EXHIBIT 4.3
FORM OF REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement
dated as of
July 18, 2000
by and between
American International Petroleum Corporation
and
GCA Strategic Investment Fund Limited
TABLE OF CONTENTS
1. Introduction........................................................1
1.2 Definition of Securities...................................1
2. Registration under Securities Act, etc..............................1
2.1 Mandatory Registration.....................................1
(a) Registration of Registrable Securities............1
(b) Registration Statement Form.......................2
(c) Expenses..........................................2
(d) Effective Registration Statement..................2
(e) Plan of Distribution..............................2
2.2 Incidental Registration....................................2
(a) Right to Include Registrable Securities...........2
(b) Priority in Incidental Registrations..............3
2.3 Registration Procedures....................................4
2.4 Underwritten Offerings.....................................7
(a) Incidental Underwritten Offerings.................7
(b) Holdback Agreements...............................7
(c) Participation in Underwritten Offerings...........7
2.5 Preparation; Reasonable Investigation......................8
2.6 Registration Default Fee...................................8
2.7 Indemnification............................................8
(a) Indemnification by the Company....................8
(b) Indemnification by the Holders....................9
(c) Notices of Claims, etc............................9
(d) Other Indemnification............................10
(e) Indemnification Payments.........................10
(f) Contribution.....................................10
3. Definitions........................................................11
4. Rule 144...........................................................13
5. Amendments and Waivers.............................................14
6. Nominees for Beneficial Owners.....................................14
7. Notices............................................................14
8. Assignment.........................................................14
9. Descriptive Headings...............................................15
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10. Governing Law......................................................15
11. Counterparts.......................................................15
12. Entire Agreement...................................................15
13. Severability.......................................................15
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of July 18,
2000, between American International Petroleum Corporation, a Nevada corporation
(the "Company"), LKB Financial, LLC, a Georgia limited liability company
("LKB"), and GCA Strategic Investment Fund Limited (the "Fund").
1. Introduction.
1.1 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, an aggregate number of the Company's Series A Convertible Preferred
Stock, $.01 par value per share (the "Preferred Shares") equal to the
Commitment Amount to the Fund or its successors, assigns or transferees
(collectively, the "Holders") and has the option to sell to the Fund the
Renewed Commitment Amount of Preferred Shares as set forth in the
Securities Purchase Agreement. The Preferred Shares issuable pursuant to
the Securities Purchase Agreement are convertible into an indeterminable
number of shares (the "Series A Conversion Shares") of the Company's common
stock, $.08 per share (the "Common Stock") pursuant to the terms of the
Preferred Shares. In addition, pursuant to the terms of the Securities
Purchase Agreement and the transactions contemplated thereby, the Company
has agreed to issue to the Fund Common Stock Purchase Warrants exercisable
for 200,000 shares of the Company's Common Stock at the Closing of the
Initial Takedown and to issue to LKB Common Stock Purchase Warrants
exercisable for 75,000 shares of the Company's Common Stock at the closing
of the Initial Takedown and each Subsequent Takedown (as such terms are
defined in the Securities Purchase Agreement) (collectively, the "Warrant
Shares"). The number of Series A Conversion Shares and Warrant Shares is
subject to adjustment upon the occurrence of stock splits,
recapitalizations and similar events occurring after the date hereof.
1.2 Definition of Securities. The Series A Conversion Shares and the
Warrant Shares are herein referred to as the "Securities."
2. Registration under Securities Act, etc.
2.1 Mandatory Registration.
(a) Registration of Registrable Securities. The Company shall prepare
and file (i) within thirty (30) days following the date hereof a
registration statement covering the resale of the Registrable Securities in
an amount equal to 22,000,000 shares of Common Stock and (ii) within thirty
(30) days following the exercise of its option to sell the Renewed
Commitment Amount of Preferred Shares covering the resale of the
Registrable Securities in an amount equal to 18,000,000 shares of Common
Stock (each a "Registration Statement"). The Company shall use its best
efforts to cause each Registration Statement to be declared effective by
the Commission on the earlier of (i) 60 days following the date the
Registration Statement is filed, (ii) five (5) business days
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following the receipt of a "No Review" or similar letter from the
Commission or (iii) the fifth business day following the day the Commission
notifies the Company that it has completed its review of the Registration
Statement and that such Registration Statement is eligible to be declared
effective (the "Required Effectiveness Date"). Nothing contained herein
shall be deemed to limit the number of Registrable Securities to be
registered by the Company hereunder. As a result, should the Registration
Statement not relate to the maximum number of Registrable Securities
acquired by (or potentially acquirable by) the holders thereof upon
conversion of the Preferred Shares, or exercise of the Common Stock
Purchase Warrants described in Section 1 above, the Company shall be
required to promptly file a separate registration statement (utilizing Rule
462 promulgated under the Exchange Act, where applicable) relating to such
Registrable Securities which then remain unregistered. The provisions of
this Agreement shall relate to any such separate registration statement as
if it were an amendment to the Registration Statement.
(b) 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 methods of disposition specified
by the Fund; provided, however, such intended method of disposition shall
not include an underwritten offering of the Registrable Securities.
(c) Expenses. The Company will pay all Registration Expenses in
connection with any registration required by this Section 2.1.
(d) 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 twenty (20) days.
(e) Plan of Distribution. The Company hereby agrees that the
Registration Statement shall include a plan of distribution section
reasonably acceptable to the Fund.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If at any time after the
date hereof but before the third anniversary of the date hereof, the
Company proposes to register any of
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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, use its
commercially reasonable best efforts to 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 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.
(b) 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 (ii) 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.
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2.3 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:
(i) prepare and file with the Commission the Registration
Statement, or amendments thereto, 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 commercially reasonable 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 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;
(ii) 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");
(iii) furnish to each Holder 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 Holder and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of
the Registrable Securities owned by such Holder;
(iv) use its commercially reasonable best 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 Holder 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 Holder to consummate
the disposition in such jurisdictions of the securities owned by such
Holder, 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;
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(v) use its commercially reasonable 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 Holder or Holders
thereof to consummate the disposition of such Registrable Securities;
(vi) furnish to each Holder of Registrable Securities a signed
counterpart, addressed to such Holder, and the underwriters, if any,
of:
(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
Holder) 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 Holder (or the
underwriters, if any) may reasonably request;
(vii) notify the Holders' Representative and its counsel promptly
and confirm such advice in writing promptly after the Company has
knowledge thereof:
(A) 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;
(B) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus or
for additional information;
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(C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings by any Person for that purpose; and
(D) 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;
(viii) notify each Holder 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 Holder
promptly prepare and furnish to such Holder 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;
(ix) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the
earliest possible moment;
(x) otherwise use its commercially reasonable 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;
(xi) enter into such agreements and take such other actions as
the Holders' Representative shall reasonably request in writing (at
the expense of the requesting or benefiting Holders) in order to
expedite or facilitate the disposition of such Registrable Securities;
and
(xii) use its commercially reasonable 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 Holder of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such Holder and the distribution of such securities as the Company may
from time to time reasonably request in writing.
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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 Statement) to which the Holders'
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.
Each Holder 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, such Holder will forthwith discontinue such Holder's disposition of
Registrable Securities pursuant to the Registration Statement relating to such
Registrable Securities until such Holder'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
such Holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
2.4 Underwritten Offerings.
(a) 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 commercially reasonable best 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.
(b) Holdback Agreements. Subject to such other reasonable requirements as
may be imposed by the underwriter as a condition of inclusion of a Holder's
Registrable Securities in the registration statement, each Holder 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.
(c) 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
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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 (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.
2.5 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.
2.6 Registration Default Fee. If the Registration Statement contemplated in
Section 2.1 is (x) not filed by the Filing Date or 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
Default Fee specified in Section 10.4 of the Securities Purchase Agreement.
2.7 Indemnification.
(a) 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
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contained therein, or any 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.
(b) Indemnification by the Holders. The Company may require, as a condition
to including any Registrable Securities in any registration statement filed
pursuant to this Agreement, that the Company shall have received an undertaking
satisfactory to it from the prospective Holder 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 Holder 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 Holder.
(c) 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
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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.
(d) 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 Holder of Registrable Securities (but
only if and to the extent required pursuant to the terms of Section 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.
(e) 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.
(f) 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 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
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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 by reason of such untrue or
alleged 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:
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"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.
"Preferred Shares": As defined in Section 1, such term to include any
securities issued in substitution of or in addition to such Preferred Shares.
"Exchange Act": The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder.
"Holders' Representative": Global Capital Advisors Ltd. or such Person
designated by Global Capital Advisors Ltd. as of the time of disposition of the
last of the Preferred Shares held by the Fund (or subsequent Holders'
Representative).
"OTC Bulletin Board": As defined in Section 1.
"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.
"Registration Expenses": All expenses incident to the Company's performance
of or compliance with this Agreement, including, without limitation, all
registration, filing and NASD
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fees, all stock exchange or other NASD or stock exchange 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
$20,000) 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 Holders 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.
"Warrant Shares": As defined in Section 1.
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) of 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 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.
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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 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
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including, without limitation, appointment of the Holders' 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 Holders' 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.
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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
COMPANY
By:
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Tel.: ▇▇▇-▇▇▇-▇▇▇▇
GCA STRATEGIC INVESTMENT FUND LIMITED
By:
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
Address: c/o Prime Management Limited
Mechanics ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇, ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Tel.: ▇▇▇-▇▇▇-▇▇▇▇
LKB FINANCIAL, LLC
By:
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: _________________________________
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Tel.: ▇▇▇-▇▇▇-▇▇▇▇
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