Exhibit 10.4
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. 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 TERM NOTE
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FOR VALUE RECEIVED, NEW CENTURY ENERGY CORP., a Colorado corporation (the
"COMPANY"), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
Corporate Services Limited, X.X. Xxx 000 XX, Xxxxxx House, South Church Street,
Xxxxxx Town, Grand Cayman, Cayman Islands, Fax: 000-000-0000 (the "HOLDER") or
its registered assigns or successors in interest, the sum of Sixteen Million Two
Hundred Ten Thousand Dollars ($16,210,000), together with any accrued and unpaid
interest hereon, on January 4, 2010 (the "MATURITY DATE") if not sooner paid.
The following terms shall apply to this Secured Term Note (this "NOTE"):
ARTICLE I
CONTRACT RATE AND REDEMPTION
1.1 Contract Rate. Subject to Sections 2.2 and 3.9, interest payable on the
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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 (2%) (the
"CONTRACT RATE"), which Contract Rate shall at no time be less than 8% per
annum. 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. Interest shall be (i) calculated on the basis of a 360
day year, and (ii) payable monthly, in arrears, commencing on February 1, 2007,
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.
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, 2007 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
Amortization Date, each such payment in the amount of $200,000 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.
1.4 Optional Redemption. The Company may prepay this Note ("OPTIONAL
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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 and/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. 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 Notice of Redemption will be null and void. For purposes
of this Section 1.4, the "APPLICABLE PRINCIPAL AMOUNT" shall mean 100% of the
Principal Amount outstanding at the time of such prepayment.
ARTICLE II
EVENTS OF DEFAULT
2.1 Events of Default. The occurrence of any of the following events set
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forth in this Section 2.1 shall constitute an event of default ("EVENT OF
DEFAULT") hereunder:
(a) Failure to Pay. The Company fails to pay when due any installment
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of principal, interest or other fees hereon in accordance herewith, or the
Company fails to pay any of the other Obligations (under and as defined in
the Master Security Agreement) when due, and, in any such case, such
failure shall continue for a period of three (3) days following the date
upon which any such payment was due.
(b) Breach of Covenant. The Company or any of its Subsidiaries
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breaches any covenant or any other term or condition of this Note in any
material respect and such breach, if subject to cure, continues for a
period of fifteen (15) days after the occurrence thereof.
(c) Breach of Representations and Warranties. Any representation,
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warranty or statement made or furnished by the Company or any of its
Subsidiaries in this Note, the Purchase Agreement or any other Related
Agreement shall at any time be false or misleading in any material respect
on the date as of which made or deemed made.
(d) Default Under Other Agreements. The occurrence of any default (or
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similar term) in the observance or performance of any other agreement or
condition relating to any indebtedness or contingent obligation of the
Company or any of its Subsidiaries beyond the period of grace (if any), the
effect of which default is to cause, or permit the holder or holders of
such indebtedness or beneficiary or beneficiaries of such contingent
obligation to cause, such indebtedness to become due prior to its stated
maturity or such contingent obligation to become payable;
(e) Material Adverse Effect. Any change or the occurrence of any event
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which could reasonably be expected to have a Material Adverse Effect;
(f) Bankruptcy. The Company or any of its Subsidiaries shall (i) apply
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for, consent to or suffer to exist the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of
all or a substantial part of its property, (ii) make a general assignment
for the benefit of creditors, (iii) commence a voluntary case under the
federal bankruptcy laws (as now or hereafter in effect), (iv) be
adjudicated a bankrupt or insolvent, (v) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vi)
acquiesce to, without challenge within ten (10) days of the filing thereof,
or failure to have dismissed, within thirty (30) days, any petition filed
against it in any involuntary case under such bankruptcy laws, or (vii)
take any action for the purpose of effecting any of the foregoing;
(g) Judgments. Attachments or levies in excess of $100,000 in the
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aggregate are made upon the Company or any of its Subsidiary's assets or a
judgment is rendered against the Company's property involving a liability
of more than $100,000 which shall not have been vacated, discharged, stayed
or bonded within thirty (30) days from the entry thereof;
(h) Insolvency. The Company or any of its Subsidiaries shall admit in
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writing its inability, or be generally unable, to pay its debts as they
become due or cease operations of its present business;
(i) Change in Control. A Change in Control shall occur. A "Change in
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Control" shall arise when any "Person" or "group" (as such terms are
defined in Sections 13(d) and 14(d) of the Exchange Act, as in effect on
the date hereof) is or becomes the "beneficial owner" (as defined in Rules
13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of 35%
or more on a fully diluted basis of the then outstanding voting equity
interest of the Company (other than a "Person" or "group" that beneficially
owns 35% or more of such outstanding voting equity interests of the Company
on the date hereof) or (ii) the Board of Directors of the Company shall
cease to consist of a majority of the Company's board of directors on the
date hereof (or directors appointed by a majority of the board of directors
in effect immediately prior to such appointment);
(j) Indictment; Proceedings. The indictment or threatened indictment
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of the Company or any of its Subsidiaries or any executive officer of the
Company or any of its Subsidiaries under any criminal statute, or
commencement or threatened commencement of criminal or civil proceeding
against the Company or any of its Subsidiaries or any executive officer of
the Company or any of its Subsidiaries pursuant to which statute or
proceeding penalties or remedies sought or available include forfeiture of
any of the property of the Company or any of its Subsidiaries;
(k) The Purchase Agreement, Related Agreements, the September 2005
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Purchase Agreement, the September 2005 Related Agreements, the Gulf Coast
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Purchase Agreements and the Gulf Coast Related Agreements. (i) An Event of
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Default shall occur under and as defined in the Purchase Agreement, any
Related Agreement, the Securities Purchase Agreement dated as of September
19, 2005 by and between the Holder and the Company (as amended, modified
and supplemented from time to time, the "September 2005 Purchase
Agreement") and/or any other document, instrument or agreement entered into
in connection with the transactions contemplated by the September 2005
Purchase Agreement (as amended, modified and supplemented from time to
time, the "September 2005 Related Agreements"), the April 26, 2006 or June
30, 2006 Gulf Coast Oil Corporation ("Gulf Coast") Securities Purchase
Agreements by and between the Holder and Gulf Coast (as amended, modified
and supplemented from time to time, the "Gulf Coast Purchase Agreements")
and/or any other document, instrument or agreement entered into in
connection with the transactions contemplated by the Gulf Coast Purchase
Agreements (as amended, modified and supplemented from time to time, the
"Gulf Coast Related Agreements"), (ii) the Company or any of its
Subsidiaries shall breach any term or provision of the Purchase Agreement,
any Related Agreement, the September 2005 Purchase Agreement or any
September 2005 Related Agreement, the Gulf Coast Purchase Agreements or any
Gulf Coast Related Agreements in any material respect and such breach, if
capable of cure, continues unremedied for a period of fifteen (15) days
after the occurrence thereof, (iii) the Company or any of its Subsidiaries
attempts to terminate, challenges the validity of, or its liability under,
the Purchase Agreement, any Related Agreement, the September 2005 Purchase
Agreement or any September 2005 Related Agreement, the Gulf Coast Purchase
Agreements or any Gulf Coast Related Agreements (iv) any proceeding shall
be brought to challenge the validity, binding effect of the Purchase
Agreement, any Related Agreement, the September 2005 Purchase Agreement or
any September 2005 Related Agreement, the Gulf Coast Purchase Agreements or
any Gulf Coast Related Agreements or (v) the Purchase Agreement, any
Related Agreement, the September 2005 Purchase Agreement or any September
2005 Related Agreement, or the Gulf Coast Purchase Agreements or any Gulf
Coast Related Agreements ceases to be a valid, binding and enforceable
obligation of the Company or any of its Subsidiaries (to the extent such
persons or entities are a party thereto); or
2.2 Default Interest. Following the occurrence and during the continuance
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of an Event of Default, the Company shall pay additional interest on this Note
in an amount equal to two percent (2%) per month, and all outstanding
obligations under this Note, the Purchase Agreement and each other Related
Agreement, including unpaid interest, shall continue to accrue interest at such
additional interest rate from the date of such Event of Default until the date
such Event of Default is cured or waived.
2.3 Default Payment. Following the occurrence and during the continuance of
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an Event of Default, the Holder, at its option, may demand repayment in full of
all obligations and liabilities owing by Company to the Holder under this Note,
the Purchase Agreement and/or any other Related Agreement and/or may elect, in
addition to all rights and remedies of the Holder under the Purchase Agreement
and the other Related Agreements and all obligations and liabilities of the
Company under the Purchase Agreement and the other Related Agreements, to
require the Company to make a Default Payment ("DEFAULT PAYMENT"). The Default
Payment shall be 130% of the outstanding principal amount of the Note, plus
accrued but unpaid interest, all other fees then remaining unpaid, and all other
amounts payable hereunder. The Default Payment shall be applied first to any
fees due and payable to the Holder pursuant to this Note, the Purchase
Agreement, and/or the other Related Agreements, then to accrued and unpaid
interest due on this Note and then to the outstanding principal balance of this
Note. The Default Payment shall be due and payable immediately on the date that
the Holder has exercised its rights pursuant to this Section 2.3.
ARTICLE III
MISCELLANEOUS
3.1 Cumulative Remedies. The remedies under this Note shall be cumulative.
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3.2 Failure or Indulgence Not Waiver. No failure or delay on the part of
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the Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
3.3 Notices. Any notice herein required or permitted to be given shall be
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in writing and provided in accordance with the terms of the Purchase Agreement.
3.4 Amendment Provision. The term "Note" and all references thereto, as
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used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument as such successor instrument may be
amended or supplemented.
3.5 Assignability. This Note shall be binding upon the Company and its
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successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Purchase Agreement. The Company may not assign any of its
obligations under this Note without the prior written consent of the Holder, any
such purported assignment without such consent being null and void.
3.6 Cost of Collection. In case of any Event of Default under this Note,
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the Company shall pay the Holder reasonable costs of collection, including
reasonable attorneys' fees.
3.7 Governing Law, Jurisdiction and Waiver of Jury Trial.
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(a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
THE COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING
TO THIS NOTE OR ANY OF THE OTHER RELATED AGREEMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATED TO THIS NOTE OR ANY OF THE RELATED AGREEMENTS;
PROVIDED, THAT THE COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS
MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK,
STATE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS NOTE SHALL BE
DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO
REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. THE COMPANY
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES
ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE
COMPANY AT THE ADDRESS SET FORTH IN THE PURCHASE AGREEMENT AND THAT SERVICE
SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY'S ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID.
(c) THE COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY
HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT,
TORT, OR OTHERWISE BETWEEN THE HOLDER AND THE COMPANY ARISING OUT OF,
CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY OTHER RELATED AGREEMENT OR
THE TRANSACTIONS RELATED HERETO OR THERETO.
3.8 Severability. In the event that any provision of this Note is invalid
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or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision of this
Note.
3.9 Maximum Payments. Nothing contained herein shall be deemed to establish
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or require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum rate permitted
by such law, any payments in excess of such maximum rate shall be credited
against amounts owed by the Company to the Holder and thus refunded to the
Company.
3.10 Security Interest and Guarantee. The Holder has been granted a
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security interest (i) in certain assets of the Company and its Subsidiaries as
more fully described in the Master Security Agreement and in the Amended
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment
of Production and (ii) in the equity interests of the Companies' Subsidiaries
pursuant to the Stock Pledge Agreement which such security interests, in each
case, have been reaffirmed and ratified pursuant to the Reaffirmation Agreement.
The obligations of the Company under this Note are guaranteed by certain
Subsidiaries of the Company pursuant to the Subsidiary Guaranty which guaranty
has been reaffirmed pursuant to the Reaffirmation Agreement.
3.11 Construction. Each party acknowledges that its legal counsel
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participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
[Balance of page intentionally left blank; signature page follows]
IN WITNESS WHEREOF, the Company has caused this Secured Term Note to be
signed in its name and become effective on December 28, 2006.
NEW CENTURY ENERGY CORP.
By: /s/ Xxxxxx X. XxXxxxxxx
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Name: Xxxxxx X. XxXxxxxxx
Title: President
WITNESS:
/s/ Xxxx X. Xxxxxxx
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