EXHIBIT 4.5
FORM OF REGISTRATION RIGHTS AGREEMENT
TABLE OF CONTENTS
1. Introduction...............................................................2
i. Securities Purchase Agreement.........................................2
ii. Definition of Securities..............................................2
iii. National Market Representation........................................2
2. Registration under Securities Act, etc.....................................2
a. Mandatory Registration................................................2
i. Registration of Registrable Securities...........................2
ii. Registration Statement Form......................................2
iii. Expenses.........................................................3
iv. Effective Registration Statement.................................3
v. Plan of Distribution.............................................3
b. Incidental Registration...............................................3
i. Right to Include Registrable Securities..........................3
ii. Priority in Incidental Registrations.............................4
c. Registration Procedures...............................................4
d. Underwritten Offerings................................................8
i. Incidental Underwritten Offerings................................8
ii. Holdback Agreements..............................................8
iii. Participation in Underwritten Offerings..........................8
e. Preparation; Reasonable Investigation.................................9
f. Registration Default Fee..............................................9
g. Indemnification.......................................................9
i. Indemnification by the Company...................................9
ii. Indemnification by the Sellers..................................10
iii. Notices of Claims, etc..........................................11
iv. Other Indemnification...........................................11
v. Indemnification Payments........................................11
vi. Contribution....................................................11
3. Definitions...............................................................11
4. Rule 144..................................................................11
5. Amendments and Waivers....................................................11
6. Nominees for Beneficial Owners............................................11
7. Notices...................................................................11
8. Assignment................................................................11
i
9. Descriptive Headings......................................................11
10. GOVERNING LAW.............................................................11
11. Counterparts..............................................................11
12. Entire Agreement..........................................................11
13. Severability..............................................................11
ii
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of February 28,
2000, among American International Petroleum Corporation, a Nevada corporation
(the "Company"), and GCA Strategic Investment Fund Limited (the "Fund").
1. Introduction.
i. Securities Purchase Agreement. The Company and the Fund have today
executed that certain Securities Purchase Agreement (the "Securities Purchase
Agreement"), pursuant to which the Company has agreed, among other things, to
issue an aggregate of $1,850,000.00 (U.S.) principal amount of Secured Bridge
Notes of the Company (the "Notes") to the Fund or its successors, assigns or
transferees (collectively, the "Holders"). In addition, pursuant to the terms of
the Securities Purchase Agreement and the transactions contemplated thereby, the
Company has issued to the Fund Common Stock Purchase Warrants exercisable for up
to an aggregate of _______ shares of the Company's common stock, $0.08 par value
per share (the "Common Stock") (the "Warrant Shares"). The number of Warrant
Shares is subject to adjustment upon the occurrence of stock splits,
recapitalization and similar events occurring after the date hereof.
ii. Definition of Securities. The Warrant Shares are collectively herein
referred to as the "Securities."
iii. National Market Representation. The Company represents and warrants
that the Company's Common Stock is currently eligible for trading on the Nasdaq
Stock Market's National Market ("National Market") under the symbol "AIPN."
Certain capitalized terms used in this Agreement are defined in Section 3
hereof; references to sections shall be to sections of this Agreement.
2. Registration under Securities Act, etc.
a. Mandatory Registration.
i. Registration of Registrable Securities. The Company will file with
the Commission, within thirty (30) days of the issue date of the Warrants,
a Registration Statement on Form S-3 (the "Registration Statement") to
register the resale of the Common Shares issuable upon the exercise of the
Warrants. The Company will use its best efforts to cause the Registration
Statement to become effective within ninety (90) days of the Issue Date
(the"Effective Date").
ii. Registration Statement Form. Registrations under this Section 2.1
shall be on Form S-3 or such other appropriate registration form of the
Commission as shall permit the disposition of such Registrable Securities
in accordance with the intended method or
1
methods of disposition specified by the Fund; provided, however, such
intended method of deposition shall not include an underwritten offering of
the Registrable Securities.
iii. Expenses. The Company will pay all Registration Expenses in
connection with any registration required by this Section 2.1.
iv. Effective Registration Statement. A registration requested
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective
within the time period specified herein, provided that a registration which
does not become effective after the Company filed a registration statement
with respect thereto solely by reason of the refusal to proceed of any
holder of Registrable Securities (other than a refusal to proceed based
upon the advice of counsel in the form of a letter signed by such counsel
and provided to the Company relating to a disclosure matter unrelated to
such holder) shall be deemed to have been effected by the Company unless
the holders of the Registrable Securities shall have elected to pay all
Registration Expenses in connection with such registration, (ii) if, after
it has become effective, such registration becomes subject to any stop
order, injunction or other order or extraordinary requirement of the
Commission or other governmental agency or court for any reason or (iii)
if, after it has become effective, such registration ceases to be effective
for more than an aggregate of ninety (90) days.
v. Plan of Distribution. The Company hereby agrees that the
Registration Statement shall include a plan of distribution section
reasonable acceptable to the Fund and substantially in the form annexed
hereto; provided, however, such plan of distribution section shall be
modified by the Company so as to not provide for the disposition of the
Registrable Securities on the basis of an underwritten offering.
b. Incidental Registration.
i. Right to Include Registrable Securities. If any time after the date
hereof but before the third anniversary of the date hereof, the Company
proposes to register any of its securities under the Securities Act (other
than by a registration in connection with an acquisition in a manner which
would not permit registration of Registrable Securities for sale to the
public, on Form S-8, or any successor form thereto, on Form S-4, or any
successor form thereto and other than pursuant to Section 2.1), on an
underwritten basis (either best-efforts or firm-commitment), then, the
Company will each such time give prompt written notice to all Holders of
its intention to do so and of such Holders' rights under this Section 2.2.
Upon the written request of any such Holder made within twenty (20) days
after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder an and the
intended method of disposition thereof), the Company will, subject to the
terms of this Agreement, effect the registration under the Securities Act
of the Registrable Securities, to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid)
of such Registrable Securities so to be registered, by inclusion of
2
such Registrable Securities in the registration statement which covers the
securities which the Company proposes to register, provided that if, at any
time after written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any
reason either not to register or to delay registration of such securities,
the Company may, at its election, give written notice of such determination
to each Holder and, thereupon, (i) in the case of a determination not to
register, shall be relieved of this obligation to register any Registrable
Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights of any holder or holders of
Registrable Securities entitled to do so to request that such registration
be effected as a registration under Section 2.1, and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering
any Registrable Securities, for the same period as the delay in registering
such other securities. No registration effected under this Section 2.2
shall relieve the Company of its obligation to effect any registration upon
request under Section 2.1, nor shall any such registration hereunder be
deemed to have been effected pursuant to Section 2.1. The Company will pay
all Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 2.2. The right
provided the Holders of the Registrable Securities pursuant to this Section
shall be exercisable at their sole discretion and will in no way limit any
of the Company's obligations to pay the Securities according to their
terms.
ii. Priority in Incidental Registrations. If the managing underwriter
of the underwritten offering contemplated by this Section 2.2 shall inform
the Company and holders of the Registrable Securities requesting such
registration by letter of its belief that the number of securities
requested to be included in such registration exceeds the number which can
be sold in such offering, then the Company will include in such
registration, to the extent of the number which the Company is so advised
can be sold in such offering, (i) first securities proposed by the Company
to be sold for its own account, and (iii) second Registrable Securities and
securities of other selling security holders requested to be included in
such registration pro rata on the basis of the number of shares of such
securities so proposed to be sold and so requested to be included;
provided, however, the holders of Registrable Securities shall have
priority to all shares sought to be included by officers and directors of
the Company as well as holders of ten percent (10%) or more of the
Company's Common Stock.
c. Registration Procedures. If and whenever the Company is required to
effect the registration of any Registrable Securities under the Securities Act
as provided in Section 2.1 and, as applicable, 2.2, the Company shall, as
expeditiously as possible:
(1) prepare and file with the Commission the Registration Statement to
effect such registration (including such audited financial statements as
may be required by the Securities Act or the rules and regulations
promulgated thereunder) and thereafter use its best efforts to cause such
registration statement to be declared effective by the Commission, as soon
as practicable, but in any event no later than the Required Effectiveness
Date (with respect to a registration pursuant to Section 2.1); provided,
however, that before filing such registration
3
statement or any amendments thereto, the Company will furnish to the
counsel selected by the holders of Registrable Securities which are to be
included in such registration, copies of all such documents proposed to be
filed;
(2) with respect to any Registration Statement pursuant to Section
2.1, prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
and to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such registration
statement, until the earlier to occur of six (6) years after the date of
this Agreement(subject to the right of the Company to suspend the
effectiveness thereof for not more than 10 consecutive days or an aggregate
of 30 days in such six (6) years period) or such time as all of the
securities which are the subject of such registration statement cease to be
Registrable Securities (such period, in each case, the "Registration
Maintenance Period");
(3) furnish to each seller of Registrable Securities covered by such
registration statement such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus contained
in such registration statement (including each preliminary prospectus and
any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities
Act, and such other documents, as such seller and underwriter, if any, may
reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities owned by such seller;
(4) use its reasonable efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities laws or blue sky laws as any seller thereof
shall reasonably request, to keep such registrations or qualifications in
effect for so long as such registration statement remains in effect, and
take any other action which may be reasonably necessary to enable such
seller to consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the
requirements of this subdivision (iv) be obligated to be so qualified or to
consent to general service of process in any such jurisdiction;
(5) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(6) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller, and the underwriters, if any, of:
4
(A) an opinion of counsel for the Company, dated the effective
date of such registration statement (or, if such registration includes
an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement),reasonably satisfactory in
form and substance to such seller) including that the prospectus and
any prospectus supplement forming a part of the Registration Statement
does not contain an untrue statement of a material fact or omits a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading, and
(B) a "comfort" letter (or, in the case of any Person which does
not satisfy the conditions for receipt of a "comfort" letter specified
in Statement on Auditing Standards No. 72, an "agreed upon procedures"
letter), dated the effective date of such registration statement (and,
if such registration includes an underwritten public offering, a
letter of like kind dated the date of the closing under the
underwriting agreement), signed by the independent public accountants
who have certified the Company's financial statement included in such
registration statement, covering substantially the same matters with
respect to such registration statement (and the prospectus included
therein) and, in the case of the accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to the underwriters in underwritten
public offerings of securities (with, in the case of an "agreed upon
procedures" letter, such modifications or deletions as may be required
under Statement on Auditing Standards No. 35) and, in the case of the
accountants' letter, such other financial matters, and, in the case of
the legal opinion, such other legal matters, as such seller (or the
underwriters, if any) may reasonably request;
(7) notify the Sellers' Representative and its counsel promptly and
confirm such advice in writing promptly after the Company has knowledge
thereof:
(v) when the Registration Statement, the prospectus or any prospectus
supplement related thereto or post-effective amendment to the Registration
Statement has been filed, and, with respect to the Registration Statement
or any post-effective amendment thereto, when the same has become
effective;
(w) of any request by the Commission for amendments or supplements to
the Registration Statement or the prospectus or for additional information;
(x) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings by an Person for that purpose; and
(y) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any Registrable Securities for sale
under the securities or blue sky laws of any jurisdiction or the initiation
or threat of any proceeding for such purpose;
5
(8) notify each seller of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or
upon 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 any material facts
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and at the
request of any such seller promptly prepare and furnish to such seller a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include 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 not
misleading in the light of the circumstances then existing;
(9) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(10) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen months,
beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(11) enter into such agreements and take such other actions as the
Sellers' Representative shall reasonably request in writing (at the expense
of the requesting or benefiting sellers) in order to expedite or facilitate
the disposition of such Registrable Securities; and
(12) use its best efforts to list all Registrable Securities covered
by such registration statement on any securities exchange on which any of
the Registrable Securities are then listed.
The Company may require each seller of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing.
The Company will not file any registration statement pursuant to Section
2.1, or amendment thereto or any prospectus or any supplement thereto (including
such documents incorporated by reference and proposed to be filed after the
initial filing of the Registration
6
Statement) to which the Sellers' Representative shall reasonably object,
provided that the Company may file such documents in a form required by law or
upon the advice of its counsel.
The Company represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby other than such waivers, consents and/or
authorizations specifically contemplated by the Securities Purchase Agreement.
The Fund agrees that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in subdivision (viii) of this
Section 2.3, the Fund will forthwith discontinue the Fund's disposition of
Registrable Securities pursuant to the Registration Statement relating to such
Registrable Securities until the Fund's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (viii) of this
section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in the
Fund's possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
d. Underwritten Offerings.
i. Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities as provided in Section 2.2 and subject to
the provisions of Section 2.2(a), use its reasonable efforts to arrange for
such underwriters to include all the Registrable Securities to be offered
and sold by such holder among the securities to be distributed by such
underwriters.
ii. Holdback Agreements. Subject to such other reasonable requirements
as may be imposed by the underwriter as a condition of inclusion of a
Fund's Registrable Securities in the registration statement, each Fund
agrees by acquisition of Registrable Securities, if so required by the
managing underwriter, not to sell, make any short sale of, loan, grant any
option for the purchase of, effect any public sale or distribution of or
otherwise dispose of, except as part of such underwritten registration, any
equity securities of the Company, during such reasonable period of time
requested by the underwriter; provided however, such period shall not
exceed the 120 day period commencing 30 days prior to the commencement of
such underwritten offering and ending 90 days following the completion of
such underwritten offering.
iii. Participation in Underwritten Offerings. No holder of Registrable
Securities may participate in any underwritten offering under Section 2.2
unless such holder of Registrable Securities (i) agrees to sell such
Person's securities on the basis provided in any underwriting arrangements
approved, subject to the terms and conditions hereof, by the holders of a
majority of Registrable Securities to be included in such underwritten
offering and
7
(ii) completes and executes all questionnaires, indemnities, underwriting
agreements and other documents (other than powers of attorney) required
under the terms of such underwriting arrangements. Notwithstanding the
foregoing, no underwriting agreement (or other agreement in connection with
such offering) shall require any holder of Registrable Securities to make
an representations or warranties to or agreements with the Company or the
underwriters other than representations and warranties contained in a
writing furnished by such holder expressly for use in the related
registration statement or representations, warranties or agreements
regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation
required by law.
e. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, and their respective
counsel and accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the reasonable opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
f. Registration Default Fee. If the Registration Statement contemplated in
Section 2.1 is (x) not declared effective by the Required Effectiveness Date or
(y) such effectiveness is not maintained for the Registration Maintenance
Period, then the Company shall pay to the Fund the applicable Default Fee
specified in Section 10.4 of the Securities Purchase Agreement.
g. Indemnification.
i. Indemnification by the Company. In the event of any registration of
any securities of the Company under the Securities Act, the Company will,
and hereby does agree to indemnify and hold harmless the holder of any
Registrable Securities covered by such registration statement, its
directors and officers, each other Person who participates as an
underwriter in the offering or sale of such securities and each other
Person, if any, who controls such holder or any such underwriter within the
meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which such holder or any such director or
officer or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities
Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any
8
amendment or supplement thereto, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Company will reimburse
such holder and each such director, officer, underwriter and controlling
person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding, provided that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage, liability, (or
action or proceeding in respect thereof) or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement
in reliance upon and in conformity with written information furnished to
the Company by such holder or underwriter stating that it is for use in the
preparation thereof and, provided further that the Company shall not be
liable to any Person who participates as an underwriter in the offering or
sale of Registrable Securities or to any other Person, if any, who controls
such underwriter within the meaning of the Securities Act, in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's
failure to send or give a copy of the final prospectus, as the same may be
then supplemented or amended, within the time required by the Securities
Act to the Person asserting the existence of an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus or an
amendment or supplement thereto. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such
holder or any such director, officer, underwriter or controlling person and
shall survive the transfer of such securities by such holder.
ii. Indemnification by the Sellers. The Company may require, as a
condition to including any Registrable Securities in any registration
statement filed pursuant to this Agreement, the Company shall have received
an undertaking satisfactory to it from the prospective seller of such
Registrable Securities, to indemnify and hold harmless (in the same manner
and to the same extent as set forth in subdivision (a) of this Section 2.7)
the Company, each director of the Company, each officer of the Company and
each other Person, if any, who controls the Company within the meaning of
the Securities Act, with respect to any statement or alleged statement in
or omission or alleged omission from such registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company through
an instrument duly executed by such seller specifically stating that it is
for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement.
Any such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such
securities by such seller.
9
iii. Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 2.7, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions of this Section
2.7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to
the extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the consent of
the indemnified party, consent to entry of any judgment or enter into any
settlement of any such action which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified
party of a release from all liability, or a covenant not to ▇▇▇, in respect
to such claim or litigation. No indemnified party shall consent to entry of
any judgment or enter into any settlement of any such action the defense of
which has been assumed by an indemnifying party without the consent of such
indemnifying party.
iv. Other Indemnification. Indemnification similar to that specified
in the preceding subdivisions of this Section 2.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities (but only if and to the extent required pursuant to the terms of
2.7(b)) with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
v. Indemnification Payments. The indemnification required by this
Section 2.7 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
vi. Contribution. If the indemnification provided for in the preceding
subdivision of this Section 2.7 is unavailable to an indemnified party in
respect of any expense, loss, claim, damage or liability referred to
therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such expense, loss, claim, damage or
liability (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the holder or
underwriter, as the case may be, on the other from the distribution of the
10
Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of
the holder or underwriter, as the case may be, on the other in connection
with the statements or omissions which resulted in such expense, loss,
damage or liability, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and the holder or underwriter, as the case may be, on the other in
connection with the distribution of the Registrable Securities shall be
deemed to be in the same proportion as the total net proceeds received by
the Company from the initial sale of the Registrable Securities by the
Company to the purchasers bear to the gain, if any, realized by all selling
holders participating in such offering or the underwriting discounts and
commissions received by the underwriter, as the case may be. The relative
fault of the Company on the one hand and of the holder or underwriter, as
the case may be, on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or omission to state a material fact relates to information supplied
by the Company, by the holder or by the underwriter and the parties'
relative intent, knowledge, access to information supplied by the Company,
by the holder or by the underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, provided that the foregoing contribution agreement
shall not inure to the benefit of any indemnified party if indemnification
would be unavailable to such indemnified party by reason of the provisions
contained in the first sentence of subdivision (a) of this Section 2.7, and
in no event shall the obligation of any indemnifying party to contribute
under this subdivision (f) exceed the amount that such indemnifying party
would have been obligated to pay by way of indemnification if the
indemnification provided for under subdivisions (b) of this Section 2.7 had
been available under the circumstances.
The Company and the holders of Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this subdivision (f) were
determined by pro rata allocation (even if the holders and any underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth in the preceding sentence and subdivision (c) of this
Section 2.7, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (f), no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay
11
by reason of such untrue or allege untrue statement or omission. 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 who was
not guilty of such fraudulent misrepresentation.
3. Definitions. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
"Agreement": As defined in Section 1.
"Commission": The Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Common Stock": As defined in Section 1.
"Company": As defined in the introductory paragraph of this Agreement.
"Conversion Shares": As defined in Section 1.
"Exchange Act": The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission thereunder.
"National Market": As defined in Section 1.
"Notes": As defined in Section 1, such term to include any securities
issued in substitution of or in addition to such Notes.
"Person": A corporation, association, partnership, organization,
business, individual, governmental or political subdivision thereof or a
governmental agency.
"Registrable Securities": The Securities and any securities issued or
issuable with respect to such Securities by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. Once issued
such securities shall cease to be Registrable Securities when (a) a
registration statement with respect to the sale of such securities shall
have become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement, (b)
they shall have been distributed to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act, (c) they shall have been
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law
then in force, (d) they shall have ceased to be outstanding, (e) on the
expiration of the applicable Registration Maintenance Period or (f) any and
all legends restricting transfer thereof have been removed in accordance
with the provisions of Rule 144(k) (or any successor provision) under the
Securities Act.
12
"Registration Expenses": All expenses incident to the Company's
performance of or compliance with this Agreement, including, without
limitation, all registration, filing and NASD fees, all stock exchange and
National Market listing fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of
counsel for the Company and of its independent public accountants,
including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance, the reasonable
fees and disbursements of not more than one law firm (not to exceed
$25,000) retained by the holder or holders of more than 50% of the
Registrable Securities, premiums and other costs of policies of insurance
of the Company against liabilities arising out of the public offering of
the Registrable Securities being registered and any fees and disbursements
of underwriters customarily paid by issuers or sellers of securities, but
excluding underwriting discounts and commissions and transfer taxes, if
any, provided that, in any case where Registration Expenses are not to be
borne by the Company, such expenses shall not include salaries of Company
personnel or general overhead expenses of the Company, auditing fees,
premiums or other expenses relating to liability insurance required by
underwriters of the Company or other expenses for the preparation of
financial statements or other data normally prepared by the Company in the
ordinary course of its business or which the Company would have incurred in
any event.
"Registration Maintenance Period": As defined in Section 2.3.
"Required Effectiveness Date": As defined in Section 2.1.
"Securities Act": The Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"Securities Purchase Agreement": As defined in Section 1.
"Sellers' Representative": Global Capital Advisors, Ltd. or such
Person designated by Global Capital Advisors, Ltd.
4. Rule 144. The Company shall timely file the reports required to be filed
by it under the Securities Act and the Exchange Act (including but not limited
to the reports under Sections 13 and 15(d) o the Exchange Act referred to in
subparagraph (c) of Rule 144 adopted by the Commission under the Securities Act)
and the rules and regulations adopted by the Commission thereunder (or, if the
Company is not required to file such reports, will, upon the request of any
holder of Registrable Securities, make publicly available other information) and
will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any
13
holder of Registrable Securities, the Company will deliver to such holder a
written statement as to whether it has complied with the requirements of this
Section 4.
5. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of the sum of the 51% or more of the shares of (i) Registrable
Securities issued at such time, plus (ii) Registrable Securities issuable upon
exercise or conversion of the Securities then constituting derivative securities
(if such Securities were not fully exchanged or converted in full as of the date
such consent if sought). Each holder of any Registrable Securities at the time
or thereafter outstanding shall be bound by any consent authorized by this
Section 5, whether or not such Registrable Securities shall have been marked to
indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number of percentage of shares of Registrable Securities
held by an holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership or such Registrable Securities.
7. Notices. Except as otherwise provided in this Agreement, all notices,
requests and other communications to any Person provided for hereunder shall be
in writing and shall be given to such Person (a) in the case of a party hereto
other than the Company, addressed to such party in the manner set forth in the
Securities Purchase Agreement or at such other address as such party shall have
furnished to the Company in writing, or (b) in the case of any other holder of
Registrable Securities, at the address that such holder shall have furnished to
the Company in writing, or, until any such other holder so furnishes to the
Company an address, then to and at the address of the last holder of such
Registrable Securities who has furnished an address to the Company, or (c) in
the case of the Company, at the address set forth on the signature page hereto,
to the attention of its President, or at such other address, or to the attention
of such other officer, as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding. Each such notice, request or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (ii) if given by any other means (including, without
limitation, by fax or air courier), when delivered at the address specified
above, provided that any such notice, request or communication shall not be
effective until received.
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto. In addition, and whether or
not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties
14
hereto other than the Company shall also be for the benefit of and enforceable
by any subsequent holder of any Registrable Securities. Each of the Holders of
the Registrable Securities agrees, by accepting any portion of the Registrable
Securities after the date hereof, to the provisions of this Agreement including,
without limitation, appointment of the Sellers' Representative to act on behalf
of such Holder pursuant to the terms hereof which such actions shall be made in
the good faith discretion of the Sellers' Representative and be binding on all
persons for all purposes.
9. Descriptive Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS.
11. Counterparts. This Agreement may be executed by facsimile and may be
signed simultaneously in any number of counterparts, each of which shall be
deemed an original, but all such counterparts shall together constitute one and
the same instrument.
12. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the Company and each other party hereto relating to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
13. Severability. If any provision of this Agreement, or the application of
such provisions to any Person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
[Signature Page Follows]
15
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of the
date first above written.
AMERICAN INTERNATIONAL PETROLEUM
CORPORATION
By: __________________________________
Name: ________________________________
Title: _______________________________
Address: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
GCA STRATEGIC INVESTMENT FUND
LIMITED
By: __________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director
Address: Mechanics ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇
▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
16