that by the operation of
Section 6.9 hereof the Majority Noteholders will have the power to diminish or
eliminate all rights of such Investor under this Agreement.

     

    6.11          Severability.  If
one or more provisions of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded from this Agreement to the
minimum extent necessary to comply with the laws of the relevant jurisdiction
and the balance of the Agreement shall be interpreted as if such provision were
so excluded in such jurisdiction and shall be enforceable in accordance with its
terms.

     

    6.12          Entire Agreement.
This Agreement and the documents referred to herein constitute the entire
agreement among the parties.

     

    6.13          Counterparts.  This
Agreement may be executed in two (2) or more original or facsimile counterparts
all of which together shall constitute one and the same instrument.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties have executed this Promissory Note Purchase
Agreement as of the date first above written.

     

    
      	
              COMPANY:

            	
              INVESTORS:

            
	 	 
	
              GABRIEL
      TECHNOLOGIES CORPORATION,

              a
      Delaware Corporation

               

              By:                                                                                      
           

              Name:      
      George Tingo, CEO and President

                               
      Gabriel Technologies Corporation

            	
              Investor:                                                                   

               

              Name:

               

              Company
      Name:

               

              Address:

               

              E-mail:

            
	 
      	 
      

    

    

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    

     

    SCHEDULE
“A”

     

    SCHEDULE OF
INVESTORS

     

    
      	
              Investor

            	
              Principal
      Amount of

              Promissory
      Note

            	
              Date
      of Investment

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              TOTAL

            	
              $______________

            	 
      

    

    

     
 

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    

    

     

    EXHIBIT
“A”

     

    FORM OF PROMISSORY
NOTE

     

    THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD,
PLEDGED, OR OTHERWISE TRANSFERRED OR DISPOSED OF UNLESS AND UNTIL THIS NOTE IS
REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

     

    GABRIEL
TECHNOLOGIES CORPORATION

     

    PROMISSORY
NOTE

     

    This
Note must be read in conjunction with the accompanying Note Purchase
Agreement

     

    $____________ January
___, 2010

    

    FOR VALUE
RECEIVED, the undersigned, Gabriel Technologies Corporation, a Delaware
corporation (“Company”), promises to pay to the order of ________________
(“Lender”) the principal sum of ________________ Dollars ($____________) (the
“Principal”), at the Interest Rate hereinafter defined, which amount shall be
due and payable in lawful money of the United States of America at such place as
Lender may from time to time designate, at the time and in accordance with the
terms and conditions provided in Sections 2 below.

     

    1.           Interest Rate and Maturity
Date.  Interest shall accrue on the Principal at six percent
(6.00%) per annum (the “Interest Rate”) commencing on the date of this
Note.  Interest shall be computed on the actual number of days elapsed
based on a 365-day year.  The balance of the Principal sum and all
Interest thereon shall be due and payable on December 31, 2010 (the “Maturity
Date”).  Any payment by the Company shall be conditioned on the
requirement that the payment on the Maturity Date shall not make the Company
insolvent (as defined in the Bankruptcy Code); and the Lender agrees that it
shall not take any action to place the Company in the position of an involuntary
receivership or bankruptcy, but, hereby expressly reserve all rights that Lender
will have all rights in the event that others place the Company in bankruptcy,
receivership or otherwise.

     

    2.           Payments.  To
the extent funds are available from any event defined in this Section 2.a or
2.b. (“Event”), the Company shall pay to each Lender (on a pro-rata basis) in
this round of financing, payments of Principal and Interest, from the “Net
Proceeds” of the Event (which for purposes of this Note shall mean proceeds
after deduction of All Company Obligations Required To Be Paid By The Company
(as hereinafter defined), Event expenses, fees and court costs, if any and as
applicable, including but not limited to obligations pursuant to any litigation
financing agreements, litigation costs, Whittle Settlement attorneys’ fees if
proceeds are received from the Whittle Settlement [but not IP Event (as
hereinafter defined) attorneys’ fees], or any other debts superior to the monies
raised pursuant to the Company raise of capital) to the Company from the below
defined Events, upon the earliest of the following Events to occur:

     

    (a)           Whittle
Settlement.  For purposes of this Note, “Whittle Settlement”
shall mean the proceeds, if any, from the action by the Company against Whittle
in the District Court of Douglas County Nebraska at docket 1092, page 798 filed
in February 2009 to the extent there are Net Proceeds from this
litigation.

     

    
      (b)           IP
Event.  For purposes of this Note, an “IP Event” is defined as
the receipt by the Company or any of its subsidiaries of a minimum of
$10,000,000.00 in Net Proceeds (in cash or the fair market value of non-cash
consideration) from a licensing, sale, transfer, settlement or other transaction
with one or more third parties relating to intellectual property of the Company
or its subsidiaries, if any.

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    2.1           Lien.  Lender
shall have a lien, for all unpaid sums due under this Note, on all claims or
causes of action that are the subject of any event set forth above in this
Section 2. This lien shall attach to any recovery, whether by settlement, award,
verdict, judgment, or other order.

     

    2.2           Additional
Benefits.  In addition to the Principal amount and Interest on
this Note, in return for every $100,000.00 loaned by a Lender to the Company,
Lender shall have the additional right to receive one percent (1.00%) of the
Proceeds of an IP Event, AFTER payment of all Company obligations required to be
paid by the Company (“All Company Obligations Required To Be Paid By The
Company”) defined as Company priority obligations which include but are not
limited to: obligations to the IRS and other Federal, State and local tax
authorities; employee wages; secured loans; judgments; company debts; and,
attorneys fees, but not including intellectual property interests of attorneys
in the Company’s action against Qualcomm.  In the event a Lender loans
the Company an amount less than $100,000.00 pursuant to this Note, said Lender
shall receive a pro-rata portion of the aforementioned Additional
Benefit.  Payment of the Additional Benefits described in this Section
2.2 shall be made no later than ten (10) business days after the final and
complete funding by the funding party of the first Event to occur. If full
repayment of interest and principal is not made after the payment to Lender from
the first Event, then lender shall be paid from each successive Event, or from
the IP Event, until Lender is paid all interest and principal due and
owing.

     

    3.           Attorney’s Fees. If
the indebtedness represented by this Note or any part thereof is collected in
bankruptcy, receivership or other judicial proceedings or if this Note is placed
in the hands of attorneys for collection after default, the Company agrees to
pay, in addition to the Principal and Interest payable hereunder, reasonable
attorney’s fees and costs incurred by Lender.

     

    4.           Pari Passu; Notes,
Subordination.  The Lender acknowledges and agrees that the
payment of all or any portion of the outstanding Principal amount of this Note
and all Interest hereon shall be pari passu in right of payment and in all other
respects to the other Notes. In the event the Lender receives payments in excess
of the Lender’s pro rata share of the Company’s payments to the holders of all
of the notes outstanding, then the Lender shall hold in trust all such excess
payments for the benefit of the holders of the other notes and shall pay such
amounts held in trust to such other holders upon demand by such
holders.  The Lender acknowledges and agrees that this Note will be
subordinate in priority and right of payment to all current and future
indebtedness of the Company to banks and other financial institutions which may
be required for secured financing in the future, and that no other writing shall
be required to affect same.

     

    5.           Surrender of
Note.  The Lender shall surrender this Note at the principal
office of the Company at the time of Payment of this Note pursuant to the
foregoing provisions.

     

    6.           Notices.  Any
notice, other communication or payment required or permitted hereunder shall be
in writing and shall be deemed to have been given upon delivery.

     

    7.           Waivers.  The
Company hereby waives presentment, demand for performance, notice of
nonperformance, protest, notice of protest and notice of dishonor.  No
delay on the part of Lender in exercising any right hereunder shall operate as a
waiver of such right or any other right.

     

    8.           Assignment.  This
Note may not be assigned by Lender without the written consent of the Company;
provided however, that any such assignment by Lender shall be in compliance with
all applicable federal and state securities laws.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    9.           Choice of Law;
Jurisdiction.  This Note shall be construed in accordance with
the laws of the State of California, without regard to the conflicts of laws
provisions thereof. Any lawsuit or litigation arising under, out of, in
connection with, or in relation to this Note, any amendment or restatement
thereof, or the breach thereof, shall be brought in the courts of Los Angeles,
CA, which courts shall have exclusive jurisdiction over any such lawsuit or
litigation.

     

    IN
WITNESS WHEREOF, Gabriel Technologies Corporation has caused this Promissory
Note to be executed by its officer thereunto duly authorized.

     

    
      	
              GABRIEL
      TECHNOLOGIES CORPORATION,

              a
      Delaware Corporation

               

               

               

            	 
      
	
              By:                                                                   

              Name:  George
      Tingo,

              Its:
      CEO and President

            	 
      

    

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    

    EXHIBIT
“B”

     

    

     

    GABRIEL
TECHNOLOGIES CORPORATION WIRE INSTRUCTIONS

     

    

     

    California
United Bank - Encino Branch

    ABA
xxxxxxxxxx

    Account
No.: xxxxxxxxx

    Gabriel
Tech Corp.

    4538 S.
140th Street

    Omaha, NE
08137

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    

    EXHIBIT
“C”

     

    GABRIEL
TECHNOLOGIES CORPORATION

    CORPORATE
DISCLOSURE DOCUMENT

     

    1.           Withdrawal of Former Attorneys
– Gabriel Technologies Corporation (“Gabriel”, or, the “Company”) has come to
the end of its relationship with its former attorneys in the Qualcomm case and
in other corporate, patent, etc., matters for Gabriel, Munck Carter, and is
proceeding to arbitration on the matter of attorneys’ fees and potentially other
matters with Munck Carter.  Gabriel’s directors believe that the
termination this relationship is in the best interests of Gabriel in its efforts
against Qualcomm and otherwise.  We expect Gabriel’s California
counsel to remain involved in the Qualcomm case for the foreseeable future, and
Gabriel has replaced Munck Carter with other attorneys for representation in
other Company matters.

     

    2.           New Gabriel Attorneys For Qualcomm
Case – After a diligent search, Gabriel is working to engage one of
several qualified law firms to succeed our former attorneys in the Qualcomm
case.  We hope to make an announcement in the next month or so
regarding the new law firm that will represent Gabriel as Lead Trial Counsel
against Qualcomm.

     

    3.           Next Stages of Qualcomm
Lawsuit – Gabriel’s Fourth Amended Complaint in the Qualcomm lawsuit was
filed on January 11, 2010.  It is expected that discovery will begin
as soon as the Qualcomm’s Answer is filed and the parties meet pursuant to the
issuance by the Court of a date for a Case Management Conference.

     

    4.           Gabriel Historical Financial
Statements – Under the management of its former officers and directors,
Gabriel did not file reports with the SEC, including historical financial
statements, since 2006.  The current management has prepared the 2007
annual financial statements and is working with the Gabriel auditors to finalize
them.  We will file and disclose Gabriel’s 2007 annual financial
statements when we have completed all required review and audit work, but the
Company does not know when such audit will be completed and/or when such
financials will be filed.

     

    5.           Action Against Select Former Gabriel
Officers, Directors and Third Parties – An action against some of the
former Gabriel officers and directors and certain third parties was filed in
2008 at the direction of the former directors of Gabriel.  The current
Gabriel directors have been assessing this lawsuit, and believe that it may be
insufficient in its naming of alleged defendants and in the causes of action
alleged.  New counsel has been retained to reassess this lawsuit and
to make recommendations to the directors as to the possible filing of an amended
complaint.

     

    6.           Gabriel Operations Financing
Transaction – Although approximately $5.8 million was invested in Gabriel
in late 2007 and early 2008, when the new Gabriel directors were appointed in
June of 2009 Gabriel was more than $600,000 past due in its payments to its
attorneys, its landlord, its insurers, and other creditors.  An
investment group, including several of Gabriel’s current directors, furnished
Gabriel approximately $1 million of financing in 2009; however, this financing
is insufficient to pay for future operations of Gabriel.  Therefore,
Gabriel is now considering, among other possible financing transactions,
entering into a short-term debt transaction and a possible multi-year financing
transaction to obtain financing of Gabriel’s operations.  Any and all
financing transactions entered into by Gabriel will be completed only as
necessary, and only at the lowest cost of funding available in the market
available to Gabriel.  There can be no assurance, however, whether or
on what terms Gabriel will be able to complete a financing or obtain needed
funds.

     

    7.           Assignment of Possible Proceeds of
Qualcomm Lawsuit – The former directors of Gabriel began the practice
years ago of assigning a portion of any settlement amount or favorable judgment
in Gabriel’s action against Qualcomm to obtain financing or pay its
creditors.  The current management and directors have continued this
practice only as necessary for the purposes of financing Gabriel’s operations
and the Qualcomm lawsuit.  The total percentage of the possible
proceeds from the Qualcomm lawsuit, if any are obtained, that has been committed
by Gabriel is expected to exceed fifty percent (50%) after the engagement of new
attorneys in the Qualcomm lawsuit.  The commitment to third parties of
any proceeds from the Qualcomm lawsuit will significantly reduce the amount of
such proceeds, if any, available to be distributed among the Gabriel
shareholders.  There also can be no assurance that Gabriel will be
able financially to continue to prosecute the Qualcomm lawsuit or, if so, that
it will achieve a favorable outcome or receive any significant
proceeds

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    8.           Actions Taken Prior To Appointment of
New Gabriel Directors – Prior to the new Gabriel directors appointment
earlier this year, actions taken at Gabriel over the past several years by the
previous Board of Directors included, but were not limited to:

     

    A.           Issuance
of all sixty million authorized shares of Gabriel’s stock (and possibly more
than sixty million authorized shares of Gabriel’s stock), in the form of stock,
and/or stock warrants, and/or Stock Equivalent Units, and or
otherwise;

     

    B.           Subsequent
to the issuance of all authorized stock/warrants, the issuance of stock
equivalency units, or SEUs, which are the equivalent of common
stock.  The total amount of SEUs issued is being ascertained, as there
is no transfer agent for such securities as SEUs to track their
issuance;

     

    C.           Investment
in Gabriel of $5.7 million in short-term notes, some of which are redeemable by
the note holders for double their face value beginning in January
2011;

     

    D.           Expenditures
by Gabriel on corporate matters alone (i.e. not including attorneys fees to
prosecute the Company’s legal action with Qualcomm) with Gabriel’s former
attorneys - in excess of $1 million;

     

    E.           The
former directors’ issuance to themselves of percentage interests in the result
of Gabriel’s action against Qualcomm;

     

    F.           The
failure to hold an annual shareholders meeting within the past three
years.  A Company annual shareholders meeting still cannot be held due
to the failure to have current financials filed with the SEC.  This
fact continues to hamper Gabriel’s efforts to raise financing for the Company,
since additional Gabriel stock cannot be authorized by Delaware State
authorities without such a shareholders meeting approving such additional stock
authorization.  This requires the Gabriel directors to continue to
rely on the possible proceeds, if any, of Gabriel’s action against Qualcomm to
obtain needed financing for the Company.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
         

      

      
        14Exhibit 4.2

 

Execution
Copy

 

REGISTRATION RIGHTS
AGREEMENT

 

REGISTRATION RIGHTS AGREEMENT (this “Agreement”),
dated as of August 25, 2006, by and among Cano Petroleum, Inc., a
Delaware corporation, with headquarters located at 801 Cherry St., Suite 3200,
Fort Worth, Texas 76102 (the “Company”),
and the undersigned buyers (each, a “Buyer”,
and collectively, the “Buyers”).

 

WHEREAS:

 

A.            In connection with the Securities Purchase Agreement by
and among the parties hereto of even date herewith (the “Securities Purchase
Agreement”), the Company has agreed, upon the terms and subject to
the conditions set forth in the Securities Purchase Agreement, to issue and
sell to each Buyer (i) shares (the “Common
Shares”) of the Company’s common stock, par value $0.0001 per share
(the “Common Stock”) (ii) preferred
shares of the Company designated as Series D Convertible Preferred Stock,
the terms of which are set forth in the certificate of designations for such
series of preferred shares (the “Certificate of
Designations”) in the form attached as Exhibit A to the
Securities Purchase Agreement (the “Preferred Shares”)
which, among other things, will be convertible into shares of Common Stock (as
converted, the “Conversion Shares”),  in accordance with the terms of the Certificate of
Designations and (iii) warrants (the “Warrants”), which will be
exercisable to purchase shares of Common Stock (as exercised collectively, the “Warrant
Shares”).

 

B.            In accordance with the terms of the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the “1933 Act”), and applicable state securities
laws.

 

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

 

1.     Definitions.

 

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

 

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

 

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

 

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

 

 

d.     “Effectiveness
Deadline” means the date which is (i) in the event that
the Registration Statement is not subject to any review by the SEC, ninety (90)
days after the Closing Date or (ii) in the event that the Registration
Statement is subject to any review by the SEC, one hundred twenty (120) days
after the Closing Date.

 

e.     “Filing
Deadline” means the date that is forty five (45) days after
the Closing Date.

 

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

 

g.     “Person” means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.

 

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

 

i.      “Registrable
Securities” means (i) the Common Shares, (ii) the
Conversion Shares issued or issuable upon conversion of the Preferred Shares, (iii) the
Warrant Shares issued or issuable upon exercise of the Warrants and (iv) any
capital stock of the Company issued or issuable with respect to the Warrants,
the Warrant Shares, the Common Shares or the Conversion Shares as a result of
any stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, without regard to any limitations on conversions of the Preferred
Shares or exercises of the Warrants.

 

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

 

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

 

l.      “Required
Registration Amount” means the sum of (i) 100% of the number of
Common Shares issued and  (ii) 130% of the maximum number of Conversion
Shares issued and issuable pursuant to the Certificate of Designations and (iii) 100%
of the maximum number of Warrant Shares issued and issuable pursuant to the
Warrants, as of the trading day immediately preceding the applicable date of
determination, all subject to adjustment as provided in Section 2(e) (without
regard to any limitations on conversion of the Preferred Shares or exercise of
the Warrants).

 

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

 

2

 

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

 

2.     Registration.

 

a.     Mandatory
Registration. The Company shall prepare, and, as soon as practicable, but
in no event later than the Filing Deadline, file with the SEC the Registration
Statement on Form S-1 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 determined as of the 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 Stockholders”
and “Plan of Distribution” sections in substantially the form attached
hereto as Exhibit B. The Company shall use its best efforts to have
the Registration Statement declared effective by the SEC as soon as
practicable, but in no event later than the Effectiveness Deadline. By 9:30 am
on the second Business Day following the Effective Date, the Company shall file
with the SEC in accordance with Rule 424 under the 1933 Act the final
prospectus to be used in connection with sales pursuant to such Registration
Statement.

 

b.     Allocation
of Registrable Securities. The initial number of Registrable Securities
included in any Registration Statement and any increase in the number of
Registrable Securities included therein shall be allocated pro rata among the
Investors based on the number of Registrable Securities held by each Investor at
the time the Registration Statement covering such initial number of Registrable
Securities or increase thereof is declared effective by the SEC. In the event
that an Investor sells or otherwise transfers any of such Investor’s
Registrable Securities, each transferee shall be allocated a pro rata portion
of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities covered by such Registration
Statement shall be allocated to the remaining Investors, pro rata based on the
number of Registrable Securities then held by such Investors which are covered
by such Registration Statement. Except for Scott White and the Estate of Miles
O’Loughlin, who have the right to include up to 1,791,320 shares of Common
Stock in the Registration Statement, in no event shall the Company include any
securities other than Registrable Securities on any Registration Statement
without the prior written consent of the Required Holders.

 

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

 

d.     Ineligibility
for Form S-3. In the event that Form S-3 is not available for the
registration of the resale of Registrable Securities hereunder, the Company
shall (i) register the resale of the Registrable Securities on another
appropriate form reasonably acceptable to the Required Holders and (ii) undertake
to register the Registrable Securities on Form S-3 as soon as such form is
available, provided that the Company shall maintain the

 

3

 

effectiveness of the
Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been
declared effective by the SEC.

 

e.     Sufficient
Number of Shares Registered. In the event the number of shares available
under a Registration Statement filed pursuant to Section 2(a) is
insufficient to cover all of the Registrable Securities required to be covered
by such Registration Statement or an Investor’s allocated portion of the
Registrable Securities pursuant to Section 2(b), the Company shall amend
the applicable Registration Statement, or file a new Registration Statement (on
the short form available therefor, if applicable), or both, so as to cover at
least the Required Registration Amount as of the trading day immediately
preceding the date of the filing of such amendment or new Registration
Statement, in each case, as soon as practicable, but in any event not later
than fifteen (15) days after the necessity therefor arises. The Company shall
use its best efforts to cause such amendment and/or new Registration Statement
to become effective as soon as practicable following the filing thereof. For
purposes of the foregoing provision, the number of shares available under a
Registration Statement shall be deemed “insufficient to cover all of the
Registrable Securities” if at any time the number of shares of Common Stock
available for resale under the Registration Statement is less than the product
determined by multiplying (i) the Required Registration Amount as of such
time by (ii) 0.90. The calculation set forth in the foregoing sentence
shall be made without regard to any limitations on the conversion of the
Preferred Shares or the exercise of the Warrants and such calculation shall
assume that the Preferred Shares are then convertible into shares of Common
Stock at the then prevailing Conversion Rate (as defined in the Certificate of
Designations) and that the Warrants are then exercisable for shares of Common
Stock at the then prevailing Exercise Price (as defined in the Warrants).

 

f.      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 3(r)) pursuant to such Registration
Statement (including, without limitation, because of a failure to keep such
Registration Statement effective, to disclose such information as is necessary
for sales to be made pursuant to such Registration Statement, to register a
sufficient number of shares of Common Stock or to maintain the listing of the
Common Stock) (a “Maintenance Failure”) then, as partial relief for the damages
to any holder by reason of any such delay in or reduction of its ability to
sell the underlying shares of Common Stock and not as a penalty (which remedy
shall not be exclusive of any other remedies available at law or in equity),
the Company shall pay to each holder of Registrable Securities relating to such
Registration Statement an amount in cash equal to one and one-half percent
(1.5%) of the aggregate Purchase Price (as such term is defined in the
Securities Purchase Agreement) of such Investor’s Registrable Securities
included in such Registration Statement on each of the following dates: (i) the
day of a Filing Failure; (ii) the day of an Effectiveness Failure; (iii) the
initial day of a Maintenance Failure; (iv) on every thirtieth day after
the day of a Filing Failure and thereafter (pro rated for periods totaling less
than thirty

 

4

 

days) until such Filing Failure is cured; (v) on every thirtieth
day after the day of an Effectiveness Failure and thereafter (pro rated for
periods totaling less than thirty days) until such Effectiveness Failure is
cured; and (vi) on every thirtieth day after the initial day of a
Maintenance Failure and thereafter (pro rated for periods totaling less than
thirty days) until such Maintenance Failure is cured. The payments to which a
holder shall be entitled pursuant to this Section 2(f) are referred
to herein as “Registration Delay Payments.” Registration Delay Payments shall
be paid on the earlier of (I) the dates set forth above and (II) the
third Business Day after the event or failure giving rise to the Registration
Delay Payments is cured. In the event the Company fails to make Registration
Delay Payments in a timely manner, such Registration Delay Payments shall bear
interest at the rate of one and one-half percent (1.5%) per month (prorated for
partial months) until paid in full. Notwithstanding anything herein or in the
Securities Purchase Agreement to the contrary (i) no Registration Delay
Payments shall be due and payable with respect to the Warrants or the Warrant
Shares and (ii) in no event shall the aggregate amount of Registration
Delay Payments (other than Registration Delay Payments payable pursuant to
events that are within the control of the Company) exceed, in the aggregate,
10% of the aggregate Purchase Price.

 

3.     Related Obligations.

 

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

 

a.     The
Company shall promptly prepare and file with the SEC a Registration Statement
with respect to the Registrable Securities and use its reasonable best efforts
to cause such Registration Statement relating to the Registrable Securities to
become effective as soon as practicable after such filing (but in no event
later than the Effectiveness Deadline). The Company shall keep each
Registration Statement effective pursuant to Rule 415 at all times until
the earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or any successor thereto) promulgated
under the 1933 Act or (ii) the date on which the Investors shall have sold
all of the Registrable Securities covered by such Registration Statement (the “Registration
Period”). The Company shall ensure that each Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein (in the case of prospectuses, in the light of the
circumstances in which they were made) not misleading. The term “reasonable
best efforts” shall mean, among other things, that the Company shall submit to
the SEC, within three (3) Business Days after the later of the date that (i) the
Company learns that no review of a particular Registration Statement will be
made by the staff of the SEC or that the staff has no further comments on a
particular Registration Statement, as the case may be, and (ii) the
approval of Legal Counsel pursuant to Section 3(c) (which approval is
immediately sought and shall not be unreasonably withheld or delayed), 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.

 

5

 

b.     The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and the
prospectus used in connection with such Registration Statement, which
prospectus is to be filed pursuant to Rule 424 promulgated under the 1933
Act, as may be necessary to keep such Registration Statement effective at all
times during the Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by such Registration Statement until such
time as all of such Registrable Securities shall have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in such Registration Statement. In the case of amendments
and supplements to a Registration Statement which are required to be filed
pursuant to this Agreement (including pursuant to this Section 3(b)) by
reason of the Company filing a report on Form 10-Q, Form 10-K or any
analogous report under the Securities Exchange Act of 1934, as amended (the “1934
Act”), the Company shall have incorporated such report by reference into
such Registration Statement, if applicable, or shall file such amendments or
supplements with the SEC within one (1) Business Day after the day on
which the 1934 Act report is filed which created the requirement for the
Company to amend or supplement such Registration Statement.

 

c.     The
Company shall (A) permit Legal Counsel to review and comment upon (i) a
Registration Statement at least five (5) 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 or Form 10-KSB,
Quarterly Reports on Form 10-Q or Form 10-QSB, Current Reports on Form 8-K,
and any similar or successor reports) within a reasonable number of days prior
to their filing with the SEC, and (B) not file any Registration Statement
or amendment or supplement thereto in a form to which Legal Counsel reasonably
objects. The Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement or any amendment or supplement
thereto without the prior approval of Legal Counsel, which consent shall not be
unreasonably withheld 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 shall reasonably cooperate with Legal Counsel in
performing the Company’s obligations pursuant to this Section 3.

 

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

 

6

 

reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.

 

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

 

f.      The
Company shall notify Legal Counsel and each Investor in writing of the
happening of any event, as promptly as practicable after becoming aware of such
event, as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact
or omission to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading (provided that in no event shall such notice
contain any material, nonpublic information), and, subject to Section 3(r),
promptly prepare a supplement or amendment to such Registration Statement to
correct such untrue statement or omission, and deliver ten (10) copies of
such supplement or amendment to Legal Counsel and each Investor (or such other
number of copies as Legal Counsel or such Investor may reasonably request). The
Company shall also promptly notify Legal Counsel and each Investor in writing (i) when
a prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to
Legal Counsel and each Investor by facsimile or e-mail on the same day of such
effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company’s reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.

 

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

 

7

 

being sold of the issuance of such order and the resolution thereof or
its receipt of actual notice of the initiation or threat of any proceeding for
such purpose.

 

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

 

i.      Upon
the written request of any Investor in connection with such Investor’s due
diligence requirements, if any, the Company shall make available for inspection
by (i) any Investor, (ii) Legal Counsel and (iii) one firm of
accountants or other agents retained by the Investors (collectively, the “Inspectors”), all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the “Records”), as shall be
reasonably deemed necessary by each Inspector, and cause the Company’s officers,
directors and employees, 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 Agreement. Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. Nothing herein (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.

 

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

 

8

 

disclosure of such information concerning an Investor is sought in or
by a court or governmental body of competent jurisdiction or through other
means, give prompt written notice to such Investor and allow such Investor, at
the Investor’s expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, such information.

 

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

 

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

 

m.      If requested by an Investor, the Company shall as soon as
practicable but in no event later than five (5) days after the 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.

 

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

 

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

 

9

 

day of the Company’s fiscal quarter next following the effective date
of the Registration Statement.

 

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

 

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

 

r.      Notwithstanding
anything to the contrary herein, at any time after the Effective Date, 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 twelve (12) consecutive days and during any three hundred
sixty five (365) day period such Grace Periods shall not exceed an aggregate of
twenty-five (25) days and the first day of any Grace Period must be at least
five (5) trading days after the last day of any prior Grace Period (each,
an “Allowable Grace Period”). For purposes of
determining the length of a Grace Period above, the Grace Period shall begin on
and include the date the Investors receive the notice referred to in clause (i) and
shall end on and include the later of the date the Investors receive the notice
referred to in clause (ii) and the date referred to in such notice. The
provisions of Section 3(g) hereof shall not be applicable during the
period of any Allowable Grace Period. Upon expiration of the Grace Period, the
Company shall again be bound by the first sentence of Section 3(g) with
respect to the information giving rise thereto unless such material, non-public
information is no longer applicable. Notwithstanding anything to the contrary,
the Company shall cause its transfer agent to deliver unlegended shares of
Common Stock to a transferee of an Investor in accordance with the terms of the
Securities Purchase Agreement in connection with any sale of Registrable
Securities with respect to which an Investor has entered into a contract for
sale, and delivered a copy of the prospectus included as part of the applicable
Registration Statement (unless an exemption from such delivery requirement
exists), prior to the Investor’s receipt of the notice of a Grace Period and
for which the Investor has not yet settled.

 

4.     Obligations of the
Investors.

 

a.     At
least ten (10) Business Days prior to the first anticipated filing date of
a Registration Statement, the Company shall notify each Investor in writing of
the information the Company requires from each such Investor if such Investor
elects to have any of such Investor’s Registrable Securities included in such
Registration Statement. It shall be a condition

 

10

 

precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held by
it and the intended method of disposition of the Registrable Securities held by
it, as shall be reasonably required to effect and maintain the effectiveness of
the registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably
request.

 

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

 

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

 

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

 

5.     Expenses of Registration.

 

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

 

6.     Indemnification.

 

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

 

a.     To
the fullest extent permitted by law, the Company will, and hereby does,
indemnify, hold harmless and defend each Investor, the directors, officers,
members,

 

11

 

partners, employees, agents, representatives of, and each Person, if
any, who controls any Investor within the meaning of the 1933 Act or the 1934
Act (each, an “Indemnified Person”), against any
losses, claims, damages, liabilities, judgments, fines, penalties, charges,
costs, reasonable attorneys’ fees, amounts paid in settlement or expenses,
joint or several, other than consequential, indirect or incidental damages
(collectively, “Claims”) incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto (“Indemnified Damages”), to which
any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of
a material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other “blue sky” laws of any jurisdiction in
which Registrable Securities are offered (“Blue Sky Filing”), or the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act,
any other law, including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any violation of
this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, “Violations”). Subject to Section 6(c),
the Company shall reimburse the Indemnified Persons, promptly as such expenses
are incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim by an Indemnified Person arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person for such
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section 3(d) and
(ii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld or delayed. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.

 

b.     In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement and each Person, if any,
who controls the Company within the meaning of the 1933 Act or the 1934 Act
(each, an “Indemnified Party”), against any Claim or Indemnified Damages
to which any of them may

 

12

 

become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any Violation,
in each case to the extent, and only to the extent, that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and, subject to Section 6(c), such Investor will reimburse any
legal or other expenses reasonably incurred by an Indemnified Party in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) and the
agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that the Investor
shall be liable under this Section 6(b) for only that amount of a
Claim or Indemnified Damages as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.

 

c.     Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 6
of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person
or Indemnified Party shall, if a Claim in respect thereof is to be made against
any indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof, and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Person or the Indemnified Party, as
the case may be; provided, however, that an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel with the fees and expenses
of not more than one counsel for such Indemnified Person or Indemnified Party
to be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In the case of an Indemnified Person, legal counsel
referred to in the immediately preceding sentence shall be selected by the
Investors holding at least a majority  in interest of the
Registrable Securities included in the Registration Statement to which the
Claim relates. The Indemnified Party or Indemnified Person shall cooperate
reasonably with the indemnifying party in connection with any negotiation or
defense of any such action or Claim by the indemnifying party and shall furnish
to the indemnifying party all information reasonably available to the Indemnified
Party or Indemnified Person which relates to such action or Claim. The
indemnifying party shall keep the Indemnified Party or Indemnified Person fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for
any settlement of any action, claim or proceeding effected without its prior
written consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Indemnified Party or
Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant

 

13

 

or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such Claim or litigation, and such
settlement shall not include any admission as to fault on the part of the
Indemnified Party or the Indemnified Person. Following indemnification as
provided for hereunder, the indemnifying party shall be subrogated to all
rights of the Indemnified Party or Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which indemnification
has been made. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.

 

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

 

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

 

7.     Contribution.

 

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

 

8.     Reports Under the 1934
Act.

 

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

 

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

 

b.     file
with the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements (it being understood that nothing herein shall
limit the Company’s obligations under Section 4(c) of the Securities
Purchase Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and

 

14

 

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

 

9.     Assignment of
Registration Rights.

 

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

 

10.   Amendment of Registration
Rights.

 

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

 

11.   Miscellaneous.

 

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

 

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

 

15

 

recognized overnight delivery service, in each case properly addressed
to the party to receive the same. The addresses and facsimile numbers for such
communications shall be:

 

	
  If to the Company:

  
	
   

  	
   

  
	
   

  	
  Cano Petroleum, Inc.

  
	
   

  	
  801 Cherry
  Street

  
	
   

  	
  Suite 3200

  
	
   

  	
  Fort Worth,
  Texas 76102

  
	
   

  	
  Telephone:

  	
  (817) 698-0900

  
	
   

  	
  Facsimile:

  	
  (817) 334-0222

  
	
   

  	
  Attention:

  	
  Morris B. Smith and James K. Teringo, Jr.

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
   

  	
   

  
	
   

  	
  W. Bruce Newsome

  
	
   

  	
  Haynes and
  Boone, LLP

  
	
   

  	
  901 Main St., Suite 3100

  
	
   

  	
  Dallas, TX 75202

  
	
   

  	
  Telephone:

  	
  (214) 651-5119

  
	
   

  	
  Facsimile:

  	
  (214) 200-0636

  
	
   

  	
   

  	
   

  
	
  If to Legal Counsel:

  
	
   

  
	
   

  	
  Schulte Roth & Zabel LLP

  
	
   

  	
  919 Third Avenue

  
	
   

  	
  New York, New York 10022

  
	
   

  	
  Telephone:

  	
  (212) 756-2000

  
	
   

  	
  Facsimile:

  	
  (212) 593-5955

  
	
   

  	
  Attention:

  	
  Eleazer N. Klein, Esq.

  

 

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

 

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

 

16

 

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

 

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

 

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

 

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

 

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

 

17

 

i.      Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.

 

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

 

k.     The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent and no rules of strict construction
will be applied against any party.

 

l.      This
Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person.

 

m.    Notwithstanding
anything to the contrary contained herein, no Buyer or holder of Registrable
Securities shall be entitled to consequential, indirect or incidental damages
hereunder. However, the foregoing shall not in any way limit a Buyer or holder
of Registrable Securities from being reimbursed for its costs, fees or
expenses, including, without limitation, reasonable attorneys’ fees and
disbursements in connection with any of its rights and remedies hereunder.

 

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

 

* * * * * *

 

18

 

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

 

	
  

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CANO
  PETROLEUM, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ S. Jeffery Johnson

  	
   

  
	
   

  	
   

  	
  Name:   S. Jeffrey Johnson

  
	
   

  	
   

  	
  Title:    Chairman and CEO

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  WILLIAM HERBERT HUNT TRUST

  ESTATE  

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. W. Beavers, Jr., Trustee

  	
   

  
	
   

  	
   

  	
  Name:  J. W.
  Beavers, Jr. 

  
	
   

  	
   

  	
  Title:   
  Trustee

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  S.A.C. CAPITAL ASSOCIATES, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  S.A.C. Capital Advisors, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter Nussbaum

  	
   

  
	
   

  	
   

  	
  Name:  Peter
  Nussbaum

  
	
   

  	
   

  	
  Title:   
  General Counsel

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  RADCLIFFE SPC, LTD., for and on

  behalf of the Class A Convertible

  Crossover Segregated Portfolio

  
	
   

  	
   

  
	
   

  	
  By:

  	
  RG Capital Management, L.P. 

  
	
   

  	
   

  
	
   

  	
  By:

  	
  RGC Management Company, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven B. Katznelson

  	
   

  
	
   

  	
   

  	
  Name:  Steven
  B. Katznelson

  
	
   

  	
   

  	
  Title:   
  Managing Director

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  D.E. SHAW LAMINAR PORTFOLIOS,

  L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Julies Gaudio

  	
   

  
	
   

  	
   

  	
  Name:  Julies
  Gaudio

  
	
   

  	
   

  	
  Title:   
  Authorized Signatory

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  INVESTCORP INTERLACHEN MULTI-

  STRATEGY MASTER FUND LIMITED

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Interlachen Capital Group LP,

  Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gregg T. Colburn

  	
   

  
	
   

  	
   

  	
  Name:  Gregg
  T. Colburn

  
	
   

  	
   

  	
  Title:   
  Authorized Signatory

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  ING VP NATURAL RESOURCES

  TRUST c/o ING Investment Management

  Co.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sal DiGanzi

  	
   

  
	
   

  	
   

  	
  Name:  Sal
  DiGanzi

  
	
   

  	
   

  	
  Title:    VP
  Compliance

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  ING GLOBAL RESOURCES

  PORTFOLIO c/o ING Investment

  Management Co.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sal DiGanzi

  	
   

  
	
   

  	
   

  	
  Name:  Sal
  DiGanzi

  
	
   

  	
   

  	
  Title:    VP
  Compliance

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  TRUK OPPORTUNITY FUND, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Atoll Asset Management, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael E. Fein

  	
   

  
	
   

  	
   

  	
  Name:  Michael
  E. Fein

  
	
   

  	
   

  	
  Title:    Principal

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  TRUK INTERNATIONAL FUND, LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Atoll Asset Management, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael E. Fein

  	
   

  
	
   

  	
   

  	
  Name:  Michael
  E. Fein

  
	
   

  	
   

  	
  Title:   
  Principal

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  FORT MASON MASTER, LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dan German

  	
   

  
	
   

  	
   

  	
  Name:  

  	
  Dan German

  
	
   

  	
   

  	
  Title:    

  	
  Managing Member

  Fort Mason Capital, LLC

  
					

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  FORT MASON PARTNERS, LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dan German

  	
   

  
	
   

  	
   

  	
  Name:  

  	
  Dan German

  
	
   

  	
   

  	
  Title:    

  	
  Managing Member

  Fort Mason Capital, LLC

  
					

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  UBS O’CONNOR LLC fbo O’Connor

  Pipes Corporate Strategies

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Illegible Signature

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  DYNAMIS ENERGY FUND, LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John H. Bocock

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John H. Bocock

  
	
   

  	
   

  	
  Title:

  	
  Managing Member

  
					

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  DYNAMIS ENERGY FUND, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John H. Bocock

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John H. Bocock

  
	
   

  	
   

  	
  Title:

  	
  Managing Member

  
					

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  KELLOGG CAPITAL GROUP LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas Cappalleri

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Nicholas Cappalleri

  
	
   

  	
   

  	
  Title:

  	
  Director — Finance and

  
	
   

  	
   

  	
   

  	
  Operations

  
					

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  GLG PARTNERS, LP acting as

  investment manager for GLG North

  American Opportunity Fund

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Simon White

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Simon White

  
	
   

  	
   

  	
  Title:

  	
  Chief Operating Officer GLG 

  
	
   

  	
   

  	
  Partners LP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Victoria Parry

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Victoria Parry

  
	
   

  	
   

  	
  Title:

  	
  Senior Legal Counsel

  
	
   

  	
   

  	
   

  	
  GLG Partners LP

  
					

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  CAMCAP ENERGY OFFSHORE

  MASTER FUND, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Roland A. von Metzsch

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Roland A. von Metzsch

  
	
   

  	
   

  	
  Title:

  	
  Managing Member,

  
	
   

  	
   

  	
   

  	
  CamCap Energy Partners, LLC

  
	
   

  	
   

  	
   

  	
  GP of CamCap Energy 

  
	
   

  	
   

  	
   

  	
  Offshore Master Fund, L.P.

  
					

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  TOURADJI DEEPROCK MASTER

  FUND, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas S. Dwan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Thomas S. Dwan

  
	
   

  	
   

  	
  Title:

  	
  CFO

  
					

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  TOURADJI GLOBAL RESOURCES

  MASTER FUND, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas S. Dwan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Thomas S. Dwan

  
	
   

  	
   

  	
  Title:

  	
  CFO

  
					

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  EUROPA INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fred Knoll

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Fred Knoll

  
	
   

  	
   

  	
  Title:

  	
  Knoll Capital Management

  
	
   

  	
   

  	
   

  	
  Investment Manager for

  
	
   

  	
   

  	
   

  	
  Europa International, Inc.

  
					

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  KNOLL CAPITAL FUND II MASTER

  FUND, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fred Knoll

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Fred Knoll

  
	
   

  	
   

  	
  Title:

  	
  KOM Capital Management 

  
	
   

  	
   

  	
   

  	
  Investment Manager

  
					

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  ADVANTAGE ADVISORS CATALYST

  INT’L LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Todd McElroy

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Todd McElroy

  
	
   

  	
   

  	
  Title:

  	
  CFO

  
					

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  ADVANTAGE ADVISORS CATALYST

  PARTNERS LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Todd McElroy

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Todd McElroy

  
	
   

  	
   

  	
  Title:

  	
  CFO

  
					

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  RIDGECREST PARTNERS LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Todd McElroy

  	
   

  
	
   

  	
   

  	
  Name: Todd McElroy

  
	
   

  	
   

  	
  Title:   CFO

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  RIDGECREST PARTNERS QP, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Todd McElroy

  	
   

  
	
   

  	
   

  	
  Name: Todd McElroy

  
	
   

  	
   

  	
  Title:   CFO

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  SPENDRIFT INVESTORS (BERMUDA)

  L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Wellington
  Management Company,

  LLP as Investment Advisor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gregory S. Konzal

  	
   

  
	
   

  	
   

  	
  Name: Gregory S. Konzal

  
	
   

  	
   

  	
  Title:   Vice President and Counsel

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  SPENDRIFT PARTNERS, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Wellington
  Management Company,

  LLP as Investment Advisor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gregory S. Konzal

  	
   

  
	
   

  	
   

  	
  Name: Gregory S. Konzal

  
	
   

  	
   

  	
  Title:   Vice President and Counsel

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  BRIGHTSTREAM FUND, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Zusman

  	
   

  
	
   

  	
   

  	
  Name: David Zusman

  
	
   

  	
   

  	
  Title:   Managing Partner

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  BRIGHTSTREAM MASTER FUND, LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Zusman

  	
   

  
	
   

  	
   

  	
  Name: David Zusman

  
	
   

  	
   

  	
  Title:   Managing Partner

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  HFR HE BRIGHTWATER MASTER

  TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Zusman

  	
   

  
	
   

  	
   

  	
  Name: David Zusman

  
	
   

  	
   

  	
  Title:   Manager

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  TRAPEZE CAPITAL CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Herbert Abramson

  	
   

  
	
   

  	
   

  	
  Name: Herbert Abramson

  
	
   

  	
   

  	
  Title:   President

  

 

 

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

 

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  TRAPEZE ASSET MANAGEMENT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Herbert Abramson

  	
   

  
	
   

  	
   

  	
  Name: Herbert Abramson

  
	
   

  	
   

  	
  Title:   President

  

 

 

 

SCHEDULE OF BUYERS

 

	
  Buyer

  	
   

  	
  Buyer Address

  and Facsimile Number

  
	
   

  	
   

  	
   

  
	
  Brightstream Fund, LLC

  	
   

  	
  c/o Brightstream Asset Management

  598 Madison Avenue, 5th
  Floor

  New York, NY 10022

  Attention: Donald Krueger
 Facsimile: 212-452-6160

  Telephone: 212-452-6100

  
	
  Brightstream Master Fund, LP

  	
   

  	
  c/o Brightstream Asset Management

  598 Madison Avenue, 5th
  Floor

  New York, NY 10022

  Attention: Donald Krueger
 Facsimile: 212-452-6160

  Telephone: 212-452-6100

  
	
  HFR HE Brightwater Master Trust

  	
   

  	
  c/o Brightstream Asset Management

  598 Madison Avenue, 5th
  Floor

  New York, NY 10022

  Attention: Donald Krueger
 Facsimile: 212-452-6160

  Telephone: 212-452-6100

  
	
  D. E. Shaw Laminar Portfolios, L.L.C.

  	
   

  	
  c/o D. E. Shaw & Co

  120 West 45th Street, 39th Floor

  New York, NY 10036

  Attention: Maureen Welby Knoblauch

  Facsimile: 212-845-1628

  Telephone: 212-478-0628

  
	
  Dynamis Energy Fund, LTD

  	
   

  	
  c/o Spectrum Global Fund Administration (Cayman)

  PO Box 10243 APO

  Grand Cayman, Cayman Islands

  Attention: John H.
  Bocock

  Facsimile: 434-220-0234

  Telephone: 434-220-4621

  
	
  Dynamis Energy Fund, LP

  	
   

  	
  310 Fourth Street, NE, Suite 101

  Charlottesville, VA 22902

  Attention: John H.
  Bocock

  Facsimile: 434-220-0234

  Telephone: 434-220-4621

  
	
  Fort Mason Master, LP

  	
   

  	
  c/o Fort Mason Capital, LLC

  4 Embarcadero Center, Suite 2050

  San Francisco, CA 94111

  Attention: KC Lynch and Marshall Jensen

  Facsimile: 415-288-8113

  Telephone: 415-288-8100

  
	
  Fort Mason Partners, LP

  	
   

  	
  c/o Fort Mason Capital, LLC

  4 Embarcadero Center, Suite 2050

  San Francisco, CA 94111

  Attention: KC Lynch and Marshall Jensen

  Facsimile: 415-288-8113

  Telephone: 415-288-8100

  
	
  GLG North American Opportunity Fund

  	
   

  	
  c/o GLG Partners LP

  Walker House, P.O. Box 908GT, Mary Street

  Georgetown, Grand Cayman, Cayman Islands

  Attention: Gitesh Parmar

  Facsimile: 44-207-016-7200

  Telephone: 44-207-016-7000

  
	
  Investcorp Interlachen Multi-Strategy Master
  Fund Limited

  	
   

  	
  c/o Interlachen Capital Group LP

  800 Nicollet Mall, Suite 2500

  Minneapolis, MN 55402

  Attention: Gregg Colburn and Legal Department

  Facsimile: 612-659-4457

  Telephone: 612-659-4407

  

 

1

 

	
  Kellogg Capital Group LLC

  	
   

  	
  55 Broadway, 4th Floor

  New York, NY 10006

  Attention: Nicholas Cappelleri

  Facsimile: 212-380-5665

  Telephone: 212-607-5061

  
	
  William Herbert Hunt Trust Estate

  	
   

  	
  1601 Elm Street, Suite 3400

  Dallas, TX 75201

  Attention: David S. Hunt

  Facsimile: 214-880-7101

  Telephone: 214-880-8484

  
	
  Radcliffe SPC, Ltd.

  For and on behalf of the Class A Convertible Crossover Segregated
  Portfolio

  	
   

  	
  c/o RG Capital Management, L.P.

  3 Bala Plaza - East, Suite 501

  Bala Cynwyd, PA 19004

  Attention: Gerald F. Stahlecker

  Facsimile: 610-617-0580

  Telephone: 610-617-5900

  
	
  Truk Opportunity Fund, LLC

  	
   

  	
  c/o Atoll Asset Management, LLC

  1 East 52nd Street, 6th Floor

  New York, NY 10022

  Attention: Antonia Koleva

  Facsimile: 212-888-0334

  Telephone: 212-888-2224

  
	
  Truk International Fund, LP

  	
   

  	
  c/o Atoll Asset Management, LLC

  1 East 52nd Street, 6th Floor

  New York, NY 10022

  Attention: Antonia Koleva

  Facsimile: 212-888-0334

  Telephone: 212-888-2224

  
	
  Touradji DeepRock Master Fund, Ltd.

  	
   

  	
  c/o Spectrum Global Fund Administration (Cayman)

  PO Box 10243 APO, Anchorage Center, Second Floor

  George Town, Grand Cayman, Cayman Islands, BWI

  Attention: Thomas S. Dwan

  Facsimile: 212-984-8881

  Telephone: 212-984-8899

  
	
  Touradji Global Resources Master Fund, Ltd.

  	
   

  	
  c/o Spectrum Global Fund Administration (Cayman)

  PO Box 10243 APO, Anchorage Center, Second Floor

  George Town, Grand Cayman, Cayman Islands, BWI

  Attention: Thomas S. Dwan

  Facsimile: 212-984-8881

  Telephone: 212-984-8899

  
	
  Trapeze Capital Corp.

  	
   

  	
  22 St. Clair Avenue East, 18th Floor

  Toronto, ON, M4T 253

  Attention: Randall Abramson

  Facsimile: 416-867-9771

  Telephone: 416-861-0774

  
	
  Trapeze Asset Management, Inc.

  	
   

  	
  22 St. Clair Avenue East, 18th Floor

  Toronto, ON, M4T 253

  Attention: Randall Abramson

  Facsimle: 416-867-9771

  Telephone: 416-861-0774

  
	
  O’Connor PIPEs Corporate Strategies Master
  Limited

  	
   

  	
  c/o UBS O’Connor LLC

  1 North Wacker Drive, 32nd Floor

  Chicago, IL 60606

  Attention: Brian Herward

  Facsimile: 312-525-6271

  Telephone: 312-525-5868

  
	
  Spindrift Partners, L.P.

  	
   

  	
  c/o Wellington Management Company, LLP

  75 State Street\

  Boston, MA 02109

  Attention: Madeline Rapp

  Facsimile: 617-204-7006

  Telephone: 617-790-7006

  
	
  Spindrift Investors (Bermuda) L.P.

  	
   

  	
  c/o Wellington Management Company, LLP

  75 State Street\

  Boston, MA 02109

  Attention: Madeline Rapp

  Facsimile: 617-204-7006

  Telephone: 617-790-7006

  
	
  CamCap Energy Offshore Master Fund, L.P.

  	
   

  	
  c/o BISYS Hedge Fund Services (Cayman) Ltd.

  P.O. Box 1748GT, Cayman Corporate Center, 27 Hospital Road

  George Town, Grand Cayman, Cayman Islands

  Attention: Roland von Metzsch

  Facsimile: 415-658-3020

  Telephone: 415-658-3010

  

 

2

 

	
  ING VP Natural Resources Trust

  	
   

  	
  c/o ING Investment Management Company

  230 Park Avenue

  New York, NY 10169

  Attention: Maria Anderson

  Facsimile: 480-477-2706

  Telephone: 480-477-2169

  
	
  ING Global Resources Portfolio

  	
   

  	
  c/o ING Investment Management Company

  230 Park Avenue

  New York, NY 10169

  Attention: Maria Anderson

  Facsimile: 480-477-2706

  Telephone: 480-477-2169

  
	
  Europa International Inc.

  	
   

  	
  c/o Knoll Capital Management

  666 Fifth Avenue, Suite 3702

  New York, NY 10103

  Attention: Fred Knoll

  Facsimile: 212-808-7475

  Telephone: 212-808-7474

  
	
  Knoll Capital Fund II Master Fund Ltd.

  	
   

  	
  c/o KOM Capital Management

  666 Fifth Avenue, Suite 3702

  New York, NY 10103

  Attention: Fred Knoll

  Facsimile: 212-808-7475

  Telephone: 212-808-7474

  
	
  Ridgecrest Partners Ltd.

  	
   

  	
  c/o Ridgecrest Partners

  220 East 42nd Street, 29th Floor

  New York, NY 10017

  Attention: Todd McElroy

  Facsimile: 212-476-9159

  Telephone: 212-476-5517

  
	
  Ridgecrest Partners QP, L.P.

  	
   

  	
  c/o Ridgecrest Partners

  220 East 42nd Street, 29th Floor

  New York, NY 10017

  Attention: Todd McElroy

  Facsimile: 212-476-9159

  Telephone: 212-476-5517

  
	
  Advantage Advisors Catalyst International Ltd.

  	
   

  	
  c/o Ridgecrest Partners

  220 East 42nd Street, 29th Floor

  New York, NY 10017

  Attention: Todd McElroy

  Facsimile: 212-476-9159

  Telephone: 212-476-5517

  
	
  Advantage Advisors Catalyst Partners L.P.

  	
   

  	
  c/o Ridgecrest Partners

  220 East 42nd Street, 29th Floor

  New York, NY 10017

  Attention: Todd McElroy

  Facsimile: 212-476-9159

  Telephone: 212-476-5517

  
	
  S.A.C. Capital Associates, LLC

  	
   

  	
  PRINCIPAL BUSINESS ADDRESS

  c/o S.A.C. Capital Associates, LLC

  P.O. Box 58, Victoria House

  The Valley, Anguilla, BWI 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  INFORMATION FOR DISTRIBUTION OF SHARES AND
  CORRESPONDENCE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c/o S.A.C. Capital Advisors, LLC

  72 Cummings Point Road

  Stamford, CT 06902

  Attention: General Counsel

  Tel: (203) 890-2000

  

 

3

 

 

EXHIBIT A

 

FORM OF NOTICE OF
EFFECTIVENESS

OF REGISTRATION STATEMENT

 

[Transfer Agent]

[Address]

Attention:

 

Re:          Cano Petroleum, Inc.

 

Ladies and Gentlemen:

 

[We are][I am] counsel to
Cano Petroleum, 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 preferred shares (the “Preferred Shares”) convertible into the
Company’s common stock, $0.0001 par value (the “Common Stock”), shares of Common Stock and warrants
exercisable for shares of Common Stock (the “Warrants”).  Pursuant to the Securities Purchase
Agreement, the Company also has entered into a Registration Rights Agreement
with the Holders (the “Registration Rights
Agreement”) pursuant to which the Company agreed, among other
things, to register the Registrable Securities (as defined in the Registration
Rights Agreement), including the shares of Common Stock issuable upon
conversion of the Preferred Shares, the shares of Common Stock and the shares
of Common Stock issuable upon exercise of the Warrants, 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-1
(File No. 333-             )
(the “Registration Statement”)
with the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names each
of the Holders as a selling stockholder thereunder.

 

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

 

Subject to the specific
prohibitions contained in the Registration Rights Agreement regarding the
inability to use the Registration Statement under specific circumstances (the “Registration Statement Limitations”), this letter shall
serve as our standing instruction to you that the shares of Common Stock are
freely transferable by the Holders pursuant to the Registration Statement
provided the prospectus delivery requirements, if any, are complied with.

 

1

 

Subject to the
Registration Statement Limitations, you need not require further letters from
us to effect any future legend-free issuance or reissuance of shares of Common
Stock to the Holders as contemplated by the Company’s Irrevocable Transfer
Agent Instructions dated            ,
2006.  This letter shall serve as our
standing opinion with regard to this matter.

 

	
  

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
  [ISSUER’S COUNSEL]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
  CC:      [LIST NAMES OF HOLDERS]

  	
   

  

 

2

 

 

EXHIBIT B

 

SELLING STOCKHOLDERS

 

The shares of Common
Stock being offered by the Selling Stockholders are those previously issued to
the Selling Stockholders and those issuable to the Selling Stockholders upon
conversion of the convertible preferred shares, and upon exercise of the
warrants.  For additional information
regarding the issuance of those shares of Common Stock, convertible preferred
shares and warrants, see “Private Placement of Common Shares, Convertible
Preferred Shares and Warrants” above.  We
are registering the shares of Common Stock in order to permit the selling
stockholders to offer the shares for resale from time to time.  Except for [        ][Discuss
Wellington’s relationships] and the ownership of the shares of common stock,
the convertible preferred shares and warrants issued pursuant to the Securities
Purchase Agreement, the selling stockholders have not had any material
relationship with us within the past three years.

 

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

 

The third column lists
the shares of Common Stock being offered by this prospectus by the Selling
Stockholders.

 

In accordance with the
terms of a registration rights agreement with the selling stockholders, this
prospectus generally covers the resale of at least the sum of (i) 100% of
the number of shares of common stock issued and (ii)130% of the maximum the
number of shares of Common Stock issuable upon conversion of the convertible
preferred shares and (iii) 100% of the maximum number of shares of Common
Stock issuable upon exercise of the warrants as of the trading day immediately
preceding the date the registration statement is initially filed with the SEC.  Because the conversion
price of the convertible preferred shares 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 Stockholders pursuant to
this prospectus.

 

Under the terms of the
certificate of designations and the warrants, a Selling Stockholder may not
convert the preferred shares or exercise the warrants to the extent such
conversion or exercise would cause such Selling Stockholder, together with its
affiliates, to beneficially own a number of shares of Common Stock which would
exceed a percentage specified by the Selling Stockholder of our then
outstanding shares of Common Stock following such conversion or exercise,
excluding for purposes of such determination shares of Common Stock issuable
upon conversion of the convertible preferred shares and upon exercise of the
warrants which have not been exercised which have not been converted.  The number of shares in the second column
does

 

1

 

not reflect this
limitation.  The Selling Stockholders may
sell all, some or none of their shares in this offering.  See “Plan of Distribution.”

 

2

 

 

	
  Name of Selling Stockholder

  	
   

  	
  Number of Ordinary Shares

  Owned Prior to Offering

  	
   

  	
  Maximum Number of

  Ordinary Shares to be Sold

  Pursuant to this Prospectus

  	
   

  	
  Number of Ordinary

  Shares Owned After

  Offering

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [Buyer] (1)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [Other Buyers]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

(1)

 

1

 

 

PLAN
OF DISTRIBUTION

 

We are registering the
shares of Common Stock previously issued and the shares of Common Stock
issuable upon conversion of the preferred shares and upon exercise of the
warrants to permit the resale of these shares of Common Stock by the holders of
the common stock, preferred shares and warrants from time to time after the
date of this prospectus.  We will not
receive any of the proceeds from the sale by the selling stockholders of the
shares of Common Stock.  We will bear all
fees and expenses incident to our obligation to register the shares of Common
Stock.

 

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

 

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

 

·                  in the over-the-counter market;

 

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

 

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

 

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

 

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

 

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

 

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

 

·                  privately negotiated transactions;

 

·                  short sales;

 

·                  sales pursuant to Rule 144;

 

 

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

 

·                  a combination of any such methods of
sale; and

 

·                  any other method permitted pursuant to
applicable law.

 

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

 

The selling stockholders
may pledge or grant a security interest in some or all of the preferred shares,
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 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, pursuant to
prospectus amendment or prospectus supplement, 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

 

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 stockholder will sell any or all of the shares of Common Stock
registered pursuant to the registration statement, of which this prospectus
forms a part.

 

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

 

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

 

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

 

3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00167-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00167-of-00352.parquet"}]]