PACIFIC ASIA PETROLEUM, INC. REGISTRATION RIGHTS AGREEMENT
PACIFIC
ASIA PETROLEUM, INC.
THIS
REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made
as of ________ ___, 2008 by and among PACIFIC ASIA PETROLEUM, INC., a Delaware
corporation (the “Company”) and the
holders of Common Stock of the Company listed on Exhibit A hereto (the
“Holders”)
pursuant to that certain Agreement and Plan of Merger dated as of July 1, 2008
(the “Merger
Agreement”).
WHEREAS,
pursuant to the Merger Agreement, Navitas Corporation (“Navitas”) shall merge
with and into the Company, and the previously outstanding 480,000 shares of
Company common stock (the “Reacquired Common
Stock”) registered in the name of Navitas shall, by reason of the merger
contemplated by the Merger Agreement (the “Merger”), be
reacquired by the Company, and shall resume the status of authorized and
unissued shares of Company common stock;
WHEREAS,
pursuant to the Merger Agreement, the Company shall issue to the Holders an
aggregate of 450,005 shares of common stock of the Company (the “Common Stock”) as
consideration in the Merger;
WHEREAS,
prior to the effectiveness of the Merger, the Reacquired Common Stock had
certain registration rights pursuant to that certain Registration Rights
Agreement, dated May 7, 2007, entered into by and among the Company and each
investor signatory thereto (the “Original Rights
Agreement”) in the form attached hereto as Exhibit
B;
WHEREAS,
the Company and Holders desire to enter into this Agreement in order to provide
the Holders with similar piggyback registration rights with respect to the
Common Stock as Navitas had with respect to the Reacquired Common Stock
immediately prior to the effectiveness of the Merger, as well as certain related
restrictions and obligations with respect to such shares;
NOW,
THEREFORE, the parties hereto hereby covenant and agree as follows:
1. Certain
Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
“Business Day” means any day
other than Saturday, Sunday or any other day on which commercial banks in The
City of New York are authorized or required by law to remain
closed.
“Commission” shall
mean the Securities and Exchange Commission or any other federal agency at the
time administering the Securities Act.
“Common Stock” shall
mean the Common Stock of the Company.
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“Co-Placement Agents”
shall mean Chadbourn Securities, Inc. and Sierra Equity Group, Ltd.
“Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
“Holder” or “Holders” shall mean
any Person or Persons to whom Registrable Securities were originally issued or
permitted transferees under this Agreement who hold Registrable
Securities.
“Holdback Period”
shall mean the period commencing on the day on which the IPO shall be
consummated and ending on (i) the date which is 180 days thereafter or
(ii) such earlier date as shall have been agreed between the underwriter of
the IPO, if any, the Company and the placement agent, acting on behalf of the
Holders pursuant to Section 2(c) hereof.
“IPO” shall mean the
initial public offering of the Company’s securities pursuant to a registration
statement under the Securities Act. For clarification and without limitation,
IPO shall not include securities issued pursuant to (i) a registration
statement relating solely to employee stock option or purchase plans;
(ii) a registration statement on Form S-4 relating solely to an SEC
Rule 145 transaction; (iii) a registration statement filed in
connection with (A) the issuance of securities pursuant to a merger, or
(B) any private placement (“P.I.P.E. Offering”)
of the Company’s securities.
“Liquidity Event”
shall mean (i) the effectiveness of the IPO, (ii) any merger,
consolidation or business combination of the Company with any other entity other
than an affiliate of the Company and pursuant to which the Company is not the
surviving entity, (iii) any sale of all or substantially all of the assets
of the Company, excluding a P.I.P.E. Offering, or (iv) any bona fide offer
by the Company or a third party, approved by the Company’s Board of Directors,
to purchase, at a price not less than fair market value, all or substantially
all of the securities of the Company.
“Person” means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and governmental
or any department or agency thereof.
“Prospectus” shall
mean (i) the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective Registration Statement in reliance upon
Rule 430A, 430B or 430C promulgated under the Securities Act), as amended
or supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus and
(ii) any “free writing prospectus” as defined in Rule 405 promulgated under the
Securities Act.
“Public Sale” shall
mean any sale of securities to the public pursuant to (i) an offering registered
under the Securities Act or (ii) the provisions of Rule 144 (or any similar rule
or rules then in effect) under the Securities Act.
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“Register,” “registered” and
“registration”
shall mean a registration effected by preparing and filing a registration
statement or statements or similar documents in compliance with the Securities
Act and the declaration or ordering of effectiveness of such registration
statement or document by the Commission.
“Registrable
Securities” shall mean (i) shares of Common Stock issued to the Holders
in the Merger, and (ii) stock issued with respect to or in any exchange for or
in replacement of stock referred to in (i) hereof. As to any
particular shares of Common Stock constituting Registrable Securities, such
shares shall cease to be Registrable Securities when they have been transferred
in a Public Sale in a transaction such that all transfer restrictions and
restrictive legends under the Securities Act with respect thereto are or may be
removed upon consummation of such sale, or shares which have been sold in a
private transaction in which the transferor’s rights under this Agreement are
not validly assigned in accordance with this Agreement.
“Registration Statement” means a
registration statement of the Company filed under the 1933 Act covering the
Registrable Securities.
“Requisite Period”
shall mean, (i) with respect to a firm commitment underwritten public offering,
the period commencing on the effective date of the Registration Statement and
ending on the date each underwriter has completed the distribution of all
securities purchased by it, and, (ii) with respect to any other registration,
the period commencing on the effective date of the Registration Statement and
ending on the earlier of the date on which the sale of all Registrable
Securities covered thereby is completed or 180 days after such effective
date.
“Securities Act” shall
mean the Securities Act of 1933, as amended, or any similar federal statue, and
the rules and regulations of the Commission thereunder, all as the same shall be
in effect at the applicable time.
2. Piggyback
Registration.
(a) If
the Company at any time proposes to register any of its shares of Common Stock
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to the
IPO and/or registration statements on Forms S-4 or S-8 and any similar successor
forms) (a “Piggyback
Registration”), each such time it will give prompt written notice to such
effect to all Holders at least thirty (30) days prior to such
filing. Upon the written request of any such Holder, received by the
Company within twenty (20) days after the giving of any such notice by the
Company, to register any of its Registrable Securities, the Company will,
subject to Section 2(b) below, cause all Registrable Securities as to which
registration shall have been so requested to be included in the securities to be
covered by the Registration Statement proposed to be filed by the Company, all
to the extent requisite to permit the sale or other disposition by the Holder of
such Registrable Securities so registered. Notwithstanding the
foregoing provisions, the Company may withdraw any registration statement
referred to in this Section 3 without thereby incurring any liability to the
Holders.
(b) In
the event that any Piggyback Registration shall be, in whole or in part, an
underwritten public offering of Common Stock and the managing underwriters
advise the Company in writing that in their opinion the number of
Registrable
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Securities
and/or other securities requested to be included in such offering exceeds the
number of shares which can be sold in an orderly manner in such offering within
a price range acceptable to the Company without adversely affecting the
marketability of the offering, then the Company will include in such
registration (i) first, the securities the Company proposes to sell; (ii)
second, the Registrable Securities and/or other securities requested to be
included in such registration, together with securities requested to be included
in such registration by holders who exercise their registration rights under
that certain Registration Rights Agreement dated May 7, 2007 among Advanced
Drilling Services, LLC., a Delaware limited liability company, and each investor
executing a copy thereof (collectively, the “ADS Securities”), pro rata from
among the holders according to the number of Registrable Securities and ADS
Securities held by such holders; and (iii) third to other shareholders
requesting registration pro rata. Notwithstanding the foregoing,
however, the number of Registrable Securities to be included in such
registration and underwriting under this Section 2(b) shall not be reduced to
less than thirty percent (30%) of the aggregate securities requested to be
included by the Holders in such registration without prior consent of at least a
majority of the Holders who have requested their shares to be included in such
registration and underwriting.
(c) The
right of the Holders of Registrable Securities to have their securities
registered in a Piggyback registration shall terminate at the earlier of (i) May
7, 2010, or (ii) as to any Holder, such earlier time at which all Registrable
Securities held by such Holder (together with any affiliate of the Holder with
whom such Holder must aggregate its sales under Rule 144) can be sold in any
three-month period without registration in compliance with Rule 144 of the
Securities Act.
3.
Holdback Agreement; Power of Attorney.
(a) In
connection with the IPO or any registration of Registrable Securities in
connection with an underwritten public offering, the holders of
Registrable Securities agree, if so requested by the underwriter or
underwriters, not to effect any Public Sale or distribution (including any sale
pursuant to Rule 144 under the Securities Act) of any Registrable Securities,
and not to effect any such Public Sale or distribution of any other equity
security of the Company or its successor or of any security convertible into or
exchangeable or exercisable for any equity security of the Company or its
successor (in each case, other than as part of such underwritten public
offering) during the (i) 10 days prior to the commencement of and during
the Holdback Period with respect to the IPO and (ii) seven days prior to
and the 120 days following the effective date of the registration statement
(other than a registration statement on Form S-4 or S-8) with respect to such
other underwritten public offering if the holders of Registrable Securities were
afforded the opportunity to include all of their Registrable Securities therein
pursuant to Section 2.
(b) Each
Holder hereby irrevocably appoints the Co-Placement Agents (and all officers
designated by the Co-Placement Agents) (“Attorney”) to act as
his or its true and lawful agents and attorneys-in-fact, with full power of
substitution, (i) to negotiate with the Company and the managing
underwriter(s) for the IPO the terms and conditions of the holdback agreements
of the Holders and any other restrictions on the right of such Holder to sell
his or its shares of Registrable Securities which shall be imposed by the
managing underwriter(s) for such offering (including, without
limitation,
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the
length of the Holdback Period, and the other rights of such Holder to sell his
or its Registrable Securities), (ii) to negotiate with the Company and any
third party the terms and conditions of any agreements affecting the rights of
such Holder under this Agreement in connection with any other Liquidity Event
and (iii) to execute and deliver any and all documents, agreements and
instruments and to take any and all actions, in the name of and on behalf of
such Holder, as may be necessary or appropriate to effectuate the foregoing on
such terms and conditions as the Attorney approves in his sole judgment. No
person to whom this Power of Attorney is presented, as authority for Attorney to
take any action or actions contemplated hereby, shall be required to inquire
into or seek confirmation from the holder of Registrable Securities as to the
authority of Attorney to take any action or actions described above, or as to
the existence of or fulfillment of any condition to this Power of Attorney,
which is intended to grant to Attorney unconditionally the authority to take and
perform the actions contemplated herein, and each Holder irrevocably waives any
right to commence any suit or action, in law or equity, against any person or
entity which acts in reliance upon or acknowledges the authority granted under
this Power of Attorney. The Power of Attorney granted hereby is coupled with an
interest, and may not be revoked or canceled by an Holder without Attorney’s
written consent. The Holder hereby ratifies, to the extent permitted by law, all
that said Attorney shall lawfully do or cause to be done by virtue
hereof.
4. Registration
Procedures. If and whenever the Company is required by the
provisions of Section 2 hereof to use commercially reasonable efforts to effect
the registration of any Registrable Securities under the Securities Act, the
Company will, subject to the foregoing, as expeditiously as
possible:
(a) subject
to Section 3(a), prepare and file with the Commission a registration
statement with respect to such securities, and use commercially reasonable
efforts to cause any registration statement subject to this Agreement to become
effective not later than 90 days from the date of its filing and to remain
effective for the Requisite Period;
(b) 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 for the Requisite Period
and comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such registration statement
in accordance with the intended method of disposition set forth in such
registration statement for such period;
(c) furnish
to each seller of Registrable Securities and to each underwriter such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the intended disposition of the Registrable Securities
covered by such registration statement;
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(d) use
commercially reasonable efforts (i) to register or qualify the Registrable
Securities covered by such registration statement under the securities or “blue
sky” laws of such jurisdictions as the sellers of Registrable Securities or, in
the case of an underwritten public offering, the managing underwriter reasonably
shall request, (ii) to prepare and file in those jurisdictions such
amendments (including post effective amendments) and supplements, and take such
other actions, as may be necessary to maintain such registration and
qualification in effect at all times for the period of distribution contemplated
thereby and (iii) to take such further action as may be necessary or
advisable to enable the disposition of the Registrable Securities in such
jurisdictions, provided, that the Company shall not for any such purpose be
required to qualify generally to transact business as a foreign corporation in
any jurisdiction where it is not so qualified or to consent to general service
of process in any such jurisdiction;
(e) use
commercially reasonable efforts to list the Registrable Securities covered by
such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;
(f) immediately
notify each seller of Registrable Securities and each underwriter under such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
of which the Company has knowledge as a result of which the prospectus contained
in such registration statement, as then in effect, includes any untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing and promptly amend or supplement such
registration statement to correct any such untrue statement or
omission;
(g) notify
each seller of Registrable Securities of the issuance by the Commission of any
stop order suspending the effectiveness of the registration statement or the
initiation of any proceedings for that purpose and make every reasonable effort
to prevent the issuance of any stop order and, if any stop order is issued,
obtain the lifting thereof at the earliest possible time;
(h) permit
a single firm of counsel designated as selling shareholders’ counsel by the
holders of a majority in interest of the Registrable Securities and all other
securities being registered (“Shareholders
Counsel”) to review the registration statement and all amendments and
supplements thereto for a reasonable period of time prior to their filing
(provided, however, that in no event shall the Company be required to reimburse
legal fees in excess of $20,000 per registration statement pursuant to this
Section 4(h)) and the Company shall not file any document in a form to
which Company counsel reasonably objects;
(i) make
generally available to its security holders as soon as practicable, but not
later than 90 days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of Rule 158 under
the Securities
6
Act)
covering a 12-month period beginning not later than the first day of the
Company’s next fiscal quarter following the effective date of the registration
statement;
(j) if
the offering is an underwritten offering, the Company will enter into a written
agreement with the managing underwriter selected in the manner herein provided
in such form and containing such provisions as are usual and customary in the
securities business for such an arrangement between such underwriter and
companies of the Company’s size and investment stature, including, without
limitation, customary holdback, indemnification and contribution
provisions;
(k) if
the offering is an underwritten offering, at the request of any seller of
Registrable Securities, use its best efforts to furnish to such seller on the
date that Registrable Securities are delivered to the underwriters for sale
pursuant to such registration: (i) a copy of an opinion dated such date of
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, stating that such registration statement has
become effective under the Securities Act and (A) that to the knowledge of
such counsel, no stop order suspending the effectiveness thereof has been issued
and no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, (B) that the registration statement,
the related prospectus and each amendment or supplement thereof comply as to
form in all material respects with the requirements of the Securities Act
(except that such counsel need not express any opinion as to financial
statements or other financial or statistical information contained therein) and
(C) to such other effects as are customarily the subject of opinions of
issuer’s counsel provided to underwriters in underwritten public offerings and
are reasonably requested by counsel for the underwriters and (ii) to the
extent available without unreasonable expense from the Company’s accounting
firm, a copy of a letter dated such date from the independent public accountants
retained by the Company, addressed to the underwriters, stating that they are
independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company included in the registration statement or the prospectus, or any
amendment or supplement thereof, comply as to form in all material respects with
the applicable accounting requirements of the Securities Act, and such letter
shall additionally cover such other financial matters (including information as
to the period ending no more than five business days prior to the date of such
letter) with respect to such registration as such underwriters reasonably may
request;
(l) make
available for inspection by each seller of Registrable Securities, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such seller
or underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company ‘s officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement;
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(m) provide
a transfer agent and registrar, which may be a single entity, for the
Registrable Securities not later than the effective date of the Registration
Statement;
(n) take
all actions reasonably necessary to facilitate the timely preparation and
delivery of certificates (not bearing any legend restricting the sale or
transfer of such securities) representing the Registrable Securities to be sold
pursuant to the Registration Statement and to enable such certificates to be in
such denominations and registered in such names as the Investors or any
underwriters may reasonably request; and
(o) it
shall be a condition precedent to the obligations of the Company to take any
action in connection with each registration subject to this Agreement, that the
sellers of Registrable Securities furnish to the Company in a timely manner in
writing such information with respect to themselves and the proposed
distribution by them as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws.
5. Expenses. All expenses
incurred by the Company in complying with Section 2, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel and independent public accountants for the Company,
fees and expenses (including counsel fees) incurred in connection with complying
with state securities or “blue sky” laws, fees of the National Association of
Securities Dealers, Inc., fees of transfer agents and registrars, costs of
insurance and fees and disbursements of one counsel for the seller of
Registrable Securities and all other securities being registered, but excluding
any Selling Expenses, are called “Registration
Expenses.” All underwriting discounts and selling commissions
applicable to the sale of Registrable Securities are called “Selling
Expenses.”
The
Company will pay all Registration Expenses in connection with each Registration
Statement filed hereunder. All Selling Expenses in connection with
each Registration Statement shall be borne by the participating sellers in
proportion to the number of Registrable Securities sold by each or as they may
otherwise agree.
6. Indemnification and
Contribution.
(a) In
the event of a registration of any of the Registrable Securities under the
Securities Act pursuant to the terms of this Agreement, the Company will
indemnify and hold harmless and pay and reimburse each seller of such
Registrable Securities thereunder, each underwriter of Registrable Securities
thereunder and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, from and against, and pay
or reimburse them for, any losses, claims, expenses, damages or liabilities,
joint or several, to which such seller, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement under which such
Registrable Securities were registered under the Securities Act pursuant hereto,
any preliminary prospectus (unless superseded by a final
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Prospectus)
or final Prospectus contained therein, or any amendment or supplement thereof,
or (ii) the omission or alleged omission to state in any such Registration
Statement a material fact required to be stated therein or necessary to make the
statements therein not misleading or, with respect to any Prospectus, necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or (iii) any violation or alleged violation of the
Securities Act or any state securities or blue sky laws applicable to the
Company and relating to action or inaction required by the Company in connection
with the offering of Registrable Securities and specifically will reimburse each
such seller, each underwriter and each such controlling person for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, damage or liability (or action in respect
thereof); provided,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability (or action in respect thereof) arises
out of or is based upon the Company's reliance on an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished by any such seller, any such underwriter or any such
controlling person in writing specifically for use in such Registration
Statement or Prospectus; and provided, further, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability (or action in respect thereof) arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission in such Registration Statement or Prospectus, which untrue statement or
alleged untrue statement or omission or alleged omission is completely corrected
in an amendment or supplement to the Registration Statement or Prospectus and
such seller or such controlling person thereafter fails to deliver or cause to
be delivered such Registration Statement or Prospectus as so amended or
supplemented prior to or concurrently with the Registrable Securities to the
person asserting such loss, claim, damage or liability (or action in respect
thereof) or expense after the Company has furnished such seller or such
controlling person with the same.
(b) In
the event of a registration of any of the Registrable Securities under the
Securities Act pursuant hereto, each seller of such Registrable Securities
thereunder, severally and not jointly, will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who signs the Registration
Statement, each director of the Company and each underwriter and each person who
controls any underwriter within the meaning of the Securities Act from and
against all losses, claims, expenses, damages or liabilities, joint or several,
to which the Company or such officer, director, or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
on any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement under which such Registrable Securities
were registered under the Securities Act pursuant hereto, any preliminary
prospectus or Prospectus, or any amendment or supplement thereof, or arise out
of or are based upon the 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 will reimburse the Company and each such officer,
director, underwriter and controlling person for any legal or
other
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expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage or liability (or action in respect thereof); provided, that such seller
will be liable hereunder in any such case if and only to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with information pertaining to such seller
furnished in writing to the Company by such seller specifically for use in such
Registration Statement or Prospectus; and provided, further, that the
liability of each seller hereunder shall be limited to the proportion of any
such loss, claim, damage, liability or expense which is equal to the proportion
that the public offering price of the Registrable Securities sold by such seller
under such Registration Statement bears to the total public offering price of
all securities sold thereunder, but not in any event to exceed the gross
proceeds received by such seller from the sale of Registrable Securities covered
by such Registration Statement. Notwithstanding the foregoing, the indemnity
provided in this Section 6(b) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or expense if such settlement is
effected without the consent of such indemnified party, which shall not be
unreasonably withheld.
(c) Promptly
after receipt by an indemnified party hereunder of notice of the commencement of
any action or claim, such indemnified party shall, if a claim in respect thereof
is to be made against the indemnifying party hereunder, notify the indemnifying
party in writing thereof, but the omission so to notify the indemnifying party
shall not relieve it from any liability which it may have to such indemnified
party other than under this Section 6 and shall only relieve it from any
liability which it may have to such indemnified party under this Section 6 if
and to the extent the indemnifying party is materially prejudiced by such
omission. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 6 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified party shall have the right to select
a separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
(d) In
order to provide for just and equitable contribution to joint liability under
the Securities Act in any case in which either (i) any Holder of
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Registrable
Securities exercising rights under this Agreement, or any controlling person of
any such holder, makes a claim for indemnification pursuant to this Section 6
but it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 6 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such seller or any such controlling person in
circumstances for which indemnification is provided under this Section 6, then,
and in each such case, the Company and such Holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that such holder is
responsible for the portion represented by the percentage that the public
offering price of its Registrable Securities offered by the Registration
Statement bears to the public offering price of all securities offered by such
Registration Statement, and the Company is responsible for the remaining
portion; provided,
that, in any such case, (A) no such holder will be required to contribute any
amount in excess of the public offering price of all such Registrable Securities
offered by it pursuant to such Registration Statement and (B) no person or
entity guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
7. Changes in Capital Stock and
Successors. If, and as often as, there is any change in the
capital stock of the Company by way of a stock split, stock dividend,
combination, reclassification, or through a merger, consolidation,
reorganization or recapitalization, or by any other means, then appropriate
adjustment shall be made in the provisions hereof so that the rights and
privileges granted hereby shall continue with respect to the capital stock as so
changed or exchanged.
8. Rule 144
Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, at all
times after 90 days after any registration statement covering a public offering
of securities of the Company under the Securities Act shall have become
effective, the Company agrees to:
(a) make
and keep public information available, as those terms are understood and defined
in Rule 144(c) under the Securities Act;
(b) file
with the Commission in a timely manner all reports and other documents required
of the Company under the Securities Act and the Exchange Act; and
(c) furnish
to each holder of Registrable Securities forthwith upon request a written
statement by the Company as to its compliance with the reporting requirements of
such Rule 144 and of the Securities Act and the Exchange Act, a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed by the Company as such holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing such holder
to sell any Registrable Securities without registration.
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9. Event of
Election. In the event that the Company fails to fulfill its
registration responsibilities pursuant to Section 2 of this Agreement, the
Holders shall have all rights and remedies available to them at law or
equity.
10. Representations and Warranties of the
Company. The Company represents and warrants to the Holders as
follows:
(a) The
execution, delivery and performance of this Agreement by the Company have been
duly authorized by all requisite corporate action and will not violate any
provision of law, any order of any court or other agency of government, the
charter or by-laws of the Company or any provision of any indenture, agreement
or other instrument to which it or any or its properties or assets is bound,
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other instrument
(except for violations, conflicts, breaches or defaults that would not have,
individually or in the aggregate, a material adverse effect on the Company) or
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the properties or assets of the Company or its
subsidiaries.
(b) This
Agreement has been duly executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the Company, enforceable in
accordance with its terms.
11. Assignment of Registration
Rights. The rights to cause or have the Company register
Registrable Securities pursuant to this Agreement may be assigned by the Holders
to transferees or assignees of such securities; provided, that: (a) there is
transferred to such transferee not less than forty thousand (40,000) shares of
Registrable Securities, appropriately adjusted for any stock splits, stock
dividends, reverse splits and similar events; (b) the Company is, within
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned, and such transferee shall
agree to be subject to all the restrictions set forth in this Agreement; and (c)
an opinion of counsel is provided by the Holder, satisfactory to the Company, to
the effect that such disposition will not require registration of such
Registrable Securities under the Securities Act. The term “Holders”
or “Holders” as used in this Agreement shall include such permitted transferees
and assignees.
12. Miscellaneous.
(a) All
covenants and agreements contained in this Agreement by or on behalf of any of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto (including without limitation
permitted transferees of any Registrable Securities), whether so expressed or
not.
(b) All
notices, requests, consents and other communications hereunder shall be in
writing and shall be delivered in person, mailed by certified or registered
mail, return receipt requested, or sent by telecopier or telex, addressed
(i) if to the Company, at 000 Xxxx Xxxxxxxxx Xxx., Xxxxx 00,
Xxxxxxxxx, Xxx Xxxx 00000, Attention: Corporate Secretary; (ii) if to
Holders, at the address of such party as set forth
12
beneath
such party’s signature; (iii) if to the Co-Placement Agents, at Chadbourn
Securities, Inc., 00000 X. Xx Xxxx Xxxx., Xxxxx 000, Xxxxxxxxx, XX 00000, facsimile: (000)
000-0000, Attention: Xxxxx X. Xxxxx; (iv) if to any subsequent Holder, to it at
such address as may have been furnished to the Company in writing by such
Holder; or (v) in any case, at such other address or addresses as shall have
been furnished in writing to the Company (in the case of a Holder) or to the
Holders (in the case of the Company) in accordance with the provisions of this
paragraph.
(c) This
Agreement and all acts and transactions pursuant hereto and the rights and
obligations of the parties hereto shall be governed, construed and interpreted
in accordance with the laws of the State of California, without giving effect to
principles of conflicts of law.
(d) Any
judicial proceeding brought against any of the parties to this Agreement on any
dispute arising out of this Agreement or any matter related hereto shall be
brought in the courts of the State of California and County of San Francisco or
in the United States District Court for the Northern District of California and,
by execution and delivery of this Agreement, each of the parties hereto accepts
for itself and himself the process in any such action or proceeding by the
mailing of copies of such process to it or him, at its or his address as set
forth in paragraph 12(b) and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement. Each party hereto
irrevocably waives to the fullest extent permitted by law any objection that it
or he may now or hereafter have to the laying of the venue of any judicial
proceeding brought in such courts and any claim that any such judicial
proceeding has been brought in an inconvenient forum. The foregoing
consent to jurisdiction shall not constitute general consent to service of
process in the State of California for any purpose except as provided about and
shall not be deemed to confer rights on any person other than the respective
parties to this Agreement.
(e) Except
as expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
referencing this Agreement and signed by the Company and the Holders holding not
less than a majority of the Registrable Securities. Any amendment, waiver,
discharge or termination effected in accordance with this paragraph shall be
binding upon each Holder and each future Holder of all such securities of
Holder. Each Holder acknowledges that by the operation of this
paragraph, the Holders of not less than a majority of the Registrable Securities
(together with the Company) will have the right and power to diminish or
eliminate all rights of such Holder under this Agreement.
(f) Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as a
waiver thereof. No waiver shall be effective unless and until it is
in writing and signed by the party granting the waiver.
(g) This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
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(h) The
Company shall not grant to any third party any registration rights more
favorable than or inconsistent with any of those contained herein, so long as
any of the registration rights under this Agreement remains in
effect.
(i) If
any provision of this Agreement shall be held to be illegal, invalid or
unenforceable, such illegality, invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render illegal, invalid
or unenforceable any other provision of this Agreement, and this Agreement shall
be carried out as if any such illegal, invalid or unenforceable provision were
not contained herein.
14
|
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
|
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| PACIFIC ASIA PETROLEUM, INC. | ||||
|
By:
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| Xxxxx X. Xxxxxxxxxx | ||||
| Chief Executive Officer | ||||
| HOLDER: | ||||
|
By:
|
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|
Name:
|
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|
Title:
|
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15
