EXHIBIT 10.9

 

FORM OF WARRANT

 

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, WHICH OPINION SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

 

No. _______

___________, 201X

Advanced Environmental Petroleum Producers, Inc.

Series A Preferred Stock Purchase Warrant

_________________

 

THIS CERTIFIES THAT, for value received on _________ (“Effective Date”),
__________, or his/her/its registered assigns (the “Purchaser”), is entitled to
purchase from Advanced Environmental Petroleum Producers, Inc., a Florida
corporation (the “Company”), at any time prior to ____, 20__ (the “Warrant
Exercise Term”), the Shares at the Exercise Price (each as defined in Section 1
below).

 

This Warrant is one of a series of warrants of like tenor (“Warrants”) that have
been issued in connection with the Company’s private offering solely to
accredited investors or the State of Texas including the Purchaser
(collectively, the “Purchasers”) of the Company’s Series A Preferred Stock, par
value $0.0001 per share (“Series A Preferred Stock”), convertible into shares of
Company common stock, par value $0.0001 per share (“Common Stock”).

 

This Warrant is subject to the following terms and conditions:

 

1. Shares. The Purchaser has, subject to the terms set forth herein, the right
to purchase, at any time during the Warrant Exercise Term, up to ___________
(______) shares (the “Shares”) of the Company’s Series A Preferred Stock, at a
per share exercise price of $.0825 (the “Exercise Price”). The Exercise Price is
subject to adjustment as provided in Section 3 hereof.

 

2. Exercise of Warrant.

 

(a) Exercise. This Warrant may be exercised by the Purchaser at any time during
the Warrant Exercise Term, in whole or in part, in addition to the manner set
forth in Section 2(b) below, by delivering the notice of exercise attached as
Exhibit A hereto (the “Notice of Exercise”), duly executed by the Purchaser to
the Company at its principal office, or at such other office as the Company may
designate, accompanied by payment, in cash or by wire transfer of immediately
available funds or by check payable to the order of the Company, or in the form
of a Cashless Exercise to the extent permitted in Section 2(b) below, of the
amount obtained by multiplying the number of Shares designated in the Notice of
Exercise by the Exercise Price (the “Purchase Price”). For purposes hereof,
“Exercise Date” shall mean the date on which all deliveries required to be made
to the Company upon exercise of this Warrant (or notice of a Cashless Exercise
in accordance with Section 2(b)) pursuant to this Section 2(a) shall have been
made.

 

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(b) The Holder may, at any time, in its sole discretion, exercise all or any
part of the Warrant in a “cashless” or “net-issue” exercise (a “Cashless
Exercise”) by delivering to the Company (1) the Notice of Exercise and (2) the
original Warrant, pursuant to which the Holder shall surrender the right to
receive upon exercise of this Warrant, a number of Shares having a value (as
determined below) equal to the Exercise Price, in which case, the number of
Shares to be issued to the Purchaser upon such exercise shall be calculated
using the following formula:

 

 

X

    =

(Y*A) - (Y*B)

           A

 

with:

X =

the number of Shares to be issued to the Purchaser

Y = the number of Shares with respect to which the Warrant is being exercised A
= the fair value per share of Series A Preferred Stock on the date of exercise
of this Warrant B = the then-current Exercise Price of the Warrant

 

Solely for the purposes of this paragraph, “fair value” per share of Series A
Preferred Stock shall mean (A) the average of the closing sales prices, as
quoted on the primary national or regional stock exchange on which the Series A
Preferred Stock is listed, or, if not listed, the OTC Bulletin Board if quoted
thereon, on the twenty (20) Trading Days (as defined below) immediately
preceding the date on which the Notice of Exercise is deemed to have been sent
to the Company or (B) if the Series A Preferred Stock is not publicly traded as
set forth above, as reasonably and in good faith determined by the Board of
Directors of the Company as of the date on which the Notice of Exercise is
deemed to have been sent to the Company. “Trading Day” means any day on which
the Series A Preferred Stock is traded on the primary national or regional stock
exchange on which the Series A Preferred Stock is listed, or if not so listed,
the OTC Bulletin Board, if quoted thereon, is open for the transaction of
business.

 

Notwithstanding the foregoing provisions of this Section 2(b), Purchaser may not
make a Cashless Exercise if and to the extent that such exercise would require
the Company to issue a number of shares of Series A Preferred Stock in excess of
its authorized but unissued shares of Series A Preferred Stock, less all amounts
of Series A Preferred Stock that have been reserved for issue upon the
conversion of all outstanding securities convertible into shares of Series A
Preferred Stock and the exercise of all outstanding options, warrants and other
rights exercisable for shares of Series A Preferred Stock. If the Company does
not have the requisite number of authorized but unissued shares of Series A
Preferred Stock to permit Purchaser to make a Cashless Exercise, the Company
shall use commercially reasonable efforts to obtain the necessary stockholder
consent to increase the authorized number of shares of Series A Preferred Stock
to permit such Purchaser to make a Cashless Exercise pursuant to this Section
2(b).

 

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(c) Issuance of Certificates. As soon as practicable after the exercise of this
Warrant, in whole or in part, in accordance with Section 2(a) hereof (or Section
2(b) with respect to a Cashless Exercise), the Company, at its expense, shall
cause to be issued in the name of and delivered to the Purchaser (i) a
certificate or certificates for the number of fully paid and non-assessable
Shares to which the Purchaser shall be entitled upon such exercise and, if
applicable, (ii) a new warrant of like tenor to purchase all of the Shares that
may be purchased pursuant to the portion, if any, of this Warrant not exercised
by the Purchaser. The Purchaser shall for all purposes hereof be deemed to have
become the Purchaser of record of such Shares on the date on which the Notice of
Exercise and payment of the Purchase Price in accordance with Section 2(a) (or a
Cashless Exercise pursuant to Section 2(b)) hereof were delivered and made,
respectively, irrespective of the date of delivery of such certificate or
certificates, except that if the date of such delivery, notice and payment is a
date when the stock transfer books of the Company are closed, such person shall
be deemed to have become the holder of record of such Shares at the close of
business on the next succeeding date on which the stock transfer books are open.

 

(d) Taxes. The issuance of the Shares upon the exercise of this Warrant, and the
delivery of certificates or other instruments representing such Shares, shall be
made without charge to the Purchaser for any tax or other charge of whatever
nature in respect of such issuance and the Company shall bear any such taxes in
respect of such issuance.

 

3. Adjustment of Exercise Price and Number of Shares.

 

(a) Adjustment for Reclassification, Consolidation or Merger. If while this
Warrant, or any portion hereof, remains outstanding and unexpired there shall be
(i) a reorganization or recapitalization (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), (ii) a merger or consolidation of the Company with or into another
corporation or other entity in which the Company shall not be the surviving
entity, or a reverse merger in which the Company shall be the surviving entity
but the shares of the Company’s capital stock outstanding immediately prior to
the merger are converted by virtue of the merger into other property, whether in
the form of securities, cash or otherwise, or (iii) a sale or transfer of the
Company’s properties and assets as, or substantially as, an entirety to any
other corporation or other entity in one transaction or a series of related
transactions, then, as a part of such reorganization, recapitalization, merger,
consolidation, sale or transfer, all necessary or appropriate lawful provisions
shall be made so that the Purchaser shall thereafter be entitled to receive, at
the Company’s option, (i) upon exercise of this Warrant, during the period
specified herein and upon payment of the Exercise Price then in effect, the
greatest number of shares of capital stock or other securities or property that
a holder of the Shares deliverable upon exercise of this Warrant would have been
entitled to receive in such reorganization, recapitalization, merger,
consolidation, sale or transfer if this Warrant had been exercised immediately
prior to such reorganization, recapitalization, merger, consolidation, sale or
transfer, all subject to further adjustment as provided in this Section 3, or
(ii) cash in an amount equal to the value of the unexercised portion of this
Warrant as determined by the Company’s board of directors. If the per share
consideration payable to the Purchaser for Shares in connection with any such
transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company’s
Board of Directors (the “Board of Directors”). The foregoing provisions of this
paragraph shall similarly apply to successive reorganizations,
recapitalizations, mergers, consolidations, sales and transfers and to the
capital stock or securities of any other corporation that are at the time
receivable upon the exercise of this Warrant. In all events, appropriate
adjustment shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Purchaser after the transaction,
to the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable or issuable after such reorganization, recapitalization, merger,
consolidation, sale or transfer upon exercise of this Warrant.

 

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(b) Adjustments for Split, Subdivision or Combination of Shares. If the Company
shall at any time subdivide (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) the shares of
Series A Preferred Stock subject to acquisition hereunder, then, after the date
of record for effecting such subdivision, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced and the
number of shares of Series A Preferred Stock subject to acquisition upon
exercise of the Warrant will be proportionately increased. If the Company at any
time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Series A Preferred Stock subject to
acquisition hereunder, then, after the record date for effecting such
combination, the Exercise Price in effect immediately prior to such combination
will be proportionately increased and the number of shares of Series A Preferred
Stock subject to acquisition upon exercise of the Warrant will be
proportionately decreased.

 

(c) Adjustments for Dividends in Stock or Other Securities or Property. If while
this Warrant, or any portion hereof, remains outstanding and unexpired, the
holders of any class of securities as to which purchase rights under this
Warrant exist at the time shall have received or, on or after the record date
fixed for the determination of eligible stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of such class of security receivable upon exercise of
this Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such holder would hold on the date of such
exercise had it been the holder of record of the class of security receivable
upon exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock available to it as aforesaid
during said period, giving effect to all adjustments called for during such
period by the provisions of this Section 3.

 

(d) Notice of Adjustments. Upon any adjustment of the Exercise Price and any
increase or decrease in the number of Shares purchasable upon the exercise of
this Warrant, then, and in each such case, the Company, within 30 days
thereafter, shall give written notice thereof to the Purchaser at the address of
such Purchaser as shown on the books of the Company, which notice shall state
the Exercise Price as adjusted and, if applicable, the increased or decreased
number of Shares purchasable upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation of each.

 

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4. Notices. All notices, requests, consents and other communications required or
permitted under this Warrant shall be in writing and shall be deemed delivered
(i) three business days after being sent by registered or certified mail, return
receipt requested, postage prepaid or (ii) one business day after being sent via
a reputable nationwide overnight courier service guaranteeing next business day
delivery, in each case to the intended recipient as set forth below:

 

If to the Company to:

 

Advanced Environmental Petroleum Producers, Inc.

14405 Walters Road, Suite 780

Houston, Texas 77014

 

If to the Purchaser at its address as furnished in the ______________.

 

Either party may give any notice, request, consent or other communication under
this Warrant using any other means (including personal delivery, messenger
service, telecopy, first class mail or electronic mail), but no such notice,
request, consent or other communication shall be deemed to have been duly given
unless and until it is actually received by the party for whom it is intended.
Either party may change the address to which notices, requests, consents or
other communications hereunder are to be delivered by giving the other party
notice in the manner set forth in this Section 4.

 

5. Legends. Each certificate evidencing the Shares issued upon exercise of this
Warrant shall be stamped or imprinted with a legend substantially in the
following form:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, WHICH OPINION SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

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6. Removal of Legend. Upon request of a holder of a certificate with the legends
required by Section 5 hereof, the Company shall issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received an opinion of counsel satisfactory to the Company in
form and substance to the effect that any transfer by such holder of the Shares
evidenced by such certificate will not violate the Act or any applicable state
securities laws.

 

7. Fractional Shares. No fractional Shares will be issued in connection with any
exercise hereunder. Instead, the Company shall round up, as nearly as
practicable to the nearest whole Share, the number of Shares to be issued.

 

8. Rights of Stockholders. Except as expressly provided in Section 3(c) hereof,
the Purchaser, as such, shall not be entitled to vote or receive dividends or be
deemed the holder of the Shares or any other securities of the Company that may
at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Purchaser, as such,
any of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, change
of par value, consolidation, merger, conveyance, or otherwise) or to receive
notice of meetings, or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have been issued, as
provided herein.

 

9. Mandatory Exchange. Upon the effective date that all issued and outstanding
shares of Series A Preferred Stock are voluntarily or mandatorily converted into
shares of Company Common Stock pursuant to the terms of the amended and restated
certificate of incorporation, or designation if applicable (“Conversion Date”),
the rights under this Warrant will automatically be amended to provide that the
Holder shall have the right to purchase, in lieu of the Shares, a number of
shares of Company Common Stock into which the Shares underlying the Warrant on
the Conversion Date are then convertible at an exercise price equal to the then
conversion price of the Shares into Common Stock on such Conversion Date, with
all other terms remaining substantially the same (“Exchange Warrant”). Each
holder of Warrants to be exchanged pursuant to this Section 9 shall be sent
written notice of such Conversion Date and the place designated for mandatory
exchange of the Warrant for the Exchange Warrant. Upon receipt of such notice,
each holder of such Warrant shall surrender his, her or its Warrant certificate
(or, if such holder alleges that such certificate has been lost, stolen or
destroyed, a lost certificate affidavit and agreement reasonably acceptable to
the Company to indemnify the Company against any claim that may be made against
the Company on account of the alleged loss, theft or destruction of such
certificate) to the Company at the place designated in such notice. If so
required by the Company, Warrant certificates surrendered for exchange shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Company, duly executed by the registered holder or by
his, her or its attorney duly authorized in writing. All rights with respect to
the Warrant being exchanged pursuant to this Section 9, will terminate at the
time of the Conversion Date (notwithstanding the failure of the holder or
holders thereof to surrender the Warrant certificates for such Exchange Warrant
certificates at or prior to such time), except only the rights of the holders
thereof, upon surrender of their Warrant certificate or certificates therefor
(or lost certificate affidavit and agreement), to receive the Exchange Warrant
as provided by this Section 9. As soon as practicable after the Conversion Date
and the surrender of the Warrant certificate (or lost certificate affidavit and
agreement), the Company shall issue and deliver to such holder, or to his, her
or its nominees, am Exchange Warrant in accordance with the provisions hereof.

  

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10. Miscellaneous.

 

(a) This Warrant and disputes arising hereunder shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
applicable to agreements made and to be performed wholly within such State,
without regard to its conflict of law rules.

 

(b) The headings in this Warrant are for purposes of reference only, and shall
not limit or otherwise affect any of the terms hereof.

 

(c) The covenants of the respective parties contained herein shall survive the
execution and delivery of this Warrant.

 

(d) The terms of this Warrant shall be binding upon and shall inure to the
benefit of any successors or permitted assigns of the Company and of the
Purchaser and of the Shares issued or issuable upon the exercise hereof.

 

(e) This Warrant and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subject hereof.

 

(f) The Company shall not, by amendment of the Certificate of Incorporation or
Bylaws, or through any other means, directly or indirectly, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant and
shall 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 Purchaser contained herein against impairment.

 

(g) Upon 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, upon delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of such Warrant, the Company, at its
expense, will execute and deliver to the Purchaser, in lieu thereof, a new
Warrant of like date and tenor.

 

(h) This Warrant and any provision hereof may be amended, waived or terminated
only by an instrument in writing signed by the Company and a majority in
interest of the shares of Series A Preferred Stock underlying the then
outstanding Warrants issued to the Purchasers.

 

(i) THE SALE OF THE SECURITIES THAT ARE THE SUBJECT OF THIS WARRANT HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND
THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE
IS SO EXEMPT.

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly
authorized officer.

 

 

Advanced Environmental Petroleum Producers, Inc.

        By:

 

Name:

Michael T. Redman     Title: President and CEO  

  

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Exhibit A

NOTICE OF EXERCISE

 

TO: Advanced Environmental Petroleum Producers, Inc.

Attention: __________________

 

The undersigned hereby elects to purchase _______________ shares (the “Shares”)
of Series A Preferred Stock of Advanced Environmental Petroleum Producers, Inc.
(the “Company”) pursuant to the terms of this Warrant, and tenders herewith:

 

(1) $______ in cash as payment of the purchase price of such Shares in full; and

 

(2) _______ shares of Series A Preferred Stock (pursuant to a Cashless Exercise
in accordance with Section 2(b) of the Warrant) (check here if the undersigned
desires to deliver an unspecified number of shares equal the number sufficient
to effect a Cashless Exercise [___]).

 

If the shares issuable upon this exercise of the Warrant are not all of the
Shares which the Holder is entitled to acquire upon the exercise of the Warrant,
the undersigned requests that a new Warrant evidencing the rights not so
exercised be issued in the name of and delivered to:

 

________________________________________

(Please print name, address and social security of federal employer

identification number (if applicable))

 

________________________________________

 

________________________________________

 

 

Name of Holder (print): _________________________

 

 

(Signature):

 

(By):

Title:

Dated:

   

The undersigned hereby represents and warrants the following:

 

(a) He/she/it (i) has such knowledge and experience in financial and business
affairs that he/she/it is capable of evaluating the merits and risks involved in
purchasing the Shares, (ii) is able to bear the economic risks involved in
purchasing the Shares, and (iii) is either (x) an “accredited investor,” as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act of
1933, as amended or (y) the State of Texas;

 

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(b) In making the decision to purchase the Shares, he/she/it has relied solely
on independent investigations made by him/her/it and has had the opportunity to
ask questions of, and receive answers from, the Company concerning the Shares,
the financial condition, prospective business and operations of the Company and
has otherwise had an opportunity to obtain any additional information, to the
extent that the Company possess such information or could acquire it without
unreasonable effort or expense;

 

(c) His/her/its overall commitment to investments that are not readily
marketable is not disproportionate to his/her/its net worth and income, and the
purchase of the Shares will not cause such overall commitment to become
disproportionate; he/she/it can afford to bear the loss of the purchase price of
the Shares;

 

(d) He/she/it has no present need for liquidity in his/her/its investment in the
Shares; and

 

(e) He/she/it acknowledges that the transaction contemplated in connection with
the purchase of the Shares has not been reviewed or approved by the Securities
and Exchange Commission or by any administrative agency charged with the
administration of the securities laws of any state, and that no such agency has
passed on or made any recommendation or endorsement of any of the securities
contemplated hereby.

 

 

 

 

 

 

(Signature and Date)

 

  

 

 

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