Document:

exv10w4

 

Exhibit
10.4

PACIFIC ASIA PETROLEUM, INC.

INDEMNIFICATION AGREEMENT

     This
Indemnification Agreement (this Agreement) is entered into as of __________________ ____,
2007, by and among Pacific Asia Petroleum, Inc., a Delaware corporation, on behalf of itself and
all present and future subsidiaries (the “Company”), and each indemnitee (“Indemnitee”) executing
this Agreement.

Recitals

     A. The Company recognizes that it is essential to the Company to retain and attract as
directors and officers the most capable persons available.

     B. Indemnitee is a director and/or officer of the Company.

     C. Both the Company and Indemnitee recognize the increased risk of litigation and other claims
currently being asserted against directors and officers of corporations.

     D. The Certificate of Incorporation and Bylaws of the Company require the Company to indemnify
and advance expenses to its directors and officers to the fullest extent permitted under Delaware
law, and the Indemnitee has been serving and continues to serve as a director and/or officer of the
Company in part in reliance on the Company’s Certificate of Incorporation and Bylaws.

     E. In recognition of Indemnitee’s need for (i) substantial protection against personal
liability based on Indemnitee’s reliance on the aforesaid Certificate of Incorporation and Bylaws,
(ii) specific contractual assurance that the protection promised by the Certificate of
Incorporation and Bylaws will be available to Indemnitee (regardless of, among other things, any
amendment to or revocation of the Certificate of Incorporation and Bylaws or any change in the
composition of the Company’s Board of Directors or acquisition transaction relating to the
Company), and (iii) an inducement to provide effective services to the Company as a director and/or
officer, the Company wishes to provide in this Agreement for the indemnification of and the
advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted
under Delaware law and as set forth in this Agreement, and, to the extent insurance is maintained,
to provide for the continued coverage of Indemnitee under the Company’s directors’ and officers’
liability insurance policies.

     Now Therefore, in consideration of the above premises and of Indemnitee continuing to
serve the Company directly or, at its request, with another enterprise, and intending to be legally
bound hereby, the parties agree as follows:

     1. Certain Definitions.

          (a) Board: the Board of Directors of the Company.

 

 

          (b) Affiliate: any corporation or other person or entity that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under common control with,
the person specified.

          (c) Change in Control: shall be deemed to have occurred if (i) any “person” (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) (other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportions as their ownership of stock of the Company, and
other than any person holding shares of the Company on the date that the Company first registers
under the Act or any transferee of such individual if such transferee is a spouse or lineal
descendant of the transferee or a trust for the benefit of the individual, his spouse or lineal
descendants), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 30% or more of the total
voting power represented by the Company’s then outstanding Voting Securities, or (ii) during any
period of two consecutive years, individuals who at the beginning of such period constitute the
Board and any new director whose election by the Board or nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a majority of the Board, or
(iii) the stockholders of the Company approve a merger or consolidation of the Company with any
other entity, other than a merger or consolidation that would result in the Voting Securities of
the Company outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of
the total voting power represented by the Voting Securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company
approve a plan of complete liquidation of the Company or an agreement for the sale or disposition
by the Company (in one transaction or a series of transactions) of all or substantially all of the
Company’s assets.

          (d) Expenses: any expense, liability, or loss, including attorneys’ fees, judgments,
fines, ERISA excise taxes and penalties, amounts paid or to be paid in settlement, any interest,
assessments, or other charges imposed thereon, any federal, state, local, or foreign taxes imposed
as a result of the actual or deemed receipt of any payments under this Agreement, and all other
costs and obligations, paid or incurred in connection with investigating, defending, being a
witness in, participating in (including on appeal), or preparing for any of the foregoing in, any
Proceeding relating to any Indemnifiable Event.

          (e) Indemnifiable Event: any event or occurrence that takes place either prior to or
after the execution of this Agreement, related to the fact that Indemnitee is or was a director or
officer of the Company, or while a director or officer is or was serving at the request of the
Company as a director, officer, employee, trustee, agent, or fiduciary of another foreign or
domestic corporation, partnership, joint venture, employee benefit plan, trust, or other
enterprise, or was a director, officer, employee, or agent of a foreign or domestic corporation
that was a predecessor corporation of the Company or of another enterprise at the request of such
predecessor corporation, or related to anything done or not done by Indemnitee in any such
capacity, whether or not the basis

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of the Proceeding is alleged action in an official capacity as a director, officer, employee,
or agent or in any other capacity while serving as a director, officer, employee, or agent of the
Company, as described above.

          (f) Independent Counsel: the person or body appointed in connection with Section 3.

          (g) Proceeding: any threatened, pending, or completed action, suit, or proceeding or
any alternative dispute resolution mechanism (including an action by or in the right of the
Company), or any inquiry, hearing, or investigation, whether conducted by the Company or any other
party, that Indemnitee in good faith believes might lead to the institution of any such action,
suit, or proceeding, whether civil, criminal, administrative, investigative, or other.

          (h) Reviewing Party: the person or body appointed in accordance with Section 3.

          (i) Voting Securities: any securities of the Company that vote generally in the
election of directors.

     2. Agreement to Indemnify.

          (a) General Agreement. In the event Indemnitee was, is, or becomes a party to or
witness or other participant in, or is threatened to be made a party to or witness or other
participant in, a Proceeding by reason of (or arising in part out of) an Indemnifiable Event, the
Company shall indemnify Indemnitee from and against any and all Expenses to the fullest extent
permitted by law, as the same exists or may hereafter be amended or interpreted (but in the case of
any such amendment or interpretation, only to the extent that such amendment or interpretation
permits the Company to provide broader indemnification rights than were permitted prior thereto).
The parties hereto intend that this Agreement shall provide for indemnification in excess of that
expressly permitted by statute, including, without limitation, any indemnification provided by the
Company’s Certificate of Incorporation, its Bylaws, vote of its shareholders or disinterested
directors, or applicable law.

          (b) Initiation of Proceeding. Notwithstanding anything in this Agreement to the
contrary, Indemnitee shall not be entitled to indemnification pursuant to this Agreement in
connection with any Proceeding initiated by Indemnitee against the Company or any director or
officer of the Company unless (i) the Company has joined in or the Board has consented to the
initiation of such Proceeding; (ii) the Proceeding is one to enforce indemnification rights under
Section 5; or (iii) the Proceeding is instituted after a Change in Control (other than a Change in
Control approved by a majority of the directors on the Board who were directors immediately prior
to such Change in Control) and Independent Counsel has approved its initiation.

          (c) Expense Advances. If so requested by Indemnitee, the Company shall advance (within
ten business days of such request) any and all Expenses to Indemnitee (an “Expense Advance”). The
Indemnitee shall qualify for such Expense Advances upon the execution and delivery to the Company
of this Agreement which shall constitute an undertaking providing that the Indemnitee undertakes to
repay such Expense Advances if and to the extent that it is ultimately

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determined by a court of competent jurisdiction in a final judgment, not subject to appeal,
that Indemnitee is not entitled to be indemnified by the Company. Indemnitee’s obligation to
reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged
thereon.

          (d) Mandatory Indemnification. Notwithstanding any other provision of this Agreement,
to the extent that Indemnitee has been successful on the merits or otherwise in defense of any
Proceeding relating in whole or in part to an Indemnifiable Event or in defense of any issue or
matter therein, Indemnitee shall be indemnified against all Expenses incurred in connection
therewith.

          (e) Partial Indemnification. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of Expenses, but not, however,
for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion
thereof to which Indemnitee is entitled.

          (f) Prohibited Indemnification. No indemnification pursuant to this Agreement shall be
paid by the Company on account of any Proceeding in which judgment is rendered against Indemnitee
for an accounting of profits made from the purchase or sale by Indemnitee of securities of the
Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as
amended, or similar provisions of any federal, state, or local laws.

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     3. Reviewing Party. Prior to any Change in Control, the Reviewing Party shall be any
appropriate person or body consisting of a member or members of the Board or any other person or
body appointed by the Board who is not a party to the particular Proceeding with respect to which
Indemnitee is seeking indemnification; after a Change in Control, the Independent Counsel referred
to below shall become the Reviewing Party. With respect to all matters arising after a Change in
Control (other than a Change in Control approved by a majority of the directors on the Board who
were directors immediately prior to such Change in Control) concerning the rights of Indemnitee to
indemnity payments and Expense Advances under this Agreement or any other agreement or under
applicable law or the Company’s Certificate of Incorporation or Bylaws now or hereafter in effect
relating to indemnification for Indemnifiable Events, the Company shall seek legal advice only from
Independent Counsel selected by Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld), and who has not otherwise performed services for the Company or the
Indemnitee (other than in connection with indemnification matters) within the last five years. The
Independent Counsel shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in representing either the
Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. Such
counsel, among other things, shall render its written opinion to the Company and Indemnitee as to
whether and to what extent the Indemnitee should be permitted to be indemnified under applicable
law. The Company agrees to pay the reasonable fees of the Independent Counsel and to indemnify
fully such counsel against any and all expenses (including attorneys’ fees), claims, liabilities,
loss, and damages arising out of or relating to this Agreement or the engagement of Independent
Counsel pursuant hereto.

     4. Indemnification Process and Appeal.

          (a) Indemnification Payment. Indemnitee shall be entitled to indemnification of
Expenses, and shall receive payment thereof, from the Company in accordance with this Agreement as
soon as practicable after Indemnitee has made written demand on the Company for indemnification,
unless the Reviewing Party has given a written opinion to the Company that Indemnitee is not
entitled to indemnification under applicable law.

          (b) Suit to Enforce Rights. Regardless of any action by the Reviewing Party, if
Indemnitee has not received full indemnification within thirty days after making a demand in
accordance with Section 4(a), Indemnitee shall have the right to enforce its indemnification rights
under this Agreement by commencing litigation in any court in the State of California or the State
of Delaware having subject matter jurisdiction thereof seeking an initial determination by the
court or challenging any determination by the Reviewing Party or any aspect thereof. The Company
hereby consents to service of process and to appear in any such proceeding. Any determination by
the Reviewing Party not challenged by the Indemnitee shall be binding on the Company and
Indemnitee. The remedy provided for in this Section 4 shall be in addition to any other remedies
available to Indemnitee at law or in equity.

          (c) Defense to Indemnification, Burden of Proof, and Presumptions. It shall be a
defense to any action brought by Indemnitee against the Company to enforce this Agreement (other
than an action brought to enforce a claim for Expenses incurred in defending a Proceeding in
advance of its final disposition) that it is not permissible under applicable law for the Company
to

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indemnify Indemnitee for the amount claimed. In connection with any such action or any
determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified hereunder, the burden of proving such a defense or determination shall be on the
Company. Neither the failure of the Reviewing Party or the Company (including its Board,
independent legal counsel, or its stockholders) to have made a determination prior to the
commencement of such action by Indemnitee that indemnification of the claimant is proper under the
circumstances because Indemnitee has met the standard of conduct set forth in applicable law, nor
an actual determination by the Reviewing Party or Company (including its Board, independent legal
counsel, or its stockholders) that the Indemnitee had not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the Indemnitee has not met the
applicable standard of conduct. For purposes of this Agreement, the termination of any claim,
action, suit, or proceeding, by judgment, order, settlement (whether with or without court
approval), conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a
presumption that Indemnitee did not meet any particular standard of conduct or have any particular
belief or that a court has determined that indemnification is not permitted by applicable law.

     5. Indemnification for Expenses Incurred in Enforcing Rights. The Company shall
indemnify Indemnitee against any and all Expenses that are incurred by Indemnitee in connection
with any action brought by Indemnitee for(i) indemnification or advance payment of Expenses by the
Company under this Agreement or any other agreement or under applicable law or the Company’s
Certificate of Incorporation or Bylaws now or hereafter in effect relating to indemnification for
Indemnifiable Events, and/or (ii) recovery under directors’ and officers’ liability insurance
policies maintained by the Company, but only in the event that Indemnitee ultimately is determined
to be entitled to such indemnification or insurance recovery, as the case may be. In addition, the
Company shall, if so requested by Indemnitee, advance the foregoing Expenses to Indemnitee, subject
to and in accordance with Section 2(c).

     6. Notification and Defense of Proceeding.

          (a) Notice. Promptly after receipt by Indemnitee of notice of the commencement of any
Proceeding, Indemnitee shall, if a claim in respect thereof is to be made against the Company under
this Agreement, notify the Company of the commencement thereof; but the omission so to notify the
Company will not relieve the Company from any liability that it may have to Indemnitee, except as
provided in Section 6(c).

          (b) Defense. With respect to any Proceeding as to which Indemnitee notifies the
Company of the commencement thereof, the Company will be entitled to participate in the Proceeding
at its own expense and except as otherwise provided below, to the extent the Company so wishes, it
may assume the defense thereof with counsel reasonably satisfactory to Indemnitee. After notice
from the Company to Indemnitee of its election to assume the defense of any Proceeding, the Company
shall not be liable to Indemnitee under this Agreement or otherwise for any Expenses subsequently
incurred by Indemnitee in connection with the defense of such Proceeding other than reasonable
costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ
legal counsel in such Proceeding, but all Expenses related thereto incurred after notice from the
Company of its assumption of the defense shall be at Indemnitee’s expense unless: (i) the
employment of legal counsel by Indemnitee has been authorized by the

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Company, (ii) Indemnitee has reasonably determined that there may be a conflict of interest
between Indemnitee and the Company in the defense of the Proceeding, (iii) after a Change in
Control (other than a Change in Control approved by a majority of the directors on the Board who
were directors immediately prior to such Change in Control), the employment of counsel by
Indemnitee has been approved by the Independent Counsel, or (iv) the Company shall not in fact have
employed counsel to assume the defense of such Proceeding, in each of which cases all Expenses of
the Proceeding shall be borne by the Company. The Company shall not be entitled to assume the
defense of any Proceeding brought by or on behalf of the Company or as to which Indemnitee shall
have made the determination provided for in (ii), (iii) and (iv) above.

          (c) Settlement of Claims. The Company shall not be liable to indemnify Indemnitee
under this Agreement or otherwise for any amounts paid in settlement of any Proceeding effected
without the Company’s written consent, such consent not to be unreasonably withheld; provided,
however, that if a Change in Control has occurred (other than a Change in Control approved by a
majority of the directors on the Board who were directors immediately prior to such Change in
Control), the Company shall be liable for indemnification of Indemnitee for amounts paid in
settlement if the Independent Counsel has approved the settlement. The Company shall not settle any
Proceeding in any manner that would impose any penalty or limitation on Indemnitee without
Indemnitee’s written consent. The Company shall not be liable to indemnify the Indemnitee under
this Agreement with regard to any judicial award if the Company was not given a reasonable and
timely opportunity, at its expense, to participate in the defense of such action; the Company’s
liability hereunder shall not be excused if participation in the Proceeding by the Company was
barred by this Agreement.

     7. Establishment of Trust. In the event of a Change in Control (other than a Change in
Control approved by a majority of the directors on the Board who were directors immediately prior
to such Change in Control) the Company shall, upon written request by Indemnitee, create a Trust
for the benefit of the Indemnitee and from time to time upon written request of Indemnitee shall
fund the Trust in an amount sufficient to satisfy any and all Expenses reasonably anticipated at
the time of each such request to be incurred in connection with investigating, preparing for,
participating in, and/or defending any Proceeding relating to an Indemnifiable Event. The amount or
amounts to be deposited in the Trust pursuant to the foregoing funding obligation shall be
determined by the Independent Counsel. The terms of the Trust shall provide that (i) the Trust
shall not be revoked or the principal thereof invaded without the written consent of the
Indemnitee, (ii) the Trustee shall advance, within ten business days of a request by the
Indemnitee, any and all Expenses to the Indemnitee (and the Indemnitee hereby agrees to reimburse
the Trust under the same circumstances for which the Indemnitee would be required to reimburse the
Company under Section 2(c) of this Agreement), (iii) the Trust shall continue to be funded by the
Company in accordance with the funding obligation set forth above, (iv) the Trustee shall promptly
pay to the Indemnitee all amounts for which the Indemnitee shall be entitled to indemnification
pursuant to this Agreement or otherwise, and (v) all unexpended funds in the Trust shall revert to
the Company upon a final determination by the Independent Counsel or a court of competent
jurisdiction, as the case may be, that the Indemnitee has been fully indemnified under the terms of
this Agreement. The Trustee shall be chosen by the Indemnitee. Nothing in this Section 7 shall
relieve the Company of any of its obligations under this Agreement. All income earned on the assets
held in the Trust shall be reported as income by the Company for federal, state, local, and foreign
tax purposes. The Company shall pay

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all costs of establishing and maintaining the Trust and shall indemnify the Trustee against
any and all expenses (including attorneys’ fees), claims, liabilities, loss, and damages arising
out of or relating to this Agreement or the establishment and maintenance of the Trust.

     8. Non-Exclusivity. The rights of Indemnitee hereunder shall be in addition to any
other rights Indemnitee may have under the Company’s Certificate of Incorporation, Bylaws,
applicable law, or otherwise; provided, however, that this Agreement shall supersede any prior
indemnification agreement between the Company and the Indemnitee. To the extent that a change in
applicable law (whether by statute or judicial decision) permits greater indemnification than
would be afforded currently under the Company’s Certificate of Incorporation, Bylaws, applicable
law, or this Agreement, it is the intent of the parties that Indemnitee enjoy by this Agreement the
greater benefits so afforded by such change.

     9. Liability Insurance. To the extent the Company maintains an insurance policy or
policies providing general and/or directors’ and officers’ liability insurance, Indemnitee shall be
covered by such policy or policies, in accordance with its or their terms, to the maximum extent of
the coverage available for any Company director or officer.

     10. Period of Limitations. No legal action shall be brought and no cause of action
shall be asserted by or on behalf of the Company or any Affiliate of the Company against
Indemnitee, Indemnitee’s spouse, heirs, executors, or personal or legal representatives after the
expiration of two years from the date of accrual of such cause of action, or such longer period as
may be required by state law under the circumstances. Any claim or cause of action of the Company
or its Affiliate shall be extinguished and deemed released unless asserted by the timely filing and
notice of a legal action within such period; provided, however, that if any shorter period of
limitations is otherwise applicable to any such cause of action, the shorter period shall govern.

     11. Amendment of this Agreement. No supplement, modification, or amendment of this
Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be binding unless in the form of a writing signed by
the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a
waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in
exercising any right or remedy hereunder shall constitute a waiver thereof.

     12. Subrogation. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall
execute all papers required and shall do everything that may be necessary to secure such rights,
including the execution of such documents necessary to enable the Company effectively to bring suit
to enforce such rights.

     13. No Duplication of Payments. The Company shall not be liable under this Agreement
to make any payment in connection with any claim made against Indemnitee to the extent Indemnitee
has otherwise received payment (under any insurance policy, Bylaw, or otherwise) of the amounts
otherwise indemnifiable hereunder.

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     14. Binding Effect. This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective successors (including any direct or
indirect successor by purchase, merger, consolidation, or otherwise to all or substantially all of
the business and/or assets of the Company), assigns, spouses, heirs, and personal and legal
representatives. The Company shall require and cause any successor (whether direct or indirect by
purchase, merger, consolidation, or otherwise) to all, substantially all, or a substantial part, of
the business and/or assets of the Company, by written agreement in form and substance satisfactory
to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform if no such succession had taken
place. The indemnification provided under this Agreement shall continue as to Indemnitee for any
action taken or not taken while serving in an indemnified capacity pertaining to an Indemnifiable
Event even though he may have ceased to serve in such capacity at the time of any Proceeding.

     15. Severability. If any provision (or portion thereof) of this Agreement shall be
held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable, the
remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore,
to the fullest extent possible, the provisions of this Agreement (including, without limitation,
each portion of this Agreement containing any provision held to be invalid, void, or otherwise
unenforceable, that is not itself invalid, void, or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, void, or unenforceable.

     16. Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware applicable to contracts made and to be performed
in such State without giving effect to its principles of conflicts of laws.

     17. Notices. All notices, demands, and other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given if delivered by
hand, against receipt, or mailed, postage prepaid, certified or registered mail, return receipt
requested, and addressed to the Company at:

Pacific Asia Petroleum, Inc.

250 East Hartsdale Ave.

Hartsdale, New York 10530

Attention: General Counsel

and to Indemnitee at:

_____________________________

_____________________________

_____________________________

Attention: _____________________

     Notice of change of address shall be effective only when given in accordance with this
Section. All notices complying with this Section shall be deemed to have been received on the date
of hand delivery or on the third business day after mailing.

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     18. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

[SIGNATURE PAGES FOLLOW]

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           In Witness Whereof, the parties hereto have executed this Indemnification Agreement
on and as of the day and year first above written.

“Company”

Pacific
Asia Petroleum, Inc., a Delaware corporation

By: ______________________________________

       Name: Frank C. Ingriselli

       Title:  President and Chief Executive Officer

AGREED TO AND ACCEPTED:

“Indemnitee”

___________________________________

By: ________________________________

        Name: ___________________________

        Title: ___________________________

SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT

PACIFIC ASIA PETROLEUM, INC.exv10w5

 

Exhibit 10.5

ADVANCED DRILLING SERVICES, LLC

REGISTRATION RIGHTS AGREEMENT

          THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of May 7, 2007 by and
among ADVANCED DRILLING SERVICES, LLC., Delaware limited liability company (the “Company”)
and each INVESTOR executing a copy hereof (“Investor”).

          WHEREAS, The Investors are parties to Subscription Agreements for the purchase of Class B
Membership Units of the Company, all in substantially similar form and collectively referred to
herein as the “Purchase Agreement”, and it is a condition to the closing of the sale of the
Class B Membership Interests to each Investor that each Investor and the Company execute and
deliver this Agreement.

          WHEREAS, the Company intends to consummate a merger with a corporation (a “Merger
Successor”), and/or a subsidiary thereof, whose shares may become registered under the Exchange
Act, pursuant to which the Class B Membership Interests of the Company shall be exchanged for
preferred stock (“Preferred Stock”) of the Merger Successor, and the Company has agreed to
undertake to use its commercially reasonable efforts to cause such Merger Successor to register the
Common Stock issuable upon conversion of the Preferred Stock issuable to the Investors holding
Class B Membership Interests under the terms set forth herein, which Agreement shall be assumed by
the Merger Successor in connection with the merger (such merger, the “Qualified Merger”).

          WHEREAS, the closing of the Qualified Merger shall be contingent upon the simultaneous closing
of a merger (“IMPCO Merger”) of the Merger Successor and/or a subsidiary thereof and Inner
Mongolia Production Company LLC (“IMPCO”), pursuant to which, among other things, Class B
Membership Interests of IMPCO shall be exchanged for Preferred Stock of Merger Successor and the
holders thereof shall enter into a registration rights agreement with Merger Successor with
substantially similar registration rights with respect to their Merger Successor Preferred Stock as
provided to the Investors hereunder.

          NOW, THEREFORE, the parties hereto hereby covenant and agree as follows:

          1. Certain Definitions. As used in this Agreement, the following terms shall have the
following respective meanings:

          “Class B Membership Interests” shall mean the shares of Class B Membership Interests
issued pursuant to the Purchase Agreement.

          “Commission” shall mean the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.

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          “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any
similar federal statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.

          “Final Closing Date” shall mean the final closing date of the sale of Class B
Membership Interests in the offering to Investors pursuant to the Purchase Agreement.

          “Holdback Period” shall mean the period commencing on the day on which the IPO shall
be consummated and ending on (i) the date which is 180 days thereafter or (ii) such earlier date as
shall have been agreed between the underwriter of the IPO, if any, the Merger Successor and the
placement agent, acting on behalf of the Investors pursuant to Section 5(c) hereof. For
clarification and without limitation, an IPO for purposes of the Holdback Period shall not
include any Qualified Merger, any IPO by a Merger Successor prior to a Qualified Merger, or any
subsequent private investment in the Company (a “P.I.P.E. Offering”) of the Merger
Successor’s securities following a Qualified Merger.

          “Holder” or “Holders” shall mean any Person or Persons to whom Registrable
Securities were originally issued or qualifying transferees under this Agreement who hold
Registrable Securities.

          “IPO” shall mean the initial public offering of the Merger Successor’s securities
pursuant to a registration statement under the Securities Act. For clarification and without
limitation, IPO shall not include securities issued pursuant to (i) a registration statement
relating solely to employee stock option or purchase plans; (ii) a registration statement on Form
S-4 relating solely to an SEC Rule 145 transaction; (iii) a registration statement filed in
connection with (A) the issuance of securities pursuant to a merger, or (B) any P.I.P.E. Offering
of the Merger Successor’s securities.

          “Liquidity Event” shall mean (i) the effectiveness of the IPO, (ii) any merger,
consolidation or business combination of the Merger Successor with any other entity other than an
affiliate of the Merger Successor and pursuant to which the Merger Successor is not the surviving
entity, (iii) any sale of all or substantially all of the assets of the Merger Successor, excluding
a P.I.P.E. Offering, or (iv) any bona fide offer by the Merger Successor or a third party, approved
by the Merger Successor’s Board of Directors, to purchase, at a price not less than fair market
value, all or substantially all of the securities of the Merger Successor.

          “Co-Placement Agents” shall mean Chadbourn Securities, Inc. and Sierra Equity Group,
Ltd.

          “Public Sale” shall mean any sale of securities to the public pursuant to (i) an
offering registered under the Securities Act or (ii) the provisions of Rule 144 (or any similar
rule or rules then in effect) under the Securities Act.

          “Register,” “registered” and “registration” shall mean a registration
effected by preparing and filing a registration statement or statements or similar documents in
compliance with the Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commission.

-2-

 

          “Registrable Securities” shall mean (i) shares of Common Stock issued upon conversion
of shares of Preferred Stock of a Merger Successor issued to Investors purchasing Class B
Membership Interests pursuant to the Purchase Agreement upon exchange in connection with a
Qualified Merger, (ii) shares of Common Stock of a Merger Successor issued upon conversion of
shares of Preferred Stock of a Merger Successor issued to Sierra Equity Group, Ltd. as a
Co-Placement Agent upon exercise of Company warrants exercisable for Class B Membership Interests,
if, and to the extent, the Company agrees in writing to register such securities, (iii) and shares
of Common Stock issued upon conversion of shares of Preferred Stock of a Merger Successor issued to
holders of IMPCO Class B Membership Interests pursuant to the IMPCO Merger, (iv) Common Stock
issued with respect to or in any exchange for or in replacement of Common Stock referred to in (i),
(ii) and (iii) hereof. For avoidance of doubt, Sierra Equity Group Ltd. shall be the sole
Co-Placement Agent entitled to receive Registrable Securities upon exercise of the warrants issued
to them as a Co-Placement Agent, if, and to the extent, the Company agrees in writing to register
such securities. As to any particular shares of Common Stock constituting Registrable Securities,
such shares shall cease to be Registrable Securities when they have been transferred in a Public
Sale in a transaction such that all transfer restrictions and restrictive legends under the
Securities Act with respect thereto are or may be removed upon consummation of such sale, or shares
which have been sold in a private transaction in which the transferor’s rights under this Agreement
are not validly assigned in accordance with this Agreement.

          “Requisite Period” shall mean, (i) with respect to a firm commitment underwritten
public offering, the period commencing on the effective date of the registration statement and
ending on the date each underwriter has completed the distribution of all securities purchased by
it, and, (ii) with respect to any other registration, the period commencing on the effective date
of the registration statement and ending on the earlier of the date on which the sale of all
Registrable Securities covered thereby is completed or 180 days after such effective date.

          “Securities Act” shall mean the Securities Act of 1933, as amended, or any similar
federal statue, and the rules and regulations of the Commission thereunder, all as the same shall
be in effect at the applicable time.

          “Shareholders” shall mean the Investors.

          2. Automatic Registration.

               (a) If the Company shall complete a Qualified Merger with a Merger Successor, and the Merger
Successor either (x) becomes a publicly reporting company under the Exchange Act (for avoidance of
doubt, a Pink Sheet listed company does not qualify as a publicly reporting company under the
Exchange Act) and successfully lists its shares for trading on a national securities exchange (the
“Listing Date”), or (y) completes an IPO prior to the first anniversary of the Final
Closing Date (the “IPO Date”), then Merger Successor shall use commercially reasonable
efforts to prepare and file a registration under the Securities Act of all the Registrable
Securities within 60 days following the closing of Listing Date or the IPO Date, as applicable, and
shall use

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commercially reasonable efforts to cause such registration to be declared effective by the SEC
within 210 days after the closing of the Listing Date or the IPO Date, as applicable, and Merger
Successor will be required to maintain the effectiveness of the registration statement until the
earlier of (a) the date that all of the Registrable Securities registered have been sold, or (b)
the date the Registrable Securities may be freely traded without registration under the Securities
Act, under Rule 144 promulgated under the Securities Act or otherwise; provided, however, that the
Merger Successor shall not be obligated to effect a registration pursuant to this Section 2(a):

                    (i) in any particular jurisdiction in which the Merger Successor would be required to execute
a general consent to service of process unless it is already subject to service in such
jurisdiction and except as required by the Securities Act;

                    (ii) if the Merger Successor furnishes to such Holders a certificate signed by the Merger
Successor’s Chief Executive Officer stating that in the good faith judgment of the Merger
Successor’s Board of Directors, it would be seriously detrimental to the Merger Successor and its
shareholders for such registration statement to be filed on or before the date filing would be
required and it is therefore essential to defer the filing of such registration statement, in which
case the Merger Successor shall have the right to defer such filing for a period of not more than
one hundred eighty (180) days after the furnishing of such a certificate of deferral; provided,
however, that this right may be exercised only once in any twelve (12) month period.

               (b) The right of the holders of Registrable Securities to have their securities registered
pursuant to this Section 2 shall terminate at the earlier of: (i) three (3) years following the
consummation of the offering detailed in the Purchase Agreement; provided, however,
that if the Merger Successor exercises its right to delay registration hereunder, the termination
date of this registration right referenced above shall be extended by an additional 120 days; or
(ii) as to any Investor, such earlier time at which all Registrable Securities held by such
Investor (together with any affiliate of the Investor with whom such Investor must aggregate its
sales under Rule 144) can be sold in any three (3)-month period without registration in compliance
with Rule 144 of the Securities Act.

          3. Piggyback Registration.

               (a) If the Merger Successor at any time (other than pursuant to Sections 2 or 4 hereof)
proposes to register any of its securities under the Securities Act for sale to the public, whether
for its own account or for the account of other security holders or both (except with respect to
the IPO, a Qualified Merger and/or registration statements on Forms S-4 or S-8 and any similar
successor forms) (a “Piggyback Registration”), each such time it will give prompt written
notice to such effect to all Holders at least thirty (30) days prior to such filing. Upon the
written request of any such Holder, received by the Merger Successor within twenty (20) days after
the giving of any such notice by the Merger Successor, to register any of its Registrable
Securities, the Merger Successor will, subject to Section 3(b) below, cause all Registrable
Securities as to which registration shall have been so requested to be included in the securities
to be covered by the registration

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statement proposed to be filed by the Merger Successor, all to the extent requisite to permit
the sale or other disposition by the Holder of such Registrable Securities so registered.
Notwithstanding the foregoing provisions, the Merger Successor may withdraw any registration
statement referred to in this Section 3 without thereby incurring any liability to the Holders.

               (b) In the event that any Piggyback Registration shall be, in whole or in part, an
underwritten public offering of Registrable Securities and the managing underwriters advise the
Merger Successor in writing that in their opinion the number of Registrable Securities and/or other
securities requested to be included in such offering exceeds the number of shares which can be sold
in an orderly manner in such offering within a price range acceptable to the Merger Successor
without adversely affecting the marketability of the offering, then the Merger Successor will
include in such registration (i) first, the securities the Merger Successor proposes to sell; (ii)
second, the Registrable Securities and/or other securities requested to be included in such
registration, pro rata from among the Holders according to the number of Registrable Securities
held by such Holders; and (iii) third to other shareholders requesting registration pro rata.
Notwithstanding the foregoing, however, the number of Registrable Securities to be included in such
registration and underwriting under this Section 3(b) shall not be reduced to less than thirty
percent (30%) of the aggregate securities requested to be included by the Holders in such
registration without prior consent of at least a majority of the Holders who have requested their
shares to be included in such registration and underwriting.

               (c) The right of the holders of Registrable Securities to have their securities registered in
a Piggyback Registration shall terminate at the earlier of (i) three (3) years following the
consummation of the offering detailed in the Purchase Agreement, or (ii) as to any Investor, such
earlier time at which all Registrable Securities held by such Investor (together with any affiliate
of the Investor with whom such Investor must aggregate its sales under Rule 144) can be sold in any
three (3)-month period without registration in compliance with Rule 144 of the Securities Act.

          4. Registration on Form S-3.

               (a) In addition to the rights under Section 2 and 3 hereof, if at any time (i) a Holder or
Holders of at least 20% of the total Registrable Securities then outstanding request(s) that the
Merger Successor file a registration statement on Form S-3 or any successor thereto for a public
offering of all or any portion of the Registrable Securities held by such requesting holder or
holders, where the reasonably anticipated aggregate price to the public of this public offering
would exceed $1,000,000 and (ii) the Merger Successor is a registrant entitled to use Form S-3 or
any successor thereto to register such Registrable Securities, then the Merger Successor shall use
commercially reasonable efforts to register under the Securities Act on Form S-3 or any successor
thereto, the number of Registrable Securities specified in such notice; provided, however, that the
Merger Successor shall not be required to effect a registration pursuant to this Section 4:

-5-

 

                    (i) at any time prior to six months following the effective date of a registration statement
for the offering of its securities effected under Sections 2 or 3;

                    (ii) in any particular jurisdiction in which the Merger Successor would be required to execute
a general consent to service of process unless it is already subject to service in such
jurisdiction and except as required by the Securities Act;

                    (iii) if the Merger Successor, within ten (10) days of the receipt of the request of such
Holders, gives notice of its bona fide intention to effect the filing of a registration statement
with the Commission within thirty (30) days of receipt of such request (other than with respect to
a registration statement relating to a Rule 145 transaction, an offering solely to employees or any
other registration which is not appropriate for the registration of Registrable Securities);

                    (iv) if the Merger Successor furnishes to such Holders a certificate signed by the Merger
Successor’s Chief Executive Officer stating that in the good faith judgment of the Merger
Successor’s Board of Directors, as the case may be, it would be seriously detrimental to the Merger
Successor and its shareholders for such registration statement to be filed on or before the date
filing would be required and it is therefore essential to defer the filing of such registration
statement, in which case the Merger Successor shall have the right to defer such filing for a
period of not more than one hundred eighty (180) days after the furnishing of such a certificate of
deferral; provided, however, that this right may be exercised only once in any twelve (12) month
period; or

                    (v) after the Merger Successor has effected two (2) such registration statements pursuant to
this Section 4.

               (b) The right of the holders of Registrable Securities to have their securities registered on
Form S-3 under this Section 4 shall terminate at the earlier of (i) three (3) years following the
consummation of the offering detailed in the Purchase Agreement, or (ii) as to any Investor, such
earlier time at which all Registrable Securities held by such Investor (together with any affiliate
of the Investor with whom such Investor must aggregate its sales under Rule 144) can be sold in any
three (3)-month period without registration in compliance with Rule 144 of the Securities Act.

          5. Holdback Agreement; Power of Attorney.

               (a) In connection with the IPO or any registration of Registrable Securities in connection
with an underwritten public offering, the holders of Registrable Securities agree, if so requested
by the underwriter or underwriters, not to effect any Public Sale or distribution (including any
sale pursuant to Rule 144 under the Securities Act) of any Registrable Securities, and not to
effect any such Public Sale or distribution of any other equity security of the Merger Successor or
of any security convertible into or exchangeable or exercisable for any equity security of the
Merger Successor (in each case, other than as part of such underwritten public offering) during (i)
the 10 days prior to the commencement of and during the Holdback Period with respect to the IPO and
(ii) the

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seven days prior to and the 120 days following the effective date of the registration
statement (other than a registration statement on Form S-4 or S-8) with respect to such other
underwritten public offering if the holders of Registrable Securities were afforded the opportunity
to include all of their Registrable Securities therein pursuant to Section 3.

               (b) Each Investor hereby irrevocably appoints the Co-Placement Agents (and all officers
designated by the Co-Placement Agents) (“Attorney”) to act as his or its true and lawful
agents and attorneys-in-fact, with full power of substitution, (i) to negotiate with the Merger
Successor and the managing underwriter(s) for the IPO the terms and conditions of the holdback
agreements of the Investors and any other restrictions on the right of such Investor to sell his or
its shares of Registrable Securities which shall be imposed by the managing underwriter(s) for such
offering (including, without limitation, the length of the Holdback Period, and the other rights of
such Investor to sell his or its Registrable Securities), (ii) to negotiate with the Merger
Successor and any third party the terms and conditions of any agreements affecting the rights of
such Investor under this Agreement in connection with any other Liquidity Event and (iii) to
execute and deliver any and all documents, agreements and instruments and to take any and all
actions, in the name of and on behalf of such Investor, as may be necessary or appropriate to
effectuate the foregoing on such terms and conditions as the Attorney approves in his sole
judgment. No person to whom this Power of Attorney is presented, as authority for Attorney to take
any action or actions contemplated hereby, shall be required to inquire into or seek confirmation
from the holder of Registrable Securities as to the authority of Attorney to take any action or
actions described above, or as to the existence of or fulfillment of any condition to this Power of
Attorney, which is intended to grant to Attorney unconditionally the authority to take and perform
the actions contemplated herein, and each Investor irrevocably waives any right to commence any
suit or action, in law or equity, against any person or entity which acts in reliance upon or
acknowledges the authority granted under this Power of Attorney. The Power of Attorney granted
hereby is coupled with an interest, and may not be revoked or canceled by an Investor without
Attorney’s written consent. The Investor hereby ratifies, to the extent permitted by law, all that
said Attorney shall lawfully do or cause to be done by virtue hereof.

          6. Registration Procedures. If and whenever the Merger Successor is required by the
provisions hereof to use commercially reasonable efforts to effect the registration of any
Registrable Securities under the Securities Act, the Merger Successor will, subject to the
foregoing, as expeditiously as possible:

               (a) subject to Sections 4 and 5(a), prepare and file with the Commission a registration
statement with respect to such securities within 90 days after delivery of a Demand Notice under
Section 4 hereof, and use commercially reasonable efforts to cause any registration statement
subject to this Agreement to become effective not later than 90 days from the date of its filing
and to remain effective for the Requisite Period;

               (b) prepare and file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for the Requisite Period

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and comply with the provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement in accordance with the intended
method of disposition set forth in such registration statement for such period;

               (c) furnish to each seller of Registrable Securities and to each underwriter such number of
copies of the registration statement and the prospectus included therein (including each
preliminary prospectus) as such persons reasonably may request in order to facilitate the intended
disposition of the Registrable Securities covered by such registration statement;

               (d) use commercially reasonable efforts (i) to register or qualify the Registrable Securities
covered by such registration statement under the securities or “blue sky” laws of such
jurisdictions as the sellers of Registrable Securities or, in the case of an underwritten public
offering, the managing underwriter reasonably shall request, (ii) to prepare and file in those
jurisdictions such amendments (including post effective amendments) and supplements, and take such
other actions, as may be necessary to maintain such registration and qualification in effect at all
times for the period of distribution contemplated thereby and (iii) to take such further action as
may be necessary or advisable to enable the disposition of the Registrable Securities in such
jurisdictions, provided, that the Merger Successor shall not for any such purpose be required to
qualify generally to transact business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process in any such jurisdiction;

               (e) use commercially reasonable efforts to list the Registrable Securities covered by such
registration statement with any securities exchange on which the Common Stock of the Merger
Successor is then listed;

               (f) immediately notify each seller of Registrable Securities and each underwriter under such
registration statement, at any time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event of which the Merger Successor has knowledge
as a result of which the prospectus contained in such registration statement, as then in effect,
includes any untrue statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in light of the
circumstances then existing and promptly amend or supplement such registration statement to correct
any such untrue statement or omission;

               (g) notify each seller of Registrable Securities of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement or the initiation of any
proceedings for that purpose and make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, obtain the lifting thereof at the earliest possible time;

               (h) permit a single firm of counsel designated as selling shareholders’ counsel by the holders
of a majority in interest of the Registrable Securities and all other securities being registered
(“Shareholders Counsel”) to review the registration statement and all amendments and
supplements thereto for a reasonable period of time

-8-

 

prior to their filing (provided, however, that in no event shall the Merger
Successor be required to reimburse legal fees in excess of $20,000 per registration statement
pursuant to this Section 6(h)) and the Merger Successor shall not file any document in a form to
which Merger Successor counsel reasonably objects;

               (i) make generally available to its security holders as soon as practicable, but not later
than 90 days after the close of the period covered thereby, an earnings statement (in form
complying with the provisions of Rule 158 under the Securities Act) covering a 12-month period
beginning not later than the first day of the Merger Successor ‘s next fiscal quarter following the
effective date of the registration statement;

               (j) if the offering is an underwritten offering, the Merger Successor will enter into a
written agreement with the managing underwriter selected in the manner herein provided in such form
and containing such provisions as are usual and customary in the securities business for such an
arrangement between such underwriter and companies of the Merger Successor ‘s size and investment
stature, including, without limitation, customary holdback, indemnification and contribution
provisions;

               (k) if the offering is an underwritten offering, at the request of any seller of Registrable
Securities, use its best efforts to furnish to such seller on the date that Registrable Securities
are delivered to the underwriters for sale pursuant to such registration: (i) a copy of an opinion
dated such date of counsel representing the Merger Successor for the purposes of such registration,
addressed to the underwriters, stating that such registration statement has become effective under
the Securities Act and (A) that to the knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have been instituted or
are pending or contemplated under the Securities Act, (B) that the registration statement, the
related prospectus and each amendment or supplement thereof comply as to form in all material
respects with the requirements of the Securities Act (except that such counsel need not express any
opinion as to financial statements or other financial or statistical information contained therein)
and (C) to such other effects as are customarily the subject of opinions of issuer’s counsel
provided to underwriters in underwritten public offerings and are reasonably requested by counsel
for the underwriters and (ii) to the extent available without unreasonable expense from the Merger
Successor’s accounting firm, a copy of a letter dated such date from the independent public
accountants retained by the Merger Successor, addressed to the underwriters, stating that they are
independent public accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the Merger Successor included in the registration
statement or the prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities Act, and such
letter shall additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter) with respect to
such registration as such underwriters reasonably may request;

               (l) make available for inspection by each seller of Registrable Securities, any underwriter
participating in any distribution pursuant to such registration statement, and any attorney,
accountant or other agent retained by such seller or

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underwriter, all financial and other records, pertinent corporate documents and properties of
the Merger Successor, and cause the Merger Successor ‘s officers, directors and employees to supply
all information reasonably requested by any such seller, underwriter, attorney, accountant or agent
in connection with such registration statement;

               (m) provide a transfer agent and registrar, which may be a single entity, for the Registrable
Securities not later than the effective date of the Registration Statement;

               (n) take all actions reasonably necessary to facilitate the timely preparation and delivery of
certificates (not bearing any legend restricting the sale or transfer of such securities)
representing the Registrable Securities to be sold pursuant to the Registration Statement and to
enable such certificates to be in such denominations and registered in such names as the Investors
or any underwriters may reasonably request; and

               (o) It shall be a condition precedent to the obligations of the Merger Successor to take any
action in connection with each registration subject to this Agreement, that the sellers of
Registrable Securities furnish to the Merger Successor in a timely manner in writing such
information with respect to themselves and the proposed distribution by them as reasonably shall be
necessary in order to assure compliance with federal and applicable state securities laws.

          7. Expenses. All expenses incurred by the Merger Successor in complying with Sections 2, 3
and 4, including, without limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel and independent public accountants for the Merger Successor, fees and
expenses (including counsel fees) incurred in connection with complying with state securities or
“blue sky” laws, fees of the National Association of Securities Dealers, Inc., fees of transfer
agents and registrars, costs of insurance and fees and disbursements of one counsel for the sellers
of Registrable Securities and all other securities being registered, but excluding any Selling
Expenses, are called “Registration Expenses.” All underwriting discounts and selling
commissions applicable to the sale of Registrable Securities are called “Selling Expenses.”

          The Merger Successor will pay all Registration Expenses in connection with each registration
statement filed hereunder. All Selling Expenses in connection with each registration statement
shall be borne by the participating sellers in proportion to the number of Registrable Securities
sold by each or as they may otherwise agree.

          8. Indemnification and Contribution.

               (a) In the event of a registration of any of the Registrable Securities under the Securities
Act pursuant to the terms of this Agreement, the Merger Successor will indemnify and hold harmless
and pay and reimburse each seller of such Registrable Securities thereunder, each underwriter of
Registrable Securities thereunder and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, from and against, and pay or reimburse them
for, any losses, claims, expenses, damages or liabilities, joint or several, to which such seller,
underwriter or controlling

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person may become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained in any registration
statement under which such Registrable Securities were registered under the Securities Act pursuant
hereto, any preliminary prospectus (unless superseded by a final prospectus) or final prospectus
contained therein, or any amendment or supplement thereof, or (ii) the omission or alleged omission
to state in any such registration statement a material fact required to be stated therein or
necessary to make the statements therein not misleading or, with respect to any prospectus,
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading, or (iii) any violation or alleged violation of the Securities Act or any state
securities or blue sky laws applicable to the Merger Successor and relating to action or inaction
required by the Merger Successor in connection with the offering of Registrable Securities and
specifically will reimburse each such seller, each underwriter and each such controlling person for
any legal or other expenses reasonably incurred by it in connection with investigating or defending
any such loss, claim, damage or liability (or action in respect thereof); provided, that the Merger
Successor will not be liable in any such case if and to the extent that any such loss, claim,
damage or liability (or action in respect thereof) arises out of or is based upon the Merger
Successor ‘s reliance on an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such seller, any such underwriter
or any such controlling person in writing specifically for use in such registration statement or
prospectus; and provided, further, that the Merger Successor shall not be liable in any such case
to the extent that any such loss, claim, damage or liability (or action in respect thereof) arises
out of or is based upon an untrue statement or alleged untrue statement or omission or alleged
omission in such registration statement or prospectus, which untrue statement or alleged untrue
statement or omission or alleged omission is completely corrected in an amendment or supplement to
the registration statement or prospectus and such seller or such controlling person thereafter
fails to deliver or cause to be delivered such registration statement or prospectus as so amended
or supplemented prior to or concurrently with the Registrable Securities to the person asserting
such loss, claim, damage or liability (or action in respect thereof) or expense after the Merger
Successor has furnished such seller or such controlling person with the same.

               (b) In the event of a registration of any of the Registrable Securities under the Securities
Act pursuant hereto, each seller of such Registrable Securities thereunder, severally and not
jointly, will indemnify and hold harmless the Merger Successor, each person, if any, who controls
the Merger Successor within the meaning of the Securities Act, each officer of the Merger Successor
who signs the registration statement, each director of the Merger Successor and each underwriter
and each person who controls any underwriter within the meaning of the Securities Act from and
against all losses, claims, expenses, damages or liabilities, joint or several, to which the Merger
Successor or such officer, director, or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based on any untrue statement or alleged untrue statement of any
material fact contained in the registration statement under which such Registrable Securities were
registered under the Securities Act pursuant hereto, any preliminary prospectus or final prospectus
contained therein, or any amendment or

-11-

 

supplement thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Merger Successor and each such officer, director,
manager, underwriter and controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage or liability (or
action in respect thereof); provided, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with information pertaining to such seller furnished in writing to
the Merger Successor by such seller specifically for use in such registration statement or
prospectus; and provided, further, that the liability of each seller hereunder shall be limited to
the proportion of any such loss, claim, damage, liability or expense which is equal to the
proportion that the public offering price of the Registrable Securities sold by such seller under
such registration statement bears to the total public offering price of all securities sold
thereunder, but not in any event to exceed the proceeds received by such seller from the sale of
Registrable Securities covered by such registration statement. Notwithstanding the foregoing, the
indemnity provided in this Section 8(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or expense if such settlement is effected without the consent of
such indemnified party, which shall not be unreasonably withheld.

               (c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of
any action or claim, such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any liability which it may
have to such indemnified party other than under this Section 8 and shall only relieve it from any
liability which it may have to such indemnified party under this Section 8 if and to the extent the
indemnifying party is materially prejudiced by such omission. In case any such action shall be
brought against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent
it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such
indemnified party, and, after notice from the indemnifying party to such indemnified party of its
election so to assume and undertake the defense thereof, the indemnifying party shall not be liable
to such indemnified party under this Section 8 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable costs of
investigation and of liaison with counsel so selected; provided, that if the defendants in any such
action include both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if the interests of
the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate counsel and to assume such
legal defenses and otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation to be reimbursed by
the indemnifying party as incurred.

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               (d) In order to provide for just and equitable contribution to joint liability under the
Securities Act in any case in which either (i) any holder of Registrable Securities exercising
rights under this Agreement, or any controlling person of any such holder, makes a claim for
indemnification pursuant to this Section 8 but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 8 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any such selling holder or any
such controlling person in circumstances for which indemnification is provided under this Section
8, then, and in each such case, the Merger Successor and such holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that such holder is responsible for the portion represented by
the percentage that the public offering price of its Registrable Securities offered by the
registration statement bears to the public offering price of all securities offered by such
registration statement, and the Merger Successor is responsible for the remaining portion;
provided, that, in any such case, (A) no such holder will be required to contribute any amount in
excess of the public offering price of all such Registrable Securities offered by it pursuant to
such registration statement and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.

          9. Changes in Capital Stock. If, and as often as, there is any change in the capital stock of
the Merger Successor by way of a stock split, stock dividend, combination or reclassification, or
through a merger, consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights and privileges
granted hereby shall continue with respect to the capital stock as so changed.

          10. Rule 144 Reporting. With a view to making available the benefits of certain rules and
regulations of the Commission which may at any time permit the sale of the Registrable Securities
to the public without registration, at all times after 90 days after any registration statement
covering a public offering of securities of the Merger Successor under the Securities Act shall
have become effective, the Merger Successor agrees to:

               (a) make and keep public information available, as those terms are understood and defined in
Rule 144(c) under the Securities Act;

               (b) file with the Commission in a timely manner all reports and other documents required of
the Merger Successor under the Securities Act and the Exchange Act; and

               (c) furnish to each holder of Registrable Securities forthwith upon request a written
statement by the Merger Successor as to its compliance with the reporting requirements of such Rule
144 and of the Securities Act and the Exchange Act, a

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copy of the most recent annual or quarterly report of the Merger Successor, and such other
reports and documents so filed by the Merger Successor as such holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing such holder to sell any
Registrable Securities without registration.

          11. Event of Election. In the event that the Merger Successor fails to fulfill its
registration responsibilities pursuant to Sections 2, 3 or 4 of this Agreement, the Holders shall
have all rights and remedies available to them at law or equity.

          12. Representations and Warranties of the Company. The Company represents and warrants to the
Shareholders as follows:

               (a) The execution, delivery and performance of this Agreement by the Company have been duly
authorized by all requisite corporate action and will not violate any provision of law, any order
of any court or other agency of government, the certificate of formation or operating agreement of
the Company or any provision of any indenture, agreement or other instrument to which it or any or
its properties or assets is bound, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement or other instrument
or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever
upon any of the properties or assets of the Company or its subsidiaries.

               (b) This Agreement has been duly executed and delivered by the Company and constitutes the
legal, valid and binding obligation of the Company, enforceable in accordance with its terms.

          13. Assignment of Registration Rights. The rights to cause or have the Merger Successor
register Registrable Securities pursuant to this Agreement may be assigned by the Shareholders to
transferees or assignees of such securities; provided, that: (a) there is transferred to such
transferee not less than forty thousand (40,000) shares of Registrable Securities, appropriately
adjusted for any stock splits, stock dividends, reverse splits and similar events; (b) the Merger
Successor is, within reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to which such
registration rights are being assigned, and such transferee shall agree to be subject to all the
restrictions set forth in this Agreement; and (c) an opinion of counsel is provided by the
Shareholder, satisfactory to the Merger Successor, to the effect that such disposition will not
require registration of such Securities or Registrable Securities under the Securities Act. The
term “Investors” as used in this Agreement shall include such transferees or permitted
assignees.

          15. Miscellaneous.

               (a) All covenants and agreements contained in this Agreement by or on behalf of any of the
parties hereto shall bind and inure to the benefit of the respective successors and assigns of the
parties hereto (including without limitation transferees of any Registrable Securities), whether so
expressed or not.

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               (b) All notices, requests, consents and other communications hereunder shall be in writing and
shall be delivered in person, mailed by certified or registered mail, return receipt requested, or
sent by telecopier or telex, addressed (i) if to the Company, at Advanced Drilling Services, LLC,
10600 N. De Anza Blvd., Suite 250, Cupertino, CA 95104, Attention: President.; (ii) if to
Investors, at the address of such party as set forth beneath such party’s signature hereto or as
set forth in the records of the Company (in the case of existing holders of Company securities);
(iii) if to the Co-Placement Agents, at Chadbourn Securities, Inc., 10600 N. De Anza Blvd., Suite
250, Cupertino, CA 95104, facsimile: (408) 873-0550, Attention: Laird Q. Cagan; (iv) if
to any subsequent holder of Registrable Securities, to it at such address as may have been
furnished to the Company in writing by such holder; or, in any case, at such other address or
addresses as shall have been furnished in writing to the Company (in the case of a holder of
Registrable Securities) or to the holders of Registrable Securities (in the case of the Company) in
accordance with the provisions of this paragraph; and (v) if the the Merger Successor, at such
address as may be furnished by the Merger Successor in writing to the holders of Registrable
Securities.

               (c) This Agreement shall be governed by and construed in accordance with the laws of the State
of California applicable to contracts entered into and to be performed wholly within said State.

               (d) Any judicial proceeding brought against any of the parties to this Agreement on any
dispute arising out of this Agreement or any matter related hereto shall be brought in the courts
of the State of California and County of San Francisco or in the United States District Court for
the Northern District of California and, by execution and delivery of this Agreement, each of the
parties hereto accepts for itself and himself the process in any such action or proceeding by the
mailing of copies of such process to it or him, at its or his address as set forth in paragraph
15(b) and irrevocably agrees to be bound by any judgment rendered thereby in connection with this
Agreement. Each party hereto irrevocably waives to the fullest extent permitted by law any
objection that it or he may now or hereafter have to the laying of the venue of any judicial
proceeding brought in such courts and any claim that any such judicial proceeding has been brought
in an inconvenient forum. The foregoing consent to jurisdiction shall not constitute general
consent to service of process in the State of California for any purpose except as provided about
and shall not be deemed to confer rights on any person other than the respective parties to this
Agreement.

               (e) Except as expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument referencing this
Agreement and signed by the Company or Merger Successor, if following a Qualified Merger, and the
holders holding not less than a majority of the Registrable Securities; provided,
however, that Investors purchasing shares of Class B Membership Interests in a closing
after the Closing Date (as defined in the Purchase Agreement) may become parties to this Agreement,
by executing a counterpart of this Agreement without any amendment of this Agreement pursuant to
this paragraph or any consent or approval of any other holder. Any such amendment, waiver,

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discharge or termination effected in accordance with this paragraph shall be binding upon each
holder and each future holder of all such securities of holder. Each holder acknowledges that by
the operation of this paragraph, the holders of not less than a majority of the Registrable
Securities (together with the Company) will have the right and power to diminish or eliminate all
rights of such holder under this Agreement.

               (f) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or
delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. No
waiver shall be effective unless and until it is in writing and signed by the party granting the
waiver.

               (g) This Agreement may be executed in two or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same instrument.

               (h) The Company or Merger Successor, if following a Qualified Merger, shall not grant to any
third party any registration rights more favorable than or inconsistent with any of those contained
herein, so long as any of the registration rights under this Agreement remains in effect.

               (i) If any provision of this Agreement shall be held to be illegal, invalid or unenforceable,
such illegality, invalidity or unenforceability shall attach only to such provision and shall not
in any manner affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable
provision were not contained herein.

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          IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written
above.

	 	 	 	 	 
	 	ADVANCED DRILLING SERVICES, LLC.

 	 
	 	By:  	/s/ Laird Q. Cagan
 	 
	 	 	Laird Q. Cagan 	 
	 	 	Chief Executive Officer, Manager 	 
	 

	 	 	 	 	 
	INVESTOR:
	 	 
	 	 	 
	 	 
	 	 
	 	 	 
	
 

Signature

	 	 
	 	 	 
	 	 
	Name:
	 	 	 
	 
	 	 	 	 
	Address:
	 	 	 
	 
	 
	 
	 	 
	Fax:
	 	 	 
	 
	 	 	 	 
	Tax ID No.:	 	 	 

SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT

ADVANCED DRILLING SERVICES, LLC

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