THIS WARRANT HAS BEEN OFFERED AND SOLD OUTSIDE OF THE UNITED STATES IN A
TRANSACTION UNDER REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT. THIS WARRANT MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED IN THE UNITED STATES
OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S) UNLESS THE WARRANT
IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH
OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO THE AVAILABLE EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
AMERICAN INTERNATIONAL PETROLEUM CORP.
COMMON STOCK PURCHASE WARRANT
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No. 080797-01
Number of Shares: 625,000 Holder:
Purchase Price: $2.7125
Expiration Date: August 6, 1999
For identification only. The governing terms of this
Warrant are set forth below.
--------------------------------------------------------------------------------
American International Petroleum Corp., a Nevada corporation (the
"Company"), hereby certifies that, for value received, or assigns, is entitled,
subject to the terms set forth below, to purchase from the Company at any time
or from time to time after the date hereof and prior to the fourth anniversary
hereof (the "Exercise Period"), at the Purchase Price hereinafter set forth,
625,000 shares of the fully paid and nonassessable Common Stock of the Company.
The number and character of such shares of Common Stock and the Purchase Price
are subject to adjustment as provided herein.
The purchase price per share of Common Stock issuable upon exercise of
this Warrant (the "Purchase Price") shall initially be $2.7125; provided,
however, that the Purchase Price shall be adjusted from time to time as provided
in Section 5, below.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
COMMON STOCK PURCHASE WARRANT - Page 1
(American International Petroleum Corp.)
(a) The term "Company" shall include American International
Petroleum Corp. and any corporation that shall succeed or assume the
obligations of the Company hereunder.
(b) The term "Common Stock" includes (a) the Company's common stock,
par value $.08 per share, (b) any other capital stock of any class or
classes (however designated) of the Company, authorized on or after such
date, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends
and liquidating dividends after the payment of dividends and distributions
on any shares entitled to preference, and the holders of which shall
ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even though the right
so to vote has been suspended by the happening of such a contingency) and
(c) any other securities into which or for which any of the securities
described in (a) or (b) may be converted or exchanged pursuant to a plan
of recapitalization, reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) that the holder of this Warrant at any time shall
be entitled to receive, or shall have received, on the exercise of this
Warrant, in lieu of or in addition to Common Stock, or that at any time
shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4 or
otherwise.
1. Exercise of Warrant.
1.1. Method of Exercise. This Warrant may be exercised in whole or
in part (but not as to a fractional share of Common Stock), at any time
and from time to time during the Exercise Period, by the holder hereof by
surrender of this Warrant, with the form of subscription at the end hereof
duly executed by such holder, to the Company at its principal office,
accompanied by payment of the Purchase Price multiplied by the number of
shares of Common Stock for which this Warrant is being exercised (the
"Exercise Price"). Payment of the Exercise Price shall be made by check or
bank draft payable to the order of the Company or by wire transfer to the
account of the Company. If the amount of the payment received by the
Company is less than the Exercise Price, the holder will be notified of
the deficiency and shall make payment in that amount within five (5)
business days. In the event the payment exceeds the Exercise Price, the
Company will refund the excess to the holder within three (3) business
days of receipt. Exercise Notice is not deemed effective until Exercise
Price is received in full. Upon exercise, the holder shall be entitled to
receive, promptly after payment in full, one or more certificates, issued
in the holder's name or in such name or names as the holder may direct,
subject to the limitations on transfer contained herein, for the number of
shares of Common Stock so purchased. The shares so purchased shall be
deemed to be issued within 24 hours of the close of business on the date
on which this Warrant shall have been exercised (the "Exercise Date").
COMMON STOCK PURCHASE WARRANT - Page 2
(American International Petroleum Corp.)
1.2. Regulation S Restrictions. Exercise of this Warrant and
acceptance of shares of Common Stock upon such exercise shall constitute
an agreement by the holder not to offer or sell such shares in the United
States, to a U.S. Person (as such term is defined in Regulation S
promulgated under the Securities Act of 1933, as amended ("Regulation S"))
or for the account or benefit of a U.S. Person during the period
commencing on the date on which it exercises the Warrant and ending on the
day following any applicable restrictive period under Regulation S. At the
time this Warrant is exercised, the Company may require the holder to
restate in the Notice of Exercise the representations set forth in a
Subscription Agreement between the Company and the holder dated the date
hereof (the "Subscription Agreement"). All certificates for the shares of
Common Stock issuable upon exercise of this Warrant shall bear a legend
stating as follows:
"The shares of Common Stock of American International Petroleum
Corp. represented hereby have been issued pursuant to Regulation S,
promulgated under the United States Securities Act of 1933, as
amended (the "Act") and have not been registered under the Act or
any applicable state securities laws. These shares 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 Regulation S during the
period commencing on the date of issuance hereof and ending [add
then applicable Restricted Period for Nonaffiliates] days
thereafter."
1.3. Company Acknowledgment. The Company will, at the time of the
exercise of this Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to afford to such holder
the registration rights to which such holder shall continue to be entitled
after such exercise in accordance with the provisions of a Registration
Rights Agreement dated the date hereof. If the holder shall fail to make
any such request, such failure shall not affect the continuing obligation
of the Company to afford to such holder any such rights.
1.4. Limitation on Exercise.. Notwithstanding the rights of the
holder to exercise all or a portion of this Warrant as described herein,
such exercise rights shall be limited, solely to the extent required, from
time to time, such that in no instance shall the maximum number of shares
of Common Stock which the holder may receive in respect of any exercise of
all or a portion of this Warrant exceed, at any one time, an amount equal
to the remainder of (i) 4.99% of the then issued and outstanding shares of
Common Stock of the Company following such exercise, minus (ii) the number
of shares of Common Stock of the Company then owned (beneficially or of
record) by the holder (the "Limitation on Conversion"); provided, however,
the Limitation on Conversion shall not apply, and shall be of no further
force and effect following the occurrence of any Event or Default (as
described in Section 9 of the Convertible Debentures of the Company issued
the date hereof pursuant to the Subscription Agreement) pursuant to which
this Warrant is issued and for which the holder hereof has provided
written notice thereof and which is not cured within the greater of the
applicable time period specified in either (I) such written notice of the
holder or (II) such Convertible Debenture. The Company shall not be
obligated to issue any Common Stock as dividends or upon conversion of the
COMMON STOCK PURCHASE WARRANT - Page 3
(American International Petroleum Corp.)
Debentures or exercise of the Warrants if, after giving effect to such
issuance, more than an aggregate of 19.9% shares of Common stock issued
and outstanding as of the Closing (the "Maximum Number of Shares") shall
have been previously issued in respect thereof. In the event that the
ISSUER issues the Maximum Number of Shares, the ISSUER take all actions to
cause the remedy as specified in Sec 4(b) of the Convertible Debenture
2. Delivery of Stock Certificates, etc., on Exercise. As soon as
practicable after the Exercise Date, and receipt of Exercise Price, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue, stamp or transfer taxes)
will cause to be issued in the name of and delivered to the holder thereof, or,
to the extent permissible hereunder, to such other person as such holder may
direct, a certificate or certificates for the number of fully paid and
nonassessable shares of Common Stock (or Other Securities) to which such holder
shall be entitled on such exercise, plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the then applicable Purchase Price, together with any other stock
or other securities and property (including cash, where applicable) to which
such holder is entitled upon such exercise pursuant to Section 1 or otherwise.
The Company covenants that upon the expiration of the applicable restrictive
period relating to the shares of Common Stock underlying this Warrant, if any,
it will use its best lawful efforts to issue or cause the transfer agent of the
Company to issue one or more certificates representing such shares of Common
Stock (or Other Securities) without any restrictive legend such that such shares
shall be freely tradable, subject only to compliance with Federal and state
securities laws. The Company acknowledges that "best lawful efforts" as used
herein shall, among other things, require the Company to cooperate with the
holder hereof in obtaining an opinion of counsel satisfactory to the holder
regarding certain Federal securities law implications in connection with
removing the restrictive legend on the shares of Common Stock issuable upon
exercise of this Warrant.
3. Adjustment for Dividends in Other Stock Property, etc.;
Reclassification, etc. In case at any time or from time to time, the holders of
Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of shareholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock split (adjustments in respect of which are provided
for in Section 5), then and in each such case the holder of this Warrant, on the
exercise hereof as provided in Section 1, shall be
COMMON STOCK PURCHASE WARRANT - Page 4
(American International Petroleum Corp.)
entitled to receive the amount of stock and other securities and property
(including cash in the cases referred to in subdivisions (b) and (c) of this
Section 3) that such holder would hold on the date of such exercise if on the
date hereof it had been the holder of record of the number of shares of Common
Stock called for on the face of this Warrant and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and all such other or additional stock and other securities and
property (including cash in the cases referred to in subdivisions (b) and (c) of
this Section 3) receivable by him as aforesaid during such period, giving effect
to all adjustments called for during such period by Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
4.1. Reorganization, etc. In case at any time or from time to time,
the Company shall (a) effect a reorganization, (b) consolidate with or
merge into any other person, or (c) transfer all or substantially all of
its properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, the
holder of this Warrant, on the exercise hereof as provided in Section 1 at
any time after the consummation of such reorganization, consolidation or
merger or the effective date of such dissolution, as the case may be,
shall receive, in lieu of the Common Stock (or Other Securities) issuable
on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such
holder would have been entitled upon such consummation or in connection
with such dissolution, as the case may be, if such holder had so exercised
this Warrant, immediately prior thereto, all subject to further adjustment
thereafter as provided in Sections 3 and 5.
4.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense
deliver or cause to be delivered the stock and other securities and
property (including cash, where applicable) receivable by the holder of
this Warrant after the effective date of such dissolution pursuant to this
Section 4 to a bank or trust company, as trustee for the holder or holders
of this Warrant.
4.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred
to in this Section 4, this Warrant shall continue in full force and effect
and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after
the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may
be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person
acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the terms
of this Warrant as provided in Section 6.
5. Adjustment for Extraordinary Events. In the event that the Company
shall (i) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock, or (iii) combine its outstanding shares of the Common stock
into a smaller number of shares of the Common Stock,
COMMON STOCK PURCHASE WARRANT - Page 5
(American International Petroleum Corp.)
then, in each such event, the Purchase Price shall, simultaneously with the
happening of such event, be adjusted by multiplying the then Purchase Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event and the denominator of which shall
be the number of shares of Common Stock outstanding immediately after such
event, and the product so obtained shall thereafter be the Purchase Price then
in effect. The Purchase Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described herein in
this Section 5. The holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1, be entitled to receive that number of shares of
Common Stock determined by multiplying the number of shares of Common Stock that
would otherwise (but for the provisions of this Section 5) be issuable on such
exercise by a fraction of which (i) the numerator is the Purchase Price that
would otherwise (but for the provisions of this Section 5) be in effect, and
(ii) the denominator is the Purchase Price in effect on the date of such
exercise.
6. Adjustments to Conversion Price for Diluting Issues.
6.1. Special Definitions. For purposes of this Section 6, the
following definitions shall apply:
(a) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(b) "Convertible Securities" shall mean any evidences of
indebtedness, shares of preferred stock or other securities directly
or indirectly convertible into or exchangeable for Common Stock.
(c) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued by the Company after the first day of the
Exercise Period, other than shares of Common Stock issued or
issuable to officers, employees or directors of the Company or any
subsidiary of the Company, pursuant to a stock purchase or option
plan or other employee stock bonus arrangement (collectively, the
"Plans") approved by the Board of Directors and shareholders of the
Company.
6.2. Issuance of Additional Shares. In the event the Company shall
issue Additional Shares of Common Stock (pursuant to an Option or
otherwise) other than in an Excluded Transaction (as hereafter defined),
for a period of six (6) months after the issuance hereof or until eighty
(80) percent of the Debenture has been converted or redeemed, without
consideration or for a consideration per share less than the applicable
fair market value t hereof (as determined based upon an average trading
price of not more than 10 days preceding the issuance) in effect on the
date of and immediately prior to such issue, then and in such event, the
Exercise Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Exercise
Price by a fraction, the numerator of which shall be (i) the number of
shares of Common Stock outstanding immediately prior to such issue plus
(ii) the number of shares of Common Stock which the aggregate
consideration received or deemed to have been received by the Company for
the total number of Additional Shares of Common Stock so
COMMON STOCK PURCHASE WARRANT - Page 6
(American International Petroleum Corp.)
issued would purchase at the fair market value thereof, and the
denominator of which shall be (i) the number of shares of Common Stock
outstanding immediately prior to such issue plus (ii) the number of
Additional Shares of Common Stock so issued or deemed to be issued. For
the purposes of the foregoing calculation, the number of shares of Common
stock deemed to be outstanding immediately prior to the issuance of any
securities described in either clause of the preceding sentence shall be
the sum of (i) the total number of shares of Common Stock issued and
outstanding at such time, plus (ii) the total number of shares of Common
Stock issuable upon conversion in full of all Convertible Securities
issued and outstanding at such time, plus (iii) the total number of shares
of Common Stock issuable upon conversion in full of all Convertible
Securities issuable upon exercise of Options for Convertible Securities
issued and outstanding at such time. An Excluded Transaction means any
issuance of shares of Common Stock (or securities convertible into or
exchangeable or exercisable for shares of Common Stock) (i) pursuant to
the acquisition by the Company of operating assets or stock of entities
from other than affiliates of the Company to be owned and operated by the
Company or a subsidiary of the Company following such acquisition; (ii)
upon the exercise of the currently outstanding options and warrants listed
in Schedule 2.4 of the Subscription Agreement; (iii) upon the exercise of
options issued pursuant to the Company's Stock Option Plans, and any
amendments or substitutions thereof; and (iv) upon the exercise of the
Warrants issued pursuant to the Subscription Agreement.
7. No Impairment. The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant against
impairment. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any shares of stock receivable on the
exercise of this Warrant above the amount payable therefor on such exercise, (b)
will take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
stock on the exercise of this Warrant, and (c) will not transfer all or
substantially all of its properties and assets to any other person (corporate or
otherwise), or consolidate with or merge into any other person or permit any
such person to consolidate with or merge into the Company (if the Company is not
the surviving person), unless such other person shall expressly assume in
writing and will be bound by all the terms of this Warrant.
8. Accountants' Certificate as to Adjustments. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable on the exercise of this Warrant, the Company at its expense will
promptly cause independent certified public accountants selected by the Company
to compute such adjustment or readjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or receivable by
the Company for any additional shares of Common Stock (or Other Securities)
issued or sold or deemed to have been issued or sold, (b) the number of shares
of Common Stock (or Other Securities) outstanding or deemed to be outstanding,
and (c) the Purchase Price and the number of shares of Common
COMMON STOCK PURCHASE WARRANT - Page 7
(American International Petroleum Corp.)
Stock to be received upon exercise of this Warrant, in effect immediately prior
to such issue or sale and as adjusted and readjusted as provided in this
Warrant. The Company will forthwith mail a copy of each such certificate to the
holder of this Warrant, and will, on the written request at any time of the
holder of this Warrant, furnish to such holder a like certificate setting forth
the Purchase Price at the time in effect and showing how it was calculated.
9. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of
any class or securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all the assets of
the Company to or consolidation or merger of the Company with or
into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
holder of this Warrant a notice specifying (i) the date on which any such record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, and
(ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 20 days prior to the date specified in such
notice on which any action is to be taken.
4. Reservation of Stock, etc. Issuable on Exercise of Warrant. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of this Warrant, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of this Warrant.
5. Exchange of Warrant. On surrender for exchange of this Warrant,
properly endorsed and in compliance with the restrictions on transfer set forth
in the legend on the face of this Warrant, to the Company, the Company at its
expense will issue and deliver to or on the order of the holder thereof a new
Warrant of like tenor, in the name of such holder or as such holder (on payment
by such holder of any applicable transfer taxes) may direct, calling in the
aggregate on the face or faces thereof for the number of shares of Common Stock
called for on the face of the Warrant so surrendered.
COMMON STOCK PURCHASE WARRANT - Page 8
(American International Petroleum Corp.)
6. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
7. Remedies. The Company stipulates that the remedies at law of the holder
of this Warrant in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement contained herein or by
an injunction against a violation of any of the terms hereof or otherwise.
8. Negotiability, etc. This Warrant is issued upon the following terms, to
all of which each holder or owner hereof by the taking hereof consents and
agrees:
(a) title to this Warrant may be transferred by endorsement
(by the holder hereof executing the form of assignment at the end
hereof) and delivery in the same manner as in the case of a
negotiable instrument transferable by endorsement and delivery.
(b) Any person in possession of this Warrant properly endorsed
is authorized to represent himself as absolute owner hereof and is
empowered to transfer absolute title hereto by endorsement and
delivery hereof to a bona fide purchaser hereof for value; each
prior taker or owner waives and renounces all of his equities or
rights in this Warrant in favor of each such bona fide purchaser,
and each such bona fide purchaser shall acquire absolute title
hereto and to all rights represented hereby;
(c) until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the
absolute owner hereof for all purposes, notwithstanding any notice
to the contrary; and
(d) notwithstanding the foregoing, this Warrant may not be
sold, transferred or assigned except pursuant to an effective
registration statement under the Securities Act of 1933, as amended
or, pursuant to an applicable exemption therefrom or in accordance
with Regulation S promulgated under such Act.
9. Notices, etc. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
10. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which
COMMON STOCK PURCHASE WARRANT - Page 9
(American International Petroleum Corp.)
enforcement of such change, waiver, discharge or termination is sought. This
Warrant shall be construed and enforced in accordance with and governed by the
internal laws of the State of New York. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof. This Warrant is being executed as an instrument under seal. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
DATED as of August 6, 1997.
AMERICAN INTERNATIONAL PETROLEUM CORP.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
[Corporate Seal]
Attest:
By:
------------------------
Secretary
