Document:

EXHIBIT 4.2
                          CERTIFICATE OF DESIGNATIONS,

                            PREFERENCES AND RIGHTS OF

                     SERIES A CONVERTIBLE PREFERRED STOCK OF

                  AMERICAN INTERNATIONAL PETROLEUM CORPORATION

                    PURSUANT TO SECTION _______ OF THE NEVADA

                             GENERAL CORPORATION LAW

     1.  Number  of  Shares  of Series A  Convertible  Preferred  Stock.  Of the
7,000,000  shares of authorized  but unissued  Preferred  Stock,  $.01 par value
("Preferred Stock") of the Corporation,  eighteen thousand (18,000) shares shall
be designated and known as Series A Convertible  Preferred Stock, par value $.01
per share ("Series A Convertible Preferred Stock").

     2. Voting.

     (a) Unless required by law, no holder of any shares of Series A Convertible
Preferred  Stock shall be entitled to vote at any meeting of stockholders of the
Corporation  (or any written  actions of  stockholders in lieu of meetings) with
respect to any matter presented to the stockholders of the Corporation for their
action or consideration.  Notwithstanding  the foregoing,  the Corporation shall
provide  each  holder of record of Series A  Convertible  Preferred  Stock  with
timely  notice of every meeting of  stockholders  of the  Corporation  and shall
provide each holder with copies of all proxy materials distributed in connection
therewith.

     (b) So  long  as  shares  of  Series  A  Convertible  Preferred  Stock  are
outstanding, the Corporation shall not, without first obtaining the approval (by
vote or written consent,  as provided by the Nevada General  Corporation Law) of
the  holders  of at  least  85% of the  then  outstanding  shares  of  Series  A
Convertible Preferred Stock:

          (i) alter or change  the  rights,  preferences  or  privileges  of the
     Series A Convertible Preferred Stock;

          (ii)  create  any new class or series of  capital  stock  ranking on a
     parity with ("Pari Passu  Securities")  or a  preference  over the Series A
     Convertible  Preferred Stock as to distribution of assets upon liquidation,
     dissolution or winding up of the Corporation ("Senior Securities") or alter
     or change the rights, preferences or privileges of any Senior Securities so
     as to affect adversely the Series A Convertible Preferred Stock;

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          (iii) increase the authorized number of shares of Series A Convertible
     Preferred Stock;

          (iv)  do any act or  thing  not  authorized  or  contemplated  by this
     Certificate of  Designations  which would result in taxation of the holders
     of shares of the Series A Convertible  Preferred Stock under Section 305 of
     the Internal Revenue Code of 1986, as amended (or any comparable  provision
     of the Internal Revenue Code as hereafter from time to time amended); or

          (v) issue any additional  shares of Series A Preferred Stock except as
     pursuant to the Securities Purchase Agreement (defined below).

     In the  event  holders  of at least 85% of the then  outstanding  shares of
Series A Convertible  Preferred Stock agree to allow the Corporation to alter or
change  the  rights,  preferences  or  privileges  of the  shares  of  Series  A
Convertible  Preferred Stock,  pursuant to subsection (b) above, so as to affect
the Series A Convertible  Preferred  Stock,  then the  Corporation  will deliver
notice  of such  approved  change to the  holders  of the  Series A  Convertible
Preferred Stock that did not agree to such alteration or change (the "Dissenting
Holders")  and  Dissenting  Holders  shall have the right for a period of thirty
(30)  days to  convert  any and all  shares of then  held  Series A  Convertible
Preferred Stock pursuant to the terms of this  Certificate of Designations as in
effect  prior to such  alteration  or change,  or else to continue to hold their
shares of Series A Convertible Preferred Stock.

     3. Dividends

     No holder of any shares of Series A  Convertible  Preferred  Stock shall be
entitled to receive any dividends.

     4. Liquidation

     (a) If the  Corporation  shall  commence a voluntary case under the Federal
bankruptcy laws or any other applicable Federal or state bankruptcy,  insolvency
or similar law, or consent to the entry of an order for relief in an involuntary
case under any law or to the  appointment of a receiver,  liquidator,  assignee,
custodian,  trustee, sequestrator (or other similar official) of the Corporation
or of any  substantial  part of its  property,  or make  an  assignment  for the
benefit of its  creditors,  or admit in writing its  inability  to pay its debts
generally  as they  become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having  jurisdiction in the premises
in an involuntary case under the Federal bankruptcy laws or any other applicable
Federal  or  state  bankruptcy,  insolvency  or  similar  law  resulting  in the
appointment   of  a  receiver,   liquidator,   assignee,   custodian,   trustee,
sequestrator  (or  other  similar   official)  of  the  Corporation  or  of  any
substantial  part of its property,  or ordering the winding up or liquidation of
its affairs,  and any such decree or order shall be unstayed and in effect for a
period of thirty (30)  consecutive  days and, on account of any such event,  the
Corporation  shall liquidate,  dissolve or wind up, or if the Corporation  shall
otherwise  liquidate,  dissolve or wind up (each such event being  considered  a
"Liquidating Event"), no distribution shall be made to the holders of any shares
of capital stock of the Corporation upon liquidation,  dissolution or winding up
unless prior thereto, the holders of shares of Series A

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Convertible  Preferred Stock shall have received the Liquidation  Preference (as
defined in Paragraph 4(c)) with respect to each share. If upon the occurrence of
a Liquidation  Event, the assets and funds available for distribution  among the
holders of the Series A  Convertible  Preferred  Stock and holders of Pari Passu
Securities  shall be  insufficient  to permit the payment to such holders of the
preferential  amounts payable  thereon,  then the entire assets and funds of the
Corporation  legally  available  for  distribution  to the Series A  Convertible
Preferred Stock and the Pari Passu Securities shall be distributed ratably among
such shares in proportion to the ratio that  Liquidation  Preference  payable on
each such share bears to the  aggregate  Liquidation  Preference  payable on all
such shares.

     (b) The  Liquidation  Preference  shall be the  Stated  Value of $1,000 per
share of Series A Convertible Preferred Stock.

     5.  Optional  Conversion.  The  holders  of shares of Series A  Convertible
Preferred Stock shall have the following conversion rights:

     (a) Right to Convert;  Conversion Price. Subject to the terms,  conditions,
and  restrictions of this Paragraph 5, commencing on the Original  Issuance Date
(as  hereinafter  defined),  the  holder of any  shares of Series A  Convertible
Preferred  Stock  shall  have the right to  convert  each such share of Series A
Convertible   Preferred   Stock  (except  that  upon  any   liquidation  of  the
Corporation, the right of conversion shall terminate at the close of business on
the business day fixed for payment of the amount  distributable  on the Series A
Convertible  Preferred  Stock) into a number of shares of Common  Stock equal to
the Stated Value of such share or shares of Series A Convertible Preferred Stock
divided by (i) 92% of the average of the three lowest  volume  weighted  average
sales prices,  as reported by Bloomberg  L.P.,  on the principal  market for the
Corporation's  Common Stock (the "Principal Market") during the period of twenty
Trading  Days ending with the last  Trading Day prior to the date of  conversion
(the "Market Price"),  (the "Conversion  Price").  To illustrate,  if the Market
Price as of the Conversion  Date is $1.35 and 100 shares of Series A Convertible
Preferred  Stock are  being  converted,  the  Stated  Value  for which  would be
$100,000,  then the  Conversion  Price shall be $1.24 per share of Common  Stock
($1.35 x .92),  whereupon  the Stated Value of $100,000 of Series A  Convertible
Preferred  Stock would  entitle the holder  thereof to convert the 100 shares of
Series A  Convertible  Preferred  Stock  into  80,645  shares  of  Common  Stock
($100,000  divided by $1.24 equals 80,645).  The right of each holder to convert
shares of Series A  Convertible  Preferred  Stock into shares of Common Stock is
subject  to the  limitations  set forth in  Paragraph  5(b)  below,  and for the
purpose of complying with the limitation set forth in Paragraph 5(b)(ii),  shall
be prorated among the original  purchasers of the shares of Series A Convertible
Preferred Stock (the "Initial  Holders') and their  subsequent  transferees,  if
any,  based upon the number of shares of Series A  Convertible  Preferred  Stock
purchased by the Initial Holders. As used herein, "Original Issuance Date" means
the date upon which shares of Series A Convertible Preferred Stock are initially
issued.

     (b) Numerical Limitations.  (i) No shares of Series A Convertible Preferred
Stock may be  converted  into Common  Stock,  to the extent  that,  after giving
effect to the conversion and issuance of the Common Stock to be issued  pursuant
to the applicable  Conversion  Notice (as defined in Paragraph 5(c) below),  the
total number of shares of Common Stock deemed beneficially

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owned by the holder requesting conversion (other than by virtue of the ownership
of unconverted  shares of Series A Convertible  Preferred Stock or the ownership
of other  securities  that have  limitations  on a holder's  rights to exchange,
convert or exercise  similar to those  limitations  set forth herein),  together
with all  shares of Common  Stock  deemed  beneficially  owned by such  holder's
Affiliates  (as defined in Rule 405 of the  Securities  Act of 1933, as amended)
that would be  aggregated  for  purposes  of  determining  whether a group under
Section 13(d) of the Securities Exchange Act of 1934, as amended,  and the rules
promulgated  thereunder,  would exceed 9.99% of the total issued and outstanding
shares of Common Stock. If any court of competent  jurisdiction  shall determine
that the  foregoing  limitation  is  ineffective  to prevent a holder from being
deemed the beneficial owner of more than 9.99% of the then outstanding shares of
Common Stock,  then the Corporation shall redeem so many of such holder's shares
of Series A Convertible Preferred Stock pursuant to Paragraph 7(a) hereof as are
necessary  to cause such  holder to be deemed the  beneficial  owner of not more
than 9.99% of the then  outstanding  shares of Common Stock;  provided that such
conversion  limitation  shall not apply following the occurrence of any Event of
Default  which is not cured within ten days of the  occurrence  of such Event of
Default.

          (ii) Unless the  Corporation  shall have  obtained the approval of its
     voting  stockholders  to such issuance,  if required in accordance with the
     rules of the Principal  Market,  the Corporation  shall not issue shares of
     Common  Stock  upon  conversion  of any  shares  of  Series  A  Convertible
     Preferred Stock if such issuance of Common Stock,  when added to the number
     of  shares of  Common  Stock  previously  issued  by the  Corporation  upon
     conversion of shares of the Series A Convertible  Preferred Stock, together
     with shares of Common Stock issued and issuable  upon  exercise of warrants
     issued  in  connection  with the sale of  shares  of  Series A  Convertible
     Preferred  Stock,  would  result in the  issuance of more than 19.9% of the
     number of shares of Common Stock which were issued and  outstanding  on the
     Original  Issuance Date. To the extent the number of shares of Common Stock
     issuable upon  conversion  would but for the  limitation  set forth in this
     Paragraph 5(b)(ii) exceed such limit, the Corporation shall redeem promptly
     (but not later than the fifth Trading Day after  receipt of the  applicable
     Conversion Notice) the shares of Series A Convertible  Preferred Stock that
     may not be  converted  into  shares  of  Common  Stock as a result  of such
     limitation in accordance with Section 7(a) hereof.

     (c) Notice of Conversion. The right of conversion shall be exercised by the
holder  thereof  by giving  written  notice  (the  "Conversion  Notice")  to the
Corporation,  by facsimile or by registered mail or overnight  delivery service,
with a copy by facsimile to the Corporation's then transfer agent for its Common
Stock,  as  designated  by the  Corporation  from time to time,  that the holder
elects to convert a specified number of shares of Series A Convertible Preferred
Stock  representing  a specified  Stated Value thereof into Common Stock and, if
such  conversion will result in the conversion of all of such holder's shares of
Series  A  Convertible  Preferred  Stock,  by  surrender  of  a  certificate  or
certificates  for  the  shares  so to be  converted  to the  Corporation  at its
principal  office  (or such  other  office or agency of the  Corporation  as the
Corporation  may  designate  by notice in writing to the holders of the Series A
Convertible  Preferred Stock) at any time during its usual business hours on the
date set forth in the Conversion Notice, together with a statement of

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the name or names (with address) in which the  certificate or  certificates  for
shares of Common Stock shall be issued.  The  Conversion  Notice  shall  include
therein the Stated Value of shares of Series A Convertible Preferred Stock to be
converted, and a calculation (i) of the Market Price, (ii) the Conversion Price,
and (iii) the number of shares of Common Stock to be issued in  connection  with
such conversion.

     (d) Issuance of Certificates;  Time Conversion Effected.  (i) Promptly, but
in no event more than five  Trading  Days,  after the receipt of the  Conversion
Notice referred to in Subparagraph 5(c) (the "Deadline"),  the Corporation shall
issue  and  deliver,  or  cause  to be  issued  and  delivered,  to the  holder,
registered  in such name or names as such holder may direct,  a  certificate  or
certificates  for the  number of whole  shares of Common  Stock  into which such
shares of Series A  Convertible  Preferred  Stock are  converted.  To the extent
permitted by law, such  conversion  shall be deemed to have been effected on the
date on which such Conversion Notice shall have been received by the Corporation
and at the time specified stated in such Conversion Notice, which must be during
the calendar  day of such  notice,  and at such time the rights of the holder of
such share or shares of Series A Convertible  Preferred  Stock shall cease,  and
the person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares  represented  thereby.
Issuance of shares of Common Stock issuable upon conversion  which are requested
to be  registered  in a name other than that of the  registered  holder shall be
subject to compliance with all applicable  federal and state securities laws. In
lieu of delivering physical certificates  representing the Common Stock issuable
upon conversion,  provided the Corporation's  transfer agent is participating in
the  Depository  Trust  Company  ("DTC")  Fast  Automated  Securities  Transfers
Program,  upon  initial  request  of the  holder  of the  Series  A  Convertible
Preferred  Stock  and its  compliance  with  the  provisions  contained  in this
Paragraph  5(d) (i),  the  Corporation  shall use its best  efforts to cause its
transfer  agent to  electronically  transmit  the  Common  Stock  issuable  upon
conversion of the Series A Convertible  Preferred Stock by crediting the account
of such  holders'  Prime  Broker with DTC through  its  Deposit  Withdraw  Agent
Commission System.

          (ii) The Corporation  understands  that a delay in the issuance of the
     shares of Common Stock beyond the Deadline could result in economic loss to
     the holder.  As  compensation  to the holder for such loss, the Corporation
     agrees to pay late  payments  to the holder for late  issuance of shares of
     Common Stock upon conversion in the event the Corporation  fails to deliver
     the Common  Stock  issuable  upon  conversion  of the Series A  Convertible
     Preferred  Stock more than one day following  the  Deadline.  Late payments
     will accrue in the amount of $500.00 for each $100,000  Stated Value of the
     Series A Convertible Preferred Stock then outstanding,  per day in cash for
     each of the first ten days  beyond the  Deadline  and,  $1,000.00  for each
     $100,000  Stated  Value of the Series A  Convertible  Preferred  Stock then
     outstanding  per day in cash for each day thereafter that the Company fails
     to deliver  such  Common  Stock.  The  Corporation  shall pay any  payments
     incurred under this Paragraph 5(d) (ii) in immediately available funds upon
     demand.  Nothing  herein shall limit  holder's  right to pursue  injunctive
     relief and/or  actual  damages for the  Corporation's  failure to issue and
     deliver Common Stock to the holder.  Furthermore,  in addition to any other
     remedies  which may be  available  to the  holder,  in the  event  that the
     Corporation  fails  for any  reason to effect  delivery  of such  shares of
     Common Stock by the Deadline, the holder will be entitled to

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     revoke the relevant Conversion Notice by delivering a notice to such effect
     to the  Corporation  whereupon the Corporation and the holder shall each be
     restored to their  respective  positions  immediately  prior to delivery of
     such Conversion Notice.

          (iii)  The  holder  shall  be  entitled  to  exercise  its  conversion
     privilege   notwithstanding   the   commencement   of  any  case  under  11
     U.S.C.ss.101  et seq.  (the  "Bankruptcy  -- ---- Code").  In the event the
     Corporation is a debtor under the Bankruptcy  Code, the Corporation  hereby
     waives to the  fullest  extent  permitted  any rights to relief it may have
     under 11 U.S.C.ss.362 in respect of the holder's conversion privilege.  The
     Corporation  hereby  waives to the fullest  extent  permitted any rights to
     relief it may have under 11  U.S.C.ss.362  in respect of the  conversion of
     the Series A Convertible  Preferred Stock. The Corporation agrees,  without
     cost or  expense  to the  holder,  to take or consent to any and all action
     necessary to effectuate relief under 11 U.S.C.ss.362.

     (e) Fractional Shares. No fractional shares shall be issued upon conversion
of Series A Convertible Preferred Stock into Common Stock. All fractional shares
shall be rounded up to the nearest whole share.

     (f) Share Reorganization. If and whenever the Corporation shall:

          (i)  subdivide the  outstanding  shares of Common Stock into a greater
     number of shares;

          (ii) consolidate the outstanding shares of Common Stock into a smaller
     number of shares;  (iii) issue Common Stock or securities  convertible into
     or  exchangeable  for shares of Common Stock as a stock  dividend to all or
     substantially all the holders of Common Stock; or

          (iv) make a  distribution  on the  outstanding  Common Stock to all or
     substantially  all the holders of Common  Stock  payable in Common Stock or
     securities convertible into or exchangeable for Common Stock;

any of such events being herein  called a "Share  Reorganization,"  then in each
such  case  the  applicable  Conversion  Price  shall  be  adjusted,   effective
immediately  after the  record  date at which the  holders  of Common  Stock are
determined for the purposes of the Share Reorganization or, if no record date is
fixed,  the  effective  date of the Share  Reorganization,  by  multiplying  the
applicable  Conversion  Price in effect on such record or effective date, as the
case may be, by a fraction of which:

               (A) the  numerator  shall be the number of shares of Common Stock
          outstanding on such record or effective date (without giving effect to
          the transaction); and

               (B) the denominator shall be the number of shares of Common Stock
          outstanding   after  giving  effect  to  such  Share   Reorganization,
          including, in the case of a

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distribution of securities convertible into or exchangeable for shares of Common
Stock,  the number of shares of Common Stock that would have been outstanding if
such  securities  had been  converted into or exchanged for Common Stock on such
record or effective date.

     (g) Rights Offering.  If and whenever the Corporation shall issue to all or
substantially all the holders of Common Stock, rights, options or warrants under
which such holders are entitled,  during a period expiring not more than 45 days
after the record date of such issue,  to subscribe for or purchase  Common Stock
(or  securities  convertible  into or  exchangeable  or  exercisable  for equity
securities  "Derivative  Securities"),  at a price per share (or, in the case of
securities  convertible into or exchangeable for Common Stock, at an exchange or
conversion price per share at the date of issue of such securities) of less than
95% of the Closing  Bid Price of the Common  Stock on such record date (any such
event  being  herein  called a  "Rights  Offering"),  then in each such case the
applicable  Conversion Price shall be adjusted,  effective immediately after the
record date at which holders of Common Stock are  determined for the purposes of
the Rights Offering, by multiplying the applicable Conversion Price in effect on
such record date by a fraction of which:

          (i) the numerator shall be the sum of:

               (A) the  number of shares of  Common  Stock  outstanding  on such
          record date; and

               (B) a number obtained by dividing: either, (i) the product of the
          total number of shares of Common Stock so offered for  subscription or
          purchase  and the price at which such shares are so  offered,  or (II)
          the  product of the maximum  number of shares of Common  Stock into or
          for which the  convertible or  exchangeable  securities so offered for
          subscription  or  purchase  may be  converted  or  exchanged  and  the
          conversion or exchange price of such  securities,  or, as the case may
          be, by the Closing Bid Price of the Common  Stock on such record date;
          and

          (ii) the denominator shall be the sum of:

               (A) the  number of shares of  Common  Stock  outstanding  on such
          record date; and

               (B)  the  number  of  shares  of  Common  Stock  so  offered  for
          subscription  or purchase (or, in the case of  Derivative  Securities,
          the  maximum  number of shares of Common  Stock for or into  which the
          securities so offered for subscription or purchase may be converted or
          exchanged).  To the extent that such  rights,  options or warrants are
          not  exercised  prior  to the  expiry  time  thereof,  the  applicable
          Conversion Price shall be readjusted effective  immediately after such
          expiry time to the applicable  Conversion  Price which would then have
          been in  effect  upon  the  number  of  shares  of  Common  Stock  (or
          Derivative  Securities)  actually  delivered upon the exercise of such
          rights, options or warrants.

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     (h) Special  Distribution.  If and whenever the Corporation  shall issue or
distribute to all or substantially all the holders of Common Stock:

          (i) shares of the Corporation of any class, other than Common Stock;

          (ii) rights, options or warrants; or

          (iii)  any other  assets  (excluding  cash  dividends  and  equivalent
     dividends in shares paid in lieu of cash dividends in the ordinary course);

and if such issuance or distribution does not constitute a Share  Reorganization
or  a  Rights   Offering   (any  such  event  being  herein  called  a  "Special
Distribution"),  then in each such case the applicable Conversion Price shall be
adjusted,  effective  immediately  after the record date at which the holders of
Common  Stock are  determined  for  purposes  of the  Special  Distribution,  by
multiplying the applicable  Conversion  Price in effect on such record date by a
fraction of which: the numerator shall be the difference between (x) the product
of the number of shares of Common Stock  outstanding on such record date and the
Closing  Bid Price of the  Common  Stock on such date;  and (y) the fair  market
value, as determined by the Directors (whose determination shall be conclusive),
to the  holders  of  Common  Stock of the  shares,  rights,  options,  warrants,
evidences of  indebtedness  or other assets issued or distributed in the Special
Distribution  (net of any  consideration  paid therefor by the holders of Common
Stock),  and the  denominator  shall be the  product  of the number of shares of
Common  Stock  outstanding  on such record date and the Closing Bid Price of the
Common Stock on such date.

     (i) Capital Reorganization. If and whenever there shall occur:

          (i) a reclassification  or redesignation of the shares of Common Stock
     or any change of the shares of Common Stock into other  shares,  other than
     in a Share Reorganization;

          (ii) a consolidation,  merger or amalgamation of the Corporation with,
     or into another body corporate; or

          (iii) the  transfer of all or  substantially  all of the assets of the
     Corporation to another body corporate;

(any such event being herein  called a "Capital  Reorganization"),  then in each
such case the holder who exercises the right to convert  Convertible  Debentures
after the  effective  date of such Capital  Reorganization  shall be entitled to
receive and shall accept, upon the exercise of such right, in lieu of the number
of shares of Common Stock to which such holder was theretofore entitled upon the
exercise of the conversion  privilege,  the aggregate  number of shares or other
securities or property of the  Corporation  or of the body  corporate  resulting
from such Capital  Reorganization  that such holder would have been  entitled to
receive as a result of such Capital  Reorganization  if, on the  effective  date
thereof,  such  holders  had been the  holder of the  number of shares of Common
Stock to which such holder was theretofore  entitled upon conversion;  provided,
however, that no such

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Capital Reorganization shall be consummated in effect unless all necessary steps
shall have been taken so that such  holders  shall  thereafter  be  entitled  to
receive such number of shares or other  securities of the  Corporation or of the
body corporate resulting from such Capital Reorganization, subject to adjustment
thereafter in accordance with provisions the same, as nearly as may be possible,
as those contained above.

     (j) Conversion Price Adjustments. In case at any time and from time to time
the Corporation shall issue any shares of Common Stock or Derivative  Securities
(the number of shares so issued, or issuable upon conversion or exercise of such
Derivative Securities, as applicable, being referred to as "Additional Shares of
Common  Stock") for  consideration  less than the then  Closing Bid Price at the
date of issuance of such shares of Common Stock or such  Derivative  Securities,
in each such case the Conversion Price shall,  concurrently  with such issuance,
be adjusted by multiplying the Conversion Price  immediately prior to such event
by a  fraction:  (i) the  numerator  of which  shall be the  number of shares of
Common Stock  outstanding  immediately  prior to the issuance of such Additional
Shares of Common  Stock  plus the  number  of  shares of Common  Stock  that the
aggregate consideration received by the Corporation for the total number of such
Additional  Shares of Common Stock so issued  would  purchase at the Closing Bid
Price and (ii) the  denominator of which shall be the number of shares of Common
Stock  outstanding  immediately  prior to the issuance of  Additional  Shares of
Common Stock plus the number of such Additional Shares of Common Stock so issued
or sold.

     (k) Conversion Price  Adjustment  Rules. The following terms and procedures
shall be  applicable to  adjustments  to the  Conversion  Price made pursuant to
Paragraphs 5(f) through (j):

          (i) no adjustment in the applicable Conversion Price shall be required
     unless  such  adjustment  would  result  in a change  of at least 1% in the
     applicable  Conversion Price then in effect,  provided,  however,  that any
     adjustments  which,  but for the provisions of this clause would  otherwise
     have been  required  to be made,  shall be carried  forward  and taken into
     account in any subsequent adjustment;

          (ii) if any event occurs of the type  contemplated  by the  adjustment
     provisions  of this  Paragraph  5 but not  expressly  provided  for by such
     provisions,  the  Corporation  will give  notice of such event as  provided
     herein,  and the Corporation's  board of directors will make an appropriate
     adjustment in the Conversion Price so that the rights of the holders of the
     applicable Security shall not be diminished by such event; and

          (iii) if a  dispute  shall  at any  time  arise  with  respect  to any
     adjustment  of the  applicable  Conversion  Price,  such  dispute  shall be
     conclusively  determined by the auditors of the Corporation or, if they are
     unable or unwilling to act, by a firm of independent  chartered accountants
     selected by the Directors and any such determination  shall be binding upon
     the  Corporation  and the  holders  of the Series A  Convertible  Preferred
     Stock.

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<PAGE>

     (l) Certificate as to Adjustment.  The Corporation  shall from time to time
promptly  after the  occurrence of any event which requires an adjustment in the
applicable  Conversion  Price deliver to the holders of the Series A Convertible
Preferred  Stock a certificate  specifying the nature of the event requiring the
adjustment,  the amount of the adjustment  necessitated  thereby, the applicable
Conversion  Price after giving effect to such  adjustment and setting forth,  in
reasonable  detail,  the  method of  calculation  and the facts  upon which such
calculation is based.

     (m) Conversion  Default Payments.  If at any time a Notice of Conversion is
submitted  and (x) the  Corporation  does not  have  sufficient  authorized  but
unissued  shares of Common Stock  available to effect such conversion in full in
accordance  with the  provisions of this  Paragraph 5 or (y) the  Corporation is
prohibited by its Principal Market to effect such conversion in full as provided
below  without  stockholder  approval  (each,  a  "Conversion   Default"),   the
Corporation  shall  issue to the holders of the Series A  Convertible  Preferred
Stock exercising such conversion rights, all of the shares of Common Stock which
are then  available  to effect  such  conversion.  The  portion of this Series A
Convertible  Preferred Stock which the holder included in its Conversion  Notice
and which exceeds the amount which is then  convertible into available shares of
Common  Stock (the  "Excess  Amount")  shall,  notwithstanding  anything  to the
contrary  contained  herein,  not be convertible into Common Stock in accordance
with the terms hereof  until (and at the holder's  option at any time after) the
date additional shares of Common Stock are authorized by the Corporation, or its
stockholders,  as  applicable,  at which  time the  Conversion  Price in respect
thereof shall be the lower of (i) the Conversion Price on the Conversion Default
Date (as defined  below) and (ii) the Conversion  Price on the  Conversion  Date
thereafter  elected by the holder in respect thereof.  The Corporation shall pay
to the holder payments  ("Conversion Default Payments") for a Conversion Default
in the  amount of (N/365) x .24 x the Excess  Amount on the  Conversion  Date in
respect of the Conversion Default (the "Conversion Default Date"), where N = the
number of days from the Conversion Default Date to the date (the  "Authorization
Date") that the Corporation,  or its stockholders,  as applicable,  authorizes a
sufficient  number of shares of Common Stock to effect  conversion  of the total
number of  outstanding  shares  of Series A  Convertible  Preferred  Stock.  The
Corporation  shall use its best efforts to authorize,  or cause its stockholders
to  authorize  within 40 days of the  occurrence  of a  Conversion  Default,  as
applicable, a sufficient number of shares of Common Stock as soon as practicable
following the earlier of (i) such time that the holder  notifies the Corporation
or that the Corporation otherwise becomes aware that there are or likely will be
insufficient  shares to allow  full  conversion  thereof  and (ii) a  Conversion
Default. The Corporation shall send notice to the holder of the authorization of
additional  shares of Common  Stock,  the  Authorization  Date and the amount of
holder's accrued  Conversion  Default Payments.  The accrued  Conversion Default
Payments for each calendar month shall be paid in cash by the fifth business day
of the month following the month in which it has accrued.

     6.   Redemption of Series A Convertible Preferred Stock.

     (a) Mandatory Redemption Date. If, upon the occurrence of the events listed
in Paragraphs  6(a)(i) through (vii) below,  there remain issued and outstanding
any shares of Series A Convertible  Preferred Stock,  then the Corporation shall
be required to redeem all of the

                                       10
<PAGE>

outstanding  shares of the  Series A  Convertible  Preferred  Stock,  within ten
business days of such occurrence,  for cash at a redemption  price  ("Redemption
Price")  equal to (x) the  number  of  shares of  Common  Stock  into  which the
outstanding   Series  A  Convertible   Preferred  Stock  are  then  convertible,
multiplied  by (y) the Average  Closing  Bid Price of Common  Stock for the five
Trading Days as reported by Bloomberg,  LP immediately  prior to the date of the
event causing such  redemption  of the shares of Series A Convertible  Preferred
Stock:

          (i) the second anniversary of the Original Issuance Date;

          (ii) Upon (w) the  occurrence  of a Change in Control of the  Company,
     (x) a transfer of all or substantially  all of the assets of the Company to
     any Person in a single transaction or series of related transactions, (y) a
     consolidation,  merger or  amalgamation of the Company with or into another
     Person in which the  Company  is not the  surviving  entity  (other  than a
     merger which is effected solely to change the jurisdiction of incorporation
     of the Company and results in a reclassification, conversion or exchange of
     outstanding  shares of Common  Stock  solely into  shares of Common  Stock)
     (each of items (w), (x) and (y) being  referred to as a "Sale  Event"),  or
     (z) the occurrence of a Registration  Default which continues uncured for a
     period of ten (10) days.

          (iii)  Upon the  issuance  of the  Maximum  Number of  Shares  and the
     failure within 40 days of such issuance to obtain  shareholder  approval to
     issue  additional  shares of Common  Stock,  the Company  shall  redeem the
     outstanding Series A Convertible Preferred Stock for the Redemption Price.

          (iv)  failure by the Company to pay or repay when due, all or any part
     of the  principal  and interest on the  Company's  $2,500,000  Bridge Note,
     $1,850,000 Bridge Note or $3,000,000 Bridge Note, held by Purchaser;

          (v) the  trading in the Common  Stock  shall  have been  suspended  or
     delisted by the  Commission  or by the Nasdaq Stock Market  (except for any
     suspension of trading of limited duration solely to permit dissemination of
     material information regarding the Company and except if, at the time there
     is any suspension or delisting on the Nasdaq Stock Market, the Common Stock
     is then  listed  and  approved  for  trading  on either  the New York Stock
     Exchange,  the American Stock Exchange, the Nasdaq Stock Market's Small Cap
     Market, or the Nasdaq Bulletin Board within ten (10) Trading Days thereof);

          (vi) the Registration Statement shall not have been declared effective
     by the Commission by the Required  Effectiveness Date, or the effectiveness
     of  any  registration  statement  required  to be  filed  pursuant  to  the
     Registration  Rights Agreement shall not be maintained for the Registration
     Maintenance Period, in each case which results in the Company incurring the
     Default Fee for a period in excess of 45 days.

     (b) Right to Redeem Series A Convertible  Preferred Stock. At any time, and
from time to time, on and after the Original Issuance Date, the Corporation may,
in its sole  discretion,  but shall not be obligated to, redeem,  in whole or in
part, the then issued and outstanding

                                       11
<PAGE>

shares of Series A Convertible  Preferred  Stock, at the Redemption  Price.  The
Company  shall select the Shares of Series A Convertible  Preferred  Stock to be
redeemed in any redemption in which not all of the outstanding  Shares of Series
A Convertible Preferred Stock are to be redeemed so that the ratio of the Shares
of Series A Convertible  Preferred  Stock of each holder selected for redemption
to the total Shares of Series A Convertible Preferred Stock owned by that holder
shall  be the  same as the  ratio of all such  Shares  of  Series A  Convertible
Preferred  Stock  selected  for  redemption  bears  to the  total  of  all  then
outstanding Shares of Series A Convertible Preferred Stock.

     (c) Notice of  Redemption.  The  Corporation  shall  provide each holder of
record of the Series A Convertible  Preferred  Stock being redeemed with written
notice of redemption  pursuant to Paragraph 6(b) (the  "Redemption  Notice") not
less  than ten days  prior to any date  stipulated  by the  Corporation  for the
redemption of the Series A Convertible  Preferred Stock (the "Redemption Date").
The Redemption  Notice shall contain (i) the Redemption Date, (ii) the number of
shares of Series A Convertible Preferred Stock to be redeemed from the holder to
whom the Redemption Notice is delivered, (iii) instructions for surrender to the
Corporation of the certificate or certificates representing the shares of Series
A  Convertible  Preferred  Stock to be  redeemed,  and (iv) a procedure  for the
holder to specify the number of shares of Series A Convertible  Preferred  Stock
to be converted into Common Stock pursuant to Subparagraph (d) below.

     (d) Right to Convert Series A Convertible  Preferred  Stock upon Receipt of
Redemption Notice.  Upon receipt of the Redemption Notice, the recipient thereof
shall have the option, at its sole election, to submit a Notice of Conversion to
a portion of the Series A Convertible  Preferred  Stock called for redemption in
the  Redemption  Notice;  provided that such Notice of  Conversion  will only be
honored by the  Corporation if the redemption is not completed by the Redemption
Date.

     (e) Surrender of  Certificates;  Payment of Redemption  Price. On or before
the Redemption Date, each holder of the shares of Series A Convertible Preferred
Stock to be redeemed shall  surrender the required  certificate or  certificates
representing  such  shares to the  Corporation,  in the  manner and at the place
designated  in the  Redemption  Notice,  and upon  payment  to the holder of the
Redemption  Price,  each such  surrendered  certificate  shall be  canceled  and
retired. If payment of such Redemption Price is not made in full by the ten days
following  the Notice of  Redemption,  the holder  shall again have the right to
convert the Series A  Convertible  Preferred  Stock as  provided in  Paragraph 5
hereof and the  Corporation's  right of redemption  under Paragraph 6(b),  shall
cease  to exist  from  and  after  the  Redemption  Date.  If a  certificate  is
surrendered and all the shares  evidenced  thereby are not being  redeemed,  the
Corporation  shall issue new  certificates  to be registered in the names of the
person(s)  whose name(s)  appear(s) as the owners on the respective  surrendered
certificates and deliver such certificate to such person(s).

     7. Notices. In case at any time:

     (a) the  Corporation  shall  declare  any  dividend  upon its Common  Stock
payable in cash or stock or make any other pro rata  distribution to the holders
of its Common Stock; or

                                       12
<PAGE>

     (b) the Corporation shall offer for subscription pro rata to the holders of
its Common Stock any additional shares of stock of any class or other rights; or

     (c) there  shall  occur any of the  events  set forth in  Paragraphs  5 (f)
through (k) hereof,  or a  consolidation  or merger of the  Corporation  with or
into, or a sale of all or  substantially  all its assets to,  another  entity or
entities; or

     (d) there shall be a voluntary or involuntary  dissolution,  liquidation or
winding up of the Corporation;

then,  in any one or more of said cases,  the  Corporation  shall give, by first
class mail, postage prepaid, or by telex or facsimile or by recognized overnight
delivery service to non-U.S.  residents,  addressed to each holder of any shares
of Series A Convertible  Preferred  Stock at the address of such holder as shown
on the books of the  Corporation,  at least 10 days' prior written notice of the
date on which  the books of the  Corporation  shall  close or a record  shall be
taken for such dividend,  distribution or subscription rights or for determining
rights  to vote in  respect  of any such  event set  forth in  Paragraphs  5 (f)
through (k) hereof,  consolidation,  merger, sale,  dissolution,  liquidation or
winding up. Such notice in accordance  with the foregoing  clause (i) shall also
specify, in the case of any such dividend,  distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto and (ii)
shall  also  specify  the date on which the  holders  of Common  Stock  shall be
entitled  to  exchange  their  Common  Stock for  securities  or other  property
deliverable upon such reorganization,  reclassification,  consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be.

     8. Stock to be Reserved.  The Corporation,  upon the effective date of this
Certificate of Designations,  has a sufficient  number of shares of Common Stock
available to reserve for issuance upon the conversion of all outstanding  shares
of Series A  Convertible  Preferred  Stock.  The  Corporation  will at all times
reserve and keep  available out of its authorized  Common Stock,  solely for the
purpose of issuance upon the conversion of Series A Convertible  Preferred Stock
as herein  provided,  such  number of  shares of Common  Stock as shall  then be
issuable upon the conversion of all  outstanding  shares of Series A Convertible
Preferred  . The  Corporation  covenants  that all shares of Common  Stock which
shall  be  so  issued  shall  be  duly  and  validly  issued,   fully  paid  and
non-assessable.  The  Corporation  will take all such  action as may be so taken
without violation of any applicable law or regulation,  or of any requirement of
any national  securities  exchange  upon which the Common Stock may be listed to
have a sufficient  number of authorized  but unissued  shares of Common Stock to
issue  upon  conversion  of  the  Series  A  Convertible  Preferred  Stock.  The
Corporation  will not take any action  which  results in any  adjustment  of the
conversion  rights if the total  number of  shares of Common  Stock  issued  and
issuable after such action upon conversion of the Series A Convertible Preferred
Stock would exceed the total number of shares of Common Stock then authorized by
the Corporation's Articles of Incorporation.

                                       13
<PAGE>

     9. No Reissuance of Series A Convertible  Preferred Stock. Shares of Series
A Convertible Preferred Stock which are converted into shares of Common Stock as
provided herein shall not be reissued.

     10. Issue Tax. The issuance of certificates for shares of Common Stock upon
conversion of Series A Convertible  Preferred Stock shall be made without charge
to the holder for any United States  issuance tax in respect  thereof,  provided
that the  Corporation  shall not be required to pay any tax which may be payable
in  respect  of any  transfer  involved  in the  issuance  and  delivery  of any
certificate  in a name other than that of the holder of the Series A Convertible
Preferred Stock which is being converted.

     11. Closing of Books.  The  Corporation  will at no time close its transfer
books against the transfer of any Series A Convertible Preferred Stock or of any
shares of Common Stock issued or issuable  upon the  conversion of any shares of
Series A Convertible  Preferred  Stock in any manner which  interferes  with the
timely  conversion of such Series A Convertible  Preferred Stock,  except as may
otherwise be required to comply with applicable securities laws.

     12.  Definitions.  As used in this  Certificate of  Designations,  the term
"Common Stock" shall mean and include the Corporation's authorized Common Stock,
$0.08 par value,  as  constituted  on the date of filing of this  Certificate of
Designations  authorizing  the  issuance of the Series A  Convertible  Preferred
Stock,  and shall also include any capital stock of any class of the Corporation
thereafter  authorized  which  shall  neither  be  limited  to a  fixed  sum  or
percentage  of par value in  respect  of the  rights of the  holders  thereof to
participate  in dividends  nor entitled to a preference in the  distribution  of
assets upon the voluntary or involuntary liquidation,  dissolution or winding up
of the  Corporation;  provided that the shares of Common Stock  receivable  upon
conversion of shares of Series A Convertible  Preferred Stock shall include only
shares  designated as Common Stock of the  Corporation  on the date of filing of
this instrument,  or in case of any reorganization,  reclassification,  or stock
split of the  outstanding  shares  thereof,  the  stock,  securities  or  assets
provided for in Paragraphs 5(f) through (k). Any capitalized  terms used in this
Certificate of  Designations  but not defined herein shall have the meanings set
forth  in that  certain  Securities  Purchase  Agreement  ("Securities  Purchase
Agreement") by the Corporation and the other persons  signatory thereto relating
to the  issuance  and sale of the Series A  Convertible  Preferred  Stock to the
holders of the Series A  Convertible  Preferred  Stock,  a copy of which will be
provided to any stockholder of the Corporation  upon request to the Secretary of
the Corporation, without charge.

     13. Loss,  Theft,  Destruction of Preferred Stock. Upon receipt of evidence
satisfactory to the Corporation of the loss, theft, destruction or mutilation of
certificates representing shares of Series A Convertible Preferred Stock and, in
the case of any such loss,  theft or  destruction,  upon  receipt  of  indemnity
reasonably  satisfactory to the Corporation (which shall not include the posting
of any  bond),  or,  in the  case of any such  mutilation,  upon  surrender  and
cancellation  of the  Series A  Convertible  Preferred  Stock  certificate,  the
Corporation  shall  make,  issue  and  deliver,  in lieu of such  lost,  stolen,
destroyed or mutilated  certificates  for Series A Convertible  Preferred Stock,
new certificates for Series A Convertible Preferred Stock of like tenor.

                                       14
<PAGE>

     14. Who Deemed Absolute Owner. The Corporation may deem the person in whose
name the Series A  Convertible  Preferred  Stock  shall be  registered  upon the
registry books of the Corporation to be, and may treat it as, the absolute owner
of the Series A Convertible Preferred Stock for the purpose of conversion of the
Series  A  Convertible  Preferred  Stock  and for all  other  purposes,  and the
Corporation  shall  not be  affected  by any  notice to the  contrary.  All such
payments  and such  conversion  shall be valid  and  effectual  to  satisfy  and
discharge the liability  upon the Series A  Convertible  Preferred  Stock to the
extent of the sum or sums so paid or the conversion so made.

     15. Register. The Corporation shall keep at its principal office a register
in which the  Corporation  shall  provide for the  registration  of the Series A
Convertible  Preferred  Stock.  Upon any  transfer  of the Series A  Convertible
Preferred Stock in accordance with the provisions  hereof, the Corporation shall
register such transfer on the Series A Convertible Preferred Stock register.

     16.  Headings.  The  headings  of  the  Sections  of  this  Certificate  of
Designations  are inserted for convenience  only and do not constitute a part of
this Certificate of Designations.

     IN WITNESS WHEREOF,  Denis J.  Fitzpatrick,  Chief Financial Officer of the
Corporation,  under  penalties of perjury,  does hereby declare and certify that
this is the act and deed of the Corporation and the facts stated herein are true
and accordingly has signed this Certificate of Designations as of this _____ day
of July, 2000.

                                              AMERICAN INTERNATIONAL PETROLEUM
                                              CORPORATION

                                              By:
                                                  ------------------------------
                                                  Denis J. Fitzpatrick
                                                  Chief Financial Officer

                                       15EXHIBIT 4.3

                      FORM OF REGISTRATION RIGHTS AGREEMENT

<PAGE>

                          Registration Rights Agreement

                                   dated as of

                                  July 18, 2000

                                 by and between

                  American International Petroleum Corporation

                                       and

                      GCA Strategic Investment Fund Limited

<PAGE>

                                TABLE OF CONTENTS

1.       Introduction........................................................1
         1.2      Definition of Securities...................................1

2.       Registration under Securities Act, etc..............................1
         2.1      Mandatory Registration.....................................1
                  (a)      Registration of Registrable Securities............1
                  (b)      Registration Statement Form.......................2
                  (c)      Expenses..........................................2
                  (d)      Effective Registration Statement..................2
                  (e)      Plan of Distribution..............................2
         2.2      Incidental Registration....................................2
                  (a)      Right to Include Registrable Securities...........2
                  (b)      Priority in Incidental Registrations..............3
         2.3      Registration Procedures....................................4
         2.4      Underwritten Offerings.....................................7
                  (a)      Incidental Underwritten Offerings.................7
                  (b)      Holdback Agreements...............................7
                  (c)      Participation in Underwritten Offerings...........7
         2.5      Preparation; Reasonable Investigation......................8
         2.6      Registration Default Fee...................................8
         2.7      Indemnification............................................8
                  (a)      Indemnification by the Company....................8
                  (b)      Indemnification by the Holders....................9
                  (c)      Notices of Claims, etc............................9
                  (d)      Other Indemnification............................10
                  (e)      Indemnification Payments.........................10
                  (f)      Contribution.....................................10

3.       Definitions........................................................11

4.       Rule 144...........................................................13

5.       Amendments and Waivers.............................................14

6.       Nominees for Beneficial Owners.....................................14

7.       Notices............................................................14

8.       Assignment.........................................................14

9.       Descriptive Headings...............................................15

                                        i
<PAGE>

10.      Governing Law......................................................15

11.      Counterparts.......................................................15

12.      Entire Agreement...................................................15

13.      Severability.......................................................15

                                       ii
<PAGE>

                          REGISTRATION RIGHTS AGREEMENT

     REGISTRATION  RIGHTS  AGREEMENT  (this  "Agreement"),  dated as of July 18,
2000, between American International Petroleum Corporation, a Nevada corporation
(the  "Company"),  LKB  Financial,  LLC,  a Georgia  limited  liability  company
("LKB"), and GCA Strategic Investment Fund Limited (the "Fund").

     1. Introduction.

          1.1 Securities Purchase Agreement. The Company and the Fund have today
     executed  that  certain  Securities  Purchase  Agreement  (the  "Securities
     Purchase Agreement"), pursuant to which the Company has agreed, among other
     things, an aggregate number of the Company's Series A Convertible Preferred
     Stock,  $.01 par value  per share  (the  "Preferred  Shares")  equal to the
     Commitment  Amount to the Fund or its  successors,  assigns or  transferees
     (collectively,  the  "Holders")  and has the option to sell to the Fund the
     Renewed  Commitment  Amount  of  Preferred  Shares  as  set  forth  in  the
     Securities  Purchase  Agreement.  The Preferred Shares issuable pursuant to
     the Securities  Purchase  Agreement are convertible into an  indeterminable
     number of shares (the "Series A Conversion Shares") of the Company's common
     stock,  $.08 per share (the  "Common  Stock")  pursuant to the terms of the
     Preferred  Shares.  In  addition,  pursuant to the terms of the  Securities
     Purchase Agreement and the transactions  contemplated  thereby, the Company
     has agreed to issue to the Fund Common Stock Purchase Warrants  exercisable
     for  200,000  shares of the  Company's  Common  Stock at the Closing of the
     Initial  Takedown  and to  issue  to LKB  Common  Stock  Purchase  Warrants
     exercisable for 75,000 shares of the Company's  Common Stock at the closing
     of the Initial  Takedown  and each  Subsequent  Takedown (as such terms are
     defined in the Securities Purchase Agreement)  (collectively,  the "Warrant
     Shares").  The number of Series A Conversion  Shares and Warrant  Shares is
     subject   to   adjustment    upon   the   occurrence   of   stock   splits,
     recapitalizations and similar events occurring after the date hereof.

          1.2 Definition of Securities.  The Series A Conversion  Shares and the
     Warrant Shares are herein referred to as the "Securities."

     2. Registration under Securities Act, etc.

          2.1 Mandatory Registration.

          (a) Registration of Registrable Securities.  The Company shall prepare
     and  file  (i)  within  thirty  (30)  days  following  the  date  hereof  a
     registration statement covering the resale of the Registrable Securities in
     an amount equal to 22,000,000 shares of Common Stock and (ii) within thirty
     (30)  days  following  the  exercise  of its  option  to sell  the  Renewed
     Commitment   Amount  of  Preferred   Shares  covering  the  resale  of  the
     Registrable  Securities in an amount equal to  18,000,000  shares of Common
     Stock (each a  "Registration  Statement").  The Company  shall use its best
     efforts to cause each  Registration  Statement to be declared  effective by
     the  Commission  on the  earlier  of (i) 60 days  following  the  date  the
     Registration Statement is filed, (ii) five (5) business days

                                        1
<PAGE>

     following  the  receipt  of a  "No  Review"  or  similar  letter  from  the
     Commission or (iii) the fifth business day following the day the Commission
     notifies the Company that it has completed  its review of the  Registration
     Statement and that such  Registration  Statement is eligible to be declared
     effective (the "Required  Effectiveness  Date").  Nothing  contained herein
     shall be  deemed  to limit  the  number  of  Registrable  Securities  to be
     registered by the Company hereunder.  As a result,  should the Registration
     Statement  not  relate  to the  maximum  number of  Registrable  Securities
     acquired  by (or  potentially  acquirable  by)  the  holders  thereof  upon
     conversion  of the  Preferred  Shares,  or  exercise  of the  Common  Stock
     Purchase  Warrants  described  in  Section 1 above,  the  Company  shall be
     required to promptly file a separate registration statement (utilizing Rule
     462 promulgated under the Exchange Act, where applicable)  relating to such
     Registrable  Securities which then remain  unregistered.  The provisions of
     this Agreement shall relate to any such separate registration  statement as
     if it were an amendment to the Registration Statement.

          (b) Registration Statement Form.  Registrations under this Section 2.1
     shall be on Form S-3 or such  other  appropriate  registration  form of the
     Commission as shall permit the disposition of such  Registrable  Securities
     in accordance with the intended method or methods of disposition  specified
     by the Fund; provided,  however,  such intended method of disposition shall
     not include an underwritten offering of the Registrable Securities.

          (c)  Expenses.  The  Company  will pay all  Registration  Expenses  in
     connection with any registration required by this Section 2.1.

          (d)  Effective   Registration   Statement.  A  registration  requested
     pursuant to this Section 2.1 shall not be deemed to have been  effected (i)
     unless a registration  statement with respect thereto has become  effective
     within the time period specified herein, provided that a registration which
     does not become effective after the Company filed a registration  statement
     with  respect  thereto  solely by reason of the  refusal  to proceed of any
     holder of  Registrable  Securities  (other than a refusal to proceed  based
     upon the advice of counsel in the form of a letter  signed by such  counsel
     and provided to the Company  relating to a disclosure  matter  unrelated to
     such holder)  shall be deemed to have been  effected by the Company  unless
     the holders of the  Registrable  Securities  shall have  elected to pay all
     Registration Expenses in connection with such registration,  (ii) if, after
     it has become  effective,  such  registration  becomes  subject to any stop
     order,  injunction  or other  order  or  extraordinary  requirement  of the
     Commission  or other  governmental  agency or court for any reason or (iii)
     if, after it has become effective, such registration ceases to be effective
     for more than an aggregate of twenty (20) days.

          (e)  Plan  of  Distribution.   The  Company  hereby  agrees  that  the
     Registration  Statement  shall  include  a  plan  of  distribution  section
     reasonably acceptable to the Fund.

     2.2 Incidental Registration.

          (a) Right to Include Registrable Securities.  If at any time after the
     date  hereof but  before  the third  anniversary  of the date  hereof,  the
     Company proposes to register any of

                                       2
<PAGE>

     its securities  under the  Securities Act (other than by a registration  in
     connection  with  an  acquisition  in  a  manner  which  would  not  permit
     registration of Registrable Securities for sale to the public, on Form S-8,
     or any successor  form thereto,  on Form S-4, or any successor form thereto
     and other than pursuant to Section 2.1), on an  underwritten  basis (either
     best-efforts  or  firm-commitment),  then,  the Company will each such time
     give prompt  written notice to all Holders of its intention to do so and of
     such Holders'  rights under this Section 2.2.  Upon the written  request of
     any such Holder made within  twenty (20) days after the receipt of any such
     notice (which request shall specify the Registrable  Securities intended to
     be  disposed of by such Holder an and the  intended  method of  disposition
     thereof), the Company will, subject to the terms of this Agreement, use its
     commercially  reasonable best efforts to effect the registration  under the
     Securities Act of the Registrable  Securities,  to the extent  requisite to
     permit the disposition (in accordance with the intended  methods thereof as
     aforesaid) of such Registrable Securities so to be registered, by inclusion
     of such Registrable  Securities in the registration  statement which covers
     the securities which the Company proposes to register, provided that if, at
     any time after written  notice of its intention to register any  securities
     and prior to the  effective  date of the  registration  statement  filed in
     connection  with such  registration,  the Company  shall  determine for any
     reason either not to register or to delay  registration of such securities,
     the Company may, at its election, give written notice of such determination
     to each Holder and,  thereupon,  (i) in the case of a determination  not to
     register,  shall be relieved of this obligation to register any Registrable
     Securities  in  connection  with  such   registration  (but  not  from  its
     obligation  to pay the  Registration  Expenses  in  connection  therewith),
     without  prejudice,  however,  to the  rights of any  holder or  holders of
     Registrable  Securities entitled to do so to request that such registration
     be effected as a registration  under Section 2.1, and (ii) in the case of a
     determination to delay registering, shall be permitted to delay registering
     any Registrable Securities, for the same period as the delay in registering
     such other  securities.  No  registration  effected  under this Section 2.2
     shall relieve the Company of its obligation to effect any registration upon
     request  under  Section 2.1, nor shall any such  registration  hereunder be
     deemed to have been effected  pursuant to Section 2.1. The Company will pay
     all  Registration   Expenses  in  connection  with  each   registration  of
     Registrable  Securities  requested  pursuant to this Section 2.2. The right
     provided the Holders of the Registrable Securities pursuant to this Section
     shall be exercisable at their sole  discretion and will in no way limit any
     of the  Company's  obligations  to pay the  Securities  according  to their
     terms.

          (b) Priority in Incidental Registrations.  If the managing underwriter
     of the underwritten  offering contemplated by this Section 2.2 shall inform
     the Company  and  holders of the  Registrable  Securities  requesting  such
     registration  by  letter  of its  belief  that  the  number  of  securities
     requested to be included in such registration  exceeds the number which can
     be  sold  in  such  offering,   then  the  Company  will  include  in  such
     registration,  to the extent of the number  which the Company is so advised
     can be sold in such offering,  (i) first securities proposed by the Company
     to be sold for its own account, and (ii) second Registrable  Securities and
     securities of other selling  security  holders  requested to be included in
     such  registration  pro rata on the  basis of the  number of shares of such
     securities  so  proposed  to be  sold  and  so  requested  to be  included;
     provided,  however,  the  holders  of  Registrable  Securities  shall  have
     priority to all shares  sought to be included by officers and  directors of
     the  Company  as  well  as  holders  of ten  percent  (10%)  or more of the
     Company's Common Stock.

                                        3
<PAGE>

     2.3  Registration  Procedures.  If and  whenever the Company is required to
effect the  registration of any Registrable  Securities under the Securities Act
as provided  in Section  2.1 and, as  applicable,  2.2,  the Company  shall,  as
expeditiously as possible:

               (i)  prepare  and  file  with  the  Commission  the  Registration
          Statement,   or  amendments   thereto,  to  effect  such  registration
          (including such audited financial statements as may be required by the
          Securities Act or the rules and  regulations  promulgated  thereunder)
          and thereafter use its  commercially  reasonable best efforts to cause
          such   registration   statement  to  be  declared   effective  by  the
          Commission, as soon as practicable, but in any event no later than the
          Required  Effectiveness Date (with respect to a registration  pursuant
          to  Section  2.1);   provided,   however,   that  before  filing  such
          registration  statement or any  amendments  thereto,  the Company will
          furnish  to  the  counsel  selected  by  the  holders  of  Registrable
          Securities  which are to be included in such  registration,  copies of
          all such documents proposed to be filed;

               (ii) with  respect  to any  registration  statement  pursuant  to
          Section 2.1,  prepare and file with the Commission such amendments and
          supplements to such registration  statement and the prospectus used in
          connection  therewith as may be  necessary  to keep such  registration
          statement   effective  and  to  comply  with  the  provisions  of  the
          Securities  Act with  respect to the  disposition  of all  Registrable
          Securities covered by such registration statement until the earlier to
          occur of six (6) years after the date of this Agreement(subject to the
          right of the Company to suspend the effectiveness thereof for not more
          than 10  consecutive  days or an  aggregate of 30 days in such six (6)
          years  period)  or such  time as all of the  securities  which are the
          subject  of  such  registration  statement  cease  to  be  Registrable
          Securities (such period, in each case, the  "Registration  Maintenance
          Period");

               (iii) furnish to each Holder of Registrable Securities covered by
          such  registration  statement such number of conformed  copies of such
          registration  statement  and of each  such  amendment  and  supplement
          thereto (in each case including all  exhibits),  such number of copies
          of the prospectus contained in such registration  statement (including
          each preliminary  prospectus and any summary prospectus) and any other
          prospectus   filed  under  Rule  424  under  the  Securities  Act,  in
          conformity with the requirements of the Securities Act, and such other
          documents,  as such Holder and  underwriter,  if any,  may  reasonably
          request in order to facilitate the public sale or other disposition of
          the Registrable Securities owned by such Holder;

               (iv) use its commercially  reasonable best efforts to register or
          qualify all  Registrable  Securities and other  securities  covered by
          such  registration  statement under such other securities laws or blue
          sky laws as any Holder thereof shall reasonably  request, to keep such
          registrations  or  qualifications  in  effect  for  so  long  as  such
          registration  statement  remains in effect,  and take any other action
          which may be reasonably  necessary to enable such Holder to consummate
          the disposition in such  jurisdictions of the securities owned by such
          Holder,  except  that the  Company  shall not for any such  purpose be
          required to qualify generally to do business as a foreign  corporation
          in any  jurisdiction  wherein it would not but for the requirements of
          this subdivision (iv) be obligated to be so qualified or to consent to
          general service of process in any such jurisdiction;

                                        4
<PAGE>

               (v) use its  commercially  reasonable  best  efforts to cause all
          Registrable  Securities  covered by such registration  statement to be
          registered  with or  approved by such other  governmental  agencies or
          authorities  as may be  necessary  to enable  the  Holder  or  Holders
          thereof to consummate the disposition of such Registrable Securities;

               (vi)  furnish to each Holder of  Registrable  Securities a signed
          counterpart,  addressed to such Holder, and the underwriters,  if any,
          of:

                    (A) an  opinion  of  counsel  for  the  Company,  dated  the
               effective  date  of  such  registration  statement  (or,  if such
               registration includes an underwritten public offering, an opinion
               dated   the  date  of  the   closing   under   the   underwriting
               agreement),reasonably  satisfactory in form and substance to such
               Holder)   including   that  the  prospectus  and  any  prospectus
               supplement forming a part of the Registration  Statement does not
               contain  an  untrue  statement  of a  material  fact  or  omits a
               material fact required to be stated therein or necessary in order
               to make the  statements  therein,  in light of the  circumstances
               under which they were made, not misleading, and

                    (B) a "comfort"  letter (or, in the case of any Person which
               does not satisfy the conditions for receipt of a "comfort" letter
               specified in Statement on Auditing  Standards  No. 72, an "agreed
               upon  procedures"  letter),  dated  the  effective  date  of such
               registration  statement  (and, if such  registration  includes an
               underwritten  public  offering,  a letter of like kind  dated the
               date of the closing under the underwriting agreement),  signed by
               the  independent   public  accountants  who  have  certified  the
               Company's  financial  statement  included  in  such  registration
               statement,  covering  substantially the same matters with respect
               to such  registration  statement  (and  the  prospectus  included
               therein)  and,  in the  case  of the  accountants'  letter,  with
               respect  to  events  subsequent  to the  date of  such  financial
               statements,  as are  customarily  covered in opinions of issuer's
               counsel and in accountants' letters delivered to the underwriters
               in underwritten public offerings of securities (with, in the case
               of an "agreed upon  procedures"  letter,  such  modifications  or
               deletions  as  may  be  required  under   Statement  on  Auditing
               Standards  No. 35) and, in the case of the  accountants'  letter,
               such  other  financial  matters,  and,  in the case of the  legal
               opinion,  such  other  legal  matters,  as  such  Holder  (or the
               underwriters, if any) may reasonably request;

               (vii) notify the Holders' Representative and its counsel promptly
          and  confirm  such  advice in writing  promptly  after the Company has
          knowledge thereof:

                    (A) when the Registration  Statement,  the prospectus or any
               prospectus supplement related thereto or post-effective amendment
               to the Registration  Statement has been filed,  and, with respect
               to the  Registration  Statement or any  post-effective  amendment
               thereto, when the same has become effective;

                    (B) of any  request  by the  Commission  for  amendments  or
               supplements  to the  Registration  Statement or the prospectus or
               for additional information;

                                        5
<PAGE>

                    (C) of the  issuance  by the  Commission  of any stop  order
               suspending the effectiveness of the Registration Statement or the
               initiation of any proceedings by any Person for that purpose; and

                    (D) of the receipt by the Company of any  notification  with
               respect to the suspension of the qualification of any Registrable
               Securities  for sale under the securities or blue sky laws of any
               jurisdiction  or the  initiation or threat of any  proceeding for
               such purpose;

               (viii) notify each Holder of  Registrable  Securities  covered by
          such registration  statement,  at any time when a prospectus  relating
          thereto is required to be delivered  under the  Securities  Act,  upon
          discovery  that,  or upon the  happening  of any  event as a result of
          which, the prospectus included in such registration statement, as then
          in effect, includes an untrue statement of a material fact or omits to
          state any material facts required to be stated therein or necessary to
          make  the  statements  therein  not  misleading  in the  light  of the
          circumstances  then  existing,  and at the  request of any such Holder
          promptly  prepare and furnish to such  Holder a  reasonable  number of
          copies of a supplement to or an amendment of such prospectus as may be
          necessary so that, as thereafter  delivered to the  purchasers of such
          securities, such prospectus shall not include an untrue statement of a
          material  fact or omit to state a material  fact required to be stated
          therein or necessary to make the statements  therein not misleading in
          the light of the circumstances then existing;

               (ix) use its best efforts to obtain the  withdrawal  of any order
          suspending  the  effectiveness  of the  Registration  Statement at the
          earliest possible moment;

               (x) otherwise  use its  commercially  reasonable  best efforts to
          comply with all applicable  rules and  regulations of the  Commission,
          and make  available to its  security  holders,  as soon as  reasonably
          practicable,  an earnings  statement  covering  the period of at least
          twelve months,  but not more than eighteen months,  beginning with the
          first  full  calendar   month  after  the   effective   date  of  such
          registration  statement,  which earnings  statement  shall satisfy the
          provisions  of  Section  11(a)  of the  Securities  Act and  Rule  158
          thereunder;

               (xi) enter into such  agreements  and take such other  actions as
          the Holders'  Representative  shall reasonably  request in writing (at
          the  expense of the  requesting  or  benefiting  Holders)  in order to
          expedite or facilitate the disposition of such Registrable Securities;
          and

               (xii) use its  commercially  reasonable  best efforts to list all
          Registrable  Securities covered by such registration  statement on any
          securities  exchange on which any of the  Registrable  Securities  are
          then listed.

     The Company may require each Holder of  Registrable  Securities as to which
any  registration  is being  effected to furnish the  Company  such  information
regarding such Holder and the distribution of such securities as the Company may
from time to time reasonably request in writing.

                                        6
<PAGE>

     The Company will not file any  registration  statement  pursuant to Section
2.1, or amendment thereto or any prospectus or any supplement thereto (including
such  documents  incorporated  by  reference  and proposed to be filed after the
initial   filing  of  the   Registration   Statement)   to  which  the  Holders'
Representative shall reasonably object,  provided that the Company may file such
documents in a form required by law or upon the advice of its counsel.

     The  Company   represents  and  warrants  to  each  holder  of  Registrable
Securities   that  it  has  obtained  all   necessary   waivers,   consents  and
authorizations   necessary  to  execute  this   Agreement  and   consummate  the
transactions  contemplated  hereby  other  than such  waivers,  consents  and/or
authorizations specifically contemplated by the Securities Purchase Agreement.

     Each Holder agrees that, upon receipt of any notice from the Company of the
occurrence  of any event of the kind  described  in  subdivision  (viii) of this
Section 2.3, such Holder will forthwith discontinue such Holder's disposition of
Registrable  Securities pursuant to the Registration  Statement relating to such
Registrable  Securities  until  such  Holder's  receipt  of  the  copies  of the
supplemented or amended  prospectus  contemplated by subdivision  (viii) of this
Section 2.3 and, if so directed by the Company,  will deliver to the Company (at
the Company's  expense) all copies,  other than permanent  file copies,  then in
such  Holder's  possession  of  the  prospectus  relating  to  such  Registrable
Securities current at the time of receipt of such notice.

     2.4 Underwritten Offerings.

     (a) Incidental  Underwritten Offerings. If the Company at any time proposes
to register any of its securities  under the Securities Act as  contemplated  by
Section 2.2 and such  securities are to be distributed by or through one or more
underwriters,  the  Company  will,  if  requested  by any Holder of  Registrable
Securities  as provided in Section 2.2 and subject to the  provisions of Section
2.2(a),  use its  commercially  reasonable  best  efforts  to  arrange  for such
underwriters to include all the Registrable Securities to be offered and sold by
such Holder among the securities to be distributed by such underwriters.

     (b) Holdback Agreements.  Subject to such other reasonable  requirements as
may be imposed by the  underwriter  as a condition  of  inclusion  of a Holder's
Registrable  Securities  in the  registration  statement,  each Holder agrees by
acquisition  of  Registrable   Securities,   if  so  required  by  the  managing
underwriter, not to sell, make any short sale of, loan, grant any option for the
purchase of, effect any public sale or distribution of or otherwise  dispose of,
except as part of such underwritten  registration,  any equity securities of the
Company,  during such  reasonable  period of time requested by the  underwriter;
provided however,  such period shall not exceed the 120 day period commencing 30
days prior to the commencement of such underwritten  offering and ending 90 days
following the completion of such underwritten offering.

     (c)  Participation  in  Underwritten  Offerings.  No Holder of  Registrable
Securities may participate in any underwritten offering under Section 2.2 unless
such  Holder  of  Registrable  Securities  (i)  agrees  to  sell  such  Person's
securities on the basis provided in any

                                        7
<PAGE>

underwriting arrangements approved,  subject to the terms and conditions hereof,
by the Holders of a majority of  Registrable  Securities  to be included in such
underwritten  offering  and (ii)  completes  and  executes  all  questionnaires,
indemnities,  underwriting  agreements and other documents (other than powers of
attorney)   required  under  the  terms  of  such   underwriting   arrangements.
Notwithstanding the foregoing,  no underwriting agreement (or other agreement in
connection   with  such  offering)  shall  require  any  Holder  of  Registrable
Securities to make an  representations  or warranties to or agreements  with the
Company or the underwriters other than  representations and warranties contained
in a  writing  furnished  by  such  Holder  expressly  for  use in  the  related
registration  statement or representations,  warranties or agreements  regarding
such Holder,  such Holder's  Registrable  Securities and such Holder's  intended
method of distribution and any other representation required by law.

     2.5  Preparation;   Reasonable   Investigation.   In  connection  with  the
preparation and filing of each  registration  statement under the Securities Act
pursuant to this  Agreement,  the Company  will give the Holders of  Registrable
Securities  registered under such registration  statement,  and their respective
counsel and  accountants,  the  opportunity to participate in the preparation of
such registration statement,  each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such  opportunities  to discuss
the  business  of the  Company  with its  officers  and the  independent  public
accountants  who have certified its financial  statements as shall be necessary,
in the  reasonable  opinion of such Holders' and such  underwriters'  respective
counsel,  to  conduct a  reasonable  investigation  within  the  meaning  of the
Securities Act.

     2.6 Registration Default Fee. If the Registration Statement contemplated in
Section  2.1 is (x) not filed by the Filing Date or  declared  effective  by the
Required  Effectiveness Date or (y) such effectiveness is not maintained for the
Registration  Maintenance  Period,  then the  Company  shall pay to the Fund the
Default Fee specified in Section 10.4 of the Securities Purchase Agreement.

     2.7 Indemnification.

     (a) Indemnification by the Company. In the event of any registration of any
securities of the Company under the Securities Act, the Company will, and hereby
does  agree to  indemnify  and  hold  harmless  the  Holder  of any  Registrable
Securities covered by such registration  statement,  its directors and officers,
each other Person who  participates as an underwriter in the offering or sale of
such  securities and each other Person,  if any, who controls such Holder or any
such  underwriter  within the meaning of the  Securities Act against any losses,
claims,  damages or liabilities,  joint or several,  to which such Holder or any
such director or officer or underwriter or controlling person may become subject
under the Securities Act or otherwise,  insofar as such losses,  claims, damages
or liabilities (or actions or proceedings,  whether commenced or threatened,  in
respect  thereof) arise out of or are based upon any untrue statement or alleged
untrue  statement of any material fact contained in any  registration  statement
under which such  securities  were  registered  under the  Securities  Act,  any
preliminary prospectus, final prospectus or summary prospectus

                                        8
<PAGE>

contained therein,  or any amendment or supplement  thereto,  or any omission or
alleged  omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and the Company will
reimburse  such  Holder  and  each  such  director,  officer,   underwriter  and
controlling  person for any legal or any other expenses  reasonably  incurred by
them in  connection  with  investigating  or  defending  any such  loss,  claim,
liability,  action or proceeding,  provided that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability, (or
action or  proceeding in respect  thereof) or expense  arises out of or is based
upon an untrue  statement  or alleged  untrue  statement  or omission or alleged
omission made in such registration  statement,  any such preliminary prospectus,
final prospectus,  summary prospectus,  amendment or supplement in reliance upon
and in  conformity  with  written  information  furnished to the Company by such
Holder or underwriter stating that it is for use in the preparation thereof and,
provided  further  that the  Company  shall  not be  liable  to any  Person  who
participates as an underwriter in the offering or sale of Registrable Securities
or to any other Person, if any, who controls such underwriter within the meaning
of the Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus,  as
the same may be then  supplemented  or amended,  within the time required by the
Securities Act to the Person  asserting the existence of an untrue  statement or
alleged  untrue  statement  or omission  or alleged  omission at or prior to the
written  confirmation  of the sale of  Registrable  Securities to such Person if
such  statement  or  omission  was  corrected  in such  final  prospectus  or an
amendment or supplement  thereto.  Such indemnity shall remain in full force and
effect  regardless of any  investigation  made by or on behalf of such Holder or
any such director, officer,  underwriter or controlling person and shall survive
the transfer of such securities by such Holder.

     (b) Indemnification by the Holders. The Company may require, as a condition
to including any  Registrable  Securities in any  registration  statement  filed
pursuant to this Agreement,  that the Company shall have received an undertaking
satisfactory to it from the prospective  Holder of such Registrable  Securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 2.7) the Company,  each director of the
Company, each officer of the Company and each other Person, if any, who controls
the  Company  within the  meaning of the  Securities  Act,  with  respect to any
statement  or alleged  statement  in or omission or alleged  omission  from such
registration statement, any preliminary prospectus,  final prospectus or summary
prospectus  contained therein,  or any amendment or supplement  thereto, if such
statement  or alleged  statement  or  omission or alleged  omission  was made in
reliance  upon and in  conformity  with  written  information  furnished  to the
Company through an instrument duly executed by such Holder specifically  stating
that  it  is  for  use  in  the  preparation  of  such  registration  statement,
preliminary  prospectus,  final  prospectus,  summary  prospectus,  amendment or
supplement. Any such indemnity shall remain in full force and effect, regardless
of any  investigation  made by or on behalf of the Company or any such director,
officer or controlling  person and shall survive the transfer of such securities
by such Holder.

     (c) Notices of Claims,  etc. Promptly after receipt by an indemnified party
of notice of the  commencement  of any action or  proceeding  involving  a claim
referred to in the

                                        9
<PAGE>

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
sue, in respect to such claim or litigation.  No indemnified party shall consent
to entry of any  judgment  or enter into any  settlement  of any such action the
defense of which has been assumed by an  indemnifying  party without the consent
of such indemnifying party.

     (d) Other Indemnification. Indemnification similar to that specified in the
preceding  subdivisions  of this  Section 2.7 (with  appropriate  modifications)
shall be given by the  Company and each Holder of  Registrable  Securities  (but
only if and to the extent required pursuant to the terms of Section 2.7(b)) with
respect to any required  registration or other qualification of securities under
any Federal or state law or regulation of any governmental authority, other than
the Securities Act.

     (e) Indemnification  Payments. The indemnification required by this Section
2.7 shall be made by periodic  payments of the amount  thereof during the course
of the  investigation  or  defense,  as and when bills are  received or expense,
loss, damage or liability is incurred.

     (f)  Contribution.  If the  indemnification  provided for in the  preceding
subdivision  of this  Section  2.7 is  unavailable  to an  indemnified  party in
respect of any expense,  loss, claim,  damage or liability  referred to therein,
then each indemnifying  party, in lieu of indemnifying  such indemnified  party,
shall  contribute to the amount paid or payable by such  indemnified  party as a
result of such expense,  loss, claim, damage or liability (i) in such proportion
as is  appropriate to reflect the relative  benefits  received by the Company on
the one hand and the  Holder  or  underwriter,  as the case may be, on the other
from the  distribution of the  Registrable  Securities or (ii) if the allocation
provided  by clause  (i)  above is not  permitted  by  applicable  law,  in such
proportion as is appropriate to reflect not only the relative  benefits referred
to in clause  (i) above but also the  relative  fault of the  Company on the one
hand and of the Holder or underwriter, as the case may be, on the

                                       10
<PAGE>

other in  connection  with the  statements or omissions  which  resulted in such
expense,  loss,  damage or liability,  as well as any other  relevant  equitable
considerations.  The relative  benefits  received by the Company on the one hand
and the Holder or  underwriter,  as the case may be, on the other in  connection
with the distribution of the Registrable Securities shall be deemed to be in the
same  proportion  as the total net  proceeds  received by the  Company  from the
initial sale of the Registrable Securities by the Company to the purchasers bear
to the gain,  if any,  realized by all  selling  Holders  participating  in such
offering  or  the  underwriting   discounts  and  commissions  received  by  the
underwriter,  as the case may be. The  relative  fault of the Company on the one
hand and of the Holder or underwriter, as the case may be, on the other shall be
determined by reference  to, among other  things,  whether the untrue or alleged
untrue statement of a material fact or omission to state a material fact relates
to information  supplied by the Company, by the Holder or by the underwriter and
the parties' relative intent,  knowledge,  access to information supplied by the
Company,  by the Holder or by the underwriter and the parties'  relative intent,
knowledge,  access to  information  and  opportunity  to correct or prevent such
statement or omission,  provided that the foregoing contribution agreement shall
not inure to the benefit of any indemnified  party if  indemnification  would be
unavailable to such indemnified  party by reason of the provisions  contained in
the first sentence of subdivision (a) of this Section 2.7, and in no event shall
the obligation of any  indemnifying  party to contribute  under this subdivision
(f) exceed the amount that such indemnifying  party would have been obligated to
pay  by  way  of  indemnification  if the  indemnification  provided  for  under
subdivisions (b) of this Section 2.7 had been available under the circumstances.

     The Company and the Holders of Registrable  Securities  agree that it would
not be just and equitable if contribution  pursuant to this subdivision (f) were
determined by pro rata allocation (even if the Holders and any underwriters were
treated as one entity for such  purpose)  or by any other  method of  allocation
that does not take account of the  equitable  considerations  referred to in the
immediately  preceding  paragraph.  The amount paid or payable by an indemnified
party as a result of the losses,  claims, damages and liabilities referred to in
the immediately  preceding paragraph shall be deemed to include,  subject to the
limitations  set forth in the  preceding  sentence and  subdivision  (c) of this
Section 2.7, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.

     Notwithstanding  the  provisions  of this  subdivision  (f),  no  Holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the  amount  by which (i) in the case of any such  Holder,  the net
proceeds received by such Holder from the sale of Registrable Securities or (ii)
in the  case of an  underwriter,  the  total  price  at  which  the  Registrable
Securities  purchased  by it and  distributed  to the public were offered to the
public exceeds,  in any such case, the amount of any damages that such Holder or
underwriter  has  otherwise  been  required  to pay by reason of such  untrue or
alleged   untrue   statement  or  omission.   No  Person  guilty  of  fraudulent
misrepresentation  (within the meaning of Section 11(f) of the  Securities  Act)
shall be  entitled  to  contribution  from any person who was not guilty of such
fraudulent misrepresentation.

     3. Definitions.  As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:

                                       11
<PAGE>

     "Agreement": As defined in Section 1.

     "Commission":  The Securities and Exchange  Commission or any other Federal
agency at the time administering the Securities Act.

     "Common Stock": As defined in Section 1.

     "Company": As defined in the introductory paragraph of this Agreement.

     "Conversion Shares": As defined in Section 1.

     "Preferred  Shares":  As defined  in  Section  1, such term to include  any
securities issued in substitution of or in addition to such Preferred Shares.

     "Exchange  Act": The Securities  Exchange Act of 1934, as amended,  and the
rules and regulations of the Commission thereunder.

     "Holders'  Representative":  Global  Capital  Advisors  Ltd. or such Person
designated by Global Capital  Advisors Ltd. as of the time of disposition of the
last  of  the  Preferred  Shares  held  by  the  Fund  (or  subsequent  Holders'
Representative).

     "OTC Bulletin Board": As defined in Section 1.

     "Person": A corporation, association, partnership,  organization, business,
individual,  governmental  or political  subdivision  thereof or a  governmental
agency.

     "Registrable  Securities":  The  Securities  and any  securities  issued or
issuable with respect to such Securities by way of stock dividend or stock split
or in  connection  with  a  combination  of  shares,  recapitalization,  merger,
consolidation or other reorganization or otherwise.  Once issued such securities
shall cease to be Registrable  Securities when (a) a registration statement with
respect to the sale of such  securities  shall have become  effective  under the
Securities  Act and such  securities  shall have been  disposed of in accordance
with such  registration  statement,  (b) they shall have been distributed to the
public  pursuant to Rule 144 (or any successor  provision)  under the Securities
Act, (c) they shall have been otherwise  transferred,  new certificates for them
not bearing a legend  restricting  further transfer shall have been delivered by
the Company and subsequent disposition of them shall not require registration or
qualification  of them under the Securities Act or any similar state law then in
force,  (d) they shall have ceased to be  outstanding,  (e) on the expiration of
the  applicable  Registration  Maintenance  Period  or (f) any  and all  legends
restricting transfer thereof have been removed in accordance with the provisions
of Rule 144(k) (or any successor provision) under the Securities Act.

     "Registration Expenses": All expenses incident to the Company's performance
of or  compliance  with  this  Agreement,  including,  without  limitation,  all
registration, filing and NASD

                                       12
<PAGE>

fees, all stock exchange or other NASD or stock exchange  listing fees, all fees
and expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees and
disbursements  of  counsel  for  the  Company  and  of  its  independent  public
accountants,  including  the  expenses of any special  audits or "cold  comfort"
letters  required  by or  incident  to  such  performance  and  compliance,  the
reasonable fees and  disbursements  of not more than one law firm (not to exceed
$20,000)  retained by the Holder or Holders of more than 50% of the  Registrable
Securities,  premiums  and other costs of policies of  insurance  of the Company
against  liabilities  arising  out of the  public  offering  of the  Registrable
Securities  being  registered  and any fees and  disbursements  of  underwriters
customarily paid by issuers or Holders of securities, but excluding underwriting
discounts and commissions and transfer taxes, if any, provided that, in any case
where  Registration  Expenses are not to be borne by the Company,  such expenses
shall not include salaries of Company  personnel or general overhead expenses of
the Company,  auditing fees,  premiums or other  expenses  relating to liability
insurance  required by  underwriters  of the Company or other  expenses  for the
preparation  of  financial  statements  or other data  normally  prepared by the
Company in the ordinary  course of its business or which the Company  would have
incurred in any event.

     "Registration Maintenance Period": As defined in Section 2.3.

     "Required Effectiveness Date": As defined in Section 2.1.

     "Securities Act": The Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder.

     "Securities Purchase Agreement": As defined in Section 1.

     "Warrant Shares": As defined in Section 1.

     4. Rule 144. The Company shall timely file the reports required to be filed
by it under the  Securities  Act and the Exchange Act (including but not limited
to the reports  under  Sections 13 and 15(d) of the  Exchange Act referred to in
subparagraph (c) of Rule 144 adopted by the Commission under the Securities Act)
and the rules and regulations  adopted by the Commission  thereunder (or, if the
Company is not  required  to file such  reports,  will,  upon the request of any
Holder of Registrable Securities, make publicly available other information) and
will take such  further  action as any  Holder  of  Registrable  Securities  may
reasonably request,  all to the extent required from time to time to enable such
Holder to sell Registrable  Securities without registration under the Securities
Act within the limitation of the  exemptions  provided by (a) Rule 144 under the
Securities  Act,  as such  Rule may be  amended  from  time to time,  or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any Holder of Registrable Securities, the Company will deliver to such Holder
a written  statement as to whether it has complied with the requirements of this
Section 4.

                                       13
<PAGE>

     5.  Amendments  and Waivers.  This Agreement may be amended and the Company
may take  any  action  herein  prohibited,  or omit to  perform  any act  herein
required to be  performed  by it, only if the Company  shall have  obtained  the
written consent to such  amendment,  action or omission to act, of the Holder or
Holders  of the  sum of  the  51% or  more  of  the  shares  of (i)  Registrable
Securities issued at such time, plus (ii) Registrable  Securities  issuable upon
exercise or conversion of the Securities then constituting derivative securities
(if such Securities were not fully exchanged or converted in full as of the date
such consent if sought).  Each Holder of any Registrable  Securities at the time
or  thereafter  outstanding  shall be bound by any  consent  authorized  by this
Section 5, whether or not such Registrable  Securities shall have been marked to
indicate such consent.

     6.  Nominees  for  Beneficial  Owners.  In the event  that any  Registrable
Securities  are  held  by a  nominee  for  the  beneficial  owner  thereof,  the
beneficial owner thereof may, at its election,  be treated as the Holder of such
Registrable Securities for purposes of any request or other action by any Holder
or  Holders  of  Registrable  Securities  pursuant  to  this  Agreement  or  any
determination  of any number of percentage of shares of  Registrable  Securities
held by an Holder or  Holders of  Registrable  Securities  contemplated  by this
Agreement.  If the beneficial owner of any Registrable Securities so elects, the
Company may require  assurances  reasonably  satisfactory  to it of such owner's
beneficial ownership or such Registrable Securities.

     7. Notices.  Except as otherwise  provided in this Agreement,  all notices,
requests and other  communications to any Person provided for hereunder shall be
in writing and shall be given to such  Person (a) in the case of a party  hereto
other than the  Company,  addressed to such party in the manner set forth in the
Securities  Purchase Agreement or at such other address as such party shall have
furnished  to the Company in writing,  or (b) in the case of any other Holder of
Registrable Securities,  at the address that such Holder shall have furnished to
the Company in writing,  or,  until any such other  Holder so  furnishes  to the
Company  an  address,  then to and at the  address  of the last  Holder  of such
Registrable  Securities  who has furnished an address to the Company,  or (c) in
the case of the Company,  at the address set forth on the signature page hereto,
to the attention of its President, or at such other address, or to the attention
of such other  officer,  as the Company  shall have  furnished to each Holder of
Registrable  Securities at the time  outstanding.  Each such notice,  request or
other communication shall be effective (i) if given by mail, 72 hours after such
communication  is  deposited  in the mails with  first  class  postage  prepaid,
addressed as aforesaid or (ii) if given by any other means  (including,  without
limitation,  by fax or air  courier),  when  delivered at the address  specified
above,  provided  that any such notice,  request or  communication  shall not be
effective until received.

     8.  Assignment.  This  Agreement  shall be  binding  upon and  inure to the
benefit of and be enforceable by the parties hereto. In addition, and whether or
not any  express  assignment  shall  have  been  made,  the  provisions  of this
Agreement which are for the benefit of the parties hereto other than the Company
shall also be for the benefit of and enforceable by any subsequent Holder of any
Registrable  Securities.  Each  of the  Holders  of the  Registrable  Securities
agrees,  by accepting any portion of the Registrable  Securities  after the date
hereof, to the provisions of this Agreement

                                       14
<PAGE>

including, without limitation, appointment of the Holders' Representative to act
on behalf of such Holder  pursuant to the terms hereof which such actions  shall
be made in the good  faith  discretion  of the  Holders'  Representative  and be
binding on all persons for all purposes.

     9. Descriptive  Headings.  The descriptive headings of the several sections
and  paragraphs of this  Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.

     10.  Governing  Law.  THIS  AGREEMENT  SHALL BE  CONSTRUED  AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS.

     11.  Counterparts.  This  Agreement may be executed by facsimile and may be
signed  simultaneously  in any number of  counterparts,  each of which  shall be
deemed an original,  but all such counterparts shall together constitute one and
the same instrument.

     12. Entire  Agreement.  This  Agreement  embodies the entire  agreement and
understanding  between the Company and each other party  hereto  relating to the
subject  matter hereof and supersedes  all prior  agreements and  understandings
relating to such subject matter.

     13. Severability. If any provision of this Agreement, or the application of
such  provisions  to any  Person or  circumstance,  shall be held  invalid,  the
remainder of this Agreement,  or the application of such provision to Persons or
circumstances  other  than  those  to  which it is held  invalid,  shall  not be
affected thereby.

                                       15
<PAGE>

     IN WITNESS  WHEREOF,  the parties have caused this Agreement to be executed
and delivered by their respective  officers  thereunto duly authorized as of the
date first above written.

                             AMERICAN INTERNATIONAL PETROLEUM
                             COMPANY

                              By:
                                         -----------------------------------
                              Name:      Denis J. Fitzpatrick
                              Title:     Chief Financial Officer

                              Address:   2950 North Loop, Suite 1000
                                         Houston TX 77092

                                         Fax: 713-681-5987
                                         Tel.: 713-802-0087

                             GCA STRATEGIC INVESTMENT FUND LIMITED

                              By:
                                         -----------------------------------
                              Name:      Lewis N. Lester
                              Title:     President

                              Address:   c/o Prime Management Limited
                                         Mechanics Building
                                         12 Church Street
                                         Hamilton HM II, Bermuda

                                         Fax:     441-295-3926
                                         Tel.:    441-295-0329

                             LKB FINANCIAL, LLC

                              By:
                                        ---------------------------------
                              Name:     Lewis N. Lester
                              Title:    _________________________________

                              Address:  106 Colony Park Drive, Suite 900
                                        Cumming, GA 30040

                                        Fax: 678-947-6499
                                        Tel.: 678-947-0028

                                       16

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