SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: (Date of earliest event reported) December 31, 1997
SABA PETROLEUM COMPANY (Exact name of registrant as specified in charter)
Delaware 1-12322 47-0617589
========================================================
(State or (Commission (IRS Employer
other File Number) Identification No.)
jurisdiction
of incorporation)
3201 Airpark Drive Suite 201, Santa Maria, CA 93455
(Address of principal executiove offices) (Zip Code)
Registrant's telephone number, including area code: (805) 347-8700
(Former name or former address, if changed since last report) Not Applicable
Item 1 Changes in Control of Registrant
Not Applicable
Item 2 Acquisition or Disposition of Assets
Not Applicable
Item 3 Bankruptcy or Receivership
Not Applicable
Item 4 Changes in Registrant's Certifying Accountant
Not Applicable
Item 5 Other Material Events.
Issuance of Series A Convertible Preferred Stock
On December 31, 1997 Registrant exchanged 10,000 shares of a newly
created class of its preferred stock, Series A Convertible Preferred Stock,
Stated Value $10,000 per share (the "Preferred Stock"), for $10 million.
Included in the price for the Preferred Stock, were warrants (the "Purchase
Warrants") to acquire 224,719 shares of Registrant's Common Stock, $0.001 Par
Value, (the "Common Stock") for a price of $10.68 per share of Common Stock. The
Purchase Warrants have a term of three years from the date of issuance. The
issuee of the Preferred Stock was RGC International Investors, LDC. The issuance
was effected as a placement exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933 by reason of Rule 506 under
Regulation D promulgated under said act and by reason of the exemption contained
in section 4(2) of said Act. The terms of issuance and those of the Preferred
Stock are set forth in Exhibit 10.1 to this report and reference is hereby made
to such exhibit for the complete terms of the issuance; the statements in this
report are qualified in their entirety by reference to such exhibit.
The Preferred Stock bears a cumulative dividend of 6% per annum and
after 120 days from the date of issuance is convertible at the option of the
holder into shares of Common Stock at a price which, except under special
circumstances, will be determined by reference to the closing bid price of the
Common Stock at a time proximate to the conversion; in no event will the
conversion price be more than $9.345 per share of Common Stock. In general,
conversion of the Preferred Stock can occur after 120 days from its issuance, in
monthly increments of 20% of the amount issued, until 241 days from December 31,
1997, after which all of the Preferred Stock may be converted. The Preferred
Stock may be converted into a maximum of approximately 2,100,000 shares of the
Common Stock (subject to increase in the event of certain dilutive events),
unless the Registrant fails to perform certain covenants (which includes
redemption of the balance of the Preferred Stock), in which case the Preferred
Stock will be convertible without limitation if either shareholder or regulatory
approvals are obtained, which the Company is obligated to seek. The Preferred
Stock is senior to all other classes of Registrant's equity securities.
The Preferred Stock is redeemable by the Company at any time and must
be redeemed upon the occurrence of certain events. The Company may redeem the
Preferred Stock until April 29, 1998 at 115% of its stated value of $10,000 per
share plus accrued dividends and the issuance of a five year warrant to purchase
200,000 shares of the Common Stock at 105% of the average closing bid price for
a five day period preceding the redemption. After such time, the Company may
redeem the Preferred Stock on the preceding basis, but the holder will have the
ability to convert the Preferred Stock into Common Stock after receipt of a
notice of conversion, except under limited circumstances. The Company is
obligated to file a registration statement with the Securities and Exchange
Commission covering the shares of Common Stock underlying the Preferred Stock
and the Warrants before January 21, 1998 and to use its best efforts to cause
the same to become effective as soon as is practicable and to keep the same
current on a continuing basis.
In connection with the issuance of the Preferred Stock, the Company
paid a placement fee of $400,000 and issued a three year warrant to purchase
44,944 shares of the Common Stock at a price of $10.68 per share. Net proceeds
of the issuance, approximately $9,500,000, were applied to the reduction of bank
indebtedness and for working capital purposes.
Amendment of Loan Agreement
On December 31, 1997, in connection with securing the consent of
Registrant's bank (the "Bank") to the transaction described above, Registrant
entered into an amendment (the "Amendment") of its existing Bank loan agreement
(the "Loan Agreement"). The terms of the consent and those of the Amendment to
the Loan Agreement are set forth in Exhibits 10.2 and 10.3 to this report and
reference is hereby made to such exhibits for the complete terms of the consent
and amended loan agreement; the statements in this report are qualified in their
entirety by reference to such exhibits.
1. The Consent
The Bank executed a consent letter dated December 31, 1997, pursuant to
which it approved the issuance of the Preferred Stock as described in the
preceding portion of this report and the payment of dividends on the Preferred
Stock and the redemption thereof, provided that at the time of payment or
proposed redemption certain conditions which might impair the Bank's security
did not exist.
2. The Amendment
The Bank and the Registrant entered into an amendatory letter dated December
31, 1997, which had the effect of extending the maturities of two notes from
Registrant to the Bank and causing the consent letter to be issued by the Bank.
Pursuant to the Amendment, $7 million of the proceeds from the sale of the
Preferred Stock was applied to the principal balance of the Registrant's
existing Term Note, reducing the outstanding principal balance thereof to
$2,688,000 at December 31, 1997.
The Amendment requires that the Registrant reduce the principal
balances of its Term Loan ($2,688,000) and Mezzanine Loan ($3,000,000) by an
aggregate of $3 million on or before April 1, 1998, and the balance of the
remaining Indebtedness to the Bank by an additional amount of not less than $3
million on or before June 1, 1998. Reference is made below* for a description of
Registrant's Loan Agreement. As at December 31, 1997, the aggregate amount of
indebtedness of Registrant to the Bank on account of principal (and after
application of the $7 million payment)on all loan facilities was $26,200,000.
The indebtedness of Registrant to the Bank is guaranteed by essentially
all of Registrant's subsidiaries and is in part guaranteed by Ilyas Chaudhary,
Chairman and Chief Executive Officer of Registrant. Fees of $113,755 were paid
to the Bank in connection with the Amendment.
* The Loan Agreement attached as Item 10.1 to Registrant's Report 10-QSB dated
September 30, 1996; The first amendment to the Loan Agreement attached as Item
10.20 to Registrant's Report 10-KSB dated December 31, 1996; The second
amendment to the Loan Agreement attached as Item 10.1 to Registrant's Report
10-Q dated September 30, 1997; The third amendment to the Loan Agreement
attached as Item 10.2 to Registrant's Report 10-Q dated September 30, 1997; The
corrections to the second and fourth amendments to the Loan Agreement attached
as Item 10.4 to Registrant's Report 10-Q dated September 30, 1997; The fourth
amendment to the Loan Agreement attached as Item 10 to Registrant's Report 8-K
dated September 24, 1997; (all as Commission File Number 001-13880).
Item 6 Resignation of Registrant's Directors
Not Applicable
Item 7 Financial Statements and Exhibits
10.1 Securities Purchase Agreement dated as of December 31, 1997 by
and among the Company and RGC International Investors, LDC
10.1(A) Exhibit "A" to the Securities Purchase Agreement filed
herewith as Exhibit 10.1, Certificate of Designations,
Preferences, and Rights of Series A Convertible Preferred
Stock of the Company
10.1(B) Exhibit "B" to the Securities Purchase Agreement filed
herewith as Exhibit 10.1, Stock Purchase Warrant (Closing
Warrant)
10.1(C) Exhibit "C" to the Securities Purchase Agreement filed
herewith as Exhibit 10.1, Registration Rights Agreement
dated as of December 31, 1997 by and among the Company and
RGC International Investors, LDC
10.1(C)(1) Exhibit "1" to the Registration Rights Agreement filed
herewith as Exhibit 10.1(C), Authorization Letter to
Transfer Agent
10.1(C)(2) Exhibit "2" to the Registration Rights Agreement filed
herewith as Exhibit 10.1(C),Opinion Letter to Transfer Agent
10.1(D) Exhibit "D" to the Securities Purchase Agreement filed
herewith as Exhibit 10.1,Stock Purchase Warrant (Redemption
Warrant)
10.1(E) Exhibit "E" to the Securities Purchase Agreement filed
herewith as Exhibit 10.1, Opinion Letter to Transfer Agent
[filed as Exhibit 10.1(C)(2) herewith and incorporated
herein by this reference]
10.1(F) Schedules to the Securities Purchase Agreement filed herewith
as Exhibit 10.1
10.2 Consent Letter to Preferred Stock Transaction by Bank One,
Texas, NA dated December 31, 1997
10.3 Amendment of First Amended and Restated Loan Agreement dated
September 23, 1996, as amended, among the Company, et al.
and Bank One, Texas, NA dated December 31, 1997
10.4 Fifth Amendment to First Amended and Restated Loan Agreement
dated September 23, 1996, as amended, among the Company,
et al. and Bank One, Texas, NA dated November 11, 1997
Item 8 Change in Fiscal Year
Not Applicable
Item 9 Sales of Equity Securities Pursuant to Regulation S
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SABA PETROLEUM COMPANY
Date: January 15, 1998 By:/s/ Ilyas Chaudhary
Chief Executive Officer
Date: January 15, 1998 By: /s/Walton C. Vance
Chief Financial Officer