EXHIBIT 4.8
FORM OF DEBENTURE
THE SECURITIES REPRESENTED HEREBY OR THOSE INTO WHICH SUCH SECURITIES
ARE CONVERTIBLE HAVE NOT BEEN REGISTERED UNDER (1) THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR (2) ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES (AS DEFINED IN REGULATION S PROMULGATED UNDER THE 1933
ACT ("REGULATION S")) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S.
PERSON (AS THAT TERM IS DEFINED IN REGULATION S) EXCEPT PURSUANT TO
REGISTRATION UNDER THE 1933 ACT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS.
DATE:
DEBENTURE # U.S.$
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
SERIES G EIGHT PERCENT (8%) REDEEMABLE CONVERTIBLE
DEBENTURES DUE MARCH _____,1999
THIS DEBENTURE is one of a duly authorized issue of debentures of
American International Petroleum Corporation, a corporation duly organized and
validly existing under the laws of the State of Nevada, United States of America
(the "Company") designated as its Series G Eight Percent (8%) Redeemable
Convertible Debentures Due March , 1999, in an aggregate principal face value
for all Debentures in this Series G not to exceed One Million Five Hundred
Thousand United States Dollars (US$1,500,000.00).
FOR VALUE RECEIVED, the Company promises to pay to _________
______________________________________, the registered holder hereof and its
successors and assigns (the "Holder"), the principal sum of
United States Dollars ($ ) on
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March , 1999 (the "Maturity Date"), and to pay interest on the principal sum
outstanding, at the rate of eight percent (8%) per annum due and payable in
quarterly installments in arrears, with the first such payment to be made on
July 1, 1997. Accrual of interest, payable in cash, shall commence on the date
hereof and shall continue until payment in full of the outstanding principal sum
has been made or duly provided for. The interest so payable will be paid to the
person in whose name this Debenture (or one or more predecessor Debentures) is
registered on the records of the Company regarding registration and transfers of
the Debentures (the "Debenture Register"); provided, however, that the Company's
obligation to a transferee of this Debenture arises only if such transfer, sale
or other disposition is made in accordance with the terms and conditions of that
Offshore Securities Subscription Agreement dated as of March , 1997, between the
Company and the Holder hereof (or its predecessor in interest) (the
"Subscription Agreement"). The principal of, and interest on, this Debenture are
payable in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts, at the
address last appearing on the Debenture Register of the Company as designated in
writing by the Holder hereof from time to time. The Company will pay the
outstanding principal of and any and all accrued and unpaid interest due upon
this Debenture on the Maturity Date, less any amounts required by law to be
deducted or withheld, to the record Holder of this Debenture as of the tenth
(10th) day prior to the Maturity Date and addressed to such Holder at the last
address appearing on the Debenture Register. The forwarding of such funds shall
constitute a payment of outstanding principal and interest hereunder and shall
satisfy and discharge the liability for principal and interest on this Debenture
to the extent of the sum represented by such check plus any amounts so deducted
or withheld.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Fifty Thousand
United States Dollars (US$50,000.00) and integral multiples thereof. The
Debentures are exchangeable commencing forty-five (45) days from the date hereof
for an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same, but not of
denominations of less than Fifty Thousand United States Dollars (US$50,000.00)
without the Company's written consent. No service charge will be made for such
registration or transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal pursuant to this Debenture any amounts required to be withheld under
the applicable provisions of the United States income tax or other applicable
laws at the time of such payments.
3. This Debenture has been issued subject to investment representations
of the original purchaser hereof and may be transferred or exchanged in the
United States or to a U.S. Person only in compliance with the 1933 Act and
applicable state securities laws. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not his Debenture be overdue, and neither the
Company
nor any such agent shall be affected or bound by notice to the contrary. Any
Holder of this Debenture, electing to exercise the right of conversion set forth
in Section 4 below, in addition to the requirements set forth in Section 4, is
also required to give the Company: (i) written confirmation that it is not a
U.S. Person and the Debenture is not being converted on behalf of a U.S. Person
(such confirmation hereinafter referred to as the "Confirmation"), and (ii) an
opinion of U.S. counsel reasonably acceptable to the Company to the effect that
the Debenture and shares of common stock in the Company issuable upon conversion
thereof have been registered under the 1933 Act or are exempt from such
registration. In the event the Confirmation and an opinion of counsel is not
provided, the Holder hereof will not be entitled to exercise the right to
convert the Debenture pursuant to Section 4(a) below.
4. (a) The Holder of this Debenture is entitled, at its option, at any
time commencing forty-five (45) days after issue hereof, to convert the original
principal face amount of this Debenture into shares of common stock in the
Company, $0.08 par value per share (the "Common Stock"), at a conversion price
(the "Conversion Price") for each share of Common Stock equal to seventy-five
percent (75%) of the Market Price (as defined below) of the Common Stock. For
the purposes of this Paragraph 4, the Market Price shall be the average closing
bid price of the Common Stock for the five (5) business days immediately
preceding the conversion date, as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"). Such conversion shall
be achieved by surrendering the Debenture to be converted with the form of
conversion notice attached hereto as Exhibit I (a "Notice of Conversion"),
executed by the Holder of this Debenture evidencing such Holder's intention to
convert this Debenture or a specified portion (as herein provided) hereof, and
accompanied by proper assignment hereof in blank. No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded to the nearest whole share. Accrued interest
shall be payable in cash. The date on which notice of conversion is given shall
be deemed to be either the date on which the Holder has delivered this
Debenture, with the Notice of Conversion duly executed, to the Company, or, if
earlier, the date set forth in such Notice of Conversion if the Debenture is
received by the Company within five (5) business days thereafter.
(b) Notwithstanding the provisions of Paragraph 4(a) above, the Company
may redeem any or all of the Debentures after the issue hereof and at any time
before receipt or within five (5) business days after receipt of a Notice of
Conversion by paying to the Holder in cash the sum of one hundred twenty-five
percent (125%) of the then outstanding principal balance of the Debenture (or
portion thereof with respect to which the Notice of Conversion has been
received, if applicable) to be converted plus accrued interest to such date, and
shall be less any amounts required by law to be deducted or withheld. Such
payment shall be made by delivering immediately available funds in United States
Dollars by
wire transfer to the Holder, or if no wiring instructions have been provided to
the Company, by cashier's or certified check to the last address of Holder
appearing on the Debenture Register. The wiring of such funds or the forwarding
of such check shall constitute payment of principal and interest hereunder and
shall satisfy and discharge the liability for principal and interest on this
Debenture to the extent of the sum represented by such wire transfer or check
plus any amount required by law to be deducted or withheld. Such payment in
redemption of the Debenture shall be made by the Company within five (5)
business days of receipt by the Company of a Notice of Conversion from the
Holder. Should the Company decide to redeem the Debenture as described in this
Paragraph, the Company shall provide to the Holder a written statement by
facsimile of its intention to redeem (a "Notice of Redemption") within one (1)
business day after receipt of a Notice of Conversion as stated above, which
Notice of Redemption shall be binding upon the Company. Should the Company not
fulfill its obligation to pay the redemption price in a timely manner as herein
stated, the Holder shall have the right at its option to adjust the Market
Price(as defined in Paragraph 4(a) above) to reflect the average closing bid
price for the five (5) business days immediately preceding the date the Holder
again in writing demands conversion of the Debenture after the failed redemption
by the Company. In addition, the Company shall proceed with conversion of the
Debenture as stated herein and as if no Notice of Redemption had been sent by
the Company.
5. No provision of this Debenture shall alter or impair the obligation
of the Company, which obligation is absolute and unconditional, to repay the
principal amount of this Debenture at the time, place, rate, and in the coin
currency, hereinabove stated. This Debenture and all other Debentures now or
hereafter issued on similar terms are direct obligations of the Company. This
Debenture ranks equally with all other Debentures now or hereafter issued under
the terms set forth herein. The Conversion Price and number of shares of Common
Stock issuable upon conversion shall be subject to adjustment from time to time
as provided in Section 6 below.
6. (a) In the event the Company should at any time or from time to
time, after the date of this Debenture, fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock (equal to at least ten
percent (10%) or more of the Company's then issued and outstanding shares of
Common Stock) or other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly additional shares of Common
Stock (hereinafter referred to as "Common Stock Equivalents") without payment of
any consideration by such holder for the additional shares of Common Stock or
the Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend, distribution, split or subdivision if no record date
is fixed), the Conversion Price shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of this Debenture shall
be increased in proportion to such increase in the aggregate number of shares of
Common Stock outstanding and those issuable with respect to such Common Stock
Equivalents.
(b) If the number of shares of Common Stock outstanding at any time
after the date of this Debenture is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price shall be appropriately increased so that the
number of shares of Common Stock issuable upon conversion of this Debenture
shall be decreased in proportion to such decrease in outstanding shares.
7. The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of this Debenture, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
of the outstanding principal amount, and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of this Debenture, in addition to such other remedies as shall be
available to Holder, the Company will take such corporate action as may, in the
opinion of its counsel, be necessary to increase the number of authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes, including without limitation, using its best efforts to
obtain the requisite stockholder approval necessary to increase the number of
authorized shares of the Company's Common Stock.
8. Except as set out in Section 10 below, the Company hereby expressly
waives demand and presentment for payment, notice of nonpayment, protest, notice
of protest, notice of dishonor, notice of acceleration or intent to accelerate,
bringing of suit and diligence in taking any action to collect amounts called
for hereunder and shall be directly and primarily liable for the payment of all
sums owing and to be owing hereunder, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder.
9. The Company agrees to pay all costs and expenses, including without
limitation reasonable attorney's fees, which may be incurred by the Holder in
collecting any amount due under this Debenture.
10. If one or more of the following described "Events of Default"
shall occur:
(a) The Company shall default in the payment of principal or
interest on this Debenture for a period of seven (7) days
following its due date; or
(b) Any of the representations or warranties made by the Company
herein, in the Subscription Agreement, or in any certificate or
financial or other written statement heretofore or hereafter furnished
by or on behalf of the Company in connection with the execution and
delivery of this Debenture or the Subscription Agreement shall be false
or misleading in any material respect at the time made and the Holder
shall have provided seven (7) days prior written notice to the Company
of the alleged misrepresentation or breach of warranty; or
(c) The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement or
obligation of the Company under this Debenture or the Subscription
Agreement and such failure shall continue uncured for a period of seven
(7) days after notice from the Holder of such failure; or
(d) The Company shall either: (i) become insolvent; (ii) admit in
writing its inability to pay its debts generally or as the become due;
(iii) make an assignment for the benefit of creditors or commence
proceedings for its dissolution; or (iv) apply for, or consent to the
appointment of, a trustee, liquidator, or receiver for its or for a
substantial part of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without
the Company's consent and such appointment is not discharged within
thirty (30) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of
the Company and shall not be dismissed within thirty (30) days
thereafter; or
(g) Any money judgment, writ or warrant of attachment, or similar
process in excess of Three Hundred Thousand United States Dollars
(US$300,000.00) in the aggregate shall be entered or filed against the
Company or any of its properties or assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in
any event later than five (5) days prior to the date of any proposed
sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any law for
the relief of debtors shall be instituted by or against the Company
and, if instituted against the Company, shall not be dismissed within
thirty (30) days after such institution or the Company shall by any
action or answer
approve of, consent to, or acquiesce in any such proceedings or admit
the material allegations of, or default in answering a petition filed
in, any such proceeding; or
(i) The Company shall have its Common Stock delisted from the NASDAQ
stock exchange (and not immediately relisted on another national
securities exchange) or suspended from trading thereon, and shall not
have its Common Stock relisted or have such suspension lifted, as the
case may be, within ten (10) business days; or
(j) The Company shall have received a notice of default on the payment
of any debt(s) aggregating in excess of Three Hundred Thousand United
States Dollars (US$300,000.00) beyond any applicable grace period;
then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
in one instance shall not be deemed to be a waiver in another instance or for
any other prior or subsequent Event of Default) at the option of the Holder and
in the Holder's sole discretion, the Holder may immediately accelerate the
maturity hereof, whereupon all principal and interest hereunder shall be
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived by the Company, anything
herein or in any note or other instrument contained to the contrary
notwithstanding, and the Holder may immediately, and upon the expiration of any
period of grace, enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law or equity.
11. As set forth herein, the Company shall use all reasonable efforts
to issue and deliver, within three (3) business days after the Holder has
fulfilled all conditions and submitted all necessary documents duly executed and
in proper form required for conversion (the "Deadline"), to the Holder or any
party receiving a Debenture by transfer from the Holder (together, a "Holder"),
at the address of the Holder on the Debenture Register, a certificate or
certificates for the number of shares of Common Stock to which the Holder shall
be entitled (the "Certificates"). The Company understands and agrees that a
delay in the issuance of the Certificates beyond the Deadline could result in
economic loss and other damages to the Holder. As compensation to the Holder for
such loss, the Company agrees to pay liquidated damages (and not as a penalty)
to the Holder for issuance and delivery of the Certificates after the Deadline,
in accordance with the following schedule (where "No. Business Days Late" is
defined as the number of business days beyond seven (7) business days from the
date of receipt by the Company of a notice of conversion and by the transfer
agent of all necessary documentation duly executed and in proper form required
for conversion, including the original Debenture to be converted, all in
accordance with the Debenture, Subscription Agreement and the requirements of
the transfer agent)
No. Business Days Late Liquidated Damages
(in US$)
1 $500
2 $1,000
3 $1,500
4 $2,000
5 $2,500
6 $3,000
7 $3,500
8 $4,000
9 $4,500
10 $5,000
11+ $5,000 + $5,000 for
each Business Day
Late beyond 11 days
The Company shall pay the Holder any liquidated damages incurred as
called for under this Section 11 by certified or cashier's check upon the
earlier of (i) issuance of the Certificates to the Holder or (ii) each monthly
anniversary of the receipt by the Company of such Holder's Notice of Conversion.
Nothing herein shall limit the Holder's right to pursue actual damages for the
Company's failure to issue and deliver the Certificates to the Holder in
accordance with the terms of the Debenture or for breach by the Company of the
Subscription Agreement.
12. This Debenture represents a general unsecured obligation of the
Company. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based thereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer, director, or
agent of the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issue hereof, expressly waived and released.
13. The Holder of this Debenture, by acceptance hereof, agrees that
this Debenture is being acquired for investment purposes and that such Holder
will not offer, sell or otherwise dispose of this Debenture or the shares of
Common Stock issuable upon exercise hereof except under circumstances which will
not result in a violation of the 1933 Act, or any applicable state "blue sky" or
other law relating to the sale of securities. Notwithstanding the foregoing, the
Holder of this Debenture has no intention of offering, selling or otherwise
disposing of this Debenture or the shares of Common Stock issuable upon exercise
hereof in violation of the requirements of Regulation S.
14. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will not in any way
be affected or impaired thereby.
15. This Debenture and the Exhibit(s) attached hereto and the
Subscription Agreement and the Exhibit(s) attached thereto constitute the full
and entire understanding between the Company and the Holder with respect to the
subject matter hereof and thereof. Neither this Debenture nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the Company and the Holder.
16. This Debenture shall be governed by and construed in accordance
with the laws of the state of New York.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized, all as of the date first
hereinabove written.
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
By: _______________________________________
Denis J. Fitzpatrick, Vice President
EXHIBIT I
NOTICE OF CONVERSION
(To Be Executed by the Registered Holder in Order to Convert the Debenture)
The Undersigned hereby irrevocably elects to convert $ of the Eight
Percent (8%) Convertible Debenture Due March , 1999,
No. , into shares of Common Stock of American International Petroleum
Corporation, (the "Company") according to the terms and conditions set forth in
such Debenture, as of the date written below.
The Undersigned represents that it is not a U.S. Person as defined in
Regulation S promulgated under the Securities Exchange Act of 1933, as amended,
and is not converting the Debenture on behalf of any U.S. Person and the
representations contained in the Subscription Agreement (as defined in the said
Debenture) are true.
Date of Conversion:*
Applicable Conversion Price: _________________________________
Holder (Print True Legal Name): ______________________________
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(Signature of Duly Authorized Representative of Holder)
Address of Holder: _________________________________
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* This original Notice of Conversion, along with the original Debenture, must be
received by the Escrow Agent and the Company by the fifth business day following
the Date of Conversion
FORM OF OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
THIS OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT dated as of March ,
1997 (the "Agreement"), is executed in reliance upon the exemption from
registration provided by Regulation S ("Regulation S") as promulgated by the
Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as
amended (the "1933 Act"). Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to them in Regulation S.
This Agreement has been executed by the undersigned purchaser
("Purchaser") in connection with the private placement of Series G Eight Percent
(8%) Redeemable Convertible Debentures of American International Petroleum
Corporation, a Nevada Corporation, with its principal executive offices located
at 444 Madison Avenue, Suite 3203, New York, New York USA 10022 (hereinafter
"Seller"). Purchaser hereby represents and warrants to, and agrees with Seller
that:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE 1933 ACT, AS AMENDED, OR THE
SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES LAW. THEY ARE
BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER REGULATION S
("REGULATION S") PROMULGATED UNDER THE 1933 ACT. THESE SECURITIES MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS
(AS THAT TERM IS DEFINED IN REGULATION S) UNLESS SUCH SECURITIES ARE REGISTERED
UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFER, SALE OR
TRANSFER IS MADE PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SAID LAWS
and,
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY BY OR TO
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL OR IN VIOLATION OF REGULATION S. INVESTMENT IN THESE SECURITIES
INVOLVES A HIGH DEGREE OF RISK. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST
RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND THE RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED OR
DETERMINED THE ACCURACY OR ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
1. Agreement to Subscribe; Purchase Price.
(a) Subscription. Purchaser hereby subscribes for and agrees
to purchase from Seller Series G Eight Percent (8%) Redeemable
Convertible Debentures substantially in the form of the Debenture
attached hereto as Exhibit A, in an aggregate principal face value for
all Debentures in such Series G not to exceed One Million Five Hundred
Thousand United States Dollars (US$1,500,000.00) (singly, a "Debenture"
and collectively, the "Debentures"), at an aggregate purchase price as
set forth in Paragraph 1(b) hereinafter.
(b) Purchase Price; Manner of Payment. The aggregate
purchase price for the Debenture(s) purchased pursuant to this
Agreement shall be ________________________ United States Dollars
($ ) (the "Purchase Price"), which shall be payable at the closing
pursuant to Paragraph 1(c) hereinafter by delivering immediately
available funds in United States Dollars, by wire transfer, to the
designated depository for closing by delivery of securities versus
payment.
(c) Closing. Subject to the satisfaction of the conditions set
forth in Paragraphs 8 and 9 hereinafter, the closing of the
transaction(s) contemplated by this Agreement shall occur on or before
March 31, 1997, or such other date as is mutually agreed to in writing
by Purchaser and Seller (the "Closing Date").
2. Purchaser Representations, Warranties and Covenants; Access to
Information.
(a) Offshore Transaction. In connection with the purchase
and sale of the Debentures, Purchaser represents and warrants to, and
covenants and agrees with Seller as follows:
(i) Purchaser is a natural person or if not a natural
person then Purchaser is not organized under the laws of any
jurisdiction within the United States, was not formed by a U.S. Person
(as defined in Regulation S) for the purpose of investing in Regulation
S securities; and Purchaser is not otherwise a U.S. Person. Purchaser
is not, and on the Closing Date will not be, an affiliate of Seller;
(ii) At the time the buy order was originated, Purchaser was
outside the United States and is outside of the United States as of the
date of 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 (the "Common
Stock") (such Debentures and Common Stock to be referred to
collectively as the
"Securities"), was made by Purchaser in the United States;
(iv) Purchaser is purchasing the Securities for its own
account and Purchaser 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 Purchaser
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 Rules 903 and 904, if
applicable, of Regulation S, or pursuant to registration of securities
under the 1933 Act or pursuant to an available exemption from
registration. In any event, none of the Securities have been nor will
they be offered or sold by Purchaser 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: (a) the date of
closing of the offering of the Securities; or (b) the date of the first
offer of the Securities to persons other than distributors (the
"Restricted Period"), as certified by Purchaser to Seller; and
thereafter only pursuant to a Registration Statement or an applicable
exemption from registration of the Securities;
(vi) The transaction(s) contemplated by this Agreement (a)
have not been and will not be pre-arranged by Purchaser with a buyer
located in the United States or a purchaser which is a U.S. Person, and
(b) are not and will not be a part of a plan or scheme by Purchaser, to
evade the registration provisions of the 1933 Act;
(vii) Purchaser 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 Purchaser set forth herein in
order to determine the applicability of such exclusions and the
suitability of Purchaser and any buyer from Purchaser to acquire the
Securities;
(viii) Purchaser 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 Purchaser pursuant to Section
(c)(2)(iv) of Rule 901 of Regulation S;
(ix) Purchaser has not conducted and shall not conduct any
"directed selling efforts" as that phrase is defined in Rule 902(b) of
Regulation S; nor has Purchaser conducted any general solicitation
relating to the offer and sale of any of the Securities in the United
States or elsewhere;
(x) This Agreement has been duly authorized, validly executed
and delivered on behalf of Purchaser and is a valid and binding
agreement in accordance with its terms, subject to general principles
of equity and to bankruptcy and other laws affecting the enforcement of
creditors' rights generally; Purchaser (and Purchaser's legal counsel)
has examined this Agreement and is satisfied that this Agreement is in
accordance with the requirements of Regulation S and is effective to
accomplish the purposes set forth herein;
(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 Purchaser of any of the terms or provisions of,
or constitute a default under, the articles of incorporation or by-laws
(or any similar constitutive documents) of Purchaser or any indenture,
mortgage, deed of trust, or other material agreement or instrument to
which Purchaser 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 Purchaser or any of its
properties or assets;
(xii) All invitations, offers and sales of or in respect of,
any of the Securities, by Purchaser and any distribution by Purchaser
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 agency or stock
exchange in any country or any political subdivision of any country
except to the extent required for the filing of Form 10(b)17 with
NASDAQ;
(xiii) Purchaser 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 Purchaser nor any of its affiliates has entered,
has any intention of entering, nor will during the Restricted Period
enter into any short position, put option, or other similar instrument
or position or any other hedging activity with respect to any of the
Securities or other securities of the same class as the Securities.
(b) No Governmental Regulation or Approval. Purchaser understands
that no Federal or State or foreign governmental agency has passed on or made
any recommendation with respect to, or endorsement of, the Securities.
(c) Current Public Information. Purchaser 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
offer and sale of the Securities which have been requested by Purchaser.
Purchaser further acknowledges that it and its advisors, if any, have received
complete and satisfactory answers to such inquiries.
(d) Purchaser's Sophistication. Purchaser acknowledges that the
purchase of the Securities involves a high degree of risk, including the risk of
the total loss of Purchaser's investment. Purchaser has such knowledge and
experience in financial matters that it is capable of evaluating the merits and
all of the risks involved with the purchase of the Securities.
(e) Tax Status. Purchaser is not a "Ten Percent Shareholder" (as
defined in Section 871(h)(3)(B) of the United States Internal Revenue Code) of
Seller.
3. Representations, Warranties and Covenants of Seller.
(a) Reporting Company Status. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada, and
is duly qualified as a foreign corporation in all jurisdictions in which the
failure to so qualify would have a material adverse effect on Seller and its
subsidiaries taken as a whole. Seller is a "Reporting Issuer" as defined in Rule
902 of Regulation S. Seller has registered its common stock, $0.08 par value per
share, pursuant to Section 12 of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and the Common Stock is listed and trades on NASDAQ and Seller
has not received any written or oral notice as to its
continued eligibility for listing. Seller has filed all material required to be
filed pursuant to all reporting obligations under either Section 13(a) or 15(d)
of the 1934 Act for a period of at least twelve (12) months immediately
preceding the offer or sale of the Securities (or for such shorter time period
that Seller has been required to file such material, if Seller has been required
to file same for less than twelve (12) months).
(b) Current Public Information. Seller has furnished Purchaser with
copies of its most recent reports, as the same may have been amended, filed
under the 1934 Act as referred to above, and other publicly available documents
and information requested by Purchaser, receipt of which is hereby acknowledged
by Purchaser.
(c) Offshore Transaction. Seller has not offered any of the
Securities to any person in the United States, any identifiable group of U.S.
citizens abroad, or to any U.S. Person, as that term is defined in Regulation
S. In addition,
(i) Seller and its agents reasonably believe that, at
the time the buy order was originated, Purchaser was outside the
United States and was not a U.S. Person, such belief based upon the
representations of Purchaser;
(ii) Seller and its agents reasonably believe that the
transaction has not been pre-arranged by Purchaser with a buyer in the
United States, based upon the representations of Purchaser;
(iii) No offer to buy or sell the Securities was or will be
made by Seller to any person in the United States or to any U.S.
Person;
(iv) The sale of the Securities by Seller pursuant to this
Agreement will be made in accordance with all of the provisions and
requirements of Regulation S provided that the representations,
warranties and covenants of Purchaser contained in this Agreement are
true and correct; and
(v) The transactions contemplated by this Agreement: (A) have
not been and will not be pre-arranged by Seller with a buyer located in
the United States or a buyer 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 requirements of the 1933 Act.
(d) No Directed Selling Efforts. With respect to the transactions
contemplated by this Agreement, 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 with the terms of the Debentures for the consideration expressed
herein and in the Debentures, will be duly and validly issued, fully paid and
non-assessable. Issuance of the Common Stock upon conversion of the Debenture(s)
in accordance with the terms of the Debenture(s), shall be duly and validly
issued, fully paid, and non-assessable and will not subject the holder(s)
thereof, if such person(s) are non-U.S. Persons, to personal liability by reason
of being such holder(s). There are no preemptive 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 and other laws affecting the enforcement of creditors' rights
generally. Seller (and Seller's legal counsel, to the extent desired by Seller)
has examined this Agreement and is satisfied that this Agreement is in
accordance with the requirements of Regulation S and is effective to accomplish
the purposes set forth herein.
(g) Non-contravention. The execution and delivery of this Agreement,
and the consummation of the issuance of the Securities and the transaction(s)
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 (or any similar constitutive
documents) 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
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 governmental body which is legally required for the issuance and
sale of the Securities to persons who are non-U.S. Persons, as contemplated by
this Agreement, other than as may be required by the NASDAQ Stock Market, Inc.
(i) Litigation. Except as set forth in Exhibit 3(i), attached hereto
and incorporated herein by this reference, there is no action, suit or
proceeding by or before any court or governmental agency or body, domestic or
foreign, now pending against Seller or any of its assets, or, to the knowledge
of Seller, which might result in any material adverse change in the condition
(financial or otherwise) or in the earnings, business affairs or business
prospects of Seller, or which might materially and adversely affect the assets
of Seller.
(j) No Default. Seller has not received any notice of default with
respect to its performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust or
other material instrument or agreement to which it is a party or by which it or
its properties or assets may be bound; and neither the execution nor the
delivery by Seller, nor the performance by Seller of its obligations under this
Agreement or the Debentures will conflict with or result in the breach or
violation of any of the terms or provisions of, or constitute a default or
result in the creation or imposition of any lien or charge on any properties or
assets of Seller, any material indenture, mortgage, deed of trust or other
material agreement or instrument to which Seller is a party or by which it is
bound or by any statute or the articles of incorporation or by-laws of Seller,
or any decree, judgment, order, rule or regulation of any court or governmental
agency or body having jurisdiction over Seller or its properties or assets.
(k) SEC Filings. None of Seller's filings with the SEC since and
including without limitation the filing of its latest Annual Report for Seller's
most recent fiscal year contains any untrue statement of a material fact or
omits to state any material fact required to be contained therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Seller has since at least January 1, 1996, timely
filed all requisite forms, reports and exhibits thereto with the SEC as the same
have become due.
(l) Full Disclosure. There is no fact known to Seller (other than
general economic conditions known to the public generally) which has not been
disclosed in writing to Purchaser that: (i) could reasonably be expected to have
a material adverse effect on the condition (financial or otherwise) of or in the
earnings, business affairs, business prospects, properties or assets of Seller;
or (ii) could reasonably be expected to materially and adversely affect the
ability of Seller to perform its obligations under this Agreement.
(m) Continued Listing. Seller shall use its best efforts to
continue to have its stock listed on the NASDAQ stock exchange.
(n) No Stop Transfer Instructions; Irrevocable Treasury Order;
Instructions to Transfer Agent. Except as otherwise expressly provided in
Paragraph 5 below, Seller will not issue stop transfer instructions to its
transfer agent with respect to, and will not place any restrictive legend of any
kind on, the share certificates represented by the shares of Common Stock
issuable upon the conversion of the Debenture(s). Seller hereby agrees to
execute an irrevocable treasury order with respect to the Common Stock, the form
of which is attached hereto as Exhibit B, and to deliver same to the closing
agent for the transaction(s) contemplated hereby. Seller agrees to instruct its
transfer agent to reserve on its books a sufficient number of shares of common
stock of Seller to effectuate the transaction(s) contemplated hereby.
(o) No Other Offerings Pursuant to Regulation S. Seller covenants that,
upon completion of the full private placement as contemplated in this Agreement,
Seller will not undertake another private placement pursuant to Regulation S for
a minimum of sixty (60) days from the date of this Agreement, but in any event
not before June 1, 1997.
4. Exemption; Reliance on Representations. Purchaser understands
that the offer and sale of the Securities are not being registered under the
1933 Act. Seller and Purchaser 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 a Debenture, the holder thereof
shall submit such Debenture to Seller with a Notice of Conversion (as defined in
Exhibit A attached hereto) and Seller shall immediately instruct Seller's
transfer agent to issue one or more certificates representing that number of
shares of Common Stock into which the Debenture is convertible in accordance
with the provisions regarding conversion set forth in Exhibit A attached hereto.
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 by a person who certifies in its Notice of
Conversion (as defined in Exhibit A attached hereto) that it is a non-U.S.
Person, Seller shall instruct Seller's transfer agent to issue stock
certificates WITHOUT ANY RESTRICTIVE LEGEND OF ANY KIND in the name of Purchaser
or its nominee (which nominee shall not be a U.S. Person) or such other non-U.S.
Persons as may be designated by Purchaser 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, other than
as specified in Paragraph 3(n) above, no instructions other
than these instructions and instructions to impose a "stop transfer" order with
respect to the said stock certificates until the end of the Restricted Period
have been given or will be given to Seller's transfer agent and that the Common
Stock shall otherwise be freely transferable on the books and records of Seller.
Nothing in this Paragraph 5, however, shall affect in any way Purchaser's or
such nominee's obligations and agreements to comply with all applicable laws
upon resale of the Securities.
6. Registration. If upon conversion of the Debentures effected by
Purchaser pursuant to the terms of this Agreement Seller fails to issue
certificates for shares of Common Stock issuable upon such conversion (the
"Underlying Shares") to Purchaser bearing no restrictive legend for any reason
other than Seller's reasonable, good faith belief that the representations and
warranties made by Purchaser in this Agreement or the Notice of Conversion
(which is defined in and a part of Exhibit A) were untrue when made, or if the
restricted period under Regulation S is extended, then Seller shall be required,
at the request of Purchaser and at Seller's expense, to effect the registration
of the Underlying Shares under the 1933 Act and all relevant "blue sky" laws as
promptly as is practicable. Seller and Purchaser 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. Seller shall file a registration statement
within fifteen (15) days of Purchaser's demand therefor and shall use its best
efforts to cause such registration statement to become effective as soon as
practicable thereafter and in any event within sixty (60) days from the initial
filing thereof. Such best efforts shall include, without limitation, promptly
responding to all comments received from the SEC and providing Purchaser's
counsel with a contemporaneous copy of all written correspondence with the SEC.
Once declared effective by the SEC, Seller shall cause such registration
statement to remain effective until the earlier of: (i) the sale by Purchaser of
all Underlying Shares registered; or (ii) one hundred twenty (120) days after
the effective date of such registration statement. In the event Seller
undertakes to file a registration statement on Form S-3 in connection with the
Common Stock, upon the effectiveness of such registration, Purchaser shall have
the option to sell the Underlying Shares pursuant thereto. The foregoing shall
not in any way limit Purchaser's rights in connection with the Common Stock or
the Underlying Shares pursuant to Regulation S or otherwise.
7. Delivery Instructions. The Debentures being purchased pursuant to
this Agreement shall be delivered to Purchaser at such time and place as shall
be mutually agreed by Seller and Purchaser, subject to the requirements that
the Debentures and the Underlying Shares may not be delivered to or for the
benefit of a U.S. Person.
8. Conditions to Seller's Obligation to Sell. Seller's
obligation to sell the Debentures is conditioned upon the following:
(a) The receipt and acceptance by Purchaser of this Agreement as
evidenced by Purchaser's execution of this Agreement; and
(b) Delivery by Purchaser into the closing depository of the Purchase
Price in immediately available funds as payment in full for the Debentures.
9. Conditions to Purchaser's Obligation to Purchase. Purchaser's
obligation to purchase the Debentures is conditioned upon the following:
(a) The receipt and acceptance by Seller of this Agreement as
evidenced by Seller's execution of this Agreement; and
(b) Delivery by Seller of the Debentures as described herein.
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 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 Purchaser, nor any direct or indirect purchaser of the
Securities from Purchaser, may directly or indirectly offer or sell the
Securities in the United States or to U.S. Persons (other than to distributors)
unless the Securities are registered under the 1933 Act and any applicable state
securities laws, or unless an exemption from the registration requirements of
the 1933 Act or any such state securities laws is available. Such statements
shall appear (i) on the cover of any prospectus or offering circular used in
connection with the offer or sale of the Securities; (ii) in the underwriting
section of any prospectus or offering circular used in connection with the offer
or sale of the Securities; and (iii) in any advertisement made or issued by
Seller, Purchaser, or any distributor, any of their respective affiliates, or
any other person acting on behalf of any of the foregoing.
11. Miscellaneous.
(a) Except as otherwise specifically provided herein, this Agreement
constitutes the entire agreement between the parties hereto, and neither party
shall be liable for or bound to the other in any manner by any warranties,
representations or covenants except as specifically set forth herein. Any
previous agreement between the parties related to the transactions contemplated
by this Agreement 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 implied, 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) Purchaser is an independent contractor, and is not the agent of
Seller. Purchaser is not authorized to bind Seller, or to make any
representation or warranty on behalf of Seller.
(c) Seller makes no representation or warranty with respect to Seller,
its finances, assets, business prospects or otherwise, other than as contained
herein. Purchaser will advise each buyer, if any, and potential buyer of the
Securities, of the foregoing sentence, and that such buyer or potential buyer is
relying on its own investigation with respect to all such matters, and that such
buyer or potential buyer will be given access to any and all documentation and
Seller personnel as it may reasonably request for such investigation.
(d) All representations and warranties contained in this Agreement by
Seller and Purchaser shall survive the closing of the transactions contemplated
by this Agreement.
(e) This Agreement shall be construed according to the internal laws of
the state of New York. This Agreement may be executed in multiple counterparts,
and the facsimile transmission of an executed counterpart to this Agreement by a
party to the other party or to the closing agent shall be effective as an
original.
(f) Each party agrees to indemnify the other and hold the other
harmless from and against any and all losses, damages, liabilities, costs and
expenses (including without limitation reasonable attorney's fees) which the
other party may sustain or incur in connection with the breach by the
indemnifying party of any representation, warranty or covenant made by it in
this Agreement, or of any other term or condition of this Agreement.
(g) Except as reasonably required in order to effectuate the
requirements and purposes hereof, and except as required by law, the parties
shall keep permanently confidential the contents of this Agreement and all other
agreements between themselves. With the exception of legal counsel and key
operations personnel of the parties, and except as required by law, under no
circumstances may either party permit this Agreement, or any copies thereof, to
be viewed and/or retained by any third party.
IN WITNESS WHEREOF, Seller and Purchaser have executed this Agreement
as of the date first hereinabove written.
[SIGNATURE PAGE FOLLOWS]
[SIGNATURE PAGE - OFFSHORE SECURITIES SUBSCRIPTION
AGREEMENT DATED MARCH ,1997]
OFFICIAL SIGNATORY OF SELLER
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
By:_________________________________________
Denis J. Fitzpatrick, Vice President
OFFICIAL SIGNATORY OF PURCHASER
Purchaser:
By:
Title:
(Print Name and Title)
Address of Purchaser:
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