EXHIBIT 4.2
- -------------------------------------------------------------------------------
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
REGULATION S SUBSCRIPTION AGREEMENT
- -------------------------------------------------------------------------------
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
THIS OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT dated as of January 7,
1997 (the "Agreement"), is executed in reliance upon the exemption from
registration afforded by Regulation S ("Regulation S") as promulgated by the
Securities and Exchange Commission ("SEC"), under the Securities Act of 1933, as
amended. Capitalized terms used herein and not defined shall have the meanings
given to them in Regulation S.
This Agreement has been executed by the undersigned "Buyer" in
connection with the private placement of 9% Series C Convertible Subordinated
Redeemable Debentures of American International Petroleum Corp., a corporation
organized under the laws of the State of Nevada, with its principal executive
offices located at 444 Madison Avenue, Suite 3203, New York, New York 10022
(hereinafter referred to as "Seller"). Buyer hereby represents and warrants to,
and agrees with Seller:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT"), AND MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN
REGULATION S OF THE 1933 ACT) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS (AS DEFINED IN REGULATION S OF THE 1933 ACT) EXCEPT
PURSUANT TO REGISTRATION UNDER OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT.
1. Agreement To Subscribe; Purchase Price.
(a) SUBSCRIPTION. The undersigned Buyer hereby subscribes for
and agrees to purchase the Seller's 9% Series C Convertible Subordinated
Redeemable Debentures substantially in the form of the Debentures attached as
Exhibit A hereto and having an aggregate original principal amount of up to U.S.
$__________ (singly, a "Debenture," and collectively, the "Debentures"), at an
aggregate purchase price as set forth in subsection 1(b) herein.
(b) PAYMENT. The aggregate Purchase Price for the Debentures
shall be ____________________ United States Dollars (U.S. $_____________) (the
"Purchase Price"). Such sale and purchase shall take place upon payment of the
Purchase Price for the Debenture, by cashier's check, certified check or
electronic transfer of funds versus delivery of the Debenture through Buyer's
counsel Sommer & Schneider LLP.
2
(c) CLOSING. Subject to the satisfaction of the conditions set
forth in Sections 7 and 8 hereof, payments of the Purchase Price may be made
from time to time in denominations of not less than $25,000 but all payments
hereunder, in any event must be completed on or before January 7, 1997, or such
earlier or later date as is mutually agreed to in writing by Buyer and Seller.
2. Buyer Representations and Covenants; Access to Information.
OFFSHORE TRANSACTION. In connection with the purchase and sale
of the Debentures, Buyer represents and warrants to, and covenants and agrees
with Seller as follows:
(i) Buyer is not a natural person and is not
organized under the laws of any jurisdiction within the United
States, was not formed by a U.S. Person (as defined in Section
902(o) of Regulation S) for the purpose of investing in
Regulation S securities and is not otherwise a U.S. Person.
Buyer is not, and on the closing date will not be, an
affiliate of Seller;
(ii) At the time the buy order was originated, Buyer
was outside the United States and is outside of the United
States as of the date of the execution and delivery of this
Agreement;
(iii) No offer to purchase the Debentures or the
common stock of Seller issuable upon conversion of the
Debentures (collectively, the "Securities"), was made by Buyer
in the United States;
(iv) Buyer is purchasing the Securities for its own
account and Buyer is qualified to purchase the Securities
under the laws of its jurisdiction of residence, and the offer
and sale of the Securities will not violate the securities or
other laws of such jurisdiction;
(v) All offers and sales of any of the Securities by
Buyer prior to the end of the Restricted Period (as
hereinafter defined) shall be made in compliance with any
applicable securities laws of any applicable jurisdiction and
in accordance with Rule 903 and Rule 904, as applicable, of
Regulation S or pursuant to registration of securities under
the 1933 Act or pursuant to an exemption from registration. In
any case, none of the Securities have been or will be
encumbered, offered, sold or otherwise transferred by Buyer
to, or for the account or benefit of, a U.S. Person or within
the United States until after the end of the forty (40) day
period commencing on the later of (x) the date of closing of
the offering of the Securities or (y) the date of the first
offer of the Securities to persons other than distributors
(the "Restricted Period"), as calculated pursuant to
Regulation S and certified by
3
Buyer to Seller and thereafter only pursuant to a Registration
Statement or an applicable exemption from the registration
provisions of the 1933 Act;
(vi) The transactions contemplated by this Agreement
(a) have not been and will not be pre-arranged by Buyer with a
purchaser located in the United States or a purchaser which is
a U.S. Person, and (b) are not and will not be part of a plan
or scheme by Buyer, to evade the registration provisions of
the 1933 Act;
(vii) Buyer understands that the Securities are not
registered under the 1933 Act and are being offered and sold
to it in reliance on specific exclusions from the registration
requirements of Federal and State securities laws, and that
Seller is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and
understandings of Buyer set forth herein in order to determine
the applicability of such exclusions and the suitability of
Buyer and any purchaser from Buyer to acquire the Securities;
(viii) Buyer shall take all reasonable steps to
ensure its compliance with Regulation S and shall promptly
send to each purchaser who acts as a distributor, dealer or a
person receiving a selling concession, fee or other
remuneration in respect of any of the Securities, who
purchases prior to the expiration of the Restricted Period
referred to in subparagraph (v) above, a confirmation or other
notice to the purchaser stating that the purchaser is subject
to the same restrictions on offers and sales as Buyer pursuant
to Section (c)(2)(iv) of Rule 901 of Regulation S;
(ix) Buyer has not conducted or permitted and shall
not conduct or permit on its behalf any "directed selling
efforts" as that term is defined in Rule 902(b) of Regulation
S; nor has Buyer conducted any general solicitation relating
to the offer and sale of any of the Securities in the United
States or elsewhere;
(x) Buyer has the full right, power and authority to
enter into this Agreement and to consummate the transaction
contemplated herein. This Agreement has been duly authorized,
validly executed and delivered on behalf of Buyer and is a
valid and binding agreement in accordance with its terms,
subject to general principles of equity and to bankruptcy or
other laws affecting the enforcement of creditors' rights
generally;
(xi) The execution and delivery of this Agreement and
the consummation of the purchase of the Securities, and the
transactions contemplated by this Agreement do not and will
not conflict with or result in a breach by Buyer of any of the
terms of provisions of, or constitute a
4
default under, the articles of incorporation or by-laws (or
similar constitutive documents) of Buyer or any indenture,
mortgage, deed of trust, or other material agreement or
instrument to which Buyer is a party or by which it or any of
its properties or assets are bound, or any existing applicable
law, rule or regulation of the United States or any State
thereof or any applicable decree, judgment or order of any
Federal or State court, Federal or State regulatory body,
administrative agency or other United States governmental body
having jurisdiction over Buyer or any of its properties or
assets;
(xii) All invitation, offers and sales of or in
respect of, any of the Securities, by Buyer and any
distribution by Buyer of any documents relating to any offer
by it of any of the Securities will be in compliance with
applicable laws and regulations and will be made in such a
manner that no prospectus need be filed and no other filing
need be made by Seller with any regulatory authority or stock
exchange in any country or any political sub-division of any
country;
(xiii) Buyer will not make any offer or sale of the
Securities by any means which would not comply with the laws
and regulations of the territory in which such offer or sale
takes place or to which such offer or sale is subject or which
would in connection with any such offer or sale impose upon
Seller any obligation to satisfy any public filing or
registration requirement or provide or publish any information
of any kind whatsoever or otherwise undertake or become
obligated to do any act; and
(xiv) Neither the Buyer nor any of its affiliates has
entered, has the intention of entering, or will during the
Restricted Period enter into any put option, short position or
other similar instrument or position with respect to any of
the Securities or securities of the same class as the
Securities.
(xv) The Buyer (or others for whom it is contracting
hereunder) has been advised to consult its own legal and tax
advisors with respect to applicable resale restrictions and
applicable tax considerations and it (or others for whom it is
contracting hereunder) is solely responsible (and the Company
is not in any way responsible) for compliance with applicable
resale restrictions and applicable tax legislation.
(xvi) NO GOVERNMENT RECOMMENDATION OR APPROVAL. Buyer
understands that no Federal or State or foreign government
agency has passed on or made any recommendation or endorsement
of the Securities.
(xvii) CURRENT PUBLIC INFORMATION. Buyer acknowledges
that it and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of
Seller and all materials relating to the
5
offer and sale of the Securities which have been requested by
Buyer, all of which contain a legend as required under Section
10 hereof. Buyer further acknowledges that it and its
advisors, if any, have received complete and satisfactory
answers to such inquiries.
(xviii) BUYER'S SOPHISTICATION. Buyer acknowledges
that the purchase of the Securities involves a high degree of
risk, including the total loss of Buyer's investment. Buyer
has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks
of purchasing the Securities. Buyer understands that the
Securities are not being registered under the 1933 Act, and
therefore Buyer must bear the economic risk of this investment
for an indefinite period of time.
(xix) TAX STATUS. Buyer is not a "10-percent
Shareholder" (as defined in Section 871(h)(3)(B) of the U.S.
Internal Revenue Code) of Seller.
3. Seller Representations and Covenants.
(a) REPORTING COMPANY STATUS. Seller is a "Reporting Issuer"
as defined by Rule 902 of Regulation S. Seller has registered its common stock,
$.08 par value per share (the "Common Stock"), pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Common
Stock is listed and trades on NASDAQ NMS. Seller has filed all material required
to be filed pursuant to all reporting obligations under either Section 13(a) or
15(d) of the Exchange Act for a period of at least twelve (12) months
immediately preceding the offer or sale of the Securities (or for such shorter
period that Seller has been required to file such material).
(b) CURRENT PUBLIC INFORMATION. Seller has furnished Buyer
with copies of its most recent reports, as amended, filed under the Exchange Act
referred to in Section 2(xvii) above, and other publicly available documents
requested by Buyer.
(c) OFFSHORE TRANSACTION. Seller has not offered any of the
Securities to any person in the United States, any identifiable groups of U.S.
citizens abroad, or to any U.S. Person, as such terms are used in Regulation S.
(i) At the time the buy order was originated, Seller
and/or its agents reasonably believe the Buyer was outside of
the United States and was not a U.S. person, based on the
representations of Buyer.
(ii) Seller and/or its agents reasonably believe that
the transaction has not been pre-arranged with a buyer in the
United States, based on the representations of Buyer.
6
(iii) No offer to buy or sell the Securities was or
will be made by Seller to any person in the United States.
(iv) The sale of the Securities by Seller pursuant to
this Agreement will be made in accordance with the provisions
and requirements of Regulation S provided that the
representations and warranties of Buyer in Section 2 hereof
are true and correct.
(v) The transactions contemplated by this Agreement
(a) have not been and will not be pre-arranged by Seller with
a purchaser located in the United States or a purchaser which
is a U.S. Person, and (b) are not and will not be part of a
plan or scheme by Seller to evade the registration provisions
of the 1933 Act.
(d) NO DIRECTED SELLING EFFORTS. In regard to this
transaction, Seller has not conducted any "directed selling efforts" as that
term is defined in Rule 902 of Regulation S nor has Seller conducted any general
solicitation relating to the offer and sale of any of the Securities in the
United States or elsewhere.
(e) CONCERNING THE SECURITIES. The issuance, sale and delivery
of the Debentures have been duly authorized by all required corporate action on
the part of Seller, and when issued, sold and delivered in accordance with the
terms hereof and thereof for the consideration expressed herein and therein,
will be duly and validly issued, fully paid and non-assessable. The Common Stock
issuable upon conversion of the Debenture has been duly and validly reserved for
issuance and, upon issuance in accordance with the terms of the Debentures,
shall be duly and validly issued, fully paid, and non-assessable and will not
subject the holders thereof, if such persons are non-U.S. persons, to personal
liability by reason of being such holders. There are no pre-emptive rights of
any shareholder of Seller.
(f) SUBSCRIPTION AGREEMENT. This Agreement has been duly
authorized, validly executed and delivered on behalf of Seller and is a valid
and binding agreement in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
(g) NON-CONTRAVENTION. The execution and delivery of this
Agreement and the consummation of the issuance of the Securities and the
transactions contemplated by this Agreement do not and will not conflict with or
result in a breach by Seller of any of the terms or provisions of, or constitute
a default under, the articles of incorporation or by-laws of Seller, or any
indenture, mortgage, deed of trust, or other material agreement or instrument to
which Seller is a party or by which it or any of its properties or assets are
bound, or any existing applicable law, rule or regulation of the United States
or any State thereof or any applicable decree, judgment or order of any Federal
or State court, Federal or State regulatory body, administrative agency or other
United States governmental body
7
having jurisdiction over Seller or any of its properties or assets.
(h) APPROVALS. Seller is not aware of any authorization,
approval or consent of any U.S. governmental body which is legally required for
the issuance and sale of the Debentures and the Common Stock issuable upon
conversion thereof to persons who are non-U.S. Persons, as contemplated by this
Agreement. Seller is relying entirely upon Buyer and Distributor with respect to
foreign consents and approvals.
4. Exemption; Reliance on Representations. Buyer understands that the
offer and sale of the Securities are not being registered under the 1933 Act.
Seller and Buyer are relying on the rules governing offers and sales made
outside the United States pursuant to Regulation S.
5. Transfer Agent Instructions.
(a) DEBENTURES. Upon the conversion of the Debentures, the
holder thereof shall submit such Debenture together with a notice of conversion
to the Seller, and Seller shall instruct Seller's transfer agent to issue one or
more Certificates representing that number of shares of Common Stock into which
the Debenture or Debentures are convertible in accordance with the provisions
regarding conversion set forth in Exhibit A hereto. The Seller shall act as
Debenture Registrar and shall maintain an appropriate ledger containing the
necessary information with respect to each Debenture.
(b) COMMON STOCK TO BE ISSUED WITHOUT RESTRICTIVE LEGEND. Upon
the conversion of any Debenture up to the total of the "Initial Conversion
Amount" (as defined in the Debenture) and 40 days after the issuance of any
"Additional Conversion Amount" (as defined in the Debenture) by a person who is
a non-U.S. Person, Seller shall instruct Seller's transfer agent to issue Stock
Certificates up to the total of the "Initial Conversion Amount" (as defined in
the Debenture) and 40 days after the "Additional Conversion Amount" (as defined
in the Debenture) without restrictive legend in the name of Buyer upon receipt
of an opinion of Buyer's Counsel to remove such legend (or its nominee (being a
non-U.S. Person) or such non-U.S. Persons as may be designated by Buyer prior to
the closing) and in such denominations to be specified at conversion
representing the number of shares of Common Stock issuable upon such conversion,
as applicable. Seller warrants that no instructions other than these
instructions and instructions to impose a "stop transfer" instruction with
respect to the certificates until the end of the respective Restricted Period of
the Initial Conversion Shares and Additional Conversion Shares, if any, have
been given or will be given to the transfer agent and that the Common Stock
shall otherwise be freely transferable on the books and records of Seller.
Nothing in this Section 5, however, shall affect in any way Buyer's or such
nominee's obligations and agreements to comply with all applicable securities
laws upon resale of the Securities.
8
6. Registration. If upon conversion of Debentures effected by the Buyer
pursuant to the terms of this Agreement the Company fails to issue certificates
for shares of Common Stock issuable upon such conversion (the "Underlying
Shares") to the Buyer bearing no restrictive legend (after the applicable
Restrictive Period of the Initial Conversion Shares or Additional Conversion
Shares, if any) for any reason other than the Company's reasonable good faith
belief that the representations and warranties made by the Buyer in this
Agreement or the Notice of Conversion were untrue when made, or if the
restricted period under Regulation S is extended, or if Additional Conversion
Amount Shares are required to be issued, then the Company shall be required, at
the request of the Buyer and at the Company's expense, to effect the
registration of the Underlying Shares and/or Additional Conversion Shares
issuable upon conversion of the Debentures under the Act and relevant Blue Sky
laws as promptly as is practicable. The Company and the Buyer shall cooperate in
good faith in connection with the furnishing of information required for such
registration and the taking of such other actions as may be legally or
commercially necessary in order to effect such registration. The Company shall
file such a registration statement within 30 days of Buyer's demand therefor and
shall use its best efforts to cause such registration statement to become
effective as soon as practicable thereafter. Such best efforts shall include,
but not be limited to, promptly responding to all comments received from the
staff of the Securities and Exchange Commission, providing Buyer's counsel with
a contemporaneous copy of all written communications from and to the staff of
the Securities and Exchange Commission with respect to such registration
statement and promptly preparing and filing amendments to such registration
statement which are responsive to the comments received from the staff of the
Securities and Exchange Commission. Once declared effective by the Securities
and Exchange Commission, the Company shall cause to be delivered to the Buyer at
least ten copies of the Prospectus and shall cause such registration statement
to remain effective until the earlier of (i) the sale by the Buyer of all
Underlying Shares registered or (ii) nine months after the effective date of
such registration statement. In the event the Company undertakes to file a
Registration Statement on Form S-3 in connection with the Common Stock, upon the
effectiveness of such Registration, Buyer shall have the option to sell the
Common Stock pursuant thereto. The foregoing shall not in any way limit Buyer's
rights in connection with the Common Stock pursuant to Regulation S.
7. Delivery Instructions. The Debentures being purchased hereunder
shall be delivered to the Buyer at such time and place as shall be mutually
agreed by Seller and Buyer.
8. Conditions To Seller's Obligation To Sell. Seller's obligation to
sell the Debentures is conditioned upon:
(a) The receipt and acceptance by Seller of this Agreement as
executed by Buyer.
9
(b) Delivery into the closing depository of good funds by
Buyer as payment in full of the purchase price of the Debentures.
(c) All of the representations and warranties of the
Subscriber contained in this Agreement shall be true and correct on the Payment
Date with the same force and effect as if made on and as of the Payment Date.
The Subscriber shall have performed or complied with all agreements and
satisfied all conditions on its part to be performed, complied with or satisfied
at or prior to the Payment Date.
(d) No order asserting that the transactions contemplated by
this Agreement are subject to the registration requirements of the Act shall
have been issued, and no proceedings for that purpose shall have been commenced
or shall be pending or, to the knowledge of the Company, be contemplated. No
stop order suspending the sale of the Debentures shall have been issued, and no
proceedings for that purpose shall have been commenced or shall be pending or,
to the knowledge of the Company, be contemplated.
(e) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency that would prevent the issuance of the Debentures. No
injunction, restraining order or order of any nature by a federal or state court
of competent jurisdiction shall have been issued that would prevent the issuance
of the Debentures.
9. Conditions To Buyer's Obligation To Purchase. Buyer's obligation to
purchase the Debentures is conditioned upon:
(a) The confirmation of receipt and acceptance by Seller of
this Agreement as evidenced by execution of this Agreement by the duly
authorized officer of Seller.
(b) Delivery of the Debentures to the Buyer or its designated
representative.
10. Offering Materials. All offering materials and documents used in
connection with offers and sales of the Securities prior to the expiration of
the Restricted Period referred to in Section 2(a)(v) hereof shall include
statements to the effect that the Securities have not been registered under the
1933 Act or applicable state securities laws, and that neither Buyer, nor any
direct or indirect purchaser of the Securities from Buyer, may directly or
indirectly offer or sell the Securities in the United States or to U.S. Persons
(other than distributors) unless the Securities are registered under the 1933
Act any applicable state securities laws, or any exemption from the registration
requirements of the 1933 Act or such state securities laws is available. Such
statements shall appear (1) on the cover of any prospectus or offering circular
used in connection with the offer
10
or sale of the Securities, (2) in the underwriting section of any prospectus or
offering circular used in connection with the offer or sale of the Securities,
and (3) in any advertisement made or issued by Seller, Buyer, any other
distributor, any of their respective affiliates, or any person acting on behalf
of any of the foregoing.
11. No Shareholder Approval. Seller hereby agrees that from the Closing
Date until the issuance of Common Stock upon the conversion of the Debentures,
Seller will not take any action which would require Seller to seek shareholder
approval of such issuance unless such shareholder approval is required by law or
regulatory body (including but not limited to the NASDAQ Stock Market, Inc.) as
a result of the issuance of the Securities hereunder.
12. Miscellaneous.
(a) Except as specifically referenced herein or in the
Distribution Agreement, this Agreement constitutes the entire contract between
the parties, and neither party shall be liable or bound to the other in any
manner by any warranties, representations or covenants except as specifically
set forth herein. Any previous agreement among the parties related to the
transactions described herein is superseded hereby. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto. Nothing in this Agreement, express
or impled, is intended to confer upon any party, other than the parties hereto,
and their respective successors and assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
(b) Buyer is an independent contractor, and is not the agent
of Seller. Buyer is not authorized to bind Seller, or to make any
representations or warranties on behalf of Seller.
(c) Seller states that, other than what is set forth in the
Seller's most recent reports, as amended, filed under the Exchange Act, Seller
makes no further representations or warranty with respect to Seller, its
finances, assets, business prospects or otherwise. Buyer will advise each
purchaser, if any, and potential purchaser of the Securities, of the foregoing
sentence, and that such purchaser is relying on its own investigation with
respect to all such matters, and that such purchaser will be given access to any
and all documents and Seller personnel as it may reasonably request for such
investigation.
(d) All representations and warranties contained in this
Agreement by Seller and Buyer shall survive the closing of the transactions
contemplated by this Agreement.
11
(e) This Agreement shall be construed in accordance with the
laws of New York applicable to contracts made and wholly to be performed within
the State of New York and shall be binding upon the successors and assigns of
each party hereto. Buyer hereby waives trial by jury and consents to exclusive
jurisdiction and venue in the State of New York. This Agreement may be executed
in counterparts, and the facsimile transmission of an executed counterpart to
this Agreement shall be effective as an original.
(f) Buyer agrees to indemnify and hold Seller harmless from
any and all claims, damages and liabilities arising from Buyer's breach of its
representations and/or covenants set forth herein.
AMOUNT SUBSCRIBED FOR
$______________________
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the date first set forth above.
Accepted this 7th day of January, 1997, as evidenced by the Parties'
authorized signatures below:
Official Signatory of Seller:
American International Petroleum Corp.
By:_________________________
Title: Vice President
----------------------
Official Signatory of Buyer:
____________________________
By:____________________________________
Title:_________________________________
Address of Buyer:
_________________________________
_________________________________
_________________________________
Fax No.:_________________________
Tel No.:_________________________
12