Exhibit 10.18
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
$875,000 dated May 20, 2005
RENTECH, INC., a Colorado
corporation (the “Company”), for value received, hereby
promises to pay to David P. Zimel, or permitted assigns (the
“Holder”), the sum of eight hundred seventy five
thousand dollars and no/100 ($875,000.00), together with interest
on the outstanding principal balance at the rate of the Prime Rate
as reported by the Wall Street Journal on the first day of the
month plus two percentage points (the “Interest”). The
Interest shall be payable monthly in arrears on the last day of
each month, in cash or at the option of the Company, payable in
shares of the Company’s registered, free-trading common stock
valued at the Market Price per share, as subsequently defined in
this document; provided that payment in such shares will not be
made in an aggregate number that exceeds 175,000 shares. Interest
shall be prorated for any partial month periods. The Interest shall
be calculated on the basis of a 360-day year. Payments of interest
shall be made to Holder at 16390 S.W. Langer Dr., Sherwood, Oregon
97140 in monthly payments commencing on June 30, 2005, and
continuing monthly thereafter on the last day of each succeeding
month until this Note is paid in full through the conversion of
principal amounts of this Note into shares of the Company’s
common stock, as subsequently provided in this Note.
1. Conversion into Common Stock . In
addition to the monthly payments of Interest in money or shares of
stock, 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 ”), at the Market Price, as subsequently defined
in this Note. Notwithstanding any provisions of this Note to the
contrary, the total number of shares issued by the Company for the
conversions of principal subsequently described shall not exceed
one million ninety three thousand seven hundred fifty thousand
(1,093,750) shares.
1.1 Definition of Market Price
and Conversion Price.
(a) For purposes of this Note, the
“ Market Price ” shall be the average of the
volume weighted average price of the Company’s common stock
for the five (5) trading days (which need not occur on consecutive
trading days) immediately preceding a notice of conversion given in
accordance with the terms of this Note. If the common stock is not
listed or admitted to unlisted trading privileges on a national
securities exchange, the Market Price shall be determined, in a
reasonable manner, as prescribed by the Company’s board of
directors. The price determined in this manner shall be final and
binding.
(b) Conversion Price . For
purposes of this Note, the principal balance to be converted into
common stock shall be divided by the Conversion Price (as set forth
below) in order to determine the
number of common shares into which the principal
may be converted. The “ Conversion Price ” per
share shall be equal to eighty percent (80%) of the Market Price,
on the date of conversion, rounded to the nearest ten thousandth;
provided , however , that subject to the provisions
of the next sentence, in no event shall the Conversion Price be
less than $0.80 per share (the “Floor Price”) or exceed
$1.3852 per share (the “Ceiling Price”). The Floor
Price and Ceiling Price shall be further adjusted upon the
occurrence of any event in Paragraph 1.1(b)(i)-(iii).
(i) Adjustment for Stock Splits
and Combinations . If
the Company shall at any time, or from time to time after the date
shares of this Note are first issued (the “Original Issue
Date”), effect a subdivision of the outstanding common stock,
the Floor Price and Ceiling Price in effect immediately prior
thereto shall be proportionately decreased, and conversely, if the
Company shall at any time or from time to time after the Original
Issue Date combine the outstanding shares of common stock, the
Floor Price and Ceiling Price then in effect immediately before the
combination shall be proportionately increased. Any adjustment
under this Paragraph 1.1(b)(i) shall become effective at the close
of business on the date the subdivision or combination becomes
effective.
(ii) Adjustment for Certain
Dividends and Distributions . In the event the Company at any time, or from
time to time after the Original Issue Date, shall make or issue, or
fix a record date for the determination of holders of common stock
entitled to receive, a dividend or other distribution payable in
additional shares of common stock, then and in each such event the
Floor Price and Ceiling Price then in effect shall be decreased as
of the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record
date, by multiplying the Floor Price and Ceiling Price then in
effect by a fraction:
a) the numerator of which shall be
the total number of shares of common stock issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date, and
b) the denominator of which shall be
the total number of shares of common stock issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of common
stock issuable in payment of such dividend or distribution;
provided , however , if such record date shall have
been fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefore, the
Floor Price and Ceiling Price shall be recomputed accordingly as of
the close of business on such record date and thereafter, the Floor
Price and Ceiling Price shall be adjusted pursuant to this
Paragraph 1.1(b)(ii) as of the time of actual payment of such
dividends or distributions.
(iii) Adjustments for Other
Dividends and Distributions . In the event the Company at any time or from
time to time after the Original Issue Date shall make or issue, or
fix a record date for the determination of holders of common stock
entitled to receive, a dividend or other distribution payable in
securities of the Company other than shares of common stock, then
and in each such event provision shall be made so that the Holder
of this Note shall receive, upon conversion thereof in addition to
the number of shares of common stock receivable thereupon, the
amount of securities of the Company that they would have received
had their Note shares been converted into common stock on the date
of such event and had thereafter, during the period from the date
of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period
giving application to all adjustments called for during such period
under this Paragraph 1.1(b) with respect to the rights of the
Holder of this Note.
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1.2 Right to Convert .
Commencing on the earlier of ninety (90) days after the date of
this Note or the date that an effective registration is on file
with the Securities and Exchange Commission with respect to the
shares of common stock issuable upon conversion of this Note,
subject to and in compliance with the provisions of this Paragraph
1.2, any outstanding principal balance of this Note may, at the
option of the Holder, be converted at any time or from time to time
into fully paid and non-assessable shares of common stock at the
Conversion Price in effect at the time of conversion, determined as
provided herein.
1.3 Mandatory Conversion .
Provided that (a) there is an effective registration statement on
file with the SEC for the shares of Common Stock issuable upon
conversion of the Note shares, and (b) the closing price of the
common stock for the twenty (20) preceding trading days is equal to
or greater than $2.70 per share, then the Company, at its option,
may by delivery of written notice, require any Holder of this Note
to convert all, or a portion, of the then outstanding balance of
principal of this Note into shares of common stock. The conversion
shall be made within five trading days after the notice.
1.4 Holder’s Election to
Convert. To carry out an election by it to convert indebtedness
in common shares, the Holder must transmit a written request to the
Company requesting conversion of that part of the indebtedness that
is allowed by the previous provisions of this Section.
1.5 Issuance of Stock
Certificates. After each conversion, whether at the written
request of the Holder or a mandatory conversion as previously
described, the Company shall issue its restricted stock
certificates representing the shares issued upon conversion (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
under authority of the Securities Exchange 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 . Notwithstanding any other
provisions of this Note, the Company may prepay this Note, in whole
or in part, by payments of money, at any time and from time to
time, without premium or penalty of any kind. 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 shall be applied for these conversions.
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 .
(a) Piggy-Back Registration .
Subject to Section 4(i) below, if at any time during the two years
following the date of this Note, the Company proposes to register
any of its common stock under the Act in connection with the public
offering of such securities solely for cash on a form that would
also permit the registration of the common stock of the holders
that they acquire through exercise of this Note, the Company will,
if the shares of common stock subject to this Note have not then
been registered with
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the Securities and Exchange Commission and if
the Company is not contractually or otherwise prohibited from
including these shares, each such time, promptly give each Holder
written notice of such determination. Upon the written request of
any Holder given within 20 days after mailing of any such notice by
the Company, the Company shall use its best efforts to cause to be
registered under the Act all of such common stock acquired through
exercise of this Note that each such Holder has requested to be
registered.
(b) Obligations of the
Company . Whenever required to use its best efforts to effect
the registration of any common stock,
