Exhibit 4.6
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of April 21, 1998,
among AMERICAN INTERNATIONAL PETROLEUM CORPORATION, a Nevada corporation (the
"Company"), and the other undersigned parties hereto (collectively, the
"Funds").
1. Introduction.
(a) Securities Purchase Agreement. The Company and the Funds
have today executed that certain Securities Purchase Agreement (the "Securities
Purchase Agreement"), pursuant to which the Company has agreed, among other
things, to issue an aggregate of $12,000,000 (U.S.) principal amount of 14%
Convertible Notes of the Company (the "Notes") to the Funds or their successors,
assigns or transferees (collectively, the "Holders"). The Notes are convertible
into an indeterminable number of shares (the "Note Conversion Shares") of the
Company's common stock, par value $.08 per share (the "Common Stock"), pursuant
to the terms of the Notes. In addition, pursuant to the terms of the Securities
Purchase Agreement and the transactions contemplated thereby, the Company has
issued to the Funds Common Stock Purchase Warrants exercisable for an aggregate
of 1,400,000 shares of Common Stock (the "Warrant Shares"). The number of Note
Conversion Shares and Warrant Shares is subject to adjustment upon the
occurrence of stock splits, recapitalizations and similar events occurring after
the date hereof.
(b) Equity Financing Agreement. The Company and the Funds have
today executed that certain Equity Financing Agreement (the "Equity Agreement"),
pursuant to which the Company has agreed, among other things, to issue shares of
Common Stock for an aggregate consideration of up to $40,000,000 (the "Equity
Shares") to the Funds. In addition, pursuant to the terms of the Equity
Agreement and the transactions contemplated thereby, the Company has issued to
the Funds (x) Common Stock Purchase Warrants exercisable for an aggregate of
1,595,978 shares of Common Stock (the "Initial Warrant Shares") and (y) Common
Stock Purchase Warrants exercisable, subject to the vesting schedule therein,
for a maximum aggregate of 2,000,000 shares of Common Stock (the "Additional
Warrant Shares"). The number of Equity Shares, Initial Warrant Shares and
Additional Warrant Shares is subject to adjustment upon the occurrence of stock
splits, recapitalizations and similar events occurring after the date hereof.
(c) October Financing. The Company and certain of the Funds
entered into that certain Securities Purchase Agreement dated October 9, 1997,
pursuant to which, among other items, the Company issued to the Funds listed
therein Common Stock Purchase Warrants exercisable for an aggregate of 1,500,000
shares of Common Stock (the "October Warrant Shares"). The number
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of October Warrant Shares is subject to adjustment upon the occurrence of stock
splits, recapitalizations and similar events occurring after the date hereof.
(d) Definition of Securities. The Note Conversion Shares,
Warrant Shares, Equity Shares, Initial Warrant Shares, Additional Warrant Shares
and October Warrant Shares are collectively herein referred to as the
"Securities."
(e) National Market Representation. The Company represents and
warrants that the Company's Common Stock is currently eligible for trading on
the Nasdaq Stock Market's National Market ("National Market") under the symbol
"AIPN". Certain capitalized terms used in this Agreement are defined in Section
3 hereof; references to sections shall be to sections of this Agreement.
2. Registration under Securities Act, etc.
2.1 Mandatory Registration.
(a) Registration of Registrable Securities. Within twenty one
(21) days of the date hereof, the Company shall prepare and file a registration
statement to effect the registration under the Securities Act of all, but not
less than all, of the Registrable Securities which relate (or, because of the
indeterminable number thereof, which could reasonably be deemed to relate) to
the Securities; all to the extent requisite to permit the public disposition of
such Registrable Securities so to be registered. The Company shall use its best
efforts to cause the Registration Statement which is the subject of this Section
2.1(a) (the "Registration Statement") to be declared effective by the Commission
upon the earlier to occur of (i) 111 days after the date hereof, (ii) 90 days
following the filing of the Registration Statement contemplated by this Section
2.1, or (iii) ten (10) business days after receipt of a "no review" or similar
letter from the Commission (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 Notes,
issuance of the Equity 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 such
separate registration statement as if it were an amendment to the Registration
Statement.
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(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
Funds; 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 has filed a registration statement with
respect thereto solely by reason of the refusal to proceed of any holder of
Registrable Securities (other than a refusal to proceed based upon the advice of
counsel in the form of a letter signed by such counsel and provided to the
Company relating to a disclosure matter unrelated to such holder) shall be
deemed to have been effected by the Company unless the holders of the
Registrable Securities shall have elected to pay all Registration Expenses in
connection with such registration, (ii) if, after it has become effective, such
registration becomes subject to any stop order, injunction or other order or
extraordinary requirement of the Commission or other governmental agency or
court for any reason or (iii) if, after it has become effective, such
registration ceases to be effective for more than an aggregate of ninety (90)
days.
(e) Plan of Distribution. The Company hereby agrees that the
Registration Statement shall include a plan of distribution section reasonably
acceptable to the Funds and substantially in the form annexed hereto; provided,
however, such plan of distribution section shall be modified by the Company so
as to not provide for the disposition of the Registrable Securities on the basis
of an underwritten offering.
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 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
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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 and the intended method of disposition thereof), the Company
will, subject to the terms of this Agreement, effect the registration under the
Securities Act of the Registrable Securities, to the extent requisite to permit
the disposition (in accordance with the intended methods thereof as aforesaid)
of such Registrable Securities so to be registered, by inclusion of such
Registrable Securities in the registration statement which covers the securities
which the Company proposes to register, provided that if, at any time after
giving 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 its 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.
2.3 Registration Procedures.
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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 to effect such registration (including such audited financial
statements as may be required by the Securities Act or the rules and regulations
promulgated thereunder) and thereafter use its best efforts to cause such
registration statement to be declared effective by the Commission, as soon as
practicable, but in any event no later than the Required Effectiveness Date
(with respect to a registration pursuant to Section 2.1); provided, however,
that before filing such registration 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
(including, without limitation, any amendment to the selling stockholder table
to reflect any transfers among the Funds of the Securities or Registrable
Securities as a result of the provisions contained in Section 2.1(d) of the
Securities Purchase Agreement or Section 2.5(b)(iii) of the Equity Agreement),
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 seller of Registrable Securities covered
by such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by such seller;
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(iv) use its reasonable efforts to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities laws or blue sky laws as any seller
thereof shall reasonably request, to keep such registrations or qualifications
in effect for so long as such registration statement remains in effect, and take
any other action which may be reasonably necessary to enable such seller to
consummate the disposition in such jurisdictions of the securities owned by such
seller, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision (iv) be
obligated to be so qualified or to consent to general service of process in any
such jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such Registrable
Securities;
(vi) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller, 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 seller) including that the prospectus and any
prospectus supplement forming a part of the Registration Statement does
not contain an untrue statement of a material fact or omits a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and
(B) a "comfort" letter (or, in the case of any such
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 statements 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,
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such other financial matters, and, in the case of the legal opinion, such
other legal matters, as such seller (or the underwriters, if any) may
reasonably request;
(vii) notify the Sellers' Representative and its counsel
promptly and confirm such advice in writing promptly after the Company has
knowledge thereof:
(v) when the Registration Statement, the prospectus or
any prospectus supplement related thereto or post-effective amendment to
the Registration Statement has been filed, and, with respect to the
Registration Statement or any post-effective amendment thereto, when the
same has become effective;
(w) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus or for
additional information;
(x) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings by any Person for that purpose; and
(y) of the receipt by the Company of any notification
with respect to the suspension of the qualification of any Registrable
Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation or threat of any proceeding for such
purpose;
(viii) notify each seller of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of any such seller promptly
prepare and furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(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 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
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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 Sellers' Representative shall reasonably request in writing (at the expense
of the requesting or benefiting sellers) in order to expedite or facilitate the
disposition of such Registrable Securities; and
(xii) use its best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange on which any
of the Registrable Securities are then listed.
The Company may require each seller of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing.
The Company will not file any registration statement pursuant to Section
2.1, or amendment thereto or any prospectus or any supplement thereto (including
such documents incorporated by reference and proposed to be filed after the
initial filing of the Registration Statement) to which the Sellers'
Representative shall reasonably object, provided that the Company may file such
document 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 Fund agrees that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in subdivision (viii) of this
Section 2.3, such Fund will forthwith discontinue such Fund's disposition of
Registrable Securities pursuant to the Registration Statement relating to such
Registrable Securities until such Fund's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (viii) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such Fund's possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
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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 reasonable efforts to arrange for such
underwriters to include all the Registrable Securities to be offered and sold by
such holder among the securities to be distributed by such underwriters.
(b) Holdback Agreements. Subject to such other reasonable
requirements as may be imposed by the underwriter as a condition of inclusion of
a Fund's Registrable Securities in the registration statement, each Fund agrees
by acquisition of Registrable Securities, if so required by the managing
underwriter, not to sell, make any short sale of, loan, grant any option for the
purchase of, effect any public sale or distribution of or otherwise dispose of,
except as part of such underwritten registration, any equity securities of the
Company, during such reasonable period of time requested by the underwriter;
provided however, such period shall not exceed the 120 day period commencing 30
days prior to the commencement of such underwritten offering and ending 90 days
following the completion of such underwritten offering.
(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 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 any 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.
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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 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 Funds the Default Fee specified in Section 10.4 of
the Securities Purchase Agreement. In addition, if the Registration Statement
contemplated in Section 2.1 is not declared effective by the Required
Effectiveness Date, then, as specified in Section 2.5 of the Equity Agreement,
the Commitment Period (as defined therein) shall expire and twenty five percent
(25%) of the Initial Warrant Shares shall be fully vested. In such event, the
remainder of such Initial Warrant Shares, and all Additional Warrant Shares,
shall not vest and shall be cancelled.
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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 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.
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(b) Indemnification by the Sellers. The Company may require,
as a condition to including any Registrable Securities in any registration
statement filed pursuant to this Agreement, that the Company shall have received
an undertaking satisfactory to it from the prospective seller of such
Registrable Securities, to indemnify and hold harmless (in the same manner and
to the same extent as set forth in subdivision (a) of this Section 2.7) the
Company, each director of the Company, each officer of the Company and each
other Person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such seller specifically stating that it is for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by such seller.
(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 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 xxx, 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.
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(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 seller of Registrable
Securities (but only if and to the extent required pursuant to the terms of
2.7(b)) with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
(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 subdivisions 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 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 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.
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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:
"Additional Warrant Shares": As defined in Section 1.
"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.
"Equity Shares": As defined in Section 1.
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REGISTRATION RIGHTS AGREEMENT - Page 14
"Exchange Act": The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission thereunder.
"Initial Warrant Shares": As defined in Section 1.
"National Market": As defined in Section 1.
"Notes": As defined in Section 1, such term to include any
securities issued in substitution of or in addition to such Notes.
"October Warrant Shares": 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 fees, all stock exchange and National Market
listing fees, all fees and expenses of complying with securities or blue sky
laws, all word processing, duplicating and printing expenses, messenger and
delivery expenses, the fees and disbursements of counsel for the Company and of
its independent public accountants, including the expenses of any special audits
or "cold comfort" letters required by or incident to such performance and
compliance, the reasonable fees and disbursements of not more than one law firm
(not to exceed $25,000) retained by the holder or holders of more than 50% of
the Registrable Securities, premiums and other costs of policies of insurance of
the Company against liabilities arising out of the public offering of the
Registrable Securities being registered and
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REGISTRATION RIGHTS AGREEMENT - Page 15
any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities, but excluding underwriting discounts and commissions and
transfer taxes, if any, provided that, in any case where Registration Expenses
are not to be borne by the Company, such expenses shall not include salaries of
Company personnel or general overhead expenses of the Company, auditing fees,
premiums or other expenses relating to liability insurance required by
underwriters of the Company or other expenses for the preparation of financial
statements or other data normally prepared by the Company in the ordinary course
of its business or which the Company would have incurred in any event.
"Registration Maintenance Period": As defined in Section 2.3.
"Required Effectiveness Date": As defined in Section 2.1.
"Securities Act": The Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"Securities Purchase Agreement": As defined in Section 1.
"Sellers' Representative": Infinity Investors Limited or such Person
designated by Infinity Investors Limited (or subsequent Sellers' Representative)
at the time of disposition of the last of the Notes held by one or more of the
Funds (or subsequent Sellers' Representative).
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.
5. Amendments and Waivers.
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REGISTRATION RIGHTS AGREEMENT - Page 16
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 is 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 or
percentage of shares of Registrable Securities held by any 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 of 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.
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REGISTRATION RIGHTS AGREEMENT - Page 17
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 including, without limitation, appointment of
the Sellers' Representative to act on behalf of such Holder pursuant to the
terms hereof which such actions shall be made in the good faith discretion of
the Sellers' Representative and be binding on all persons for all purposes.
9. Descriptive Headings.
The descriptive headings of the several sections and
paragraphs of this Agreement are inserted for reference only and shall not limit
or otherwise affect the meaning hereof.
10. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE
OF NEW YORK WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS.
11. Counterparts.
This Agreement may be executed by facsimile and may be signed
simultaneously in any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument.
12. Entire Agreement.
This Agreement embodies the entire agreement and understanding
between the Company and each other party hereto relating to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
13. Severability.
If any provision of this Agreement, or the application of such
provisions to any Person or circumstance, shall be held invalid, the remainder
of this Agreement, or the application
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REGISTRATION RIGHTS AGREEMENT - Page 18
of such provision to Persons or circumstances other than those to which it is
held invalid, shall not be affected thereby.
[Signature Page Follows]
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REGISTRATION RIGHTS AGREEMENT - Page 19
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
AMERICAN INTERNATIONAL
PETROLEUM CORPORATION
By: s/ Xxxxx X. Xxxxxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxxxxx
-----------------------------------
Title: Vice President and
Chief Financial Officer
-----------------------------------
Address: 000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
-------------------------------
Fax: (000)000-0000
Attn: Xxxxxx Xxxxx
INFINITY INVESTORS LIMITED
By: s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxx
-----------------------------------
Title: Director
-----------------------------------
Address: 00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx XXX 0XX
Telephone: 000-00-000-000-0000
Attn: X. X. Xxxxxxxx
With copy to: HW Partners, L.P.
0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn.: Xxxxxx Xxxxxxxxx, Esq.
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REGISTRATION RIGHTS AGREEMENT - Page 20
INFINITY EMERGING
OPPORTUNITIES LIMITED
By: s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxx
-----------------------------------
Title: Director
-----------------------------------
Address: 00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx X0X 0XX
Telephone: 000-00-000-000-0000
Attn: X. X. Xxxxxxxx
With copy to: HW Partners, L.P.
0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn.: Xxxxxx Xxxxxxxxx, Esq.
GLACIER CAPITAL LIMITED
By: s/ Xxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: President
-----------------------------------
Address: 00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx X0X 0XX
Telephone: 000-00-000-000-0000
Attn: X. X. Xxxxxxxx
With copy to: HW Partners, L.P.
0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn.: Xxxxxx Xxxxxxxxx, Esq.
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REGISTRATION RIGHTS AGREEMENT - Page 21
SUMMIT CAPITAL LIMITED
By: s/ Xxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: President
-----------------------------------
Address: 00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx X0X 0XX
Telephone: 000-00-000-000-0000
Attn: X. X. Xxxxxxxx
With copy to: HW Partners, L.P.
0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn.: Xxxxxx Xxxxxxxxx, Esq.
--------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 22
