Exhibit 4.1
THIS CONVERTIBLE NOTE HAS BEEN ISSUED PURSUANT TO REGULATION S PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED AND HAS NOT BEEN REGISTERED UNDER THE
1933 ACT OR ANY APPLICABLE STATE SECURITIES LAWS. THIS CONVERTIBLE NOTE MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OF A "U.S.
PERSON" AS THAT TERM IS DEFINED IN REGULATION S DURING THE PERIOD COMMENCING ON
THE SALE OF THIS CONVERTIBLE NOTE AND ENDING ON THE 40TH DAY FOLLOWING
COMPLETION OF THE REGULATION S OFFERING PURSUANT TO WHICH THIS NOTE HAS BEEN
ISSUED (THE "RESTRICTED PERIOD"). IN ADDITION, A SECURITIES PURCHASE AGREEMENT,
DATED AS OF THE DATE HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT
ITS PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG THE
PARTIES, INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH (A) LIMIT THE
CONVERSION RIHTS OF THE HOLDER, (B) SPECIFY VOLUNTARY AND MANDATORY REPAYMENT,
PREPAYMENT AND REDEMPTION RIGHTS AND OBLIGATIONS AND (C) SPECIFY EVENTS OF
DEFAULT FOLLOWING WHICH THE REMAINING BALANCE DUE AND OWING HEREUNDER MAY BE
ACCELERATED.
$_________
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
14% Convertible Note due October 15, 1998
AMERICAN INTERNATIONAL PETROLEUM CORPORATION, a Nevada corporation
(together with its successors, the "Company"), for value received hereby
promises to pay to:
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(the "Holder") and registered assigns, the principal sum of __________ Dollars
($__________) or, if less, the principal amount of this Note then outstanding,
on the Maturity Date by wire transfer of immediately available funds to the
Holder in such coin or currency of the United States of America as at the time
of payment shall be legal tender for the payment of public and private debts,
and to pay interest, semi-annually in arrears, on (i) the last day of June and
December of each year until the Maturity Date, commencing December 31, 1997
(unless such day is not a Business Day, in which event on the next succeeding
Business Day) (each an "Interest Payment Date"), (ii) the Maturity Date, (iii)
each Conversion Date, as hereafter defined,
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(American International Petroleum Corporation - No. 1)
and (iv) the date the principal amount of the Convertible Notes shall be
declared to be or shall automatically become due and payable, on the principal
sum hereof outstanding in like coin or currency, at the rates per annum set
forth below, from the most recent Interest Payment Date to which interest has
been paid on this Convertible Note, or if no interest has been paid on this
Convertible Note, from the date of this Convertible Note until payment in full
of the principal sum hereof has been made.
The interest rate shall be fourteen percent (14%) per annum (the "Interest
Rate") or, if less, the maximum rate permitted by applicable law. Past due
amounts (including interest, to the extent permitted by law) will also accrue
interest at the Interest Rate plus 2% per annum or, if less, the maximum rate
permitted by applicable law, and will be payable on demand ("Default Interest").
Interest on this Convertible Note will be calculated on the basis of a 360-day
year of twelve 30 day months. All payments of principal and interest hereunder
shall be made for the benefit of the Holder pursuant to the terms of the
Agreement (hereafter defined). At the option of the Company, interest may be
paid in cash or in shares of Common Stock. If the Company determines to pay
interest in shares of Common Stock, it shall be required to notify the Holder of
such election at least five (5) Business Days prior to the applicable Interest
Payment Date. The number of shares of Common Stock issued as interest shall be
determined by dividing the dollar amount of interest due on the applicable
Interest Payment Date by the Conversion Price then in effect.
This Convertible Note is one of a duly authorized issuance of $10,000,000
aggregate principal amount of Convertible Notes of the Company (the "Convertible
Note") referred to in that certain Securities Purchase Agreement dated as of the
date hereof between the Company and the Purchasers named therein (the
"Agreement"). The Agreement contains certain additional agreements among the
parties with respect to the terms of this Convertible Note, including, without
limitation, provisions which (A) limit the conversion rights of the Holder, (B)
specify voluntary and mandatory repayment, prepayment and redemption rights and
obligations and (C) specify Events of Default following which the remaining
balance due and owing hereunder may be accelerated. All such provisions are an
integral part of this Convertible Note and are incorporated herein by reference.
This Convertible Note is transferable and assignable to one or more purchasers
(in minimum denominations of $100,000 or larger multiples of $1,000), in
accordance with the limitations set forth in the Agreement.
The Company shall keep a register (the "Register") in which shall be
entered the names and addresses of the registered holder of this Convertible
Note and particulars of this Convertible Note held by such holder and of all
transfers of this Convertible Note. References to the Holder or "Holders" shall
mean the Person listed in the Register as the registered holder of such
Convertible Notes. The ownership of this Convertible Note shall be proven by the
Register.
1. Certain Terms Defined. All terms defined in the Agreement and not
otherwise defined herein shall have for purposes hereof the meanings provided
for therein.
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(American International Petroleum Corporation - No. 1)
2. Covenants. Unless the Majority Holders otherwise consent in writing,
the Company covenants and agrees to observe and perform each of its obligations
and undertakings contained in the Agreement, which obligations and undertakings
are expressly assumed herein by the Company and made for the benefit of the
holder hereof.
3. Payment of Principal. The Company shall repay the remaining unpaid
balance on this Convertible Note on the Maturity Date. The Company may, and
shall be obligated to, prepay all or a portion of this Convertible Note on the
terms specified in the Agreement.
4.1 Conversion of Convertible Note.
(a) The Holder shall have the right, at its option, at any time, and
from time to time, after the Restricted Period to convert the principal
amount of this Convertible Note, or any portion of such principal amount,
into that number of fully paid and nonassessable shares of Common Stock
(as such shares shall then be constituted) determined pursuant to this
Section 4.1. The number of shares of Common Stock to be issued upon each
conversion of this Convertible Note shall be determined by dividing the
Conversion Amount (as defined below) by the Conversion Price in effect on
the date (the "Conversion Date") a Notice of Conversion is delivered to
the Company by the Holder by facsimile or other reasonable means of
communication dispatched prior to 5:00 p.m., New York City Time. The term
"Conversion Amount" means, with respect to any conversion of this
Convertible Note, the sum of (1) the principal amount of this Convertible
Note to be converted in such conversion plus (2) accrued and unpaid
interest, if any, on such principal amount at the interest rates provided
in this Convertible Note to the Conversion Date plus (3) Default Interest,
if any, on the interest referred to in the immediately preceding clause
(2) plus (4) at the Holder's option, any amounts owed to the Holder
pursuant to Section 4.3 hereof, Section 10.1 of the Agreement or Section
10.4 of the Agreement.
(b) Notwithstanding the foregoing, during the first 120 days
following the date hereof, the Holder shall not be entitled to convert the
principal amount of this Convertible Note unless the highest Trading Price
(as hereafter defined) for any Trading Day during such 120 day period
exceeds the product of 133-1/3% multiplied by the Initial Conversion
Price. As used herein, Trading Price means the price at which the Common
Stock has been traded, as reported by Bloomberg, L.P. ("Bloomberg") on the
Nasdaq Market or, if not reported by Bloomberg on the Nasdaq Market, as
reported by such other exchange or market where the Common Stock is then
traded.
4.2 Conversion Price. The Conversion Price of this Convertible Note (the
"Conversion Price") shall be $_______ per share (the "Initial Conversion Price")
provided that, if (x) the Company shall have declined to repay in full this
Convertible Note on the Call Date or (y) if an Event of Default (including,
without limitation, the failure to pay interest or principal when due) shall
have occurred, then following each such event the Conversion Price shall be the
lesser of (i) the Initial Conversion Price, (ii) 0.85 times the Market Price and
(iii) the 40-Day
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(American International Petroleum Corporation - No. 1)
DWASP (as hereafter defined) (subject, in each case, to equitable adjustments
for stock splits, stock dividends or rights offerings by the Company relating to
the Company's securities or the securities of any subsidiary of the Company,
combinations, recapitalization, reclassifications, extraordinary distributions
and similar events). The term "40-Day DWASP" means, for any security as of any
date, the daily-weighted average sales price on the Nasdaq Market as reported by
Bloomberg or, if the Nasdaq Market is not the principal trading market for such
security, the daily-weighted average sales price of such security on the
principal securities exchange or trading market where such security is listed or
traded as reported by Bloomberg, or if the foregoing do not apply, the
daily-weighted average sales price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no daily-weighted average sales price is reported for such
security by Bloomberg, then the average of the bid prices of any market makers
for such security as reported in the "pink sheets" by the National Quotation
Bureau, Inc., in each case for the lowest five (5) consecutive Trading Day
period during such 40-day period. If the 40-Day DWASP cannot be calculated for
such security on such date on any of the foregoing bases, the 40-Day DWASP of
such security on such date shall be the fair market value as mutually determined
by the Company and the Holders of a majority in interest of Convertible Notes
being converted for which the calculation of the closing bid price is required
in order to determine the Conversion Price of such Convertible Notes.
4.3 Authorized Shares.
(a) Consistent with Section 9.2 of the Agreement, the Company (i)
acknowledges that it has irrevocably instructed its transfer agent to
issue certificates for the Common Stock issuable upon conversion of this
Convertible Note and (ii) agrees that its issuance of this Convertible
Note shall constitute full authority to its officers and agents who are
charged with the duty of executing stock certificates to execute and issue
the necessary certificates for shares of Common Stock in accordance with
the terms and conditions of this Convertible Note.
(b) If at any time a Holder of this Convertible Note submits a
Notice of Conversion (x) the Company does not have sufficient authorized
but unissued shares of Common Stock available to effect such conversion in
full in accordance with the provisions of this Article 4 or (y) the
Company is prohibited by the applicable rules of the Nasdaq Market to
effect such conversion in full as provided in subsection (d) below,
without stockholder approval (each, a "Conversion Default"), the Company
shall issue to the Holder all of the shares of Common Stock which are then
available to effect such conversion. The portion of this Convertible Note
which the Holder included in its Conversion Notice and which exceeds the
amount which is then convertible into available shares of Common Stock
(the "Excess Amount") shall, notwithstanding anything to the contrary
contained herein, not be convertible into Common Stock in accordance with
the terms hereof until (and at the Holder's option at any time after) the
date additional shares of Common Stock are authorized by the Company, or
its stockholders, as applicable, at which time the Conversion Price in
respect thereof shall be the lower of (i) the
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(American International Petroleum Corporation - No. 1)
Conversion Price on the Conversion Default Date (as defined below) and
(ii) the Conversion Price on the Conversion Date thereafter elected by the
Holder in respect thereof. The Company shall pay to the Holder payments
("Conversion Default Payments") for a Conversion Default in the amount of
(N/365) x .24 x the Excess Amount on the Conversion Date in respect of the
Conversion Default (the "Conversion Default Date"), where N = the number
of days from the Conversion Default Date to the date (the "Authorization
Date") that the Company, or its stockholders, as applicable, authorizes a
sufficient number of shares of Common Stock to effect conversion of the
full outstanding principal balance of this Convertible Note. The Company
shall use its best efforts to authorize, or cause its stockholders to
authorize within 90 days of the occurrence of a Conversion Default, as
applicable, a sufficient number of shares of Common Stock as soon as
practicable following the earlier of (i) such time that the Holder
notifies the Company or that the Company otherwise becomes aware that
there are or likely will be insufficient shares to allow full conversion
thereof and (ii) a Conversion Default. The Company shall send notice to
the Holder of the authorization of additional shares of Common Stock, the
Authorization Date and the amount of Holder's accrued Conversion Default
Payments. The accrued Conversion Default Payments for each calendar month
shall be paid in cash or shall be convertible into Common Stock (at such
time as there are sufficient authorized shares of Common Stock) at the
Market Price, at the Holder's option, as follows:
(i) In the event the Holder elects to take such payment in
cash, cash payment shall be made to Holder by the fifth day of the
month following the month in which it has accrued; and
(ii) In the event the Holder elects to take such payment in
Common Stock, the Holder may convert such payment amount into Common
Stock at the Conversion Price (as in effect at the time of
conversion) at any time after the fifth day of the month following
the month in which it has accrued (at such time as there are
sufficient authorized shares of Common Stock) in accordance with the
terms of this Article 4.
(c) The Holder's election pursuant to this Section 4.3 shall be made
in writing to the Company at any time prior to 5:00 p.m., New York City
Time, on the third day of the month following the month in which
Conversion Default payments have accrued. If no election is made, the
Holder shall be deemed to have elected to receive cash. Nothing herein
shall limit the Holders right to pursue actual damages (to the extent in
excess of the Conversion Default Payments) due to the Company's failure to
maintain a sufficient number of authorized shares of Common Stock.
(d) In no event shall the Company issue more than the Maximum Number
of Shares upon conversion of this Convertible Note, unless the Company
shall have obtained Stockholder Approval (as defined below) or a waiver of
such requirement by the Nasdaq Market. As used herein, Stockholder
Approval means approval by the
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(American International Petroleum Corporation - No. 1)
stockholders of the Company in accordance with Rule 4460(i) of the rules
of the Nasdaq Market. Once the Maximum Number of Shares has been issued
(the date of which is hereinafter referred to as the "Maximum Conversion
Date"), unless the Company shall have obtained Stockholder Approval or a
waiver of such requirement by the Nasdaq Market within 90 days of the
Maximum Conversion Date, the Company shall pay to the Holder within five
(5) Business Days of the Maximum Conversion Date (or, if the Company is,
in good faith, using its best efforts to obtain Stockholder Approval, then
the earlier of (x) 90 days following the Maximum Conversion Date, and (y)
such date that it becomes reasonably apparent that Stockholder Approval
will not be obtained within such 90 day period), the greater of (x) the
Formula Amount plus accrued and unpaid Default Interest, if any, and (y)
the Par Value Redemption Amount plus accrued and unpaid Default Interest,
if any. The Maximum Number of Shares shall be subject to adjustment from
time to time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring
after the date hereof as contemplated by Article XI of the Agreement. With
respect to each Holder of Convertible Notes, the Maximum Number of Shares
shall refer to such Holder's pro rata share thereof based upon the
aggregate principal balance of the convertible Notes then outstanding. In
the event that the Company obtains Stockholder Approval, the approval of
the Nasdaq Market or otherwise is able to increase the number of shares to
be issued above the Maximum Number of Shares (such increased number being
the "New Maximum Number of Shares"), the references to Maximum Number of
Shares above shall be deemed to be, instead, references to the New Maximum
Number of Shares.
4.4 Method of Conversion
(a) Notwithstanding anything to the contrary set forth herein,
upon conversion of this Convertible Note in accordance with the
terms hereof, the Holder shall not be required to physically
surrender this Convertible Note to the Company unless the entire
unpaid principal amount of this Convertible Note is so converted.
The Company and the Holder shall maintain records showing the
principal amount so converted and the date of such conversions or
shall use such other method, reasonably satisfactory to the Holder
and the Company, so as not to require physical surrender of this
Convertible Note upon each such conversion. In the event of any
dispute or discrepancy, such records of the Company shall be
controlling and determinative in the absence of manifest error.
Notwithstanding the foregoing, if any portion of this Convertible
Note is converted as aforesaid, the Company may not transfer this
Convertible Note unless the Holder first physically surrenders this
Convertible Note to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new note
of like tenor, registered as the Holder (upon payment by the Holder
of any applicable transfer taxes), may request, representing in the
aggregate the remaining unpaid principal amount of this Convertible
Note. The Holder and any assignee, by acceptance of this Convertible
Note, acknowledge and agree that, by
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(American International Petroleum Corporation - No. 1)
reason of the provisions of this paragraph, following conversion of
a portion of this Convertible Note, the unpaid and unconverted
principal amount of this Convertible Note represented by this
Convertible Note may be less than the amount stated on the face
hereof.
(b) The Company shall not be required to pay any tax which may
be payable in respect of any transfer involved in the issuance and
delivery of shares of Common Stock or other securities or property
on conversion of this Convertible Note in a name other than that of
the Holder (or in street name), and the Company shall not be
required to issue or deliver any such shares or other securities or
property unless and until the person or persons (other than the
Holder or the custodian in whose street name such shares are to be
held for the Holder's account) requesting the issuance thereof shall
have paid to the Company the amount of any such tax or shall have
established to the satisfaction of the Company that such tax has
been paid.
(c) Upon receipt by the Company of a Notice of Conversion, the
Holder shall be deemed to be the holder of record of the Common
Stock issuable upon such conversion, the outstanding principal
amount and the amount of accrued and unpaid interest on this
Convertible Note shall be reduced to reflect such conversion, and,
unless the Company defaults on its obligations under this Article 4,
all rights with respect to the portion of this Convertible Note
being so converted shall forthwith terminate except the right to
receive the Common Stock or other securities, cash or other assets,
as herein provided, on such conversion. If the Holder shall have
given a Notice of Conversion as provided herein, the Company's
obligation to issue and deliver the certificates for shares of
Common Stock shall be absolute and unconditional, irrespective of
the absence of any action by the Holder to enforce the same, any
waiver or consent with respect to any provision thereof, the
recovery of any judgment against any person or any action by the
Holder to enforce the same, any failure or delay in the enforcement
of any other obligation of the Company to the Holder of record, or
any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the Holder of any obligation to the
Company, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in
connection with such conversion. The date of receipt (including
receipt via telecopy) of such Notice of Conversion shall be the
Conversion Date so long as it is received before 5:00 p.m., New York
City Time, on such date.
(d) Notwithstanding the foregoing, if a Holder has not
received certificates for all shares of Common Stock prior to the
expiration of the Deadline with respect to a conversion of any
portion of this Convertible Note for any reason, then (unless the
Holder otherwise elects to retain its status as a holder of Common
Stock by so notifying the Company), the Holder shall regain the
rights of a Holder of this Convertible Note with respect to such
unconverted portions of
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(American International Petroleum Corporation - No. 1)
this Convertible Note and the Company shall, as soon as practicable,
return such unconverted Convertible Note to the holder or, if the
Convertible Note has not been surrendered, adjust its records to
reflect that such portion of this Convertible Note has not been
converted. In all cases, the Holder shall retain all of its rights
and remedies (including, without limitation, (i) the right to
receive Conversion Default Payments to the extent required thereby
for such Conversion Default and any subsequent Conversion Default
and (ii) the right to have the Conversion Price with respect to
subsequent conversions determined in accordance with Section 4.3 for
the Company's failure to convert this Convertible Note.
(e) In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the Company's
transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer program, upon request of
the Holder and its compliance with the provisions contained in
Section 4.1 and in this Section 4.4, the Company shall use its best
efforts to cause its transfer agent to electronically transmit the
Common Stock issuable upon conversion to the Holder by crediting the
account of Holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission system.
5. Miscellaneous. This Convertible Note shall be deemed to be a contract
made under the laws of the State of New York, and for all purposes shall be
governed by and construed in accordance with the laws of said State. The parties
hereto, including all guarantors or endorsers, hereby waive presentment, demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Convertible Note,
except as specifically provided herein, and assent to extensions of the time of
payment, or forbearance or other indulgence without notice. The Company hereby
submits to the exclusive jurisdiction of the United States District Court for
the Southern District of New York and of any New York state court sitting in New
York City for purposes of all legal proceedings arising out of or relating to
this Convertible Note. The Company irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum. The Company hereby irrevocably waives any and all right to trial by jury
in any legal proceeding arising out of or relating to this Convertible Note.
The Holder of this Convertible Note by acceptance of this Convertible Note
agrees to be bound by the provisions of this Convertible Note which are
expressly binding on such Holder.
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(American International Petroleum Corporation - No. 1)
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: October __, 1997
AMERICAN INTERNATIONAL
PETROLEUM CORPORATION
By: _____________________________________
Name: ___________________________________
Title: __________________________________
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(American International Petroleum Corporation - No. 1
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: October __, 1997
AMERICAN INTERNATIONAL
PETROLEUM CORPORATION
By: _____________________________________
Name: ___________________________________
Title: __________________________________
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