EXHIBIT 10.2
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.
SECURED CONVERTIBLE TERM NOTE
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FOR VALUE RECEIVED, NEW CENTURY ENERGY
CORP., a Colorado corporation (the
"COMPANY"), promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
Corporate
Services Limited, P.O. Box 309 GT, Ugland House, South Church
Street, George
Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (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 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
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Street Journal from time to time (the
"PRIME RATE"), plus two percent (2%) (the
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"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
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%).
<PAGE>
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 January 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, 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"). 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.
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(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.
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(b)
Monthly Amount
Conversion
Conditions.
Subject to Sections
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2.1(a), 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
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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 date
hereof and
ending on the date immediately preceding the first anniversary of the
date
hereof, 125% of the Principal Amount
outstanding at the time of such prepayment,
(b) during the period commencing on the
first anniversary of the 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
date
hereof and ending on the Maturity Date,
115% of the Principal Amount outstanding
at the time of such prepayment.
<PAGE>
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 to
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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)
4.99% 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 Parent.
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 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.
<PAGE>
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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