Document:

exv10w2

 

Exhibit
10.2

Execution Version

REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (this “Registration Rights Agreement”) is dated as
of April 2, 2008, by and among Teton Energy Corporation, a Delaware corporation (the
“Company”), and the holders listed on Schedule A hereto (each, a “Holder”,
collectively, the “Holders”).

RECITALS

A. The Company and Shelby Resources, LLC, a Colorado limited liability company,
have entered into that certain Purchase, Sale and Exploration Agreement, dated as of March 24, 2008
(the “Asset Purchase Agreement”), pursuant to which the Company issued to the Holders
shares (the “Shares”) of common stock, par value $0.001 per share, of the Company (the
“Common Stock”) and warrants to purchase additional shares of Common Stock (the
“Warrants”); and

B. The Company and the Holders are obligated to enter into this Registration Rights Agreement, in
order, among other things, to provide for restrictions on the transfer of the Shares and the
Warrants and registration rights with respect to the Registrable Securities (as defined below), on
the terms and conditions more fully set forth herein.

AGREEMENT

     In consideration of the foregoing recitals and the mutual promises set forth in this
Registration Rights Agreement, the parties agree as follows:

ARTICLE I

DEFINITIONS

     “Affiliate” means, with respect to any specified person, any person that directly, or
indirectly through one or more intermediaries, controls, is controlled by or is under common
control with the person specified.

     “Business Day” means any Monday, Tuesday, Wednesday, Thursday and Friday that is not a
day on which banking institutions in Colorado are authorized or obligated by law or executive order
to close.

     “Company Stock” means means (i) the Shares issued to the Holders pursuant to the Asset
Purchase Agreement, (ii) all shares of Common Stock issuable to the Holders upon exercise of the
Warrants issued to the Holders pursuant to the Asset Purchase Agreement, and (iii) any shares of
Common Stock issued as a dividend or distribution with respect to, or in exchange for, or in
replacement of the shares described in clauses (i) and (ii) above.

 

 

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

     “Form S-3” means a Registration Statement on Form S-3 or any successor form.

     “register,” “registered” and “registration” refer to a registration
effected by preparing and filing a registration statement or similar document in compliance with
the Securities Act, and the declaration or ordering of effectiveness of such registration statement
or document.

     “Registrable Securities” means (i) the Shares issued to the Holders pursuant to the
Asset Purchase Agreement, (ii) all shares of Common Stock issuable to the Holders upon exercise of
the Warrants issued to the Holders pursuant to the Asset Purchase Agreement, and (iii) any shares
of Common Stock issued as a dividend or distribution with respect to, or in exchange for, or in
replacement of the shares described in clauses (i) and (ii) above, provided, however, that
Registrable Securities shall not include any securities described in clauses (i) through (iii)
above which either (w) have been sold to the public either pursuant to a registration statement or
pursuant to Rule 144 under the Securities Act, (x) have been sold in a private transaction in which
the Holder’s rights under this Registration Rights Agreement are not assigned (y) may then be sold
by the Holder pursuant to Rule 144 under the Securities Act, or (z) have otherwise been registered
by the Company pursuant to a shelf registration statement.

     “Registrable Securities then outstanding” means the number of shares of Common Stock
that are Registrable Securities and are then issued and outstanding and the number of shares of
Common Stock that are issuable upon the exercise of the Warrants.

     “Registration Statement” means the Form S-3 registration statement filed by the
Company with the SEC pursuant to Section 2.1 hereof; provided, however, if the Company is not
eligible to use a Form S-3 registration statement to fulfill its obligations under Section 2.1
hereof, then Registration Statement means the Form S-1 or Form S-2 registration statement filed by
the Company, as determined by the Company, with the SEC pursuant to Section 2.1 hereof.

     “Representative” shall mean Shelby Resources, LLC, a Colorado limited liability
company, or such other person as designated by the Holders holding Registrable Securities then
outstanding representing a majority of all of the Holders’ Registrable Securities then outstanding
and following written notice to the Company of such designation.

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

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

     “Transfer” means mean any direct or indirect, voluntary or involuntary, sale,
assignment, transfer, conveyance, distribution, or gift whereby the rights of ownership of the
person are alienated or disposed of, whether by operation of law or otherwise.

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ARTICLE II

REGISTRATION

     2.1 Company’s Obligation. Subject to receipt of necessary information in writing from
the Holders, the Company will use its commercially reasonable efforts to prepare and file with the
SEC, as soon as practicable after the Closing Date (as defined in the Asset Purchase Agreement),
but in no event later than ninety (90) days from the Closing Date, the Registration Statement to
enable the resale of the Registrable Securities by the Holders from time to time during the
Registration Period (defined below) on the American Stock Exchange (or such other market, quotation
system or exchange on which the Common Stock may then be listed) or in privately negotiated
transactions. The Company will use its commercially reasonable efforts to cause the Registration
Statement to be declared effective by the SEC as soon as practicable after filing. Once the
Registration Statement has been declared effective by the SEC, the Company will use its
commercially reasonable efforts to prepare and file with the SEC such amendments and supplements to
the Registration Statement as may be necessary to keep the Registration Statement current and
effective until the earliest to occur of (i) the expiration of thirty (30) months from the Closing
Date extended by the number of days of any Deferral (as defined below) or Suspension (as defined
below); (ii) the date on which all Registrable Securities may be sold within any three-month period
under Rule 144 promulgated under the Securities Act; and (iii) the date on which all Registrable
Securities have been sold pursuant to the Registration Statement or otherwise (the
“Registration Period”). Thereafter, the Company shall be entitled to withdraw the
Registration Statement and the Holders will have no further right to offer or sell any of the
Registrable Securities pursuant to the Registration Statement. Subject to the provisions in the
following sentence, the Company will not be obligated to effect, or to take any action to effect,
any registration pursuant to this Section 2.1 if (a) a material event has occurred or is reasonably
likely to occur that has not been publicly disclosed (provided that nothing herein requires the
disclosure of such information to the Holders) or (b) the Company reasonably determines in good
faith, following consultation with counsel, that a registration would be reasonably likely to
materially interfere with any material financing, acquisition, disposition, corporate
reorganization or other material transaction involving the Company or any of its subsidiaries
(taken as a whole). If any event in clause (a) or (b) occurs, the Company will have the right to
defer (a “Deferral”) taking such action for a period of not more than ninety (90) days
after written certification by the Company’s Chief Executive Officer of such Deferral is given to
the Representative on behalf of the Holders. Notwithstanding the foregoing, the Company shall only
be entitled to Deferrals for a period of time not to exceed sixty (60) consecutive days or more
than an aggregate of ninety (90) days in any rolling twelve-month period under this Registration
Rights Agreement (unless Holders holding Registrable Securities then outstanding representing a
majority of all of the Holders’ Registrable Securities then outstanding otherwise consent in
writing).

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     2.2 Suspension. In the event:

     (a) of any request by the SEC or any other federal or state governmental authority
during the period of effectiveness of the Registration Statement for amendments or
supplements to the Registration Statement,

     (b) of the issuance by the SEC or any other federal or state governmental authority of
any stop order suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose,

     (c) of the receipt by the Company of any notification with respect to the suspension or
the qualification or exemption from qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation of any proceeding for such purpose,

     (d) of any event or circumstance which necessitates the making of any changes in the
Registration Statement, or any document incorporated or deemed to be incorporated therein by
reference, so that, in the case of the Registration Statement, it will not contain any
untrue statement of a material fact or any omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and that in the
case of the prospectus included in the Registration Statement, it will not contain any
untrue statement of a material fact or any 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, or

     (e) a good faith determination of the Company, following consultation with counsel, is
made that continued use by the Holders of the Registration Statement for purposes of
effecting offers or sales of Registrable Securities pursuant thereto would require, under
the Securities Act, premature disclosure in the Registration Statement of material,
nonpublic information concerning the Company, its business or prospects or any proposed
transaction involving the Company and that it is essential to suspend the use by the Holders
of such Registration Statement for purposes of effecting offers or sales of Registrable
Securities thereto,

then the Company will deliver a written certification by the Company’s Chief Executive Officer to
the Holders (the “Suspension Notice”) to the effect of the foregoing and, upon delivery of
such Suspension Notice, the Holders will stop selling any Registrable Securities pursuant to the
Registration Statement (a “Suspension”) until the Holders’ receipt of copies of a
supplemented or amended Registration Statement that has been prepared and filed by the Company or
until they are advised in writing by the Company that the current Registration Statement may be
used. The receipt of any Suspension Notice by the Holders shall not be disclosed, and shall be
kept in strict confidence, by the Holders. Notwithstanding the foregoing, the Holders shall not be
prohibited (unless Holders holding Registrable Securities then outstanding representing a majority
of all of the Holders’ Registrable Securities then outstanding otherwise consent in writing) from
selling Registrable Securities pursuant to the Registration Statement as a result of

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Suspensions under this Section 2.2 for a period of time not to exceed sixty (60) consecutive days
or more than an aggregate of ninety (90) days in any rolling twelve-month period.

     2.3 Restrictions on Holders. The Holders agree that they will not effect any
disposition of the Registrable Securities except as permitted by law (and subject to any other
restrictions contained in agreements to which Holder is a party) and that they will each promptly
notify the Company in writing of any changes in the information set forth in the Registration
Statement regarding each such Holder or its plan of distribution. No Holder will have any right to
obtain or seek any injunction restraining or otherwise delaying any registration hereunder as a
result of any controversy that might arise with respect to the interpretation or implementation of
this Registration Rights Agreement. The Company is entitled to instruct its transfer agent to
impose “stop transfer instructions” with respect to the Registrable Securities whenever the
transfer of such Registrable Securities is prohibited pursuant to this Registration Rights
Agreement or applicable law.

     2.4 Expenses. All expenses incident to the Company’s performance of or compliance
with the registration pursuant to ARTICLE II consisting of all registration and filing fees, fees
and expenses of compliance with securities or blue sky laws, fees and expenses incurred in
connection with listing on the American Stock Exchange (or such other market, quotation system or
exchange on which the Common Stock may then be listed), printing expenses, messenger expenses,
telephone and delivery expenses, and fees and disbursements of the Company’s counsel and of
independent certified public accountants of the Company, will be borne by the Company. The Company
will also pay its internal expenses and the fees and expenses of any person retained by the
Company.

ARTICLE III

OBLIGATIONS OF COMPANY AND HOLDERS

     3.1 Company Actions. Whenever required to effect the registration of any Registrable
Securities under this Registration Rights Agreement, the Company will, as expeditiously as
commercially reasonable:

     (a) prepare and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement;

     (b) furnish to the Representative on behalf of the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they reasonably may request in writing in order
to facilitate the disposition of the Registrable Securities owned by them that are included
in such registration;

     (c) use its commercially reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky

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laws of such jurisdictions as will reasonably be requested by the Holders, provided
that the Company will 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 unless the Company is already qualified to do business or subject to
service in such jurisdiction and except as may be required by the Securities Act;

     (d) use its commercially reasonable efforts to cause all such Registrable Securities
registered pursuant to this Registration Rights Agreement to be listed on the American Stock
Exchange (or such other market, quotation system or exchange on which the Common Stock may
then be listed);

     (e) provide a transfer agent and registrar for all Registrable Securities registered
pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not
later than the effective date of such registration;

     (f) enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter or underwriters of such offering, provided
that Holder shall also enter into and perform its obligations under such underwriting
agreement;

     (g) use its commercially reasonable efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, (i) an opinion, dated as of such date, of the counsel
representing the Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and (ii) a letter, dated as of such date, from the independent
certified public accountants of the Company, in form and substance as is customarily given
by independent certified public accountants to underwriters in an underwritten public
offering addressed to the underwriters;

     (h) notify the Representative on behalf of each Holder covered by such registration
statement at any time when a prospectus relating thereto is required to be delivered under
the Securities Act of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances then
existing;

     (i) amend or supplement any such prospectus in order to cause such prospectus not to
include any untrue statement of material fact and to include any omitted statement required
to be stated therein or necessary to make the statements therein not misleading in light of
the circumstances then existing; and

     (j) advise the Representative on behalf of each selling Holder and any underwriters
promptly after the occurrence of any of the following events (i) when the

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prospectus or any prospectus supplement relating to the registration statement filed on
behalf of such selling Holders or post-effective amendment has been filed, and, with respect
to such registration statement or any post-effective amendment thereto, when the same has
become effective, (ii) of any request by the Commission for amendments to the registration
statement or amendments or supplements relating to the registration statement filed on
behalf of such selling Holders to the prospectus or for additional information relating
thereto, or (iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Registration Securities for offering or
sale in any jurisdiction, or the initiation of any proceeding for any of the preceding
purposes.

     3.2 Holders Must Furnish Information. It will be a condition precedent to the
obligations of the Company to take any action pursuant to ARTICLE II that the selling Holders will
from to time to time furnish to the Company such information in writing regarding themselves, the
Registrable Securities held by them and the intended method of disposition of such securities as
will be required to timely effect or maintain the registration of their Registrable Securities.
The Company will permit a single firm of legal counsel (designated by the Holders holding
Registrable Securities then outstanding representing a majority of all of the Holders’ Registrable
Securities then outstanding) to review and comment on the Registration Statement and all amendments
and supplements thereto on behalf of all of the Holders for a reasonable period of time (not to
exceed two (2) Business Days) prior to its filing with the SEC. Each Holder hereby covenants with
the Company not to make any sale of the Registrable Securities under the Registration Statement
without effectively causing the prospectus delivery requirement under the Securities Act to be
satisfied, and further agrees to comply with reasonable requests of the Company and/or its transfer
agent to provide additional information and representations concerning such sale.

     3.3 Reports under the Exchange Act. With a view to making available to the Holders
the benefits of Rule 144 promulgated under the Securities Act (or any successor rule) and any other
rule or regulation of the SEC that may at any time permit any Holder to sell Registrable Securities
to the public without registration, the Company shall use its commercially reasonable efforts to
(a) make and keep public information available, as those terms are understood and defined in
Rule 144, until such date as all of Registrable Securities shall have been eligible to be resold
under Rule 144; and (b) file with the SEC in a timely manner all reports and other documents
required to be filed by the Company under the Exchange Act.

     3.4 Legend on Shares. Each certificate representing Registrable Securities shall bear
the following restrictive legends:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO PROVISIONS OF A
REGISTRATION RIGHTS AGREEMENT, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL
OFFICE OF THE COMPANY.

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR
ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
PURSUANT TO RULE 144 OF SUCH ACT.”

     3.5 Restrictions on Sale of Shares of Company Common Stock.

     (a) During the period of time commencing on the date of this Registration Rights
Agreement and continuing until October 2, 2008 (the “Lock-up Period”), neither any
Holder nor any Permitted Assignee (as defined below) shall Transfer any Company Stock,
except Transfers to a Permitted Assignee.

     (b) Following the expiration of the Lock-up Period and continuing until July 2, 2009,
neither any Holder nor any Permitted Assignee shall Transfer any Company Stock, except as
follows:

(i) sales of shares of Common Stock by a Holder and its Permitted Assignees
that do not exceed during any calendar month an amount equal to 15% of the
sum of (x) the number of Shares issued to Holder pursuant to the Asset
Purchase Agreement plus (y) the number of shares of Common Stock
issued upon the exercise of Warrants issued to Holder pursuant to the Asset
Purchase Agreement (as appropriately adjusted to reflect any stock split,
combination, dividend or other distribution occurring after the date
hereof), provided, however that any sales pursuant to Section 3.5(b)(ii)
below shall be excluded for purposes of calculating the number of shares
saleable under this Section 3.5(b)(i) during any calendar month;

(ii) sales of not less than one hundred thousand (100,000) shares of Common
Stock (as appropriately adjusted to reflect any stock split, combination,
dividend or other distribution occurring after the date hereof), or such
lesser amount to the extent that such Holder (and any Permitted Assignee)
sell all remaining shares of Company Stock held by such Holder (and its
Permitted Assignee), in privately negotiated sales transactions following
the Company’s written consent, which consent shall not be unreasonably
withheld, conditioned or delayed; or

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(iii) Transfers to a Permitted Assignee.

     (c) Notwithstanding the provisions of this Section 3.5, all or any portion of the
Company Stock or Warrants issued to any Holder may be Transferred to a shareholder, partner
(limited or general), member, other equity owner or other Affiliate of such Holder (a
“Permitted Assignee”), provided that the Holder provides the Company with written
notice of such Transfer and the Permitted Assignee executes and delivers to the Company at
least three (3) Business Days prior to such Transfer a written instrument in form and
substance reasonably satisfactory to the Company, signifying, among other things, that such
Permitted Assignee’s agreement to be bound by all of the terms of this Registration Rights
Agreement and any amendments hereto, that such Permitted Assignee has complied with all
applicable federal and state securities laws, and to the assumption of all of the terms and
provisions of this Registration Rights Agreement and any amendments hereto. The Permitted
Assignee shall be bound by all of the obligations of and restrictions upon a Holder under
this Registration Rights Agreement.

ARTICLE IV

INDEMNIFICATION

     If any Registrable Securities are included in a registration statement pursuant to this
Registration Rights Agreement:

     4.1 By the Company. To the extent permitted by law, the Company will indemnify and
hold harmless each Holder and each of its directors, officers, managers and other Affiliates (if
any), any underwriter (as defined in the Securities Act) for such Holder and each person (if any)
who controls such Holder or underwriter (within the meaning of the Securities Act or the Exchange
Act) against any losses, claims, damages or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively a “Violation”):

     (a) any untrue statement or alleged untrue statement of a material fact contained in
such Registration Statement, including any final prospectus contained therein, or any
amendments or supplements thereto;

     (b) the omission or alleged omission to state in such Registration Statement, including
any final prospectus contained therein, or any amendments or supplements thereto, a material
fact required to be stated therein, or necessary to make the statements therein not
misleading; or

     (c) any violation or alleged violation by the indemnifying party of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities law in connection with the offering
covered by such Registration Statement, which untrue

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statement, omission, or violation, as applicable, is a direct cause of monetary damage
suffered by such indemnified party.

The Company’s obligation to indemnify hereunder is subject to and conditioned upon (i) receiving
prompt written notice in reasonable detail from the indemnified party of the nature of and the
facts surrounding such claim, accompanied by all documents related thereto; (ii) such indemnified
party’s full cooperation with the prosecution, defense, and settlement of any such claim; and (iii)
the Company having the right to prosecute, defend, and settle any such claim with counsel of its
own choosing. Subject to the following sentence, the Company will reimburse such indemnified
party for the costs of any settlement of any claim, provided, however, that the indemnity agreement
contained in this Section 4.1 will not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the written consent of the
Company, which consent will not be unreasonably withheld, conditioned or delayed nor will the
Company be liable in any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon any breach of this Agreement or violation of
applicable law or a Violation which occurs in reliance upon and in conformity with any information
furnished expressly for use in connection with such registration by such Holder, officer, director
or controlling person of such Holder.

     4.2 By Holders. To the extent permitted by law, each Holder will indemnify and hold
harmless the Company, each of its directors, officers, and each other Affiliates (if any) of the
Company, each person (if any) who controls the Company (within the meaning of the Securities Act),
any underwriter (ad defined in the Securities Act), any other Holder selling securities under such
Registration Statement and any of such other Holder’s directors, officers, other Affiliates, or
controlling person against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, other Affiliate, controlling person, or other such
Holder, director, officer, other Affiliate or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with any information furnished by such Holder expressly for use in
connection with such registration. A Holder’s obligation to indemnify hereunder is subject to and
conditioned upon (a) receiving prompt written notice in reasonable detail from the indemnified
party of the nature of and the facts surrounding such claim, accompanied by all documents related
thereto; (b) such indemnified party’s full cooperation with the prosecution, defense, and
settlement of any such claim; and (c) the Holder having the right to prosecute, defend, and settle
any such claim with counsel of its own choosing. Subject to the following sentence, the Holder
will reimburse such indemnified party for the costs of any settlement of any claim, provided,
however, that the indemnity agreement contained in this Section 4.2 will not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such settlement is effected
without the written consent of the Holder, which consent will not be unreasonably withheld,
conditioned or delayed, provided, further that no such Holder will be required to indemnify any
amount under this Section 4.2 in excess of the net proceeds of all such Registrable Securities
offered and sold by such Holder pursuant to such Registration Statement.

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     4.3 Contribution. If the indemnification provided for in this ARTICLE IV is held by a
court of competent jurisdiction to be unavailable to an indemnified party with respect to any
losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in connection with the
Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant
equitable considerations, provided that in no event shall any contribution by a Holder hereunder
exceed the net proceeds from the offering giving rise to the violation received by such Holder less
any amounts paid pursuant to Section 4.2.

ARTICLE V

GENERAL PROVISIONS

     5.1 Assignment. Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the parties hereto and their respective
successors, permitted assigns, heirs, executors, and administrators and shall inure to the benefit
of and be enforceable by each person who shall be a holder of Registrable Securities from time to
time; provided, however, that prior to the receipt by the Company of adequate written notice of the
transfer of any Registrable Securities specifying the full name and address of the transferee and
prior to receipt by the Company of sufficient assurance of compliance with the applicable federal
and state securities laws in connection with any proposed transfer, the Company may deem and treat
the person listed as the holder of such shares or other securities in its records as the absolute
owner and holder of such shares and securities for all purposes.

     5.2 Amendment. Unless otherwise provided for herein, any provision of this
Registration Rights 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 Holders holding Registrable Securities then outstanding
representing a majority of all of the Holders’ Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this Section 5.2 will be binding upon each Holder
and the Company.

     5.3 Termination. This Registration Rights Agreement shall terminate at the expiration
of the Registration Period, provided, however that ARTICLE IV (Indemnification) and this ARTICLE V
(General Provisions) shall survive such termination of this Registration Rights Agreement and shall
remain in full force and effect for the duration of the applicable statute of limitations.

     5.4 Notices. All notices, requests, claims, demands and other communications under
this Registration Rights Agreement will be in writing and will be deemed given (a) upon
transmitter’s confirmation of a receipt of a facsimile if received prior to 4:00 pm local time of
the recipient on a Business Day, (b) when delivered, if delivered personally (including by
courier),

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or (c) on the Business Day after mailing, if sent by a nationally recognized overnight
delivery service which has and maintains records of the time, place, and recipient of delivery,
addressed at the following addresses:

     (i) if to a Holder, at such Holder’s respective address as set forth below such
Holder’s name on Schedule A;

with a copy (which shall not constitute notice) to:

Hogan & Hartson LLP

One Tabor Center

1200 Seventeenth Street, Suite 1500

Denver, CO 80202

Attention: Mark Heimlich, Esq.

Facsimile: 303.899.7333

     (ii) if to the Company, to:

Teton Energy Corporation

410 17th Street, Suite 1850

Denver, CO 80202

Attention: Mr. Dominic Bazile

Facsimile: 303.565.4606

with a copy (which shall not constitute notice) to:

Gersten Savage LLP

600 Lexington Avenue, 9th Floor

New York, NY 10022-6018

Attention: David Danovitch, Esq.

Facsimile: 212.980.5192

     (iii) if to the Representative, to:

Shelby Resources LLC

1658 Cole Boulevard, Suite 205

Lakewood, CO 80401

Attention: James A. Waechter III, Manager

Facsimile: 720.274.4685

with a copy (which shall not constitute notice) to:

Hogan & Hartson LLP

One Tabor Center

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1200 Seventeenth Street, Suite 1500

Denver, CO 80202

Attention: Mark Heimlich, Esq.

Facsimile: 303.899.7333

Any party may by notice so given change its address for future notices hereunder by giving five (5)
Business Days advance notice to all other parties.

     5.5 Entire Agreement. This Registration Rights Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter of this Registration Rights Agreement and is not
intended to confer upon any person other than the parties hereto any rights or remedies hereunder.
In the event of any express conflict between the terms of this Registration Rights Agreement, the
Asset Purchase Agreement and the other agreements referenced herein and therein to which both the
Company and the Holder are a party, this Registration Rights Agreement shall govern.

     5.6 Governing Law. The internal laws of the State of Delaware, irrespective of its
conflicts of law principles, shall govern the validity of this Registration Rights Agreement, the
construction of its terms, and the interpretation and enforcement of the rights and duties of the
parties hereto; provided, however, that issues involving securities laws shall be subject to the
provisions of any applicable federal and state securities laws.

     5.7 Expenses. If any action at law or in equity is necessary to enforce the terms of
this Registration Rights Agreement, the prevailing party shall be entitled to reasonable attorneys’
fees, costs and necessary disbursements incurred in connection with such enforcement in addition to
any other relief to which such party may be entitled.

     5.8 Severability. If any term, provision, covenant or restriction herein is held by a
court of competent jurisdiction or other authority to be invalid, void or unenforceable or against
its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this
Registration Rights Agreement will remain in full force and effect and will in no way be affected,
impaired or invalidated, and the parties agree to put the parties in as similar a place as possible
if such term, provision, covenant or restriction had not been invalidated, voided or not enforced.

     5.9 Counterparts; Facsimile Delivery. This Registration Rights Agreement may be
executed in counterparts, each of which will be deemed an original, but all of which together will
constitute one and the same instrument. This Registration Rights Agreement may be delivered by PDF
or facsimile.

[Remainder of this Page Intentionally Left Blank]

- 13 -

 

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

	 	 	 	 	 
	 	 	TETON ENERGY CORPORATION, a Delaware
 corporation
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Dominic J. Bazile II
	 

	 	 	 	Executive Vice President and Chief Operating Officer
	 
	 	 	 	 
	 

	 	HOLDER:
	 
	 	 	 	 
	 	 	 
	 	 	(Signature)

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]exv10w3

 

Exhibit
10.3

FORM OF WARRANT

THE WARRANT EVIDENCED HEREBY, AND THE SECURITIES ISSUABLE HEREUNDER, HAVE BEEN AND SHALL BE ISSUED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE WARRANT AND SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND SHALL NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE
PROPOSED DISPOSITION IS THE SUBJECT OF A CURRENTLY EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND SUCH STATE SECURITIES LAWS IN CONNECTION WITH SUCH
DISPOSITION.

TETON ENERGY CORPORATION

COMMON STOCK PURCHASE WARRANT

Original Issue Date: APRIL 2, 2008

Void After: 11:59 P.M., APRIL 1, 2010

This
Warrant is Issued to _________________ (hereinafter called the “Holder,” which
term shall include the Holder’s legal representatives, heirs, successors and permitted assigns) by
Teton Energy Corporation, a Delaware corporation (hereinafter referred to as the
“Company”). This Warrant may be transferred by the Holder in accordance with the provisions
of Section 12.

     1. Exercise of Warrant. For value received and subject to the terms and
conditions hereinafter set forth, the Holder is entitled, upon surrender of this Warrant at any
time on or after July 2, 2008 and on or prior to April 1, 2010 (the “Exercise Date”) (with
the subscription form annexed hereto (the “Subscription Form”) duly executed) at the office
of the Company at 410 17th Street, Suite 1850, Denver, Colorado 80202, or such other
office in the United States of which the Company shall notify the Holder hereof in writing, to
purchase from the Company, at the purchase price hereinafter specified (as adjusted from time to
time, the “Exercise Price”), _______ shares (the “Warrant Shares”) (as adjusted from
time to time) of the Common Stock, $0.001 par value per share, of the Company (the “Common
Stock”). The initial Exercise Price shall be $6.00 per share.

     2. Issuance of Stock Certificates. As promptly as practicable after surrender of
this Warrant and receipt of payment of the Exercise Price, the Company shall issue and deliver to
the Holder a certificate or certificates for the shares purchased hereunder, in certificates of
such denominations and in such names as the Holder may specify.

     3. Payment of Exercise Price. Payment of the Exercise Price shall be made by
check made payable to the order of the Company or wire transfer of immediately available funds to a
bank account designated by the Company.

 

 

     4. Limitations on Exercise. Notwithstanding anything to the contrary contained
herein, the number of Warrant Shares that may be acquired by the Holder upon any exercise of this
Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that,
following such exercise (or other issuance), the total number of shares of Common Stock then
beneficially owned by the Holder and its affiliates and any other persons whose beneficial
ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”) does not exceed 4.999%
of the total number of issued and outstanding shares of Common Stock (including for such purpose
the shares of Common Stock issuable upon such exercise). For such purposes, beneficial ownership
shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. Each delivery of a Subscription Form by the Holder will
constitute a representation by the Holder that it has evaluated the limitation set forth in this
Section 4 and determined that issuance of the full number of Warrant Shares requested in such
Subscription Form is permitted under this Section 4. The Company’s obligation to issue shares of
Common Stock in excess of the limitation referred to in this Section 4 shall be suspended (and,
except as provided below, shall not terminate or expire notwithstanding any contrary provisions
hereof) until such time, if any, as such shares of Common Stock may be issued in compliance with
such limitation; provided, that, if, as of 5:30 P.M., New York City time, on the Expiration Date,
the Company has not received written notice that the shares of Common Stock may be issued in
compliance with such limitation, the Company’s obligation to issue such shares shall terminate. By
written notice to the Company, the Holder may waive the provisions of this Section 4 but any such
waiver will not be effective until the 61st day after such notice is delivered to the
Company, nor will any such waiver effect any other Holder.

     5. [Reserved].

     6. Adjustment for Dividends, Distributions, Subdivisions, Combinations, Mergers,
Consolidations or Sale of Assets.

          6.1. Manner of Adjustment.

               (a) Stock Dividends, Distributions or Subdivisions. In the event
the Company shall issue shares of Common Stock in a stock dividend, stock distribution or
subdivision, the Exercise Price in effect immediately before such stock dividend, stock
distribution or subdivision shall, concurrently with the effectiveness of such stock dividend,
stock distribution or subdivision, be proportionately decreased and the number of shares of Common
Stock purchasable by exercise of this Warrant shall be proportionately increased.

               (b) Combinations or Consolidations. In the event the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price in effect immediately
prior to such combination or consolidation shall, concurrently with the effectiveness of such
combination or consolidation, be proportionately increased and the number of shares of Common Stock
purchasable by exercise of this Warrant shall be proportionately decreased.

 

 

               (c) Adjustment for Reclassification, Exchange or Substitution. In
the event that the class of securities issuable upon the exercise of this Warrant shall be changed
into the same or a different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than any event addressed by Sections 6.1(a),
6.1(b) or 6.1(d)), then and in each such event the Holder shall have the right thereafter to
exercise this Warrant for the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification, or other change, by holders of the number of
shares of the class of securities into which such Warrant might have been exercisable for
immediately prior to such reorganization, reclassification, or change, all subject to further
adjustment as provided herein.

               (d) Adjustment for Merger, Consolidation or Sale of Assets. In the
event that the Company shall merge or consolidate with or into another entity or sell all or
substantially all of its assets, this Warrant shall thereafter be exercisable for the kind and
amount of shares of stock or other securities or property to which a holder of the number of shares
of Common Stock of the Company deliverable upon exercise of this Warrant would have been entitled
upon such consolidation, merger or sale; and, in such case, appropriate adjustment (as determined
in good faith by the Company’s Board of Directors) shall be made in the application of the
provisions set forth in this Section 6 with respect to the rights and interest thereafter of the
Holder of this Warrant, to the end that the provisions set forth in this Section 6 shall thereafter
be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property
thereafter deliverable upon the exercise of this Warrant.

          6.2. Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Exercise Price pursuant to this Section 6, the Company at its expense shall
promptly upon request compute such adjustment or readjustment in accordance with the terms hereof
and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based.

          6.3. Closing of Books. The Company shall at no time close its transfer books
against the transfer of any shares of Common Stock issued or issuable upon the exercise of this
Warrant in any manner which interferes with the timely and proper issuance of such shares.

     7. Covenants of the Company. During the period within which the rights
represented by this Warrant may be exercised, the Company shall at all times have authorized and
reserved for the purpose of issue upon exercise of the rights evidenced hereby, a
sufficient number of shares of the class of securities issuable upon exercise of this Warrant to
provide for the exercise of such rights. All securities which may be issued upon the exercise of
the rights represented by this Warrant shall, upon issuance, be duly authorized, validly issued,
fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue
thereof. Upon surrender for exercise, this Warrant shall be canceled and shall not be reissued;
provided, however, that upon the partial exercise hereof a substitute Warrant of
like tenor and date representing the rights to subscribe for and purchase any such unexercised
portion hereof shall be issued.

     8. No Rights as Shareholder Until Exercise. This Warrant shall not entitle the
Holder to any voting rights or any other rights as a stockholder of the Company but upon
presentation of this

 

 

Warrant with the Subscription Form duly executed and the tender of payment of
the Exercise Price at the office of the Company pursuant to the provisions of this Warrant, the
Holder shall forthwith be deemed a stockholder of the Company in respect of the securities for
which the Holder has so subscribed and paid.

     9. No Change Necessary. The form of this Warrant need not be changed because of
any adjustment in the Exercise Price or in the number of shares issuable upon its exercise. A
Warrant issued after any adjustment or any partial exercise or upon replacement may continue to
express the same Exercise Price and the same number of shares (appropriately reduced in the case of
partial exercise) as are stated on this Warrant as initially issued, and that Exercise Price and
that number of shares shall be considered to have been so changed as of the close of business on
the date of adjustment.

     10. Addresses for Notices. All notices, requests, consents and other
communications hereunder shall be in writing, either delivered in hand or mailed by registered or
certified mail, return receipt requested, or sent by facsimile, and shall be deemed to have been
duly made when delivered:

          If to the Holder, to the Holder’s address as shown on the books of
the Company; or

          If to the Company, to the address set forth on the first page of this
Warrant.

     11. Substitution. In the case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new Warrant of like tenor and denomination and deliver the
same (a) in exchange and substitution for and upon surrender and cancellation of any mutilated
Warrant, or (b) in lieu of any Warrant lost, stolen or destroyed, upon receipt of evidence
satisfactory to the Company of the loss, theft, or destruction of such Warrant (including, without
limitation, a reasonably detailed affidavit with respect to the circumstances of any loss, theft or
destruction), and indemnity agreement satisfactory to the Company.

     12. Transfer Restrictions. Subject to the Holder complying with the applicable
federal and state securities laws, this Warrant shall be freely transferable by the Holder, and may
be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise).

     13. Severability. If one or more provisions of this Warrant are held to be
unenforceable under applicable law, the parties agree to renegotiate such provision(s) reasonably
and in good faith, in order to maintain or achieve the economic position enjoyed by each party as
close as possible to that under the provision(s) rendered unenforceable, and (a) such unenforceable
provision(s) shall be excluded from this Warrant and replaced with the renegotiated provision,
(b) the balance of the provisions of this Warrant shall be interpreted as if such unenforceable
provision(s) were so excluded and (c) the balance of the provisions of this Warrant shall be
enforceable in accordance with its terms.

     14. Taxes. The Company makes no representations about tax treatment to the Holder
with respect to receipt or exercise of this Warrant or acquiring, holding, or disposing of the
Common Stock, and the Holder represents that the Holder has had the opportunity to discuss such
treatment with the Holder’s tax advisers.

 

 

     15. Governing Law. This Warrant shall be construed and enforced in accordance
with, and governed by, the laws of the State of Delaware without regard to its principles of
conflicts of laws.

     16. Registration Rights. All of the Warrant Shares are subject to and covered by
the terms of a Registration Rights Agreement dated April 2, 2008.

     17. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the Holder and the Company.

[remainder of page intentionally left blank]

 

 

     IN
WITNESS WHEREOF, the parties have caused this Warrant to be executed this ___ day of
April, 2008.

	 	 	 	 	 
	 	 	TETON ENERGY CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Dominic J. Bazile II
	 

	 	 	 	 
	 

	 	Title:
	 	EVP & Chief Operating Officer
	 

	 	 	 	 

 

 

SUBSCRIPTION FORM

	 	 	 
	TO: 

	 	Teton Energy Corporation
	 

	 	410 17th Street, Suite 1850
	 

	 	Denver, CO 80202

     (1) The
undersigned hereby elects to purchase ___ shares of the Common Stock of Teton
Energy Corporation (the “Company”) pursuant to the terms of the attached Warrant,
and tenders herewith payment of the exercise price in full. If this Warrant is not fully
exercised, the undersigned requests that a new Warrant to purchase the balance of the shares of
Common Stock remaining purchasable hereunder be issued in the name of
                                        .

     (2) Please issue a certificate or certificates representing said shares of Common
Stock in the name of the undersigned or in such other name as is
specified below:

	 	 	 	 	 
	 

	 	 

(Name)
	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	(Address)	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	(Tax Identification Number)	 	 
	 
	 	 	 	 

	 	 	 
	 

(Date)

	 	 
	 
	 	 
	 

(Signature)

	 	 
	 
	 	 
	 

(Print name)

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