Exhibit 4.2
THIS PROMISSORY NOTE AND THE SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR
ANY STATE SECURITIES LAWS (COLLECTIVELY, THE ACTS), AND THIS NOTE MAY
NOT
BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED OR ASSIGNED EXCEPT
PURSUANT TO
A REGISTRATION STATEMENT UNDER THE ACTS OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH
REGISTRATION IS NOT REQUIRED.
RENTECH, INC.
Convertible Promissory Note
$_________ Denver, Colorado
February 25, 2002
RENTECH, INC., a Colorado corporation (the "Company"), for value
received, hereby promises to pay to ____________________________________
______________________________________, organized under the laws of the
state of _______________ (the "Holder"), the principal sum of
______________________________ Dollars and no/100 ($____________),
together with interest on the unpaid principal balance at the rate of
eight and one-half percent (8.5%) per annum from the date of this Note
until paid. This Note shall be payable in equal monthly installments of
___________________________________________ ($_______________)
consisting of principal and interest. Payments shall be made to Holder
at _______________ ______________________________ in monthly installments
commencing on April 1, 2002, and continuing monthly thereafter on the
first day of each succeeding month until this Note is paid in full
through these monthly payments of money or through a combination of such
payments and the conversion of principal amounts of this Note into shares
of the Company's common stock, as subsequently provided in this Note. If
not sooner paid, the entire unpaid balance of principal and interest
shall be paid in full on February 25, 2006.
1. Conversion into Common Stock. In addition to the monthly
installments of payments in money, as previously described, principal
amounts of this Note shall be converted into duly authorized, validly
issued, fully paid and non-assessable shares of the Company's common
stock as subsequently provided in this Agreement ("Conversion Shares").
Notwithstanding any provisions of this Note to the contrary, the total
number of shares issued by the Company for the conversions subsequently
described shall not exceed _____________________________________
(_____________) shares less two shares for every dollar of principal
reduction of the Note paid in the form of money.
1.1 Definition of Market Price and Conversion Price.
(a) For purposes of this Note, the "Market Price" means
the closing price of the common stock on the American Stock Exchange for
the day on which the Company receives Holder's written notice of
conversion. If the common stock is not listed on that market, the Market
Price shall be the closing or the average of the last reported bid and
asked price reported by the National Association of Securities Dealers
Quotation System (or, if the price is not quoted on NASDAQ, by the
National Quotation Bureau, Inc.) or any other national securities
exchange with unlisted trading privileges. If the common stock is not
listed or admitted to unlisted trading privileges on a national
securities exchange, the Market Price shall be determined by a nationally
recognized investment banking or appraisal firm (the "Appraiser")
mutually acceptable to the Company and the Holder. If Company and Holder
do not agree on the Appraiser, the Appraiser shall be selected by the
Presiding Judge of the District Court of Multnomah County, Oregon. The
price determined in this manner shall be final and binding.
(b) For purposes of this Note, the "Conversion Price"
means the price per share at which the indebtedness is converted into
Conversion Shares.
(c) For purposes of this Note, the "Conversion Date" is
the date on which the Holder sends the Conversion Notice (as defined in
Section 1.5 below) to the Company.
1.2 Conversion During First Year. Until the first anniversary
date of this Note, Holder may elect to convert part or all of the
principal balance into common stock at a Conversion Price of $.50 per
share if the Market Price is $.50 per share or higher. Conversion is not
permitted during the first year if the Market Price on the Conversion
Date is less than $.50 per share.
1.3 Conversion After First Year. At any time following the
first anniversary date of this Note, Holder may elect to convert part or
all of the principal balance into common stock of the Company at a
Conversion Price of $.50 per share; provided, however, no conversion
shall be made if the Market Price is less than $.50 per share on the
Conversion Date.
1.4 Automatic Conversion. Starting on the first day of the
thirteenth calendar month following the date of this Note, and continuing
on the first day of each succeeding calendar month until the Note is paid
in full by a combination of the monthly payments in money and the
conversion of indebtedness into common stock, principal in the amount of
one-thirty-sixth of the declining principal balance of the Note shall
automatically convert into the Company's common stock at a Conversion
Price of $.50 per share. If the average daily Market Price for the seven
trading days preceding the first day of such calendar month is less than
$.50 per share, the difference between $.50 per share and the average
daily Market Price for the seven trading days preceding the date of
conversion shall be determined and that dollar amount shall be multiplied
by the number of shares issued to the Holder as a result of the
conversion, and the resulting dollar amount shall be added to the current
principal balance of the Note.
1.5 Holder's Election to Convert. To carry out an election by
it to convert indebtedness into common shares of the Company, the Holder
must transmit a written request (the "Conversion Notice") to the Company
requesting conversion of that part of the indebtedness that is allowed by
the previous provisions of this Section. No Conversion Notice or other
notice of conversion shall be required of the Company with respect to the
automatic conversions described in Section 1.4.
1.6 Issuance of Stock Certificates. After each conversion,
whether at the written request of the Holder or an automatic conversion
as previously described, the Company shall issue its restricted stock
certificates representing the Conversion Shares to the Holder, as
promptly as practical. The Company will issue the certificates in
accordance with Rule 144 promulgated by the Securities and Exchange
Commission (ASEC@) under authority of the Securities Act of 1933, as
amended, and will cause the stock certificates to be delivered to Holder
in its name at its address on the Company's records.
2. Prepayment. The Company may prepay this Note, in whole or in
part, by payments of money, from time to time, without premium or penalty
of any kind; provided, however, (i) a prepayment may be made only if the
Market Price is then $.50 or more, (ii) no prepayment may be made and no
notice of prepayment may be given by the Company until the registration,
described in Section 4.1 of this Note, of the Conversion Shares has been
declared effective by the SEC, and (iii) no more than one-half of the
original principal balance of the Note may be prepaid during the first
year following the date of this Note. Notice of prepayment shall be
given by the Company in writing, mailed not less than ten (10) days prior
to the date fixed for prepayment. The notice shall be mailed by
certified mail, return receipt requested, to the Holder at its address of
record or such address as it may from time to time furnish to the Company
in writing. The notice shall specify the date fixed for prepayment and
the amount to be prepaid. The prepayment shall be applied first to
accrued and unpaid interest and the balance, if any, to principal. If
this Note is called for prepayment, the Holder shall have the right to
convert the outstanding balance of principal and interest of this Note
into common stock of the Company as if the Note had not been called for
prepayment, at any time up to and including, but not after, the date
fixed for its prepayment, or if such date be a Saturday, Sunday or legal
holiday, on the next succeeding business day, but not thereafter. If the
Company defaults in the payment of any prepayment amount as to which it
has given notice, the Holder may revoke any conversion election it made
based on that notice. The Conversion Price at which the outstanding
balance of principal and interest is converted into Conversion Shares
shall be $0.50.
3. Transfers of Note to Comply with the Securities Laws. The
Holder agrees that this Note may not be sold, pledged, hypothecated,
converted, or otherwise disposed of except by succession of law, and then
only in compliance with federal and applicable state securities laws.
4 Registration Rights.
4.1 Filing Registration Statement. Within forty-five (45)
days from the date of this Note, the Company will file its registration
statement with the SEC registering for resale all Conversion Shares
issued or that may be issued to Holder in accordance with the provisions
of this Note, or in exchange or replacement for such shares (the
ARequired Filing Date@). The Company shall use its best efforts to cause
the registration statement to be declared effective as soon as possible,
but in no event later than the earlier of the date which is (i) three
days after the date the SEC provides notice that it may be declared
effective, or (ii) one hundred twenty (120) days from the date of this
Note (the "Effective Date"). The Company shall use its best efforts to
cause all of the Conversion Shares to be acquired upon conversion of this
Note to be registered under the Securities Act of 1933, as amended (the
Act). If at any time the number of shares of common stock issuable upon
conversion of this Note exceeds the aggregate number of shares of common
stock then registered, the Company shall promptly either file with the
SEC an amendment to or an additional registration statement to cover such
shares. If the registration statement covering the shares issuable upon
conversion of this Note is not filed by the Required Filing Date, Holder
may deem the Company to be in default under this Note and the Holder may
charge the Company the amount of $200,000 as liquidated damages, which
election will not limit any other rights or remedies that Holder may have
at law or under this Agreement. The parties estimate that the amount of
the liquidated damages for failure to timely file the registration
statement with the SEC on or before the Required Filing Date to be a
reasonable estimate of the damages incurred by Holder for such failure.
4.2 Company's Undertakings. In furtherance of its undertaking
to register the Conversion Shares to be issued in accordance with the
terms of this Note, the Company will:
(a) Prepare and file with the SEC a registration
statement with respect to such common stock and cause the registration
statement to become and remain effective until the date that the Holder
no longer owns any of the shares acquired under this Note or any right
to acquire shares of common stock upon conversion of this Note;
provided, however, the registration statement will not be kept
effective, in any event, after all rights to acquire shares have
terminated and the last of the shares that have been acquired are
eligible for resale without restriction under the provisions of Rule
144(k).
(b) Prepare and file with the SEC such amendments and
supplements to the registration statement and the prospectus used in
connection with the registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition
of all securities covered by such registration statement.
(c) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as Holder may
reasonably request in order to facilitate the disposition of the
Conversion Shares owned by it.
(d) Register or qualify the securities covered by the
registration statement under such other securities or blue-sky laws of
the jurisdictions that are reasonably appropriate for the distribution
of the securities covered by the registration statement, provided that
the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general
consent to service of process in any state or jurisdiction, and further
provided, that (anything in this Section 4.2(d) to the contrary
notwithstanding with respect to the bearing of expenses) if any
jurisdiction in which the securities are qualified requires that
expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders pro
rata, to the extent required by such jurisdiction.
(e) Maintain listing of shares subject to registration
hereunder on the American Stock Exchange or, in the event such listing
is cancelled, to secure authorization and quotation of the shares for
trading on the Nasdaq OTC Bulletin Board and to arrange for at least
three market makers in the stock.
(f) With a view to making available to Holder the
benefits of Rule 144 (or its successor), the Company will make and keep
available at all times public information as those terms are defined
under Rule 144, file in a timely manner all reports and other documents
required by the Company under the Securities Act of 1933 and the
Securities Exchange Act of 1934, and furnish to the Holder upon request
a written statement by the Company that it has complied with the
reporting requirements of Rule 144 and such further information as may
be reasonably requested by Holder.
4.3 Holder's Information. It shall be a condition precedent
to the obligations to the Company to take any action that the Holder
shall furnish to the Company such information regarding it, the
Conversion Shares held by it, and the intended method of disposition of
those securities as the Company reasonably requests and as is required
in connection with the action to be taken by the Company.
4.4 Expenses of Registration. The Company shall bear all
registration and qualification fees and expenses (excluding
underwriter's discounts, commissions and expenses), and any additional
costs and disbursements of counsel for the Company in connection with
the registration.
4.5 No Action to Delay Registration. No Holder shall have
any right to take any action to restrain, enjoin, or otherwise delay
any
registration as the result of any controversy that might arise with
respect to the interpretation or implementation of this Section 4.
4.6 Indemnification.
(a) To the extent permitted by law, the Company will
indemnify and hold harmless the Holder, any underwriter (as defined in
the Act) for it, and each such person, if any, who controls the Holder
or underwriter within the meaning of the Act, against any losses,
claims, damages, or liabilities, joint or several, to which they may
become subject under the Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based on any untrue or alleged untrue statement of any
material fact contained in the registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, or arise out of or are based upon
the omission or alleged omission to state in it a material fact
required to be stated in it, or necessary to make the statements in it
not misleading. The Company will also, to the extent permitted by law,
reimburse the Holder, the underwriter, or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any loss, claim, damage, liability, or
action indemnified against; provided, however, that the indemnity
agreement contained in this Section 4.6 shall not apply to amounts paid
in settlement of any loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be
liable in any case for any loss, claim, damage, liability, or action to
the extent that it arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in
connection with the registration statement, preliminary prospectus,
final prospectus, or amendments or supplements thereto, in reliance
upon and in conformity with written information furnished expressly for
use in connection with the registration by the Holder, underwriter, or
controlling person, or any of them.
(b) To the extent permitted by law, any Holder
requesting or joining in a registration will indemnify and hold
harmless the Company, each of its directors, each of its officers who
have signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, and each agent and
any underwriter for the Company (within the meaning of the Act) against
any losses, claims, damages, or liabilities to which the Company or any
such director, officer, controlling person, agent, or underwriter may
become subject, under the Act or otherwise, insofar as the losses,
claims, damages, or liabilities (or actions in respect thereto) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement,
including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, or arise out of or
are based upon the omission or alleged omission to state in it a
material fact required to be stated in it or necessary to make the
statements in it not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in the registration statement,
preliminary or final prospectus, or amendments or supplements thereto,
in reliance upon and in conformity with written information furnished
by such Holder expressly for use in connection with such registration;
and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer,
controlling person, agent, or underwriter in connection with
investigating or defending any such loss, claim, damage, liability, or
action. The indemnity agreement contained in this Section 4.6 shall
not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if the settlement is effected without the
consent of the Holder (which consent shall not be unreasonably
withheld).
(c) Promptly after receipt by an indemnified party
under this Section 4.6 of notice of the commencement of any action, the
indemnified party will, if a claim relating to the notice is to be made
against any indemnifying party under this paragraph, notify the
indemnifying party in writing of the commencement of the action. The
indemnifying party will have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties. The failure to
notify an indemnifying party promptly of the commencement of any such
action, if prejudicial to its ability to defend such action, shall
relieve the indemnifying party of any liability to the indemnified
party under this paragraph, but the omission to so notify the
indemnifying party will not relieve it of any liability that it may
have to any indemnified party otherwise than under this paragraph.
4.7 No Further Obligations. The Company shall have no
obligations pursuant to this Section 4 after the due date of this Note.
5. Representations of the Company. The Company represents and
warrants to the Holder as of the date hereof that:
5.1 Corporate Existence. The Company: (i) is a corporation
duly organized, validly existing and in good standing under the laws of
the state of Colorado; (ii) has the power and authority to carry on its
business as now conducted and to own or hold under lease the properties
it purports to own or hold under lease; and (iii) is duly qualified,
licensed or registered to transact its business in each jurisdiction in
which failure to be so qualified, licensed or registered could or would
have a material adverse effect on its business, assets, operations or
financial condition.
5.2 Corporate Authority. The Company has all requisite
power and authority to execute and deliver this Note and to perform its
obligations hereunder. This Note has been specifically approved and
issued pursuant to the authorization of the Board of Directors and
constitutes the valid and binding obligation of the Company enforceable
against it in accordance with its terms.
5.3 No Obligation Contravened. The execution, delivery and
performance by the Company of this Note and the performance by the
Company of its obligations hereunder do not and will not contravene or
constitute a default under, or give rise to a right of termination,
cancellation or acceleration of any right or obligation of the Company
under any provision of applicable law or regulation or of any
agreement, judgment, injunction, order, decree or other instrument
binding on the Company and, except as contemplated in this Note, will
not result in the imposition of any lien on any asset of the Company.
5.4 Enforceability of Note. There is not pending, nor to
the knowledge of the Company is there now threatened, any judicial,
administrative, or arbitrable action, claim, suit, proceeding or
investigation or other controversy which might affect the validity or
enforceability of this Note or any action taken or to be taken in
connection herewith or which, if adversely determined, would have a
material and adverse effect on the Company or its business, assets,
operations or financial condition.
6. Events of Default. This Note shall become due and payable
upon written demand made by the Holder hereof if one or more of the
following events, herein called "events of default," shall occur and is
not cured within thirty (30) days after the Company has received
written notice from the Holder asserting that an event of default has
occurred and specifying in detail the facts that are claimed to be an
event of default:
6.1 Default in Payment. Default in Company's obligation to
make any payment required under this Note, when and as they become due
and payable;
6.2 Other Obligations. Failure of the Company to perform
any of its obligations specified in this Note other than a payment
default; provided, however, if any failure, other than a failure to pay
money, is curable, it may be cured and no event of default will have
occurred, if the Company, after receiving written notice from Lender
specifying the events alleged to constitute a default: (a) cures the
failure within thirty (30) days; or (b) if the cure requires more than
thirty (30) days, immediately initiates steps sufficient to cure the
failure and thereafter continues and completes all reasonable and
necessary steps sufficient to produce compliance within ninety (90)
days after notice is received.
6.3 Late Charge. If the Company defaults in any payment
obligation under this Note for a period in excess of fifteen (15) days,
it shall pay a late payment charge equal to five percent (5%) of the
amount not timely paid.
In case any one or more of the events of default specified above
shall occur and are continuing after the written notice has been given
to the Company as previously required and the Company has not cured the
event of default within the time previously described, the Holder may
proceed to protect and enforce its right by suit for the specific
performance of any covenant or agreement contained in this Note or may
proceed to enforce the payment of this Note.
7. Miscellaneous.
7.1 Ownership. The Company may consider and treat the
person in whose name this Note is registered as the absolute owner
thereof for all purposes whatsoever (whether or not payment of this
Note is overdue) and the Company shall not be affected by any notice to
the contrary. This Note shall be registered on the books of the
Company as to both principal and interest. The transfer of the Note
may be effected only by the Holder, or by transfer by operation of law,
if accompanied by evidence satisfactory to the Company substantiating
the transfer. Communications sent to the registered Holder shall be
effective as against all Holders or transferees of the Note who are not
registered on the Company's books at the time of sending the
communications regarding transfer.
7.2 No Shareholder Rights. The Holder shall not, by virtue
of this Note, be entitled to any rights of a shareholder in the
Company, either at law or in equity, and the rights of the Holder are
limited to those expressed in this Note.
7.3 No Individual Recourse. No recourse shall be had for
the payment of the principal or interest of this Note against any
incorporator or any past, present, or future stockholder, officer,
director, employee, or agent of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, all such liability of the incorporators, stockholders,
officers, directors, employees, and agents being hereby waived,
released, and surrendered by the Holder hereof by the acceptance of
this Note.
7.4 Effect. This Note shall be binding upon, and
enforceable by and against the Company, and its permitted successors
and assigns.
7.5 Collection; Attorneys Fees. In the event this Note is
placed in the hands of an attorney for collection following the
occurrence of an event of default, the Company agrees to pay all costs
of collection incurred by the Holder including reasonable attorneys'
fees and costs even if a lawsuit is not filed. In the event the
maturity of the Notes is accelerated as provided in this Note as a
result of the occurrence of an event of default, then after written
notice by Holder to the Company demanding payment, this Note shall
thereafter bear interest at the rate of 14% per annum until the event
of default is waived or cured. In any litigation arising out of the
terms of this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys fees at trial and on any appeal.
8. Choice of Law; Jurisdiction. THIS NOTE SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF
OREGON, WITHOUT REFERENCE TO ITS RULES RELATING TO CONFLICTS OF LAW.
THE HOLDER HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF
THE
STATE AND FEDERAL COURTS LOCATED IN THE CITY OF PORTLAND, COUNTY OF
MULTNOMAH, OREGON, AND AGREES AND CONSENTS THAT SERVICE OF
PROCESS MAY
BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT
OR
ANY OTHER RELATIONSHIP BETWEEN HOLDER AND THE COMPANY BY ANY
MEANS
ALLOWED UNDER STATE OR FEDERAL LAW. ANY LEGAL PROCEEDING ARISING
OUT OF
OR IN ANY WAY RELATED TO THIS NOTE OR ANY OTHER RELATIONSHIP
BETWEEN
HOLDER AND THE COMPANY SHALL BE BROUGHT AND LITIGATED EXCLUSIVELY
IN
ANY ONE OF THE STATE OR FEDERAL COURTS LOCATED IN THE CITY AND
COUNTY
OF DENVER, COLORADO HAVING JURISDICTION UNLESS THE COMPANY SHALL
ELECT
OTHERWISE. THE HOLDER AND THE COMPANY HEREBY WAIVE ANY CLAIM, AND
AGREE NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE,
THAT
ANY SUCH PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT
SUCH
VENUE IS IMPROPER.
9. Notices. All notices, requests, and other communications
hereunder shall be in writing and shall be delivered by courier or
other means of personal service (including by means of a nationally
recognized courier service or professional messenger service); or sent
by facsimile or mailed first class, postage prepaid, by certified mail,
return receipt requested; in all cases, addressed to each party at the
following address. All notices, requests, and other communications
shall be deemed given on the date of actual receipt or delivery as
evidenced by written receipt, acknowledgment, or other evidence of
actual receipt or delivery to the address specified above. Notice sent
by facsimile shall be deemed given on the date printed by the sender's
facsimile machine confirming receipt of the facsimile by the other
party's facsimile machine. Any party hereto may from time to time, by
notice in writing served as set forth previously, designate a different
address or a different or additional person to which all such notices
or communications thereafter are to be given.
Company: Holder:
Rentech, Inc.
1331 17th Street, Suite 720
Denver, Colorado 80202
10. No Third-Party Beneficiaries. This Agreement does not
create, and shall not be construed as creating, any rights enforceable
by any person not a party to this Agreement.
11. Entire Agreement. This Agreement (including any exhibits
hereto) and the agreements, documents, and instruments to be signed and
delivered pursuant hereto or thereto, embodies the final, complete and
exclusive agreement among the parties with respect to the subject
matter of this Agreement and related transactions; supersedes all prior
agreements, understandings, and representations, written or oral, with
respect thereto; and may not be contradicted by evidence of any such
prior or contemporaneous agreement, understanding, or representation,
whether written or oral. No change or modification to this Agreement
shall be valid unless in writing and signed by the parties hereto.
RENTECH, INC.
ATTEST:
By:
- ------------------------------- ------------------------------