REGISTRATION RIGHTS AGREEMENT
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THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
February 18, 1999 between AMERICAN INTERNATIONAL PETROLEUM CORP., a Nevada
corporation with offices at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ (the "Company") and HALIFAX FUND, L.P., with offices at c/o the Palladin
Group, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Investor").
W I T N E S S E T H:
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WHEREAS, pursuant to that certain Convertible Secured Debenture
Purchase Agreement by and between the Company and the Investor dated as of
February 11, 1999 (the "Purchase Agreement"), the Company has agreed to sell and
issue to the Investor, and the Investor has agreed to purchase from the Company,
$10,000,000 principal amount of 5% Convertible Secured Debentures Due February
18, 1999 (the "Debentures"), on the terms and conditions set forth therein;
WHEREAS, the Purchase Agreement contemplates that the Debentures may be
converted into shares (the "Common Shares") of common stock, $0.08 par value, of
the Company ("Common Stock") pursuant to the terms and conditions set forth in
the Debentures; and
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investor's agreement to enter into the Purchase Agreement, the Company has
agreed to issue to the Investor warrants exercisable for shares of Common Stock
in the form attached as Exhibit 1.1B to the Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the Purchase
Agreement and this Agreement, the Company and the Investor agrees as follows:
Certain Definitions. Capitalized terms used herein and not otherwise
defined shall have the meaning ascribed thereto in the Purchase Agreement,
Warrants or the Debentures. As used in this Agreement, the following terms shall
have the following respective meanings:
"Closing" and "Closing Date" shall have the meanings ascribed
to such terms in the Purchase Agreement.
"Commission" or "SEC" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Registrable Securities" shall mean: (i) the Common Shares and
Warrant
Shares issued to each Holder or its permitted transferee or designee
upon conversion of the Debentures or exercise of the Warrants, as applicable, or
upon any stock split, stock dividend, recapitalization or similar event with
respect to such Common Shares or Warrant Shares; (ii) any securities issued or
issuable to each Holder upon the conversion, exercise or exchange of any
Debentures, Warrants, Warrant Shares, or Common Shares; and (iii) any other
security of the Company issued as a dividend or other distribution with respect
to, or upon conversion or exchange of or in replacement of Registrable
Securities.
The terms "register", "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
"Registration Expenses" shall mean all expenses to be incurred
by the Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, and the expense of any audited financial statements incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company, which shall be paid in any event by the
Company).
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for Holders not included within "Registration
Expenses".
"Holder" and "Holders" shall include the Investor and any
transferee of the Debentures, Warrants, Warrant Shares or Common Shares or
Registrable Securities which have not been sold to the public to whom the
registration rights conferred by this Agreement have been transferred in
compliance with this Agreement.
"Registration Statement" shall have the meaning set forth in
Section 2(a)(i) herein.
"Regulation D" shall mean Regulation D as promulgated pursuant
to the Securities Act, and as subsequently amended.
"Securities Act" or "Act" shall mean the Securities Act of
1933, as amended.
"Warrants" shall mean the warrants in form and substance of
Exhibit 1.1B to the Purchase Agreement between the Company and the Investor
dated as of the date hereof.
"Warrant Shares" shall mean shares of Common Stock of the
Company issued and issuable upon exercise of the Warrants.
Registration Requirements. The Company shall use reasonable commercial
efforts to effect the registration of the Registrable Securities (including
without limitation the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable
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blue sky or other state securities laws and appropriate compliance with
applicable regulations issued under the Securities Act) as would permit or
facilitate the sale or distribution of all the Registrable Securities in the
manner (including manner of sale) and in all states reasonably requested by the
Holder on an Approved Market. Such reasonable commercial efforts by the Company
shall include the following:
(a) The Company shall, as expeditiously as reasonably possible
after the Closing Date:
(i) But in any event within 60 days thereafter, prepare
and file a registration statement with the Commission pursuant to Rule 415 under
the Securities Act on Form S-3 under the Securities Act (or in the event that
the Company is ineligible to use such form, such other form as the Company is
eligible to use under the Securities Act) covering the Registrable Securities
("Registration Statement") which Registration Statement (including any
amendments or supplements thereto an prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading. Such Registration Statement shall, in addition and without
limitation, register (pursuant to Rule 416 under the Securities Act, or
otherwise) such additional indeterminate number of Registrable Securities as
shall be necessary to permit the conversion in full of the Debentures or
exercise of th Warrants to prevent dilution resulting from stock splits, stock
dividends or similar transactions. Thereafter, the Company shall use reasonable
commercial efforts to cause such Registration Statement and other filings to be
declared effective as soon as possible, and in any event prior to 180 days
following the Closing Date (the "Effective Date"). The number of shares of
Common Stock initially included in such Registration Statement shall be no less
than 13,177,160, without regard to any limitation on the Investor's ability to
convert the Debentures or exercise the Warrants.
(ii) 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 keep the Registration
Statement effective and to comply with the provisions of the Act with respect to
the disposition of all securities covered by such Registration Statement until
such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement and notify the Holders of the
filing and effectiveness of such Registration Statement and any amendments or
supplements. In the event the number of shares available under a Registration
Statement filed pursuant to this Agreement is insufficient to cover all of the
Registrable Securities issued or issuable upon conversion of the Debentures and
exercise of the Warrants, the Company shall amend the Registratio Statement, or
file a new Registration Statement (on the short form available therefore, if
applicable), or both, so as to cover all of the Registrable Securities, in each
case, as soon as practicable, but in any event within twenty (20) business days
after the necessity therefor arises (based on the market price of the Common
Stock and other relevant factors on which the Company reasonably elects to
rely). The Company shall use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as reasonably practicable
following the filing thereof. The provisions of Section 2(b)(i) below
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shall be applicable with respect to such obligation, with the Effective Date (as
defined in Section 2(b)(i) below) running from the day after the date on which
the Company reasonably first determines (or reasonably should have determined)
the need therefor.
(iii) Furnish to each Holder such numbers of copies of a
current prospectus conforming with the requirements of the Act, copies of the
Registration Statement, any amendment or supplement thereto and any documents
incorporated by reference therein and such other documents as such Holder may
reasonably require in order to facilitate the disposition of Registrable
Securities owned by such Holder and, in the case of the Registration Statement
referred to in Section 2(a)(i), each letter written by or on behalf of the
Company to the SEC or the staff of the SEC, and each item of correspondence from
the SEC or the staff of the SEC, in each case relating to such Registration
Statement (other than any portion of any thereof which contains information for
which the Company has sought confidential treatment). The Company will
immediately notify the Investor by facsimile of the effectiveness of the
Registration Statement or any post-effective amendment. The Company will
promptly respond to any and all comments received from the SEC, with a view
towards causing any Registration Statement or any amendment thereto to be
declared effective by the SEC as soon as reasonably practicable and shall
promptly file an acceleration request as soon as practicable following the
resolution or clearance of all SEC comments or, if applicable, following
notification by the SEC that the Registration Statement or any amendment thereto
will not be subject to review.
(iv) (a) Register and qualify, or obtain an appropriate
exemption from registration or qualification, the securities covered by such
Registration Statement under such other securities or "Blue Sky" laws of such
jurisdictions as shall be reasonably requested by each Holder (b) prepare and
file in those jurisdictions such supplements (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof, (c) take such other actions as
may be necessary to maintain such registrations and qualifications in effect at
all times, and (d) take all other actions reasonably necessary or advisable to
qualify the Registrable Securities for sale in such jurisdictions; provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, and shall not be required to
register or qualify in any jurisdiction where such registration or qualification
is not permitted or approved by such jurisdiction following the Company's best
efforts to obtain such permission or approval.
(v) Notify each Holder immediately of the happening of any
event as a result of which the prospectus (including any supplements thereto or
thereof) included in such Registration Statement, as then in effect, includes an
untrue statement of material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing, and use its best efforts to promptly
update and/or correct such prospectus to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to
each Holder as such Holder may reasonably request.
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(vi) Notify each Holder immediately of the issuance by the
Commission or any state securities commission or agency of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose. The Company shall prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting thereof at
the earliest possible time.
(vii) Permit a single firm of counsel, designated as
Holders' counsel by the Holders of a majority of the Registrable Securities
included in the Registration Statement, to review the Registration Statement and
all amendments and supplements thereto within a reasonable period of time prior
to each filing, and shall not file any document in a form to which such counsel
reasonably objects and will not request acceleration of the Registration
Statement without prior notice to suc counsel. The sections of the Registration
Statement covering information with respect to the Investor, the Investor's
beneficial ownership of securities of the Company or the Investor's intended
method of disposition of Registrable Securities shall conform to the information
provided to the Company by the Investor.
(viii) List the Registrable Securities covered by such
Registration Statement with all securities exchange(s) and/or markets on which
the Common Stock is then listed and prepare and file any required filings with
the National Association of Securities Dealers, Inc. or any exchange or market
where the Common Shares are traded.
(ix) If applicable, take all steps necessary to enable
Holders to avail themselves of the prospectus delivery mechanism set forth in
Rule 153 (or successor thereto) under the Act.
(x) The Company shall hold in confidence and not make any
disclosure of information concerning the Investor provided to the Company unless
(a) disclosure of such information is necessary to comply with federal or state
securities laws, (b) the disclosure of such information is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (c) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmenta body of competent jurisdiction, or (d) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or obtain a protective order for,
such information.
(xi) The Company shall provide a transfer agent and
registrar, which may be a single entity, for the Registrable Securities not
later than the effective date of the Registration Statement.
(xii) The Company shall cooperate with the Investor who
holds Registrable Securities being offered to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be offered
pursuant to the Registration
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Statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the Investor may reasonably request and registered in
such names as the Investor may request, and, within three (3) business days afte
a Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investor whose Registrable Securities are
included in such Registration Statement) an instruction in the form attached
hereto as Exhibit 1 and an opinion of such counsel in the form attached hereto
as Exhibit 2.
(xiii) From and after the date of this Agreement, except
for shares of Common Stock listed on Schedule 2.1(a), the Company shall not, and
shall not agree to, allow the holders of any securities of the Company to
include any of their securities in any Registration Statement under Section 2(a)
hereof or any amendment or supplement thereto under Section 3(b) hereof without
the consent of the holders of a majority-in-interest of the Registrable
Securities.
(xiv) The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investor of Registrable
Securities pursuant to the Registration Statement.
(b) Set forth below in this Section 2(b) are (I) events that
may arise that the Investor considers will interfere with the full enjoyment of
their rights under the the Purchase Agreement and this Agreement (the
"Interfering Events"), and (II) certain remedies applicable in each of these
events.
Paragraphs (i) through (iv) of this Section 2(b) describe
the Interfering Events, provide a remedy to the Investor if an Interfering Event
occurs and provide that the Investor may require that the Company convert
outstanding shares of Debentures at a specified price if certain Interfering
Events are not timely cured.
Paragraph (v) provides, inter alia, that if cash payments
required as the remedy in the case of certain of the Interfering Events are not
paid when due, the Company may be required by the Investor to convert
outstanding shares of Debentures at a specified price.
Paragraph (vi) provides, inter alia, that the Investor has
the right to specific performance.
The preceding paragraphs in this Section 2(b) are meant to
serve only as an introduction to this Section 2(b), are for convenience only,
and are not to be considered in applying, construing or interpreting this
Section 2(b).
(i) Delay in Effectiveness of Registration Statement. The
Company agrees that it shall file the Registration Statement complying with the
requirements of this Agreement promptly and shall use its best efforts to cause
such Registration Statement to become effective as soon as possible and in any
event prior to 120 days following the initial closing of the purchase (the
"Closing Date") (the "Effective Date"). In the event that such
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Registration Statement has not been declared effective within 120 days from the
Closing Date, then the percentage (initially 125% or 85%, as the case may be)
employed to determine the "Conversion Price" pursuant to Section 5(c) of the
Debentures (the "Agreed Percentage") shall be reduced by 1% during and after the
first 30-day period from and after the 120th day following the Closing Date
during any part of which such Registration Statement is not effective, and such
Agreed Percentage shall be further reduced by an additional 1.5% during and
after each subsequent 30-day period thereafter during any part of which the
Registration Statement is not effective. In each case, the Agreed Percentage and
the Conversion Price shall be subject to further adjustment as set forth in the
Debenture and the Purchase Agreement. If the Registration Statement has not been
declared effective within 180 days after the Closing Date, then each Holder
shall have the right in its sole discretion (i) to sell its Debentures to the
Company (in whole or in part) at a price in immediately available funds (the
"Premium Conversion Price") equal to 1.25 times (i.e., 125% of) the Outstanding
Principal Amount of the Debentures plus any accrued but unpaid or unrecognized
interest or default payments, and/or (ii) require the Company to redeem the
Warrants for cash in an amount (the "Warrant Redemption Price") equal to (x) the
product of (I) the number of shares exercisable under the Warrants (without
regard to any beneficial ownership limitations contained therein), multiplie by
(II) the average closing bid price for the ten (10) consecutive trading days
immediately preceding the notice of redemption of such Warrants, minus (y) the
product of (I) the number of shares exercisable under the Warrants (without
regard to any beneficial ownership limitations contained therein), multiplied by
(II) the Exercise Price (as defined in the Warrants). Payment of such amount
shall be due and payable within 3 business days of demand therefor, which demand
shall be revocable by the Holder at any time prior to its actual receipt of the
Premium Conversion Price.
(ii) No Listing; Premium Price Conversion for Delisting of
Class of Shares.
(A) In the event that the Company fails, refuses or
is unable to cause the Registrable Securities covered by the Registration
Statement to be listed with the Approved Market and each other securities
exchange and market on which the Common Stock is then traded at all times during
the period ("Listing Period") commencing the earlier of the effective date of
the Registration Statement or the 120th day following the Closing Date, and
continuing thereafter for so long a the Debentures are outstanding, then the
Company shall pay in cash to each Holder a default payment at a rate (the
"Default Payment Rate") equal to one and one half percent (1.5%) of the sum of
(x) the Outstanding Principal Amount of, (y) the accrued but unpaid interest on,
plus (z) the accrued but unpaid or unrecognized default payments on the
Debentures (the "Debenture Amount") held by such Holder for each 30-day period
(or portion thereof) during the Listing Period from and after such failure,
refusal or inability to so list the Registrable Securities until the Registrable
Securities are so listed. Alternatively, at any time five (5) days after the
commencement of the running of the first 30-day period described above, a holder
shall have the right to (1) require the Company to purchase the Debentures for
cash in an amount equal to the Premium Conversion Price, and/or (2) require the
Company to redeem the Warrants for cash in an amount equal to the Warrant
Redemption Price.
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(B) In the event that shares of Common Stock of the
Company are delisted from the Approved Market at any time following the Closing
Date and remain delisted for five (5) consecutive trading days, then at the
option of each Holder and to the extent such Holder so elects, the Holder will
be entitled to (i) require the Company to purchase the Debentures for cash in an
amount equal to the Premium Conversion Price, and/or (ii) require the Company to
convert the Warrants for cash in an amount equal to the Warrant Redemption
Price.
(iii) Blackout Periods. In the event any Holder's ability
to sell Registrable Securities under the Registration Statement is suspended for
more than (i) five (5) consecutive days or (ii) fifteen (15) days in any 360-day
period ("Suspension Grace Period"), including without limitation by reason of a
suspension of trading of the Common Stock on the Approved Market, any suspension
or stop order with respect to the Registration Statement or the fact that an
event has occurred as aresult of which the prospectus (including any supplements
thereto) included in such Registration Statement then in effect includes an
untrue statement of material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing, then the Company shall pay in cash to
each Holder a default payment at the Default Payment Rate of the Debenture
Amount for the Debentures held by such Holder for each 30-d period (or portion
thereof) from and after the expiration of the Suspension Grace Period.
Alternatively, a holder shall have the right to (i) require the Company to
purchase the Debentures for cash in an amount equal to the Premium Conversion
Price, and/or (ii) require the Company to redeem the Warrants for cash in an
amount equal to the Warrant Redemption Price.
(iv) Conversion Deficiency; Premium Price Conversion for
Conversion Deficiency. In the event that the Company does not have a sufficient
number of Common Shares available to satisfy the Company's obligations to any
Holder upon receipt of a Conversion Notice (as defined in the Debenture) or is
otherwise unable or unwilling to issue such Common Shares (including without
limitation by reason of the limit described in Section 10 below) in accordance
with the terms of the Debenture for any reason after receipt of a Conversion
Notice, then:
(A) The Company shall pay in cash to each Holder a
default payment at the Default Payment Rate on the Outstanding Amount for the
Debentures held by such Holder for each 30-day period (or portion thereof) that
the Company fails or refuses to issue Common Shares in accordance with the
Debenture terms; and
(B) At any time five days after the commencement of
the running of the first 30-day period described above in clause (A) of this
paragraph (iv), (1) at the request of any Holder pursuant to a redemption
notice, the Company promptly (aa) shall purchase from such Holder, at a purchase
price equal to the Premium Conversion Price, the Outstanding Amount of
Debentures equal to such Holder's pro rata share of the "Deficiency", as such
terms are defined below, if the failure to issue Common Shares results from the
lack of a sufficient number thereof and (bb) shall purchase all (or such portion
as such Holder may elect) of such Holder's Debentures at such Premium Conversion
Price if the failure to issue
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Common Shares results from any other cause, and/or (2) at the request of any
Holder, redeem the Warrants for cash in an amount equal to the Warrant
Redemption Price. The "Deficiency" shall be equal to the Outstanding Amount of
Debentures that would not be able to be converted for Common Shares, due to an
insufficient number of Common Shares available, if all the outstanding
Debentures were submitted for conversion at the Conversion Price set forth in
the Debentures as of the date such Deficiency is determined. Any request by a
Holder pursuant to this paragraph (iv)(B) shall be revocable by that Holder at
any time prior to its receipt of the Premium Conversion Price and/or the Warrant
Redemption Price.
(v) Premium Price Conversion for Cash Payment
Defaults.
(A) The Company acknowledges that any failure, refusal or
inability by the Company described in the foregoing paragraphs (i) through (iv)
will cause the Holders to suffer damages in an amount that will be difficult to
ascertain, including without limitation damages resulting from the loss of
liquidity in the Registrable Securities and the additional investment risk in
holding the Registrable Securities. Accordingly, the parties agree that it is
appropriate to include in this Agreement the foregoing provisions for default
payments, discounts and mandatory conversions in order to compensate the Holders
for such damages. The parties acknowledge and agree that the default payments,
discounts and mandatory conversions set forth above represent the parties' good
faith effort to quantify such damages and, as such, agree that the form and
amount of such default payments, discounts and mandatory conversions are
reasonable and will not constitute a penalty.
(B) Each default payment provided for in the foregoing
paragraphs (ii) through (iv) shall be in addition to each other default payment.
All default payments (which payments shall be pro rata on a per diem basis for
any period of less than 30 days) required to be made in connection with the
above provisions shall be paid in cash at any time upon demand, and whether or
not a demand is made, by the tenth (10th) day of each calendar month for each
partial or full 30-da period occurring prior to that date.
(C) In the event that the Company fails or refuses to pay any
default payment or honor any penalty or similar amounts when due, at any
Holder's request and option the Company shall purchase (1) all or a portion of
the Debentures, Common Shares and/or Warrant Shares held by such Holder (with
default payments accruing through the date of such purchase), within five (5)
days of such request, at a purchase price equal to the Premium Conversion Price,
and/or (2) all or a portion of the Warrants, within five (5) days of such
request, held by such Holder at a purchase price equal to the Warrant Redemption
Price, provided that such Holder may revoke either such request at any time
prior to receipt of such payment of such purchase price. Until such time as the
Company purchases such Debentures at the request of such Holder pursuant to the
preceding sentence, at any Holder's request and option the Company shall as to
such Holder pay such amount by adding and including the amount of such default
payment to the Outstanding Principal Amount of a Holder's Debentures.
(vi) Cumulative Remedies. The default payments and mandatory
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conversions provided for above are in addition to and not in lieu or limitation
of any other rights the Holders may have at law, in equity or under the terms of
the Debentures, the Purchase Agreement, the Warrants or this Agreement,
including without limitation the right to specific performance. Each Holder
shall be entitled to specific performance of any and all obligations of the
Company in connection with the registration rights of the Holders hereunder.
(vii) Deferral of Maturity Date. In the event of a failure of
Effective Registration or in the event of any of the circumstances described in
the foregoing clauses (i) through (iv) above, then the Maturity Date shall be
deferred by 1.5 days for each day that any of the circumstances in clauses (i),
(ii), (iii) (without regard to the applicability of the Suspension Grace
Period), or (iv) exist.
(c) Subject to Section 2(b) above, the Company may suspend the use
of any prospectus used in connection with the Registration Statement only in the
event, and for such period of time as, such a suspension is required by the
rules and regulations of the Commission. The Company will use reasonable
commercial efforts to cause such suspension to terminate at the earliest
possible date.
(d) The Company shall file a Registration Statement with respect to
any newly authorized and/or reserved shares, if necessary to fulfill its
obligations under this Agreement within fifteen (15) business days of any
shareholders meeting authorizing same and shall use reasonable commercial
efforts to cause such Registration Statement to become effective within ninety
(90) days of such shareholders meeting. If the Holders become entitled, pursuant
to an event described in clause (iii) of the definition of Registrable
Securities, to receive any securities in respect of Registrable Securities that
were already included in a Registration Statement, subsequent to the date such
Registration Statement is declared effective, and the Company is unable under
the securities laws to add such securities to the then effective Registration
Statement, the Company shall promptly file, in accordance with the procedures
set forth herein, an additional Registration Statement with respect to such
newly Registrable Securities. The Company shall use reasonable commercial
efforts to (i) cause any such additional Registration Statement, when filed, to
become effective under the Securities Act, and (ii) keep such additional
Registration Statement effective during the period described in Section 5 below.
All of the registration rights and remedies under this Agreement shall apply to
the registration of such newly reserved shares and such new Registrable
Securities, including without limitation the provision providing for default
payments contained herein.
Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses of a Holder shall be borne by such Holder.
Registration on Form S-3. The Company shall seek to qualify for
registration on Form S-3 or any comparable or successor form or forms, or in the
event that the Company is ineligible to use such form, such form as the Company
is eligible to use under the Securities Act.
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Registration Period. In the case of the registration effected by
the Company pursuant to this Agreement, the Company will use its best efforts to
keep such registration effective until all the Holders have completed the sales
or distribution described in the Registration Statement relating thereto or, if
earlier, until such Registrable Securities may be sold under Rule 144(k)
(provided that the Company's transfer agent has accepted an instruction from the
Company to such effect).
Indemnification.
(a) The Company Indemnity. The Company will indemnify each
Holder, each of its officers, directors and partners, and each person
controlling each Holder, within the meaning of Section 15 of the Securities Act
and the rules and regulations thereunder with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on 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, or any violation by the Company of the Securities Act or any state
securities law or in either case, any rule or regulation thereunder applicable
to the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each Holder, each of its officers, directors and partners, and each
person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to a Holder to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by such Holder or the
underwriter (if any) therefor and stated to be specifically for use therein. The
indemnity agreement contained in this Section 6(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent will
not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally and not
jointly, if Registrable Securities held by it are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors, officers, partners, and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, each other Holder (if any), and each of their officers, directors
and partners, and each person controlling such other Holder(s) against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statement therein not misleading,
-11-
and will reimburse the Company and such other Holder(s) and their directors,
officers and partners, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein, and provided that the maximum
amount for which such Holder shall be liable under this indemnity shall not
exceed the net proceeds received by such Holder from the sale of the Registrable
Securities. The indemnity agreement contained in this Section 6(b shall not
apply to amounts paid in settlement of any such claims, losses, damages or
liabilities if such settlement is effected without the consent of such Holder
(which consent shall not be unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under
this Article (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is prejudiced by such failure
to provide notice. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement 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 in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
Contribution. If the indemnification provided for in Section 6 herein
is unavailable to the Indemnified Parties in respect of any losses, claims,
damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such 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 losses, claims, damages or
liabilities as between the Company on the one hand and any Holder on the other,
in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of any Holder 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 or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder.
-12-
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Holders or the underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraphs. 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 paragraphs shall be deemed to include, subject to the
limitations set forth above, 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 section, no Holder or
underwriter shall be required to contribute any amount in excess of the amount
by which (i) in the case of any 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 by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person liable for or 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 liable for or
guilty of such fraudulent misrepresentation.
Survival. The indemnity and contribution agreements contained in
Sections 6 and 7 shall remain operative and in full force and effect regardless
of any termination of this Agreement or the Purchase Agreement.
Information by Holders. Each Holder shall furnish to the Company such
information regarding such Holder and the distribution and/or sale proposed by
such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities as so provided
by such Investor shall be included without alteration in the Registration
Statement covering the Registrable Securities and shall not be changed without
written consent of such Holder or its designated representative.
Nasdaq Limit on Stock Issuances. Notwithstanding anything to the
contrary herein, the Company shall not be obligated to issue or register with
the SEC any shares of Common Stock to the extent that such issuance or
registration is prohibited by any rule, regulation or policy of Nasdaq or any
exchange or market upon which the Common Stock may be traded.
Replacement Certificates. The certificate(s) representing the Common
Shares or Warrant Shares held by the Investor (or then Holder) may be exchanged
by the Investor (or such Holder) at any time and from time to time for
certificates with different denominations
-13-
representing an equal aggregate number of Common Shares or Warrant Shares, as
reasonably requested by the Investor (or such Holder) upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange.
Transfer or Assignment. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Investor by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of at least $500,000 aggregate principal amount of Debentures or
Warrants which transfer has been effected in compliance with the Debentures and
Warrants, and all other rights granted to the Investor by the Company hereunder
may be transferred or assigned to any transferee or assignee of any Debentures
or Warrants; provided in each case that the Company must be given written notice
by the such Investor at the time of or within a reasonable time after said
transfer or assignment, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
right are being transferred or assigned; and provided further that the
transferee or assignee of such rights agrees in writing to be bound by the
registration provisions of this Agreement.
Miscellaneous.
(c) Remedies. The Company and the Investor acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity.
(b) Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
to the Company:
American International Petroleum Corp.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
-14-
with copies to:
Snow ▇▇▇▇▇▇ ▇▇▇▇▇▇ P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
to the Warrant Holder:
Halifax Fund, L.P.
c/o Palladin Group, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
(d) Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter. The representations and warranties and
the agreements and covenants of the Company and each Investor contained herein
shall survive the Closing.
(e) Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
(f) Publicity. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of the Investor
without its consent, unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement.
(g) Entire Agreement. This Agreement, together with the
Purchase Agreement, the Debentures and the Warrants and the agreements and
documents
-15-
contemplated hereby and thereby, contains the entire understanding and
agreement of the parties, and may not be modified or terminated except by a
written agreement signed by both parties.
(h) Governing Law; Consent of Jurisdiction. THIS AGREEMENT AND
THE VALIDITY AND PERFORMANCE OF THE TERMS HEREOF SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY IN SUCH STATE
AND, WHERE APPLICABLE, FEDERAL LAW.
(i) Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL
BY JURY.
(j) Titles. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
[Signature page follows]
-16-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
AMERICAN INTERNATIONAL PETROLEUM CORP.:
By:______________________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
INVESTOR:
________________________________________________
HALIFAX FUND, L.P.
By: The Palladin Group, as Attorney-in-Fact
and Investment Advisor
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-17-
EXHIBIT 1
To Registration Rights Agreement
[Company Letterhead]
[Date]
[Name and address of Transfer Agent]
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and direction
to you (1) to issue shares (the "Common Shares") of Common Stock, par value
$0.08 per share (the "Common Stock"), of American International Petroleum Corp.,
a Nevada corporation (the "Company"), to or upon the order of the registered
holder from time to time of 5% Convertible Secured Debentures Due February 18,
2004 of the Company (the "Debentures") upon surrender to you of the Debentures
and (2) to issue shares (the "Warrant Shares") of Common Stock to or upon the
order of the registered holder from time to time of the Warrants of the Company
(the "Warrants") upon surrender to you of a properly completed and duly executed
Exercise Agreement and such Warrants notwithstanding the legend appearing on
such Warrants. Certificates for the Common Shares and Warrant Shares should not
bear any restrictive legend and should not be subject to any stop-transfer
restriction.
Pursuant to applicable securities laws or certain agreements between
the Company and Halifax Fund, L.P. (the "Investor"), the Investor may be
prohibited during certain limited periods of time from selling its shares of
Common Stock issuable upon conversion of the Debentures and exercise of the
Warrants under the Registration Statement; provided, however, that such Investor
may continue to sell such securities pursuant to an exemption from registration
under the Securities Act of 1933, as amended (the "Securities Act"). The Company
may, during such periods, deliver a notice to you advising you to refrain from
transferring any Common Shares or Warrant Shares pursuant to such Registration
Statement, provided that such notice shall not prohibit the transfer of such
shares pursuant to an exemption from registration under the Securities Act
during such periods.
Contemporaneous with the delivery of this letter, the Company is
delivering to you a letter of ___________________________ as to registration of
the Common Shares and the Warrant Shares under the Securities Act of 1933, as
amended.
Should you have any questions concerning this matter, please contact
me.
Very truly yours,
AMERICAN INTERNATIONAL PETROLEUM
CORP.
By: _____________________________
Title:___________________________
Enclosures
cc: Halifax Fund, L.P.
-2-
EXHIBIT 2
To Registration Rights
Agreement
[Date]
[Name and address
of Transfer Agent]
Re: American International Petroleum Corp.
Ladies and Gentlemen:
We are counsel to American International Petroleum Corp., a Nevada
corporation (the "Company"), and we understand that Halifax Fund, L.P. (the
"Holder") has purchased from the Company a 5% Convertible Secured Debenture Due
February 18, 2004 of the Company (the "Debenture") and warrants (the "Warrants")
that are convertible into or exercisable into the Company's Common Stock, par
value $0.08 per share (the "Common Stock"). The Debentures and Warrants were
purchased by the Holder pursuant to a Convertible Debenture Purchase Agreement,
dated as of February 11, 1999, between the Holder and the Company (the
"Agreement"). Pursuant to a Registration Rights Agreement, dated as of February
18, 1999, between the Company and the Holder (the "Registration Rights
Agreement"), the Company agreed with the Holder, among other things, to register
the Registrable Securities (as that term is defined in the Registration Rights
Agreement) under the Securities Act of 1933, as amended (the "Securities Act"),
upon the terms provided in the Registration Rights Agreement. In connection with
the Company's obligations under the Registration Rights Agreement, on
______________, 1999, the Company filed a Registration Statement on Form S-3
(File No. 333-___________) (the "Registration Statement") with the Securities
and Exchange Commission relating to the Registrable Securities, which names the
Holder as a selling stockholder thereunder.
[Other introductory language to be inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
[Other appropriate language to be included.]
Very truly yours,
cc: Halifax Fund, L.P.