FOOTHILLS RESOURCES, INC. FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT
10.10
FOOTHILLS
RESOURCES, INC.
FORM
OF REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this “Agreement”) is made as of September 8, 2006
by and among Foothills Resources, Inc., a Nevada corporation, (the “Company”),
each institutional investor listed on Schedule
1
hereto
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Inc., a Texas corporation (“SMH”), individually and as
agent and attorney-in-fact for each retail investor listed on Schedule
2
hereto
(each such institutional investor, retail investor and SMH is referred to herein
individually an “Initial Investor” and, collectively, the “Initial Investors”).
WHEREAS,
the Company has agreed to issue and sell to the Initial Investors, and the
Initial Investors have agreed to purchase from the Company, shares (the
“Shares”) of the Company’s common stock, $0.001 par value per share (including
any securities issued or issuable thereto or into which or for which such shares
may be exchanged for, or converted into, pursuant to any stock dividend, stock
split, stock combination, recapitalization, reclassification, reorganization
or
other similar event, the “Common Stock”) and warrants (the “Warrants”) to
purchase shares of Common Stock, at a per-share price and upon the terms and
conditions set forth in the Securities Purchase Agreement, dated as of the
date
hereof, by and between the Company and the Investors (the “Securities Purchase
Agreement”); and
WHEREAS,
the terms of the Securities Purchase Agreement provide that it shall be a
condition precedent to the closing of the transactions thereunder for the
Company and the Initial Investors to execute and deliver this Agreement.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements contained
herein, the parties hereto hereby agree as follows:
1.
DEFINITIONS.
Unless
the context clearly indicates otherwise, capitalized terms used but not defined
herein shall have the meanings ascribed to them in the Securities Purchase
Agreement. The following terms shall have the meanings provided below:
“Affiliates”
means
any Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, a Person, as such
terms are used and construed under Rule 144.
“Board”
means
the board of directors of the Company.
“Business
Day”
means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday or a day on which banking institutions in the State of New York are
authorized or required by law or other governmental action to close.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and all of the rules and
regulations promulgated thereunder.
1
“Investor”
means
the Initial Investors and any Person holding Registrable Securities or any
Person to whom the rights under this Agreement have been
transferred.
“Person”
(whether or not capitalized) means an individual, partnership, limited liability
company, corporation, association, trust, joint venture, unincorporated
organization, and any government, governmental department or agency or political
subdivision thereof.
“Prospectus”
means
the prospectus included in any Registration Statement (including, without
limitation, a Prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective Registration Statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement,
and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference in such
Prospectus.
“Registrable
Securities”
means,
at the relevant time of reference thereto, the Shares, the Warrants and the
Warrant Shares (including any shares of capital stock that may be issued in
respect thereof, or into which or for which such Shares, Warrants or Warrant
Shares may be exchanged for or converted into, pursuant to a stock split, stock
dividend, recombination, recapitalization, reorganization, reclassification
or
the like), provided,
however,
that
the term “Registrable Securities” shall not include any of the Shares or
Warrants that are actually sold pursuant to either a registration statement
that
has been declared effective under the Securities Act by the SEC or Rule 144.
“Registration
Statement”
means
the Mandatory Registration Statement and any additional registration statements
contemplated by this Agreement, including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference in such registration statement or Prospectus.
“Rule
144”
means
Rule 144, promulgated under the Securities Act and any successor or substitute
rule, law or provision.
“SEC”
means
the Securities and Exchange Commission.
“Securities
Act”
means
the Securities Act of 1933, as amended, and all of the rules and regulations
promulgated thereunder.
“Warrant
Shares”
means
the shares of Common Stock issuable upon exercise of or otherwise pursuant
to
the Warrants.
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2. MANDATORY
REGISTRATION.
(a) As
promptly as possible after the date hereof, and in any event prior to the date
that is 30 days following the Closing Date (the “Mandatory Filing Date”), the
Company shall prepare and file with the SEC a Registration Statement on Form
SB-2 (or on such other appropriate form for the required purpose) for the
purpose of registering under the Securities Act all of the Registrable
Securities for resale by, and for the account of, each Investor as an initial
selling stockholder thereunder (the “Mandatory Registration Statement”). The
Mandatory Registration Statement shall permit the Investors to offer and sell,
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act,
any or all of the Registrable Securities and shall contain (except if otherwise
required pursuant to written comments received from the SEC upon a review of
the
Mandatory Registration Statement) the “Plan of Distribution” attached hereto as
Annex
A.
The
Company agrees to use its best efforts to cause the Mandatory Registration
Statement to be declared effective as soon as possible but in no event later
than the date that is 120 days following the Mandatory Filing Date (or 150
days
following the Mandatory Filing Date in the event the Registration Statement
is
reviewed by the SEC) (the “Mandatory Effective Date”) (including filing with the
SEC, within five (5) Business Days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the SEC that the Mandatory
Registration Statement will not be “reviewed” or will not be subject to further
review, a request for acceleration of effectiveness in accordance with Rule
461
promulgated under the Securities Act (an “Acceleration Request”), which request
shall request an effective date that is within three (3) Business Days of the
date of such request) and will otherwise effect all such registration, obtain
all such qualifications and comply with all such laws, rules and regulations
as
may be necessary to permit the sale, transfer and other disposition of the
Registrable Securities by the Investors thereof pursuant to the Mandatory
Registration Statement. The Company shall notify each Investor in writing
promptly (and in any event within three (3) Business Days) after the Company
is
notified by the SEC that the Mandatory Registration Statement has been declared
effective. The Company shall be required to keep the Mandatory Registration
Statement and any qualification, exemption or compliance under state securities
laws which the Company determines to obtain or which the Company obtains at
the
request of the Investors continuously effective (including through the filing
of
any required post-effective amendments) with respect to the Investors, and
to
keep such Mandatory Registration Statement and related Prospectus free of any
material misstatements or omissions, until the earlier to occur of (i) a date
after which all of the Registrable Securities registered thereunder shall have
been sold or (ii) a date after which all of the Registrable Securities
(excluding such Registrable Securities as are registered pursuant to any other
effective Registration Statement) are freely tradable without any volume
limitations by the Investors pursuant to Rule 144(k) promulgated under the
Securities Act or any successor or substitute rule, law or provision.
Thereafter, the Company shall be entitled to withdraw the Mandatory Registration
Statement and, upon such withdrawal, the Investors shall have no further right
to offer or sell any of the Registrable Securities pursuant to the Mandatory
Registration Statement (or any Prospectus relating thereto).
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(b) Notwithstanding
anything in this Section 2 to the contrary, if the Company shall furnish to
the
Investors a certificate signed by the Chief Executive Officer of the Company
stating that the Board has made the good faith determination (i) that the
continued use by the Investors of the Mandatory Registration Statement for
purposes of effecting offers or sales of Registrable Securities pursuant hereto
would require, under the Securities Act and the rules and regulations
promulgated thereunder, premature disclosure in the Mandatory Registration
Statement (or the Prospectus relating thereto) of material, nonpublic
information concerning the Company, its business or prospects or any proposed
material transaction involving the Company, (ii) that such premature disclosure
would be materially adverse to the Company, its business or prospects or any
such proposed material transaction or would not be in the best interests of
the
Company and (iii) that it is therefore essential to suspend the use by the
Investors, of the Mandatory Registration Statement (and the Prospectus relating
thereto), then the right of the Investors to use the Mandatory Registration
Statement (and the Prospectus relating thereto) for purposes of effecting offers
or sales of Registrable Securities pursuant thereto shall be suspended for
a
period (the “Suspension Period”) not greater than fifteen (15) Business Days
during any consecutive twelve (12) month period. During the Suspension Period,
the Investors shall not offer or sell any Registrable Securities pursuant to
or
in reliance upon the Mandatory Registration Statement (or the Prospectus
relating thereto). The Company agrees that, as promptly as possible, but in
no
event later than one (1) Business Day, after the consummation, abandonment
or
public disclosure of the event or transaction that caused the Company to suspend
the use of the Mandatory Registration Statement (and the Prospectus relating
thereto) pursuant to this Section 2(b), the Company will as promptly as possible
lift any suspension, provide the Investors with revised Prospectuses, if
required, and will notify the Investors of their ability to effect offers or
sales of Registrable Securities pursuant to or in reliance upon the Mandatory
Registration Statement.
(c) It
shall
be a condition precedent to the obligations of the Company to register
Registrable Securities for the account of an Investor pursuant to this Section
2
or Section 3 that such Investor furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the method of
disposition of such securities as shall be required by the SEC to effect the
registration of such Investor’s Registrable Securities.
(d) In
the
event that the Mandatory Registration Statement or other required Registration
Statement is not declared effective by the SEC by the Mandatory Effective Date,
then the Company shall pay each Investor as liquidated damages for such failure
and not as a penalty, one percent (1%) of the purchase price set forth in the
Securities Purchase Agreement (the “Liquidated Damages Amount”), each month for
such time period beyond the Mandatory Effective Date that such Registration
Statement is not effective or beyond any applicable Suspension Period (a
“Penalty Period”) (for purposes of clarity, it is hereby understood and agreed
that, solely for the purpose of this Section 2(d), the deemed purchase price
for
each Share is $1.75 and the purchase price of each Warrant underlying each
Unit
shall be deemed to be equal to $0.50, provided that the dollar amounts set
forth
in this parenthetical clause shall be appropriately adjusted in the event of
any
adjustment, pursuant to the terms of the Warrants, in the exercise price of
the
Warrants or the number of shares issuable upon exercise of the Warrants);
provided, however, that the amount payable to any Investor hereunder for any
partial Penalty Period will not be pro-rated for the number of actual days
during such Penalty Period during which a registration default remains uncured.
The Company’s payment of liquidated damages shall be made to each Investor
within five (5) calendar days after the Penalty Period either, at the Investor’s
option, (1) in cash or (2) in additional shares of Common Stock of the Company,
such shares being valued at the average of the volume-weighted average prices
(“VWAP”s) of the Common Stock as reported by Bloomberg Financial L.P. (based on
a trading day from 9:30 a.m. to 4:02 p.m. Eastern Time) using the VWAP of the
Common Stock over the 20 trading days immediately prior to the Mandatory
Effective Date. The payment of liquidated damages pursuant to this Section
2(d)
shall not relieve the Company from its obligations to register the Registrable
Securities pursuant to this Agreement. If the Company fails to pay liquidated
damages to a Investor entitled thereto by the applicable date specified herein,
the Company will pay interest thereon at a rate of 12% per annum (or such lesser
maximum amount that is permitted to be paid by applicable law) to such Investor,
accruing daily from the date such liquidated damages are due until such amounts,
plus all such interest thereon, are paid in full. The total amount of liquidated
damages payable to the Investors pursuant to this section 2(d), including any
interest thereon, shall in no event exceed ten percent (10%) of the purchase
price for the Units (as set forth in the Securities Purchase Agreement).
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(e) During any Penalty Period, the Company shall not (i) file any other registration statement, (ii) file any amendment to any other registration statement, or (iii) request acceleration of the effective date of any other registration statement registering with the SEC any securities of the Company until the Company has cured the condition leading to such Penalty Period, unless such filing or request has been approved by the holders of a majority of the then-outstanding Registrable Securities; provided, however, that the foregoing shall not limit the Company’s right to file or request acceleration of the effective date of any other registration statements using Forms S-4 or S-8 or other applicable successor Forms.
3. PIGGYBACK
REGISTRATION.
(a) If
at any
time (i) any Registrable Securities are not able to be resold pursuant to an
effective Registration Statement, or (ii) amounts remain outstanding under
that
certain Credit and Guaranty Agreement dated as of August __, 2006 among the
Company, certain subsidiaries of the Company, various lenders, and ▇. ▇▇▇▇
&
Company, or (iii) ▇▇▇▇▇▇▇
▇▇▇▇▇ & Co. and any affiliates thereof is the beneficial owner (as defined
in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended)
of more than 5% of the outstanding Shares of the Company, and
the
Company proposes to register any of its Common Stock under the Securities Act,
whether as a result of an offering for its own account or the account of others
(but excluding any registrations to be effected on Forms S-4 or S-8 or other
applicable successor Forms), the Company shall, each such time, give, with
respect to subsection
(i)
above,
to the Investors, and with respect to subsections
(ii)
or
(iii)
above,
to ▇▇▇▇▇▇▇,
Sachs & Co. and any affiliate thereof that owns Shares,
20
days’ prior written notice of its intent to do so, and such notice shall
describe the proposed registration and shall offer such Investors or
▇▇▇▇▇▇▇,
▇▇▇▇▇ & Co. and any affiliate thereof that owns Shares,
as
applicable, the opportunity to register such number of Registrable Securities
as
each such person may request. Upon the written request of any Investor or
▇▇▇▇▇▇▇,
Sachs & Co. and any affiliate thereof that owns Shares,
as
applicable, given to the Company within 20 days after the receipt of any such
notice by the Company, the Company shall include in such Registration Statement
all or part of the Registrable Securities of such person, to the extent
requested to be registered.
5
(b) If
a
registration pursuant to Section 3 hereof involves an underwritten offering
and
the managing underwriter shall advise the Company in writing that, in its
opinion, the number of shares of Common Stock requested by the Investors or
▇▇▇▇▇▇▇,
▇▇▇▇▇ & Co. and any affiliate thereof that owns Shares,
as
applicable, to be included in such registration is likely to affect materially
and adversely the success of the offering or the price that would be received
for any shares of Common Stock offered in such offering, then, notwithstanding
anything in this Section 3 to the contrary, the Company shall only be required
to include in such registration, to the extent of the number of shares of Common
Stock which the Company is so advised can be sold in such offering, (i)
first, the number of shares of Common Stock requested to be included in such
registration for the account of any stockholders of the Company (including
the
Investors or
▇▇▇▇▇▇▇,
Sachs & Co. and any affiliate thereof that owns Shares,
as
applicable,),
pro
rata among such stockholders on the basis of the number of shares of Common
Stock that each of them has requested to be included in such registration,
and
(ii) second, any shares of Common Stock proposed to be included in such
registration for the account of the Company.
(c) In
connection with any offering involving an underwriting of shares, the Company
shall not be required under this Section 3 or otherwise to include the
Registrable Securities of any Investor or ▇▇▇▇▇▇▇,
▇▇▇▇▇ & Co. and any affiliate thereof that owns Shares,
as
applicable, therein unless such Investor or ▇▇▇▇▇▇▇,
Sachs & Co. and any affiliate thereof that owns Shares,
as
applicable, accepts and agrees to the terms of the underwriting, which shall
be
reasonable and customary, as agreed upon between the Company and the
underwriters selected by the Company.
4. OBLIGATIONS
OF THE COMPANY.
In
connection with the Company’s registration obligations hereunder, the Company
shall, as expeditiously as practicable:
(a)
Use
its
best efforts to diligently prepare and file with the SEC a Registration
Statement on the appropriate form under the Securities Act with respect to
the
Registrable Securities, which form shall comply as to form in all material
respects with the requirements of the applicable form and include all financial
statements required by the SEC to be filed therewith, and use its best efforts
to cause such Registration Statement to become and remain effective until
completion of the proposed offering;
(b) (i)
Furnish to each Investor copies of all documents filed with the SEC relating
to
the registration of the Registrable Securities prior to their being filed with
the SEC (and in any event 15 Business Days prior to the filing), and (ii) notify
the Investors of any stop order issued or threatened by the SEC and use best
efforts to prevent the entry of such stop order or to remove it if
entered.
(c) (i)
Prepare and file with the SEC such amendments and supplements, including
post-effective amendments, to each Registration Statement and the Prospectus
used in connection therewith as may be necessary to comply with the Securities
Act and to keep the Registration Statement continuously effective as required
herein, and prepare and file with the SEC such additional Registration
Statements as necessary to register for resale under the Securities Act all
of
the Registrable Securities (including naming any permitted transferees of
Registrable Securities as selling stockholders in such Registration Statement);
(ii) cause any related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant
to
Rule 424; (iii) respond as promptly as possible to any comments received from
the SEC with respect to each Registration Statement or any amendment thereto
and
as promptly as possible provide the Investors true and complete copies of all
correspondence from and to the SEC relating to the Registration Statement (other
than correspondence containing material nonpublic information); and (iv) comply
with the provisions of the Securities Act and the Exchange Act with respect
to
the disposition of all Registrable Securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented.
6
(d) Notify
the Investors as promptly as possible: (i) when the SEC notifies the
Company whether there will be a “review” of a Registration Statement and
whenever the SEC comments in writing on such Registration Statement; and
(ii) when a Registration Statement, or any post-effective amendment or
supplement thereto, has become effective, and after the effectiveness thereof:
(A) of any request by the SEC or any other federal or state governmental
authority for amendments or supplements to the Registration Statement or
Prospectus or for additional information; (B) of the issuance by the SEC or
any
state securities commission of any stop order suspending the effectiveness
of
the Registration Statement covering any or all of the Registrable Securities
or
the initiation of any proceedings for that purpose; and (C) of the receipt
by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of
any
proceeding for such purpose. Without limitation of any remedies to which the
Investors may be entitled under this Agreement, if any of the events described
in Section 4(d)(ii)(A), 4(d)(ii)(B), and 4(d)(ii)(C) occur, the Company shall
use its best efforts to respond to and correct the event.
(e) Notify
the Investors and any underwriter as promptly as possible of the happening
of
any event as a result of which the Prospectus included in or relating to a
Registration Statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading; and,
thereafter, the Company will as promptly as possible prepare (and, when
completed, give notice to each Investor) a supplement or amendment to such
Prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such Prospectus will not contain an untrue statement
of
a material fact or omit to state any fact necessary to make the statements
therein not misleading; provided that upon such notification by the Company,
the
Investors will not offer or sell Registrable Securities pursuant to such
Prospectus until the Company has notified the Investors that it has prepared
a
supplement or amendment to such Prospectus and delivered copies of such
supplement or amendment to the Investors (it being understood and agreed by
the
Company that the foregoing proviso shall in no way diminish or otherwise impair
the Company’s obligation to as promptly as possible prepare a Prospectus
amendment or supplement as above provided in this Section 4(e) and deliver
copies of same as provided in Section 4(i) hereof), and it being further
understood that, in the case of the Mandatory Registration Statement, any such
period during which the Investors are restricted from offering or selling
Registrable Securities shall constitute a Suspension Period.
(f) Upon
the
occurrence of any event described in Section 4(e) hereof, as promptly as
possible, prepare a supplement or amendment, including a post-effective
amendment, to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein
by
reference, and file any other required document so that, as thereafter
delivered, neither the Registration Statement nor such Prospectus will contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of
the circumstances under which they are made, not misleading.
7
(g) Use
its
best efforts to avoid the issuance of or, if issued, obtain the withdrawal
of,
(i) any order suspending the effectiveness of any Registration Statement or
(ii) any suspension of the qualification (or exemption from qualification)
of any of the Registrable Securities for sale in any jurisdiction, as promptly
as possible (it being understood that, in the case of the Mandatory Registration
Statement, any period during which the effectiveness of the Mandatory
Registration Statement or the qualification of any Registrable Securities is
suspended shall constitute a Suspension Period).
(h) Furnish
to each of the Investors, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, and all exhibits to the
extent requested by an Investor (including those previously furnished or
incorporated by reference) as promptly as possible after the filing of such
documents with the SEC.
(i) Furnish
to each selling Investor, without charge, such number of copies of a Prospectus,
including a preliminary Prospectus, in conformity with the requirements of
the
Securities Act, and such other documents (including, without limitation,
Prospectus amendments and supplements) as each such selling Investor may
reasonably request in order to facilitate the disposition of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto.
The Company hereby consents to the use of such Prospectus and each amendment
or
supplement thereto by each of the selling Investors in connection with the
offering and sale of the Registrable Securities covered by such Prospectus
and
any amendment or supplement thereto to the extent permitted by federal and
state
securities laws and regulations.
(j) Use
its
best efforts to register and qualify (or obtain an exemption from such
registration and qualification) the Registrable Securities under such other
securities or blue sky laws of the states of residence of each Investor and
such
other jurisdictions as each Investor shall reasonably request, to keep such
registration or qualification (or exemption therefrom) effective during the
periods each Registration Statement is effective, and do any and all other
acts
or things which may be reasonably necessary or advisable to enable each Investor
to consummate the public sale or other disposition of Registrable Securities
in
such jurisdiction, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions where
it is not then qualified or subject to process.
(k) Cooperate
with the Investors to facilitate the timely preparation and delivery of
certificates representing the Registrable Securities to be delivered to a
transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by the Securities Purchase Agreement and
applicable law, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as such
Investors may request.
8
(l) Cooperate
with any reasonable due diligence investigation undertaken by the Investors,
any
managing underwriter participating in any disposition pursuant to a Registration
Statement, Investors’ counsels and any attorney, accountant or other agent
retained by Investors or any managing underwriter, in connection with the sale
of the Registrable Securities, including, without limitation, making available
any documents and information; provided, however, that the Company will not
deliver or make available to any Investor material, nonpublic information unless
such Investor specifically requests and consents in advance in writing to
receive such material, nonpublic information and, if requested by the Company,
such Investor agrees in writing to treat such information as
confidential.
(m) Cause
the
Registrable Securities covered by such Registration Statement to be listed
on
the securities exchange or quoted on the quotation system on which the Common
Stock of the Company is then listed or quoted (or if the Common Stock is not
listed or quoted, then on such exchange or quotation system as the selling
holders of Registrable Securities and the Company shall determine).
(n) Otherwise
use its best efforts to comply with all applicable rules and regulations of
the
SEC and make generally available to its security holders, in each case as soon
as practicable, but not later than 30 days after the close of the period covered
thereby, an earnings statement of the Company which will satisfy the provisions
of Section 11(a) of the Securities Act and Rule 158 thereunder (or any
comparable successor provisions).
(o) Otherwise
cooperate with the SEC and other regulatory agencies and take all actions and
execute and deliver or cause to be executed and delivered all documents
necessary to effect the registration of any Registrable Securities under this
Agreement.
(p) During
the period when the Prospectus is required to be delivered under the Securities
Act, promptly file all documents required to be filed with the SEC pursuant
to
Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act.
(q) At
the
request of an Affiliate of an Investor, the Company shall amend any Registration
Statement to include such Affiliate as a selling stockholder in such
Registration Statement.
(r) Comply
with all applicable rules and regulations of the SEC in all material respects.
5. EXPENSES
OF REGISTRATION.
The
Company shall pay for all expenses incurred in connection with a registration
pursuant to this Agreement and compliance with Section 4 of this Agreement,
including without limitation (i) all registration, filing and qualification
fees
and expenses (including without limitation those related to filings with the
SEC, the NASD’s Over-the-Counter Bulletin Board, The Nasdaq Stock Market or any
national securities exchange upon which the Company’s securities are at such
time listed and in connection with applicable state securities or blue sky
laws), (ii) all printing expenses, (iii) all messenger, telephone and delivery
expenses incurred by the Company, (iv) all fees and disbursements of counsel
for
the Company, (v) fees and disbursements of counsel for ▇▇▇▇▇▇▇,
▇▇▇▇▇ & Co. and any affiliate thereof that owns Shares (not to exceed
$25,000),
and (vi)
all fees and expenses of all other Persons retained by the Company or
▇▇▇▇▇▇▇,
Sachs & Co. and any affiliate thereof that owns Shares
in
connection with the consummation of the transactions contemplated by this
Agreement. In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement, the expense of any annual audit and audits
of
any significant acquisitions required to be included in the applicable
registration statement.
9
6. DELAY
OF REGISTRATION.
Subject
to Section 12(g) hereof, the Investors and the Company (other than with respect
to Section 4(e) hereof) shall not take any action to restrain, enjoin or
otherwise delay any registration as the result of any controversy which might
arise with respect to the interpretation or implementation of this Agreement.
7. INDEMNIFICATION.
In the
event that any Registrable Securities of the Investors are included in a
Registration Statement pursuant to this Agreement:
(a) To
the
fullest extent permitted by law, the Company will indemnify and hold harmless
each Investor and each officer, director, fiduciary, agent, investment advisor,
employee, member (or other equity holder), general partner and limited partner
(and affiliates thereof) of such Investor, each broker, underwriter or other
person acting on behalf of such Investor and each person, if any, who controls
such Investor within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, (the “Losses”) to which they
may become subject under the Securities Act or otherwise, insofar as such Losses
(or actions in respect thereof) arise out of or relate to any untrue or alleged
untrue statement of any material fact contained in the Registration Statement,
or arise out of or relate to the omission or alleged omission to state therein
a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act
or
state securities or blue sky laws applicable to the Company and leading to
action or inaction required of the Company in connection with such registration
or qualification under such Securities Act or state securities or blue sky
laws;
and, subject to the provisions of Section 7(c) hereof, the Company will
reimburse on demand such Investor, such broker or other person acting on behalf
of such Investor or such officer, director, fiduciary, employee, member (or
other equity holder), manager, general partner, limited partner, affiliate
or
controlling person for any legal or other expenses reasonably incurred by any
of
them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 7(a) shall not apply to amounts paid in settlement of any such
Losses if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable
in
any such case for any such loss, damage, liability or action to the extent
that
it solely arises out of or is based upon an untrue statement of any material
fact contained in the Registration Statement or omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent that such untrue statement
or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement in reliance upon and in conformity with written
information furnished by such Investor with respect to such Investor expressly
for use in connection with such Registration Statement.
10
(b) To
the
fullest extent permitted by law, each Investor, severally (as to itself) and
not
jointly, will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the Registration Statement, each person,
if
any, who controls the Company within the meaning of the Securities Act, against
any Losses to which the Company or any such director, officer or controlling
person may become subject to, under the Securities Act or otherwise, insofar
as
such Losses (or actions in respect thereto) solely arise out of or are based
upon any untrue statement of any material fact contained in the Registration
Statement, or solely arise out of or relate to the omission to state therein
a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent that such untrue statement
or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement in reliance upon and in conformity with written
information furnished by such Investor with respect to such Investor expressly
for use in connection with such Registration Statement; and, subject to the
provisions of Section 7(d) hereof, such Investor will reimburse on demand any
legal or other expenses reasonably incurred by the Company or any such director,
officer, or controlling person in connection with investigating or defending
any
such Losses, provided, however, that the maximum aggregate amount of liability
of such Investor under this Section 7 shall be limited to the proceeds (net
of
underwriting discounts and commissions, if any) actually received by such
Investor from the sale of Registrable Securities covered by such Registration
Statement; and provided, further, however, that the indemnity agreement
contained in this Section 7(b) or 7(e) shall not apply to amounts paid in
settlement of any such Losses if such settlement is effected without the consent
of such Investor against which the request for indemnity is being made (which
consent shall not be unreasonably withheld), and that no selling Investor shall
be required to indemnify any Person against any liability arising from any
untrue or misleading statement or omission contained in any preliminary
Prospectus if such deficiency is corrected in the final prospectus or for any
liability which arises out of the failure of any Person to deliver a Prospectus
as required by the Securities Act.
(c) As
promptly as possible after receipt by an indemnified party under this Section
7
of notice of the threat, assertion or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against
any
indemnifying party under this Section 7, notify the indemnifying party in
writing of the commencement thereof and the indemnifying party shall have the
right to participate in and, to the extent the indemnifying party desires,
jointly with any other indemnifying party similarly noticed, to assume at its
expense the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that, the failure to notify an indemnifying party promptly
of
the threat, assertion or commencement of any such action shall not relieve
such
indemnifying party of any liability to the indemnified party under this Section
7 except (and only) to the extent that it shall be finally determined by a
court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the indemnifying party.
(d) If
any
indemnified party shall have reasonably concluded that there may be one or
more
legal defenses available to such indemnified party which are different from
or
additional to those available to the indemnifying party, or that such claim
or
litigation involves or could have an effect upon matters beyond the scope of
the
indemnity agreement provided in this Section 7, the indemnifying party shall
not
have the right to assume the defense of such action on behalf of such
indemnified party, and such indemnifying party shall reimburse such indemnified
party and any person controlling such indemnified party for the fees and
expenses of counsel retained by the indemnified party which are reasonably
related to the matters covered by the indemnity agreement provided in this
Section 7. Subject to the foregoing, an indemnified party shall have the right
to employ separate counsel in any such action and to participate in the defense
thereof but the fees and expenses of such counsel shall not be at the expense
of
the Company.
11
(e) If
the
indemnification provided for in this Section 7 from the indemnifying party
is
applicable by its terms but unavailable to an indemnified party hereunder in
respect of any Losses, then the indemnifying party, in lieu of indemnifying
such
indemnified party, shall, subject to the maximum aggregate liability of any
Investor as set forth in Section 7(b), contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified party in connection
with the actions which resulted in such losses, claims, damages, liabilities
or
expenses, as well as any other relevant equitable considerations. The relative
faults of such indemnifying party and indemnified party shall be determined
by
reference to, among other things, whether any action in question, including
any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the parties’
relative intent, knowledge, access to information and opportunity to correct
or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Sections 7(a), 7(b),
7(c) and 7(d), any legal or other fees, charges or expenses reasonably incurred
by such party in connection with any investigation or proceeding. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of
the Securities Act) shall be entitled to contribution from any person. The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 7(e) were determined by pro rata allocation or by
any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph.
(f) The
indemnity and contribution agreements contained in this Section are in addition
to any liability that any indemnifying party may have to any indemnified party.
8. REPORTS
UNDER THE EXCHANGE ACT.
With a
view to making available to the Investors the benefits of Rule 144 and any
other
rule or regulation of the SEC that may at any time permit the Investors to
sell
the Registrable Securities to the public without registration, the Company
agrees to use best efforts to: (i) make and keep public information available,
as those terms are understood and defined in Rule 144, (ii) file with the SEC
in
a timely manner all reports and other documents required to be filed by an
issuer of securities registered under the Securities Act or the Exchange Act;
(iii) as long as any Investor owns any Shares, Warrants or Warrant Shares,
to
furnish in writing upon such Investor’s request a written statement by the
Company that it has complied with the reporting requirements of Rule 144 and
of
the Securities Act and the Exchange Act, and to furnish to such Investor a
copy
of the most recent annual and quarterly reports of the Company, and such other
reports and documents so filed by the Company as may be reasonably requested
in
availing such Investor of any rule or regulation of the SEC permitting the
selling of any such Shares, Warrants or Warrant Shares without registration,
and
(iv) undertake any additional actions reasonably necessary to maintain the
availability of a Registration Statement, including any successor or substitute
forms, or the use of Rule 144.
12
9. TRANSFER
OF REGISTRATION RIGHTS.
Each
Investor may assign or transfer any or all of its rights under this Agreement
to
any Person, provided such assignee or transferee agrees in writing to be bound
by the provisions hereof that apply to such assigning or transferring Investor.
Upon any such, and each successive, assignment or transfer to any permitted
assignee or transferee in accordance with the terms of this Section 9, such
permitted assignee or transferee shall be deemed to be an “Investor” for all
purposes of this Agreement.
10. ENTIRE
AGREEMENT.
This
Agreement constitutes and contains the entire agreement and understanding of
the
parties with respect to the subject matter hereof, and it also supersedes any
and all prior negotiations, correspondence, agreements or understandings with
respect to the subject matter hereof.
11. MISCELLANEOUS.
(a) This
Agreement, and any right, term or provision contained herein, may not be
amended, modified or terminated, and no right, term or provision may be waived,
except with the written consent of the Company and the holders of a majority
of
the then outstanding Registrable Securities; provided that any amendment or
modification that is materially and disproportionately adverse to any particular
Investor (as compared to all Investors as a group) shall require the consent
of
such Investor.
(b) This
Agreement shall be governed by and construed and enforced in accordance with
the
laws of the State of New York without regard to conflict of law principles.
This
Agreement shall be binding upon the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns and transferees,
provided that the terms and conditions of Section 9 hereof are satisfied.
Notwithstanding anything in this Agreement to the contrary, if at any time
any
Investor (including any successors or assigned) shall cease to own any
Registrable Securities, all of such Investor’s rights under this Agreement shall
immediately terminate.
(c) Each
party hereby irrevocably and unconditionally (i) agrees that any suit, action
or
other legal proceeding arising out of this Agreement shall be brought in a
state
court located in New York, New York; (ii) consents to the jurisdiction of any
such court in any suit, action or proceeding; and (iii) waives any objection
which such party may have to the laying of venue of any such suit, action or
proceeding in any such court.
(d) Each
of
the Company and the Investor hereby waives any right to a trial by jury in
any
lawsuit, action, claim or proceeding to enforce or defend any right under this
Agreement or any amendment, instrument, document or agreement delivered or
to be
delivered in connection with this Agreement and agrees that any lawsuit, action,
claim or proceeding will be tried before a court and not before a
jury.
13
(e) Any
notices to be given pursuant to this Agreement shall be in writing and shall
be
given by certified or registered mail, return receipt request. Notices shall
be
deemed given when personally delivered or when mailed to the addresses of the
respective parties as set forth on Exhibit
A,
Schedule
1
or
Schedule
2
hereto,
as applicable, or to such changed address of which any party may notify the
others pursuant hereto, except that a notice of change of address shall be
deemed given when received. An electronic communication (“Electronic Notice”)
shall be deemed written notice for purposes of this Section 11(e) if sent with
return receipt requested to the electronic mail address specified by the
receiving party on Exhibit
A,
Schedule
1
or
Schedule
2
hereto,
as applicable. Electronic Notice shall be deemed received at the time the party
sending Electronic Notice receives verification of receipt by the receiving
party.
(f)
The
parties acknowledge and agree that in the event of any breach of this Agreement,
in addition to other rights granted under this Agreement or at law, each of
the
parties hereto shall be entitled to specific performance of the obligations
of
the other parties hereto and to such appropriate injunctive relief as may be
granted by a court of competent jurisdiction. All remedies, either under this
Agreement or by law or otherwise afforded to any of the parties, shall be
cumulative and not alternative.
(g) This
Agreement may be executed in a number of counterparts. All such counterparts
together shall constitute one Agreement, and shall be binding on all the parties
hereto notwithstanding that all such parties have not signed the same
counterpart. The parties hereto confirm that any facsimile copy of another
party’s executed counterpart of this Agreement (or its signature page thereof)
will be deemed to be an executed original thereof.
(h) Except
as
contemplated in Section 9 hereof, this Agreement is intended solely for the
benefit of the parties hereto and is not intended to confer any benefits upon,
or create any rights in favor of, any Person (including, without limitation,
any
stockholder or debt holder of the Company) other than the parties hereto;
provided, however, that each retail investor listed on Schedule
2
hereto
is entitled to all rights and benefits of an “Initial Investor” under this
Agreement.
(i) If
any
provision of this Agreement is invalid, illegal or unenforceable, such provision
shall be ineffective to the extent, but only to the extent of, such invalidity,
illegality or unenforceability, without invalidating the remainder of such
provision or the remaining provisions of this Agreement, unless such a
construction would be unreasonable.
[Signature
Pages Follow]
14
IN
WITNESS WHEREOF, the parties hereto have executed this Registration Rights
Agreement as of the date and year first above written.
|
FOOTHILLS
RESOURCES, INC.
|
|
|
By:
__________________________________
|
|
|
Chief
Executive Officer
|
[SIGNATURE
PAGE TO THE REGISTRATION RIGHTS AGREEMENT]
15
|
Investors
Listed on Schedule 1
|
|
|
____________________________________
|
|
|
[Name
of Investor]
|
|
|
By:
________________________________________
|
|
|
Name:
______________________________________
|
|
|
Title:
_______________________________________
|
[SIGNATURE
PAGE TO THE REGISTRATION RIGHTS AGREEMENT]
16
|
Investors
Listed on Schedule 2
|
|
|
_______________________________
|
|
|
▇▇▇▇
▇. ▇▇▇▇▇▇▇, Attorney-in-Fact
|
[SIGNATURE
PAGE TO THE REGISTRATION RIGHTS AGREEMENT]
17