REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (the "Agreement") is made by and between the
undersigned (the "Shareholder") and The American Energy Group, Ltd., a Nevada
corporation (the "Company").
W
I T N E
S S E T H:
WHEREAS,
the Shareholder has purchased __________ shares (the "Shares") of common stock
of the Company, par value $.001 per share (the “Common Stock”) and ___________
warrants to purchase Common Stock (the “Warrants”) in the Offering of Shares of
Common Stock and Warrants (the “Offering”) made by the Company as described in
the Confidential Private Offering Memorandum dated May 3, 2006 (the
“Memorandum”) as evidenced by that certain Securities Purchase Agreement
executed and submitted to the Company by Shareholder dated May 3, 2006 (the
“Purchase Agreement”);
NOW
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the parties agree as follows:
The
Company covenants and agrees as follows:
1.
Definitions.
For
purposes of this Agreement:
(a)
The
term
"Holder" means any person owning or having the right to acquire Shares or the
Registrable Securities, including Shareholder or any transferees of
Shareholder.
(b) The
term
“1933 Act” means the Securities Act of 1933, as amended.
(c) The
term
“1934 Act” means the Securities Exchange Act of 1934, as amended.
(d) The
terms
“register,” “registered” and “registration” refer to a registration effected by
preparing and filing a registration statement or similar document in compliance
with the 1933 Act, and such registration statement or document becoming
effective.
(e) The
term
"Registrable Securities" means (i) the Shares, (ii) the Warrants(iii) the shares
of Common Stock underlying the Warrants, all issued by the Company pursuant
to
the Offering, or in exchange for or in replacement of the Shares, but excluding
in all cases, however, any Registrable Securities sold by a person in a
transaction in which his rights are not assigned;
provided,
however,
that
any such securities shall cease to be Registrable Securities when one or more
registration statements with respect to the sale of such securities shall have
become effective under the 1933 Act and all such securities shall have been
disposed of in accordance with the plan of distribution set forth
therein.
(f) The
number of shares of "Registrable Securities Then Outstanding" shall be equal
to
the sum of the number of shares of Common Stock outstanding and the number
of
shares of Common Stock underlying the outstanding Warrants which are Registrable
Securities.
(g) The
term
"Registration Expenses" means all registration, qualification, listing and
filing fees, printing expenses, escrow fees and blue sky fees, fees and
disbursements of counsel for the Company and of the Company's independent
certified public accountants, in each case incident to or required by the
registration under this Agreement, and any other fees and expenses of the
registration under this Agreement which are not Selling Expenses.
(h) The
term
"Selling Expenses" means all underwriting discounts, selling commissions and
stock transfer taxes applicable to the securities registered by the Holders
and
all fees and disbursements of counsel for any Holder.
(i) All
other
capitalized terms used in this Section that are not defined herein shall have
the meaning otherwise given in the Memorandum.
2. Registration
Obligation. Within
sixty (60) days after the Closing Date of the Offering (as defined in the
Memorandum), the Company agrees to file a registration statement (the
“Registration Statement”) pursuant to the 1933 Act to register the resale of the
Registrable Securities with the Securities and Exchange Commission (the
“Commission”). The Company shall promptly give written notice to all holders of
record of the Shares and the Warrants which were purchased or issued in
connection with the Offering. The Company will use reasonable efforts to cause
the Registration Statement to become effective. The Company shall use its
commercially reasonable efforts to cause the Registration Statement to be
declared effective as promptly as possible after the filing thereof, but not
later than one hundred twenty (120) days after the Closing Date. Should the
Company fail to file the registration statement within sixty (60) days after
the
Closing Date, then upon such occurrence, and on every monthly anniversary
thereof until the filing of the Registration Statement by the Company, the
Company shall pay to the Holder an amount in cash as liquidated damages and
not
as a penalty, equal to 1.0% of the number of Shares then owned by Holder
acquired in the Offering. Any payments made pursuant to the terms hereof shall
apply on a prorated basis for any portion of a month prior to the filing of
the
Registration Statement by the Company. In the event the Company fails to make
the payments pursuant to the terms hereof in a timely manner, such payments
shall bear interest at a rate of 1% per month (prorated for partial months)
until paid in full. The Company will give each Holder written notice of such
registration and include in such registration (and any related qualification
under blue sky or other state securities laws) all of the Registrable
Securities. The Company shall not be obligated to effect more than one
registration on behalf of the Shareholders and purchasers in the Offering.
3. Expenses
of Registration.
All
Registration Expenses incurred in connection with a registration pursuant to
this Agreement shall be borne by the Company. All Selling Expenses relating
to
the Registrable Securities registered on behalf of the Holders shall be borne
by
the Holders of such Registrable Securities pro rata
based
upon the total number of Registrable Securities included in the registration
or,
if such Selling Expenses are specifically allocable to Registrable Securities
held by specific Holders, by such Holders to the extent related to the sale
of
such Registrable Securities.
4. Registration
Procedures.
(a) In
connection with the registration of Registrable Securities required pursuant
to
this Agreement, the Company shall as expeditiously as is
reasonable:
(i)
prepare
and file with the SEC on any appropriate form a registration statement with
respect to such Registrable Securities and use its reasonable best efforts
to
cause such registration statement to become and remain effective for the period
described in paragraph (ii) below;
(ii) prepare
and file with the SEC such amendments (including post-effective 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 1933 Act with respect to the disposition
of
all Registrable Securities and other securities covered by such registration
statement the earliest of (w) when the Registrable Securities have been sold
pursuant to Rule 144 promulgated under the 1933 Act (or any successor provision)
("Rule 144") or such registration statement, (x) when the Registrable Securities
have been otherwise transferred and a new certificate for the Registrable
Securities not bearing a legend restricting further transfer shall have been
delivered by the Company, (y) when all of the Holder’s and its Affiliates’
remaining Registrable Securities can be sold in a single transaction in
compliance with Rule 144, or (z) when the Registrable Securities have ceased
to
be outstanding;
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(iii) furnish
to each seller of such Registrable Securities such number of conformed copies
of
such registration statement and of each such amendment and supplement thereto
(at least one of which shall include all exhibits), such number of copies of
the
prospectus included in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity with the requirements
of
the 1933 Act, such documents incorporated by reference in such registration
statement or prospectus, and such other documents, as such seller may reasonably
request in order to facilitate the sale or disposition of such Registrable
Securities;
(iv) use
its
reasonable best efforts to register or qualify all Registrable Securities and
other securities covered by such registration statement under such other
securities or “blue sky” laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things as may be
reasonably necessary to consummate the disposition in such jurisdictions of
the
Registrable Securities covered by such registration statement, 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 is not so
qualified, or to subject itself to taxation in respect of doing business in
any
such jurisdiction, or to consent to general service of process in any such
jurisdiction;
(v) immediately
notify each seller of Registrable Securities, at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a
material fact or omits to state 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 or if it is necessary, in the opinion of counsel
to
the Company, to amend or supplement such prospectus to comply with law, and
at
the request of any such seller prepare and furnish to any 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 Registrable 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 and shall otherwise comply in
all
material respects with law and so that such prospectus, as amended or
supplemented, will comply with law;
(vi) otherwise
use its reasonable best efforts to comply with all applicable rules and
regulations of the SEC, and make available to its security holders, as soon
as
reasonably practicable, an earnings statement covering the period of at least
twelve (12) months, beginning with the first month of the first fiscal quarter
after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the 1933
Act;
(vii) use
its
reasonable best efforts to list such securities on each securities exchange
or
over-the-counter market on which shares of Common Stock are then listed, if
such
securities are not already so listed and if such listing is then permitted
under
the rules of such exchange and, if shares of Common Stock are not then listed
on
a securities exchange or over- the-counter market, to use its reasonable best
efforts to cause such securities to be listed on such securities exchange or
over-the-counter market as such seller shall reasonably request;
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(viii) provide
a
transfer agent and registrar for such Registrable Securities not later than
the
effective date of such registration statement; and
(b) The
Holder or Holders of Registrable Securities included in any registration shall
furnish to the Company such information regarding such Holder or Holders, the
Registrable Securities held by them and the distribution proposed by such Holder
or Holders as the Company may from time to time reasonably request and as shall
be reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement.
(c)
Notwithstanding the registration rights granted to the Shareholder under this
Agreement, in the event the Company files a registration statement for an
underwritten public offering of Common Stock (a "Company Offering") within
three
years of the termination of the Offering and while the Registration Statement
covering the Registrable Securities is effective, then upon the request of
the
Company's underwriter in such Company Offering, the Shareholder agrees to enter
into an agreement pursuant to which the Shareholder will be prohibited from
transferring the Registrable Securities for such period of time, not to exceed
60 days after completion of the Company Offering, as the Company's underwriter
may request. The Company may enter stop transfer orders with its transfer agent
in order to effect this prohibition.
5. Obligations
of Shareholder.
(a) The
Shareholder agrees that it will offer and sell Shares in compliance with all
applicable state and federal securities laws. Specifically, without limitation,
the Shareholder agrees as follows:
(i) The
Shareholder agrees not to use any prospectus (as that term is defined under
the
0000 Xxx) for the purpose of offering or selling the Shares to the public except
for the Prospectus, as the same may be supplemented and amended from time to
time.
(ii) Neither
the Shareholder nor any affiliate of the Shareholder shall engage in any
practice which would violate Rule 10b-6 promulgated under the 1934 Act
("Exchange Act").
(iii) Neither
the Shareholder nor any Affiliate of the Shareholder shall solicit purchases
of
Common Stock to facilitate the distribution of Shares in violation of Rule
10b-2
promulgated under the 1934 Act.
(iv) Neither
the Shareholder nor any Affiliate of the Shareholder shall effect any
stabilizing transactions to facilitate the offer and sale of Shares to the
public in violation of Rule 10b-7 promulgated under the 0000 Xxx.
(b) The
Shareholder agrees to promptly notify the Company as and when any Shares are
sold and when the Shareholder elects to terminate all further offers and sales
of Shares pursuant to the Registration Statement. The Shareholder acknowledges
that any Shares which have not been sold within two years after the termination
of the Offering or any earlier termination of the distribution of the Shares
will be removed from registration by means of a post-effective amendment to
the
Registration Statement.
(c) It
shall
be a condition precedent to the obligations of the Company to take any action
with respect to registering the Shares that the Shareholder furnish the Company
in writing such information regarding the Shareholder, the Shares and other
securities of the Company held by the Shareholder, and the distribution of
such
Shares as the Company may from time to time reasonably request in writing.
If
the Shareholder refuses to provide the Company with any of such information
on
the grounds that it is not necessary to include such information in the
Registration Statement, the Company may exclude the Shareholder's Shares from
the Registration Statement if the Company provides the Shareholder with an
opinion of counsel to the effect that such information must be included in
the
Registration Statement and the Shareholder thereafter continues to withhold
such
information.
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6. Restrictions
on Transfer.
The
Shareholder agrees that it will not sell, exchange, pledge or otherwise transfer
any Shares except in transactions (i) made pursuant to the Registration
Statement, or (ii) which are exempt from all registration requirements of the
1933 Act (or conducted pursuant to Rule 144 thereunder) and all applicable
state
securities laws, and for which the Company is provided with an opinion of
counsel to the Shareholder and other evidence as may be reasonably satisfactory
to the Company to the effect that such transfer will not be in violation of
the
1933 Act and all applicable state securities laws.
7. Indemnification.
(a) The
Company will indemnify each Holder or transferee with respect to which
registration has been effected pursuant to this Agreement, each of its officers
and directors, if any, and each underwriter for such Holder or transferee,
if
any, and each person who controls the Holder or any such underwriter within
the
meaning of Section 15 of the 1933 Act, against any and all losses, claims,
damages, liabilities or expenses (or actions in respect thereof), including
any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement or
prospectus, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
in
which they were made, not misleading, or any violation by the Company of the
1933 Act or any rule or regulation promulgated under the 1933 Act applicable
to
the Company in connection with any such registration, and the Company will
reimburse each such Holder, each such underwriter and each person who controls
any such underwriter, for any legal and other expenses reasonably incurred,
as
such expenses are incurred, in connection with investigating, preparing or
defending any such claims, loss, damage, liability or action; provided,
however,
that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made
in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder or underwriter and stated
to be specifically for use therein.
(b) Each
Holder or transferee will, if Registrable Securities held by such Holder or
transferee are included in the securities as to which such registration is
being
effected, indemnify the Company, each of its directors and officers, each
underwriter for such Holder, if any, of the Company’s securities covered by such
a registration statement, each Person who controls the Company or such
underwriter within the meaning of Section 15 of the 1933 Act and each other
such
Holder against any and all losses, claims, damages, liabilities and expenses
(or
actions in respect thereof), arising out of or based on any untrue statement
(or
alleged untrue statement) of a material fact contained in any such registration
statement or prospectus, or any omission (or alleged omission) to state therein
a material fact required to be stated therein or necessary to make the statement
therein, in the light of the circumstances under which they were made, not
misleading, and will reimburse the Company, such Holders, underwriters or
control persons for any legal or any other expenses reasonably incurred, as
such
expenses are incurred, in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement or
prospectus in reliance upon and in conformity with written information furnished
to the Company by such Holder. Notwithstanding the foregoing, the liability
of
each Holder under this Section shall be limited to an amount equal to the
aggregate proceeds received by such Holder from the sale of Registrable
Securities hereunder, unless such liability arises out of or is based on willful
conduct by such Holder.
5
(c) Each
party entitled to indemnification under this Section 7 (the “Indemnified Party”)
shall give notice to the party required to provide indemnification (the
“Indemnifying Party”) promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claims or any litigation
resulting therefrom; provided,
however,
that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party (which approval shall
not be unreasonably withheld), and the Indemnified Party may participate in
such
defense at such Indemnified Party’s expense; provided,
however,
that
the failure of any Indemnified Party to give notice as provided herein shall
not
relieve the Indemnifying Party of its obligations under this Agreement unless
the failure to give such notice is materially prejudicial to an Indemnifying
Party’s ability to defend such action. Notwithstanding the foregoing, the
Indemnifying Party shall not be entitled to assume the defense for matters
as to
which there is, in the opinion of counsel to the Indemnifying Party, a conflict
of interest or separate and different defenses. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of
each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect of such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required
in
connection with the defense of such claim and the litigation resulting
therefrom.
| 8. |
Contribution.
|
(a)
If
the indemnification provided for herein is unavailable to the Indemnified
Parties in respect of any losses, claims, damages, liabilities or expenses
(or
actions in respect thereof) referred to therein, then each such Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to
the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) in
such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and the Indemnified Party on the other in connection
with
the statement or omission which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue statement (or alleged
untrue statement), of a material fact or the omission (or alleged omission)
to
state a material fact relates to information supplied by the Indemnifying Party
or the Indemnified Party and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and each Holder agree that it would
not
be just and equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation or by any other method of allocation which does not
take
account of the equitable considerations referred to above. The amount paid
or
payable by an Indemnified Party as a result of the losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to above in
this Section 8 shall be deemed to include any legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim.
(b)
Notwithstanding anything to the contrary contained herein, the obligation of
each Holder to contribute pursuant to this Section 8 is several and not joint
and no selling Holder shall be required to contribute any amount in excess
of
the amount by which the total price at which the Registrable Securities of
such
selling Holder were offered to the public exceeds the amount of any damages
which such selling Holder has otherwise been required to pay by reason of such
untrue statement (or alleged untrue statement) or omission (or alleged
omission).
6
(c)
No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 0000 Xxx) shall be entitled to contribution from any person who
was
not guilty of such fraudulent misrepresentation.
9. Delay
of Registration.
No
Holder
shall have any right to obtain or seek an injunction restraining or otherwise
delaying any registration as the result of any controversy that might arise
with
respect to the interpretation or implementation of the terms of this
Agreement.
10. Notices.
All
notices required or permitted herein must be in writing and shall be deemed
to
have been duly given the first business day following the date of service if
served personally, on the first business day following the date of actual
receipt if delivered by telecopier, telex or other similar communication to
the
party or parties to whom notice is to be given, or on the third business day
after mailing if mailed to the party or parties to whom notice is to be given
by
registered or certified mail, return receipt requested, postage prepaid, to
the
Shareholder at the address set forth in the Purchase Agreement, and to the
Company at the address set forth below, or to such other addresses as either
party hereto may designate to the other by notice from time to time for this
purpose.
If
to
Company:
The
American Energy Group, Ltd.
Attn:
President
000
Xxxx
Xxxx Xxxx, Xxxxx 000
Xxxxxxxx,
Xxxxxxxxxxx 00000
If
to
Shareholder: _____________________________
_____________________________
_____________________________
11. Entire
Agreement.
This
Agreement contains and constitutes the entire agreement between and among the
parties with respect to the matters set forth herein and supersedes all prior
agreements and understandings between the parties hereto relating to the subject
matter hereof. There are no agreements, understandings, restrictions, warranties
or representations among the parties relating to the subject matter hereof
other
than those set forth or referred to herein. This instrument is not intended
to
have any legal effect whatsoever, or to be a legally binding agreement or any
evidence thereof, until it has been signed by all parties hereto.
12. Binding
Effect.
This
Agreement shall be binding on and enforceable by the Shareholder and by the
Company and its successors. No transferee of Shares shall acquire any rights
under this Agreement except with the written consent of the Company, which
may
be withheld for any reason. In the event the Company is a party to a merger
or
consolidation in a transaction in which the Shares are converted into equity
securities of another entity, then the Company shall cause such other entity
to
assume the Company's obligations under this Agreement such that this Agreement
shall apply to the equity securities received by the Shareholder in exchange
for
the Shares, unless such equity securities are, upon receipt and without further
action by the Shareholder, readily salable without registration under the
Securities Act.
7
13. Construction.
This
Agreement shall be construed, enforced and governed in accordance with the
laws
of the State of Nevada. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine or neuter gender thereof or to the plurals
of each, as the identity of the person or persons or the context may require.
The descriptive headings contained in this Agreement are for reference purposes
only and are not intended to describe, interpret, define or limit the scope,
extent or intent of this Agreement or any provision contained
herein.
14. Invalidity.
If any
provision contained in this Agreement shall for any reason be held to be
invalid, illegal, void or unenforceable in any respect, such provisions shall
be
deemed modified so as to constitute a provision conforming as nearly as possible
to such invalid, illegal, void or unenforceable provisions while still remaining
valid and enforceable, and the remaining terms or provisions contained herein
shall not be affected thereby.
15. Counterparts.
This
Agreement may be executed in any number of counterparts and by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and
the
same Agreement.
16. Amendments
and Waivers.
Any
term or provision of the registration rights stated in this Agreement may be
amended and the observance of any term of such rights may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders
of
at least sixty-seven percent (67%) of the Registrable Securities Then
Outstanding. Any amendment or waiver effected in accordance with this Section
shall be binding upon each holder of the Shares and any Registrable Securities
Then Outstanding, each future holder of Shares and such Registrable Securities,
and the Company.
17. Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Nevada, without regard to principles of conflict of laws. In any
action between or among any of the parties, whether arising out of this
Agreement or otherwise, each of the parties irrevocably consents to the
exclusive jurisdiction and venue of the federal and state courts located in
Washoe County, Nevada.
[SIGNATURES
APPEAR ON THE NEXT PAGE.]
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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the dates shown
below.
SHAREHOLDER: ________________________________________________
_______________________________________________
Date
COMPANY: THE
AMERICAN ENERGY GROUP, LTD.
By: __________________________________________
Xxxxxx
Xxxxxxx, President and CEO
Date: May
3,
2006
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