REGISTRATION RIGHTS AGREEMENT
EXHIBIT
10.5
THIS
AGREEMENT (the “Agreement”)
is
made and entered into effective as of the 17th day of February 2006, by and
between Petro Resources Corporation, a Delaware corporation (the “Company”),
and
the subscribers of the Company’s securities pursuant to the Confidential Private
Placement Memorandum dated February 17, 2006 (the “Holder”).
For
good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Company and Holder hereby agree as follows.
| 1. |
Definitions.
|
As
used
in this Agreement, the following terms, not previously defined, will have the
meanings as set forth herein:
1.1 “Commission”
means
the United States Securities and Exchange Commission, and any successor thereto.
1.2 “Common
Stock”
means
the Company’s Common Stock, $.01 par value.
1.3 “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated from time to time thereunder.
1.4 “Person”
means
an individual, partnership, limited partnership, corporation, business trust,
limited liability company, an association, joint stock company, a trust,
unincorporated organization, joint venture or other entity of whatever nature.
1.5 “Registrable
Common”
means
any shares of Common Stock issued to the Holder or issuable to the Holder upon
the exercise of the warrants issued pursuant to a Subscription Agreement,
including any shares of Common Stock issued as a dividend, stock split,
reclassification, recapitalization or other distribution with respect to or
in
exchange for replacement of the preceding; provided,
however,
that
Registrable Common will not include any shares, the sale of which has been
registered pursuant to the Securities Act or which have been or could be sold
to
the public pursuant to Rule 144 promulgated by the Commission under the
Securities Act without restriction under the volume limitations of Rule
144.
1.6 “Register,”
“registered”
and
“registration”
refer
to a registration effected by preparing and filing a registration statement
in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such Registration Statement.
1.7 “Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated from time to time thereunder.
1.8 “Subscription
Agreement”
means
the Subscription Agreement and Letter of Investment Intent executed by the
Holder for the purchase of shares of Common Stock and warrants to purchase
Common Stock in the private placement offering (the “Offering”) pursuant to the
Company’s Private Placement Memorandum, dated February 17, 2006.
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| 2. |
Registration
Rights.
|
2.1. Subject
to the limitations and requirements set forth in this Section 2, the Company
will use commercially reasonable efforts to prepare and file, by March 15,
2006,
a registration statement under the Securities Act, on the appropriate form
covering resale of the Registrable Common, and will use commercially reasonable
efforts to cause such registration statement to become effective as soon as
is
practicable after such filing.
2.2. The
Company will not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance, unless the Company already is subject to service
in
such jurisdiction and except as may be required by the Securities
Act.
2.3. If
the
Company furnishes to such Holder(s) a certificate signed by the Chief Executive
Officer of the Company stating that in the good faith judgment of the Board
of
Directors of the Company it would be seriously detrimental to the Company and
its stockholders for such registration statement to be filed at such time,
then
the Company will have the right to defer such filing for a period ending not
later than thirty (30) days from the latest filing date of such offering as
required herein.
3. Registration
Procedures.
When
the Company is required by the terms of this Agreement to effect the
registration of Registrable Common under the Securities Act, the Company
will:
3.1. Filing.
Prepare
and file with the Commission a registration statement with respect to such
securities, and use commercially reasonable efforts to cause such registration
statement to become and remain effective for such period as may be reasonably
necessary to effect the sale of such securities, but not to exceed the lesser
of
(i) one year following the final closing of the offering or (ii) until the
distribution described in the registration statement has been
completed.
3.2. Period
of Effectiveness.
Prepare
and file with the Commission such amendments to such registration statement
and
supplements to the prospectus contained therein as may be necessary to keep
such
registration statement effective for the period described in Section
3.1.
3.3. Copies.
Furnish
to the Holders participating in such registration and, if applicable, to the
underwriters of the securities being registered such reasonable number of copies
of the registration statement, preliminary prospectus, final prospectus and
such
other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities.
3.4. Blue
Sky.
Use its
commercially reasonable efforts to register or qualify the securities covered
by
such registration statement under such state securities or blue sky laws of
such
jurisdictions as such participating Holder may reasonably request in writing
within twenty (20) days following the original filing of such registration
statement, except that the Company will not for any purpose be required to
execute a general consent to service of process or to qualify to do business
as
a foreign corporation or subject itself to taxation in any jurisdiction wherein
it is not so qualified or taxed.
3.5. Notification.
Notify
the Holders participating in such registration, promptly after it receives
notice thereof, of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed.
3.6. Amendment
Notice.
Notify
the Holders participating in such registration promptly of any request by the
Commission for the amending or supplementing of such registration statement
or
prospectus or for additional information.
3.7. Update.
Prepare
and promptly file with the Commission and promptly notify the Holders
participating in such registration of the filing of such amendment or supplement
to such registration statement or prospectus as may be necessary to correct
any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event
has
occurred as the result of which any such prospectus or any other prospectus
as
then in effect would include an untrue statement of a material fact or omit
to
state any material fact necessary to make the statements therein, in light
of
the circumstances in which they were made, not misleading.
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3.8. Stop
Orders.
Advise
the Holders participating in such registration, promptly after it receives
notice or obtains knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
4. Expenses.
With
respect to the registration requested pursuant to Section 2 hereof (except
as
otherwise provided in such Section) and with respect to each inclusion of
Registrable Common in a registration statement pursuant to Section 2 hereof
(except as otherwise provided in such Section), the Company will bear the
following fees, costs and expenses: all registration, filing and NASD fees,
printing expenses, fees and disbursements of counsel and accountants for the
Company, all internal Company expenses, all legal fees and disbursements and
other expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified, and the premiums and other costs of policies of insurance against
liability (if any) arising out of such public offering. Fees and disbursements
of counsel and accountants for the selling security Holders, underwriting
discounts and commissions and transfer taxes relating to the shares included
in
the offering by the selling security Holders, and any other expenses incurred
by
the selling security Holders not expressly included above, will be borne by
the
selling security Holders.
| 5. |
Indemnification.
|
5.1. Indemnification
by Company.
To the
fullest extent permitted by law, the Company will indemnify and hold harmless
each Holder which has Registrable Common included in a registration statement
pursuant to the provisions hereof, its directors and officers, and any
underwriter (as defined in the Securities Act) for such Holder and each Person,
if any, who controls such Holder or such underwriter within the meaning of
the
Securities Act, from and against, and will reimburse such Holder and each such
underwriter and controlling Person with respect to, any and all loss, damage
and
liability (collectively, “Losses”) to which such Holder or any such underwriter
or controlling Person may become subject under the Securities Act, state
securities laws or otherwise, and the Company will pay to each such Holder,
underwriter or controlling person any legal or other costs or expenses
reasonably incurred by such person in connection with investigating or defending
any such Loss, insofar as such Losses arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which
they were made, not misleading; provided, however, that the Company will not
be
liable in any such case to the extent that any such Loss arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by such
Holder, such underwriter or such controlling Person in writing specifically
for
use in the preparation thereof; provided, however, that the indemnity agreement
in this Section 5.1 will not apply to amounts paid in settlement of any such
Loss if such settlement is effected without the consent of the Company, which
consent will not be unreasonably withheld, and that the foregoing indemnity
obligation with respect to any preliminary prospectus or final prospectus (if
such final prospectus has been amended or supplemented and such amendments
or
supplements have been furnished to such Holder prior to the written confirmation
of the sale involved) will not inure to the benefit of any Holder on account
of
any Loss whatsoever arising from the sale of any Registrable Common by such
Holder to any person if (A) a copy of the final prospectus (as amended or
supplemented if such amendments or supplements have been furnished to such
Holder prior to the written confirmation of the sale involved) has not been
sent
or given by or on behalf of such Holder to such person, if required by law,
with
or prior to the written confirmation of the sale involved, and (B) the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in such preliminary prospectus or final prospectus
from
which such Loss arose was corrected in the final prospectus (as amended or
supplemented if such amendments or supplements thereto have been furnished
as
aforesaid).
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5.2. Indemnification
by Holder.
Each
Holder which has Registrable Common included in a registration statement
pursuant to the provisions hereof will severally, but not jointly, indemnify
and
hold harmless the Company, its directors and officers, each Person, if any,
who
controls the Company within the meaning of the Securities Act, any other Holder
selling securities pursuant to such registration statement, any controlling
Person of any such selling Holder, any underwriter and any controlling Person
of
any such underwriter (each, an “Indemnitee”) from and against, and will
reimburse any Indemnitee with respect to, any and all Losses to which such
Indemnitee may become subject under the Securities Act, state securities laws
or
otherwise, and such Holder will pay to each Indemnitee, any legal or other
costs
or expenses reasonably incurred by such person in connection with investigating
or defending any such Loss, insofar as such Losses are caused by any untrue
or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary
to
make the statements therein, in light of the circumstances in which they were
made, not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was so made in reliance upon and in conformity with written information
furnished by such Holder specifically for use in the preparation thereof;
provided, however, that the indemnity agreement in this Section 5.2 will not
apply to amounts paid in settlement of any such Loss if such settlement is
effected without, and that hat the foregoing indemnity obligation with respect
to any preliminary prospectus or final prospectus (if such final prospectus
has
been amended or supplemented and such amendments or supplements have been
furnished to such Indemnitee prior to the written confirmation of the sale
involved) will not inure to the benefit of any Indemnitee on account of any
Loss
whatsoever arising from the sale of any Registrable Common by the Holder to
any
person if (A) a copy of the final prospectus (as amended or supplemented if
such
amendments or supplements have been furnished to such Indemnitee prior to the
written confirmation of the sale involved) has not been sent or given by or
on
behalf of such Indemnitee to such person, if required by law, with or prior
to
the written confirmation of the sale involved, and (B) the untrue statement
or
alleged untrue statement or omission or alleged omission of a material fact
contained in such preliminary prospectus or final prospectus from which such
Loss arose was corrected in the final prospectus (as amended or supplemented
if
such amendments or supplements thereto have been furnished as aforesaid);
provided further, however, that the obligations of each Holder under this
Section 5.2 will be limited to an amount equal to the net proceeds to such
Holder from the sale of Registrable Common as contemplated herein, unless such
claim, loss, damage, liability or action resulted from such Holder’s fraudulent
misconduct.
5.3. Indemnification
Procedures.
Promptly after receipt by a party entitled to indemnification pursuant to this
Section (each, an “Indemnified Party”) of notice of the commencement of any
action involving the subject matter of the foregoing indemnity provisions such
Indemnified Party will, if a claim is to be made against the party obligated
to
provide indemnification pursuant to this section (each, an “Indemnifying
Party”), promptly notify the Indemnifying Party of the commencement thereof; but
the omission to provide such notice will not relieve the Indemnifying Party
from
any liability hereunder, except to the extent that the delay in giving, or
failing to give, such notice has a material adverse effect upon the ability
of
the Indemnifying Party to defend against the claim. In case such action is
brought against an Indemnified Party, the Indemnifying Party will have the
right
to participate in and, at the Indemnifying Party’s option, to assume the defense
thereof, singly or jointly with any other Indemnifying Party similarly notified,
with counsel or reasonably satisfactory to the Indemnified Party; provided,
however, that if the defendants in any action include both the Indemnified
Party
and the Indemnifying Party and the Indemnified Party reasonably concludes that
there may be legal defenses available to any Indemnified Parties that are
different from or additional to those available to the Indemnifying Party,
or if
there is a conflict of interest which would prevent counsel for the Indemnifying
Party from also representing the Indemnified Party, the Indemnified Party will
have the right to select counsel to participate in the defense of such action
on
behalf of such Indemnified Party at the expense of the Indemnifying Party;
provided further, however, that the Indemnifying Party will be responsible
for
the expenses of only one such special counsel (and one local counsel if
necessary for jurisdictional purposes) selected jointly by the Indemnified
Parties if there is more than one Indemnified Party. After notice from an
Indemnifying Party to any Indemnified Party of such Indemnifying Party’s
election to assume the defense or the action, the Indemnifying Party will not
be
liable to such Indemnified Party pursuant to this Section 5 for any legal or
other expense subsequently incurred by such Indemnified Party in connection
with
the defense thereof, unless (i) the Indemnified Party has employed counsel
in
accordance with the proviso of the preceding sentence, or (ii) the Indemnifying
Party has not employed counsel satisfactory to the Indemnified Party to
represent the Indemnified Party within a reasonable time after the notice of
the
commencement of the action, or (iii) the Indemnifying Party has authorized
the
employment of counsel for the Indemnified Party at the expense of the
Indemnifying Party.
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6. Cooperation.
Any
Holder whose Registrable Common are to be included in a Registration Statement
either filed pursuant to a demand or as part of a Company registration agrees
to
cooperate with all reasonable requests by the Company necessary to effectuate
the purposes of this Agreement, including by timely providing the Company with
all information necessary to prepare and file a registration
statement.
| 7. |
Miscellaneous.
|
7.1. Waivers,
Amendments and Approvals.
In each
case in which the approval of the Holder is required by the terms of this
Agreement, such requirement will be satisfied by a vote or the written action
of
Holders of at least a majority of the Registrable Common held by all the
Holders, unless a higher percentage is specifically required by the terms of
this Agreement. Any term or provision of this Agreement requiring performance
by
or binding upon the Company or the Holders 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 by a writing signed
by
the Company and the Holders of at least a majority of the Registrable Common
held by all the Holders. Any amendment or waiver effected in accordance with
this Section will be binding upon all of the Holders (including permitted
assigns pursuant to Section 7.4 hereof). The waiver by a party of any breach
hereof or default in payment of any amount due hereunder or default in the
performance hereof will not be deemed to constitute a waiver of any other
default or succeeding breach or default. Written notice of any such waiver,
consent or agreement of amendment, modification or supplement will be given
to
the record Holder of Registrable Common who did not give written consent
thereto.
7.2. Notices.
All
notices, requests, consents and other communications required or permitted
hereunder will be in writing and will be delivered either by (i) personal
delivery, (ii) registered or certified airmail, postage prepaid or (iii)
facsimile, as follows:
7.2.1. to
a
Holder, addressed to such Holder at the address set forth in the Subscription
Agreement.
7.2.2. to
the
Company, to:
Petro
Resources Corporation
0000
Xxxxxxxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Attention:
Xxxxx X. Xxxx
Fax:
(000) 000-0000
and
such
notices and other communications will for all purposes of this Agreement be
treated as being effective or having been given if delivered personally, or,
if
sent by mail, when received. Any party may change its address for such
communications by giving notice thereof to the other parties in conformity
with
this Section.
7.3. Entire
Agreement.
This
Agreement, the documents referenced herein and the exhibits thereto, constitute
the entire understanding and agreement of the parties hereto with respect to
the
subject matter hereof and thereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto and thereto. The
express terms hereof control and supersede any course of performance or usage
of
the trade inconsistent with any of the terms hereof.
7.4. Other
Remedies.
Any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with, and not exclusive of, any other remedy conferred hereby or by law on
such
party, and the exercise of any one remedy will not preclude the exercise of
any
other.
7.5. Delays
or Omissions.
Except
as expressly provided herein, no delay or omission to exercise any right, power
or remedy accruing to any party under this Agreement will impair any such right,
power or remedy of such party nor will it be construed to be a waiver of any
such breach or default, or an acquiescence thereto, or of a similar breach
of
default thereafter occurring; nor will any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party hereto of any breach or default under the
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement must be in writing and will be effective only
to
the extent specifically set forth in such writing.
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7.6. Governing
Law.
This
Agreement will be governed by and construed under the laws of the State of
Texas, without regard to the conflict of laws principles thereof.
7.7. Counterparts.
This
Agreement may be executed concurrently (including facsimile signatures) in
two
or more counterparts, each of which will be deemed an original, but all of
which
together will constitute one and the same instrument.
7.8. Severability.
Should
any one or more of the provisions of this Agreement or of any agreement entered
into pursuant to this Agreement be determined to be illegal or unenforceable,
all other provisions of this Agreement and of each other agreement entered
into
pursuant to this Agreement, will be given effect separately from the provision
or provisions determined to be illegal or unenforceable and will not be affected
thereby.
IN
WITNESS WHEREOF, this Agreement is hereby executed as of the date first written
above.
PETRO
RESOURCES CORPORATION
By: /s/
Xxxxx X. Xxxx
Xxxxx
X. Xxxx, Chief Executive Officer
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Schedule
A
|
Name
and Address of Investor
|
Number
of
Shares
Purchased
|
Number
of
Warrant
Shares
|
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