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Exhibit 10.3
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE
UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY
SATISFACTORY TO NEW CENTURY ENERGY CORP. THAT SUCH REGISTRATION IS
NOT REQUIRED.
SECOND AMENDED AND RESTATED
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SECURED CONVERTIBLE TERM NOTE
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FOR VALUE RECEIVED, NEW CENTURY ENERGY CORP., a Colorado
corporation (the
"COMPANY"), promises to pay to PROMETHEAN INDUSTRIES, INC. as
successor in
interest to LAURUS MASTER FUND, LTD., c/o Laurus Capital
Management, LLC, 825
Third Ave., 14th Floor, New York, NY 10022, (the "HOLDER") or its
registered
assigns or successors in interest, the sum of Fifteen Million
Dollars
($15,000,000), together with any accrued and unpaid interest
hereon, on June 30,
2008 (the "MATURITY DATE") if not sooner paid.
Capitalized terms used herein without definition shall have the
meanings
ascribed to such terms in that certain Securities Purchase
Agreement dated as of
the date hereof by and between the Company and the Holder (as
amended, modified
and/or supplemented from time to time, the "PURCHASE
AGREEMENT").
The following terms shall apply to this Second Amended and Restated
Secured
Convertible Term Note (this "NOTE"):
ARTICLE I
CONTRACT RATE AND AMORTIZATION
1.1 Contract Rate. Subject to Sections 4.2 and 5.10, interest
payable
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on the outstanding principal amount of this Note (the "PRINCIPAL
AMOUNT")
shall accrue at a rate per annum equal to the "prime rate"
published in The
---
Wall Street Journal from time to time (the "PRIME RATE"), plus two
percent
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(2%) (the "CONTRACT RATE"). The Contract Rate shall be increased
or
decreased as the case may be for each increase or decrease in the
Prime
Rate in an amount equal to such increase or decrease in the Prime
Rate;
each change to be effective as of the day of the change in the
Prime Rate.
Subject to Section 1.2, the Contract Rate shall not at any time be
less
than seven percent (7%). Interest shall be (i) calculated on the
basis of a
360 day year, and (ii) payable monthly, in arrears, commencing on
September
1, 2005, on the first business day of each consecutive calendar
month
thereafter through and including the Maturity Date, and on the
Maturity
Date, whether by acceleration or otherwise.
1.2 Contract Rate Adjustments and Payments. The Contract Rate shall
be
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calculated on the last business day of each calendar month
hereafter (other
than for increases or decreases in the Prime Rate which shall be
calculated
and become effective in accordance with the terms of Section 1.1)
until the
Maturity Date (each a "DETERMINATION DATE") and shall be subject
to
<PAGE>
adjustment as set forth herein. If (i) the Company shall have
registered
the shares of the Common Stock underlying the conversion of this
Note and
each Warrant on a registration statement declared effective by
the
Securities and Exchange Commission (the "SEC"), and (ii) the market
price
(the "MARKET PRICE") of the Common Stock as reported by Bloomberg,
L.P. on
the Principal Market for the five (5) trading days immediately
preceding a
Determination Date exceeds the then applicable Fixed Conversion
Price by at
least twenty-five percent (25%), the Contract Rate for the
succeeding
calendar month shall automatically be reduced by 100 basis points
(100
b.p.) (1%) for each incremental twenty-five percent (25%) increase
in the
Market Price of the Common Stock above the then applicable Fixed
Conversion
Price. Notwithstanding the foregoing (and anything to the
contrary
contained herein), in no event shall the Contract Rate at any time
be less
than zero percent (0%).
1.3 Principal Payments. Amortizing payments of the aggregate
principal
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amount outstanding under this Note at any time (the "PRINCIPAL
AMOUNT")
shall be made by the Company on July 1, 2006 and on the first
business day
of each succeeding month thereafter through and including the
Maturity Date
(each, an "AMORTIZATION DATE"). Subject to Article III below,
commencing on
the first Amortization Date through December 31, 2006, the Company
shall
make monthly payments to the Holder on each Repayment Date, each
such
payment in the amount of $250,000 together with any accrued and
unpaid
interest on such portion of the Principal Amount plus any and all
other
unpaid amounts which are then owing under this Note, the Purchase
Agreement
and/or any other Related Agreement (collectively, the "MONTHLY
AMOUNT").
Beginning January 1, 2007, through December 31, 2007, the Monthly
Amount
shall be $100,000. Beginning January 1, 2008, through the Maturity
Date,
the Monthly amount shall be $250,000. Any outstanding Principal
Amount
together with any accrued and unpaid interest and any and all other
unpaid
amounts which are then owing by the Company to the Holder under
this Note,
the Purchase Agreement and/or any other Related Agreement shall be
due and
payable on the Maturity Date.
ARTICLE II
CONVERSION AND REDEMPTION
2.1 Payment of Monthly Amount.
(a) Payment in Cash or Common Stock. If the Monthly Amount (or
a
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portion of such Monthly Amount if not all of the Monthly Amount may
be
converted into shares of Common Stock pursuant to Section 3.2) is
required
to be paid in cash pursuant to Section 2.1(b), then the Company
shall pay
the Holder an amount in cash equal to 102% of the Monthly Amount
(or such
portion of such Monthly Amount to be paid in cash) due and owing to
the
Holder on the Amortization Date. If the Monthly Amount (or a
portion of
such Monthly Amount if not all of the Monthly Amount may be
converted into
shares of Common Stock pursuant to Section 3.2) is required to be
paid in
shares of Common Stock pursuant to Section 2.1(b), the number of
such
shares to be issued by the Company to the Holder on such
Amortization Date
(in respect of such portion of the Monthly Amount converted into
shares of
Common Stock pursuant to Section 2.1(b)), shall be the number
determined by
dividing (i) the portion of the Monthly Amount converted into
shares of
Common Stock, by (ii) the then applicable Fixed Conversion Price.
For
purposes hereof, subject to Section 3.6 hereof, the initial
"FIXED
CONVERSION PRICE" means $0.62.
<PAGE>
(b) Monthly Amount Conversion Conditions. Subject to Sections
2.1(a),
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2.2, and 3.2 hereof, the Holder shall convert into shares of Common
Stock
all or a portion of the Monthly Amount due on each Amortization
Date if the
following conditions (the "CONVERSION CRITERIA") are satisfied: (i)
the
average closing price of the Common Stock as reported by Bloomberg,
L.P. on
the Principal Market for the five (5) trading days immediately
preceding
such Amortization Date shall be greater than or equal to 110% of
the Fixed
Conversion Price and (ii) the amount of such conversion does not
exceed
twenty five percent (25%) of the aggregate dollar trading volume of
the
Common Stock for the period of twenty-two (22) trading days
immediately
preceding such Amortization Date. If subsection (i) of the
Conversion
Criteria is met but subsection (ii) of the Conversion Criteria is
not met
as to the entire Monthly Amount, the Holder shall convert only such
part of
the Monthly Amount that meets subsection (ii) of the Conversion
Criteria.
Any portion of the Monthly Amount due on an Amortization Date that
the
Holder has not been able to convert into shares of Common Stock due
to the
failure to meet the Conversion Criteria, shall be paid in cash by
the
Company at the rate of 102% of the Monthly Amount otherwise due on
such
Amortization Date, within three (3) business days of such
Amortization
Date.
2.2 No Effective Registration. Notwithstanding anything to the
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contrary herein, none of the Company's obligations to the Holder
may be
converted into Common Stock unless (a) either (i) an effective
current
Registration Statement (as defined in the Registration Rights
Agreement)
covering the shares of Common Stock to be issued in connection
with
satisfaction of such obligations exists or (ii) an exemption
from
registration for resale of all of the Common Stock issued and
issuable is
available pursuant to Rule 144 of the Securities Act and (b) no
Event of
Default (as hereinafter defined) exists and is continuing, unless
such
Event of Default is cured within any applicable cure period or
otherwise
waived in writing by the Holder.
2.3 Optional Redemption in Cash. The Company may prepay this
Note
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("OPTIONAL REDEMPTION") by paying to the Holder a sum of money
equal to the
Applicable Principal Amount (as defined below) together with
accrued but
unpaid interest thereon and any and all other sums due, accrued or
payable
to the Holder arising under this Note, the Purchase Agreement or
any other
Related Agreement (the "REDEMPTION AMOUNT") outstanding on the
Redemption
Payment Date (as defined below). The Company shall deliver to the
Holder a
written notice of redemption (the "NOTICE OF REDEMPTION")
specifying the
date for such Optional Redemption (the "REDEMPTION PAYMENT DATE"),
which
date shall be seven (7) business days after the date of the Notice
of
Redemption (the "REDEMPTION PERIOD"). A Notice of Redemption shall
not be
effective with respect to any portion of this Note for which the
Holder has
previously delivered a Notice of Conversion (as hereinafter
defined) or for
conversions elected to be made by the Holder pursuant to Section
3.3 during
the Redemption Period. The Redemption Amount shall be determined as
if the
Holder's conversion elections had been completed immediately prior
to the
date of the Notice of Redemption. On the Redemption Payment Date,
the
Redemption Amount must be paid in good funds to the Holder. In the
event
the Company fails to pay the Redemption Amount on the Redemption
Payment
Date as set forth herein, then such Redemption Notice will be null
and
void. For purposes of this Section 2.3, the "APPLICABLE PRINCIPAL
AMOUNT"
shall mean (a) during the period commencing on the effective date
hereof
and ending on the date immediately preceding the first anniversary
of the
effective date hereof, 125% of the Principal Amount outstanding at
the time
of such prepayment, (b) during the period commencing on the
first
<PAGE>
anniversary of the effective date hereof and ending on the date
immediately
preceding the second anniversary of the date hereof, 120% of the
Principal
Amount outstanding at the time of such prepayment and (c) during
the period
commencing on the second anniversary of the effective date hereof
and
ending on the Maturity Date, 115% of the Principal Amount
outstanding at
the time of such prepayment.
ARTICLE III
HOLDER'S CONVERSION RIGHTS
3.1 Optional Conversion. Subject to the terms set forth in this
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Article III, the Holder shall have the right, but not the
obligation, to
convert all or any portion of the issued and outstanding Principal
Amount
and/or accrued interest and fees due and payable into fully paid
and
nonassessable shares of Common Stock at the Fixed Conversion Price.
The
shares of Common Stock to be issued upon such conversion are
herein
referred to as, the "CONVERSION SHARES."
3.2 Conversion Limitation. Notwithstanding anything contained
herein
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to the contrary, the Holder shall not be entitled to convert
pursuant to
the terms of this Note an amount that would be convertible into
that number
of Conversion Shares which would exceed the difference between (i)
9.99% of
the outstanding shares of Common Stock and (ii) the number of
shares of
Common Stock beneficially owned by the Holder. For purposes of
the
immediately preceding sentence, beneficial ownership shall be
determined in
accordance with Section 13(d) of the Exchange Act and Regulation
13d-3
thereunder. The Conversion Shares limitation described in this
Section 3.2
shall automatically become null and void following notice to any
Company
upon the occurrence and during the continuance of an Event of
Default, or
upon 75 days prior notice to the Company. Notwithstanding
anything
contained herein to the contrary, the provisions of this Section
3.2 are
irrevocable and may not be waived by the Holder or any Company.
3.3 Mechanics of Holder's Conversion. In the event that the
Holder
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elects to convert this Note into Common Stock, the Holder shall
give notice
of such election by delivering an executed and completed notice
of
conversion in substantially the form of Exhibit A hereto
(appropriate
completed) ("NOTICE OF CONVERSION") to the Company and such Notice
of
Conversion shall provide a breakdown in reasonable detail of the
Principal
Amount, accrued interest and fees that are being converted. On
each
Conversion Date (as hereinafter defined) and in accordance with its
Notice
of Conversion, the Holder shall make the appropriate reduction to
the
Principal Amount, accrued interest and fees as entered in its
records and
shall provide written notice thereof to the Company within two (2)
business
days after the Conversion Date. Each date on which a Notice of
Conversion
is delivered or telecopied to the Company in accordance with the
provisions
hereof shall be deemed a Conversion Date (the "CONVERSION DATE").
Pursuant
to the terms of the Notice of Conversion, the Company will
issue
instructions to the transfer agent accompanied by an opinion of
counsel
within one (1) business day of the date of the delivery to the
Company of
the Notice of Conversion and shall cause the transfer agent to
transmit the
certificates representing the Conversion Shares to the Holder by
crediting
the account of the Holder's designated broker with the Depository
Trust
Corporation ("DTC") through its Deposit Withdrawal Agent
Commission
("DWAC") system within three (3) business days after receipt by the
Company
of the Notice of Conversion (the "DELIVERY DATE"). In the case of
the
<PAGE>
exercise of the conversion rights set forth herein the conversion
privilege
shall be deemed to have been exercised and the Conversion Shares
issuable
upon such conversion shall be deemed to have been issued upon the
date of
receipt by the Company of the Notice of Conversion. The Holder
shall be
treated for all purposes as the record holder of the Conversion
Shares,
unless the Holder provides the Company written instructions to
the
contrary.
3.4 Late Payments. The Company understands that a delay in the
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delivery of the Conversion Shares in the form required pursuant to
this
Article beyond the Delivery Date could result in economic loss to
the
Holder. As compensation to the Holder for such loss, in addition to
all
other rights and remedies which the Holder may have under this
Note,
applicable law or otherwise, the Company shall pay late payments to
the
Holder for any late issuance of Conversion Shares in the form
required
pursuant to this Article II upon conversion of this Note, in the
amount
equal to $200 per business day after the Delivery Date. The Company
shall
make any payments incurred under this Section in immediately
available
funds upon demand.
3.5 Conversion Mechanics. The number of shares of Common Stock to
be
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issued upon each conversion of this Note shall be determined by
dividing
that portion of the principal and interest and fees to be
converted, if
any, by the then applicable Fixed Conversion Price. In the event of
any
conversions of a portion of the outstanding Principal Amount
pursuant to
this Article III, such conversions shall be deemed to
constitute
conversions of the outstanding Principal Amount applying to Monthly
Amounts
for the remaining Amortization Dates in chronological order.
3.6 Adjustment Provisions. The Fixed Conversion Price and number
and
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kind of shares or other securities to be issued upon conversion
determined
pursuant to this Note shall be subject to adjustment from time to
time upon
the occurrence of certain events during the period that this
conversion
right remains outstanding, as follows:
(a) Reclassification. If the Company at any time shall, by
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reclassification or otherwise, change the Common Stock into the
same or a
different number of securities of any class or classes, this Note,
as to
the unpaid Principal Amount and accrued interest thereon, shall
thereafter
be deemed to evidence the right to purchase an adjusted number of
such
securities and kind of securities as would have been issuable as
the result
of such change with respect to the Common Stock (i) immediately
prior to or
(ii) immediately after, such reclassification or other change at
the sole
election of the Holder.
(b) Stock Splits, Combinations and Dividends. If the shares of
Common
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