Exhibit 10.3
THE SECURITY REPRESENTED BY THIS
INSTRUMENT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”). ACCORDINGLY,
THIS SECURITY MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AS EVIDENCED
BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
THIS NOTE IS BEING ISSUED IN
EXCHANGE FOR THE AMOUNTS OUTSTANDING UNDER THE TERM LOAN (INCLUDING
TERM ADVANCES THEREUNDER) (COLLECTIVELY, THE “TERM
LOAN”) ISSUED UNDER THAT CERTAIN CREDIT AGREEMENT DATED AS OF
JANUARY 31, 2007, AS AMENDED THROUGH THE DATE HEREOF (THE
“CREDIT AGREEMENT”), BY AND BETWEEN THE COMPANY AND THE
PURCHASER. IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT THIS NOTE
SHALL REPLACE THE TERM LOAN AS EVIDENCE OF SUCH INDEBTEDNESS OF THE
UNDERSIGNED TO THE PURCHASER, AND SUCH INDEBTEDNESS OF THE
UNDERSIGNED TO THE PURCHASER HERETOFORE REPRESENTED BY THE TERM
LOAN, AS OF THE DATE HEREOF, SHALL BE CONSIDERED OUTSTANDING
HEREUNDER FROM AND AFTER THE DATE HEREOF AND SHALL NOT BE
CONSIDERED PAID (NOR SHALL THE UNDERSIGNED’S OBLIGATION TO
PAY THE SAME BE CONSIDERED DISCHARGED OR SATISFIED) AS A RESULT OF
THE ISSUANCE OF THIS NOTE.
QUANTUM FUEL SYSTEMS TECHNOLOGIES
WORLDWIDE, INC.
CONVERTIBLE PROMISSORY
NOTE
QUANTUM FUEL SYSTEMS TECHNOLOGIES
WORLDWIDE, INC., a Delaware corporation (the “ Company
”), hereby promises to pay to the order of WB QT, LLC, a
Delaware limited liability company (the “ Purchaser
”), the principal amount of Six Million Six Hundred
Thirty-Nine Thousand and Fifty-Eight Dollars ($6,639,058) plus the
portion of the Accreted Principal Amount (as defined below) in
excess thereof together with interest on the Accreted Principal
Amount calculated from the date hereof in accordance with the
provisions of this Note.
ARTICLE I
PAYMENT OF INTEREST; CONTINGENT
INTEREST
Interest shall accrue on the
Accreted Principal Amount (in each case computed on the basis of a
365/366-day year and the actual number of days elapsed in any year)
at an annual rate equal to 11.50% (or, from and after any extension
of the maturity date of this Note under Section 2.1 below,
9.5%) per annum or (if less) at the highest rate then
permitted under applicable law, all of which shall be payable by
adding such interest to the Accreted Principal Amount on each
Interest Payment Date (as defined below), and on the final maturity
hereof (the “ PIK Amounts ”). At any time, the
outstanding principal amount of this Note, including all PIK
Amounts and Default PIK Amounts (as defined below) added thereto
through such time, is referred to in this Note as the “
Accreted Principal Amount .” All accrued interest
(including PIK Amounts, Default PIK Amounts and interest on the
Accreted Principal Amount) shall be added to the Accreted Principal
Amount on the first day of each July and January (each, an “
Interest Payment Date ”) and on the final maturity
date of this Note. Any Accreted Principal Amount (including PIK
Amounts and Default PIK Amounts) which for any reason has not
theretofore been paid shall increase the principal of the Note and
be paid in full on the date on which the final principal payment on
this Note is made (the “ Default PIK Amounts ”);
provided , however , that any such reason shall not
affect or waive any Event of Default that arises due to the failure
to make such payment in cash; provided further , that the
Company has the option to elect by written notice to Lender at
least five (5) business days prior to each Interest Payment
Date to pay a total of 6.5% of the PIK Amounts in cash. Interest
shall accrue on any principal payment due under this Note
(including as to accrued interest added to the principal) until
such time as payment therefor is actually delivered to the holder
of this Note.
ARTICLE II
PAYMENT OF PRINCIPAL ON
NOTE
Section 2.1 Scheduled Payment
. The Company shall pay the Accreted Principal Amount or, if less,
the outstanding principal amount of this Note to the holder of this
Note on August 31, 2010, together with all accrued and unpaid
interest on the principal amount being repaid At the election of
the Purchaser in its sole discretion and upon written notice to the
Company no later than August 15, 2010, such maturity date
shall be extended until August 31, 2013 (either such date, the
“ Maturity Date ”).
Section 2.2 Conversion .
Notwithstanding any provision contained in this Article 2, the
holder of this Note may convert all or any portion of the
outstanding principal amount of this Note into shares of common
stock, $.001 par value per share, of the Company (the “
Common Shares ”) in accordance with Article 6
until such time as such principal amount has been paid.
ARTICLE III
[Reserved].
ARTICLE IV
[Reserved].
2
ARTICLE V
EVENTS OF DEFAULT; REMEDIES ON
DEFAULT
Section 5.1 Event of Default
. An “ Event of Default ” shall exist if any of
the following conditions or events shall occur and be
continuing:
(a) the Company defaults in the
payment of principal on the Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or
by declaration or otherwise, or fails to deliver the Common Shares
to the Purchaser in the manner and at the times set forth in
Article 6 hereof, and such failure to pay is not cured within three
(3) business days after the occurrence thereof; or
(b) the Company defaults in the
payment of any interest on the Note for more than five
(5) business days after the same becomes due and payable;
or
(c) the Company defaults with
respect to Section 6.1 of the Purchase Agreement;
or
(d) the Company defaults in the
performance of, or compliance with, any other term contained in the
Purchase Agreement or the Note (other than those referred to in
Section 5.1(a), (b) or (c) above) and the default is
not remedied within thirty (30) days after the earlier of
(i) the Chief Executive Officer or the Chief Financial Officer
obtaining actual knowledge of the default and (ii) the Company
receiving written notice of the default from the holder of this
Note (any such written notice to be identified as a “notice
of default” and to refer specifically to this
Section 5.1(d)); or
(e) any representation or warranty
made by the Company in Article IV of the Purchase Agreement
proves to have been false in any material respect on the Closing
Date; or
(f) the Company (i) is
generally not paying, or admits in writing its inability to pay its
debts as they become due (ii) files, or consents by answer or
otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy,
for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any
jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property or
(v) is adjudicated as insolvent or to be liquidated;
or
(g) a court or Governmental
Authority of competent jurisdiction enters an order appointing,
without consent by the Company, a custodian, receiver, trustee or
other officer with similar powers with respect to it or with
respect to any substantial part of its property, or constituting an
order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution,
3
winding-up or liquidation of the
Company, or any such petition shall be filed against the Company
and such petition shall not be dismissed within thirty
(30) days; or
(h) an Event of Default (as defined
in the Credit Agreement) shall have occurred and be continuing and
shall not have been waived by the requisite holders of Indebtedness
under the Credit Agreement or cured.
Section 5.2 Acceleration
.
(a) If an Event of Default with
respect to the Company described in subsection (f) of
Section 5.1 has occurred, the Note shall automatically become
immediately due and payable.
(b) If any other Event of Default
has occurred and is continuing, the holder of the Note may at any
time at his, her or its option, by notice to the Company, declare
the Note to be immediately due and payable.
(c) Upon the Note becoming due and
payable under this Section 5.2, whether automatically or by
declaration, the Note will forthwith mature and the entire unpaid
principal amount of the Note, plus all accrued and unpaid interest
thereon, shall all be immediately due and payable, in each and
every case without presentment, demand, protest or further notice,
all of which are hereby waived.
Section 5.3 Other Remedies .
If any Event of Default has occurred and is continuing, and
irrespective of whether the Note has become or has been declared
immediately due and payable under Section 5.1, the holder of
the Note may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement
contained herein, or for an injunction against a violation of any
of the terms hereof or thereof, or in aid of the exercise of any
power granted hereby or thereby or by law or otherwise.
Section 5.4 No Waivers or
Election of Remedies; Expenses . No course of dealing and no
delay on the part of the holder of the Note in exercising any
right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder’s rights, powers or remedies.
The Company shall pay the principal and interest of the Note
without any deduction for any setoff or counterclaim. No right,
power or remedy conferred by the Purchase Agreement or by the Note
upon the holder thereof shall be exclusive of any other right,
power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. The Company
will pay to the holder of the Note on demand such further amount as
shall be sufficient to cover all reasonable costs and expenses of
such holder incurred in any enforcement or collection under this
Article 5, including, without limitation, reasonable
attorneys’ fees, expenses and disbursements.
Section 5.5 Waiver of Demand
. The Company hereby waives diligence, presentment, protest and
demand and notice of protest and demand, dishonor and nonpayment of
this Note, and expressly agrees that this Note, or any payment
hereunder, may be extended from time to
4
time and that the holder hereof may accept
security for this Note or release security for this Note, all
without in any way affecting the liability of the Company
hereunder.
ARTICLE VI
CONVERSION
Section 6.1 Conversion
Procedure .
(a) At any time prior to the payment
of this Note in full, the holder of this Note may convert all or
any portion of the outstanding principal and/or accrued interest
amount
