SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act
of 1934
Date of Report (Date of earliest event reported) February 18, 1999
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AMERICAN INTERNATIONAL PETROLEUM CORPORATION
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(Exact name of registrant as specified in charter)
Nevada 0-14905 13-3130236
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
440 Madison Avenue, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 688-3333
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N/A
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
On February 18, 1999, the Registrant issued and sold
$10,000,000 principal amount of its 5% convertible secured debentures due 2004
(the "Debentures") and warrants to purchase 2,000,000 shares of common stock to
an institutional investor for a purchase price of $10,000,000. The net proceeds
from the sale were used primarily to repay certain indebtedness, including
$3,500,000 principal amount of our 14% convertible notes due April 21, 2000. The
Debentures and warrants were issued pursuant to the exemption from the
registration requirements of the Securities Act provided by Section 4(2) of the
Securities Act and Rules 506 of the Regulation D promulgated by the SEC under
that Section.
The Debentures bear interest at the rate of 5% per annum,
payable on the last day of each calendar quarter, commencing March 31, 1999, and
are payable on February 18, 2004, or earlier upon acceleration following the
occurrence of an event of default. Payment of the Debentures is secured by a
mortgage and first priority security interest on specified fixed assets located
at the Lake Charles, Louisiana refinery of the Company's wholly owned
subsidiary, American International Refinery, Inc. The mortgage and security
interest will be released at such time as the outstanding principal amount of
the Debentures is less than $3,000,000. The Debentures are senior in right of
payment to all indebtedness of the Company and its subsidiaries, other than the
Company's 14% convertible notes due April 21, 2000, which rank pari passu with
the Debentures, and indebtedness secured by accounts receivable, inventory or
other assets of the Company and its subsidiaries, other than the fixed assets
subject to the mortgage and security interest.
The Debentures are convertible into shares of the Company's
common stock, at the option of the holder thereof, commencing August 17, 1999,
subject to the limitations stated below. The conversion price is equal to the
lesser of $1.288 and 85% of the average of the lowest three daily weighted
average sales prices of the common stock for the 20 trading days prior to the
date upon which the holder gives notice of conversion. The right of conversion
is subject to the following limitations:
1. The holder may convert the Debentures prior to
August 17, 1999 if the closing bid price of the
common stock is at least $1.55 per share for five
consecutive trading days, except that the number
of shares converted and sold on any one day prior
to August 17, 1999 may not exceed 10% of the
daily sales volume of the common stock.
2. The number of shares of common stock that the
holder may acquire upon conversion of the
Debentures, together with shares beneficially
owned by the holder and its affiliates, may not
exceed 4.9% of the total outstanding shares of
common stock. The holder may change this
limitation upon 61
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days prior notice to the Company or immediately
following a change in control of the Company.
3. The conversion price will be reduced if at any
time prior to January 18, 2000 the Company issues
shares of common stock (or securities
convertible, exercisable or exchangeable for
common stock) in a private placement at less than
$1.288 per share, if a fixed price, or less than
the discount specified in the Debentures. In
addition, the discount used to determine he
conversion rate will be increased by 1% during
the first 30 day period and an additional 1.5%
during each subsequent 30 day period following
June 18, 1999 that the registration statement,
referred to below, is not effective.
The Company has agreed to file a registration statement for
the resale of the shares of common stock that the holder may acquire upon
conversion of the Debentures and the warrants.
The Company may redeem up to $5,000,000 principal amount of
the Debentures during any 90 day period, commencing August 17, 1999, provided
that during the 90 day period preceding notice of redemption there has not been
an event of default and the Company's registration statement for the resale of
the common stock has remained effective. The redemption price for the Debentures
will be equal to the greater of (x) 115% of the principal amount, plus accrued
but unpaid interest and default payments and (y) the product of the conversion
rate and the closing bid price of the common stock on the first trading day
after the date a holder notifies the Company that the redemption will be
effective.
The holder has the right to require redemption of the
Debentures, in whole or in part, following a change in control of the Company at
a redemption price equal to 130% of the principal amount, plus accrued but
unpaid interest and penalties, or if the registration statement has not been
declared effective by August 17, 1999, to sell the Debentures to the Company at
a purchase price equal to 125% of the principal amount, plus accrued but unpaid
interest and penalties.
The warrants may be exercised at any time before February 18,
2004, at an exercise price of $2.061 per share, subject to the following
limitations:
1. The number of shares of common stock that the
holder may acquire upon exercise of the warrants,
together with shares beneficially owned by the
holder and its affiliates, may not exceed 4.9% of
the total outstanding shares of common stock. The
holder may change this limitation upon 61 days
prior notice to the Company or immediately
following a change in control of the Company.
2. The expiration date of the warrants will be
extended if the registration statement is not
declared effective by August 17, 1999, or the
effectiveness of the registration statement is
not continuously maintained thereafter, or if the
Company does not obtain and maintain the listing
of the shares of common stock that the holder may
acquire upon conversion
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of the Debentures and the exercise of the
warrants, or if the Company fails to issue shares
of common stock upon conversion of the
Debentures.
The holder has the right to sell the warrants to the Company
if the registration statement is not declared effective by August 17, 1999, for
a purchase price equal to (x) the product of the number of shares that the
holder may acquire upon exercise (without regard to any limitation concerning
beneficial ownership) and the average of the closing bid prices for the common
stock during the 10 trading days preceding the notice of redemption, minus (y)
the product of the number of shares that the holder may acquire upon exercise
(without regard to any limitation concerning beneficial ownership) and the
exercise price.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
4.1 Convertible Debenture Purchase Agreement dated
February 11, 1999.
4.2 Form of 5% Convertible Secured Debenture.
4.3 Form of Warrant.
4.4 Form of Registration Rights Agreement.
4.5 Form of Mortgage and Security Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
AMERICAN INTERNATIONAL
PETROLEUM CORPORATION
Dated: March 1, 1999 By: s/ Denis J. Fitzpatrick
New York, New York ------------------------------
Denis J. Fitzpatrick
Vice President and
Chief Financial Officer
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