EXHIBIT 10.63
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 HOST AMERICA CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE TERM NOTE A
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FOR VALUE RECEIVED, HOST AMERICA CORPORATION, a Colorado corporation
(the "Borrower"), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o
Ironshore Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House,
South Church Street, Grand Cayman, Cayman Islands, Fax: 000-000-0000 (the
"Holder") or its registered assigns or successors in interest, on order,
the sum of Four Million Dollars ($4,000,000), together with any accrued
and unpaid interest hereon, on June 23, 2007 (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 between the Borrower and the Holder
(the "Purchase Agreement").
The following terms shall apply to this Note:
ARTICLE I
INTEREST & AMORTIZATION
1.1(a) INTEREST RATE. Subject to Sections 4.11 and 5.6 hereof,
interest payable on this Note shall accrue at a rate per annum (the
"Interest Rate") equal to the "prime rate" published in The Wall Street
Journal from time to time, plus one percent (1%). The Interest 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 such rate. Subject to Section 1.1(b) hereof, the Interest
Rate shall not be less than five percent (5%). Interest shall be (i)
calculated on the basis of a 360 day year, and (ii) payable monthly, in
arrears, but calculated for the actual number of days elapsed commencing
on July 1, 2004 and on the first business day of each consecutive
calendar month thereafter until the Maturity Date (and on the Maturity
Date), whether by acceleration or otherwise (each, a "Repayment Date").
1.1 (b) INTEREST RATE ADJUSTMENT. The Interest Rate shall be
calculated on the last business day of each month hereafter but
calculated for the actual number of days elapsed until the Maturity Date
(each a "Determination Date") and shall be subject to adjustment as set
forth herein. If (i) the
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Borrower shall have registered the shares of the Borrower's common stock
underlying each of the conversion of the Note and that certain warrant
issued to Holder on a registration statement (the "Registration
Statement") declared effective by the Securities and Exchange Commission
(the "SEC"), and (ii) the average market price (the "Market Price") of
the Common Stock as reported by Bloomberg, L.P. on the Principal Market
(as defined below) 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 Interest Rate for the succeeding
calendar month shall automatically be reduced by 100 basis points (100
b.p.) (1.0.%) 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 in herein), in no event shall the Interest Rate be
less than zero percent (0%).
1.2 MINIMUM MONTHLY PRINCIPAL PAYMENTS. Amortizing payments of the
aggregate principal amount outstanding under this Note at any time (the
"Principal Amount") shall begin on January 1, 2005 and shall recur on the
first business day of each succeeding month thereafter until the Maturity
Date (each, an "Amortization Date"). Subject to Section 2.1 and Article
3 below, beginning on the first Amortization Date, the Borrower shall
make monthly payments to the Holder on each Repayment Date, each in the
amount of $129,032.26 together with any accrued and unpaid interest to
date on such portion of the Principal Amount plus any and all other
amounts which are then owing under this Note, the Purchase Agreement or
any other Related Agreement but have not been paid (collectively, the
"Monthly Amount"). Any Principal Amount that remains outstanding on the
Maturity Date shall be due and payable on the Maturity Date.
ARTICLE II
CONVERSION REPAYMENT
2.1 (a) PAYMENT OF MONTHLY AMOUNT IN CASH OR COMMON STOCK. Each
month by the fifth (5th) business day prior to each Amortization Date
(the "Notice Date"), the Holder shall deliver to Borrower a written
notice in the form of Exhibit B attached hereto converting the Monthly
Amount payable on the next Repayment Date in either cash or Common Stock,
or a combination of both (each, a "Repayment Notice"). If a Repayment
Notice is not delivered by the Holder on or before the applicable
Notice Date for such Repayment Date and the Conversion Criteria
(hereinafter defined) has not been met on such Notice Date, then the
Borrower shall pay the Monthly Amount due on such Repayment Date in cash.
Any portion of the Monthly Amount paid in cash on a Repayment Date, shall
be paid to the Holder an amount equal to 102% of the principal portion
of the Monthly Amount due and owing to Holder on the Repayment Date (with
the amount in excess of 100% of the Monthly Amount to be considered
additional interest with respect to this Note). Upon conversion of all or
a portion of the Monthly Amount in shares of Common Stock as provided
herein, the number of such shares to be issued by the Borrower to the
Holder on such Repayment Date shall be the number determined by dividing
(x) the portion of the Monthly Amount to be paid in shares of Common
Stock, by (y) the then applicable Fixed Conversion Price. For purposes
hereof, the initial "Fixed Conversion Price" means $5.03.
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(b) MONTHLY AMOUNT CONVERSION GUIDELINES. Subject to Sections
2.1(a), 2.2, and 3.2 hereof, the Holder shall be obligated to convert
all or a portion of the Monthly Amount due on each Repayment Date to
shares of Common Stock if 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 Repayment Date was greater than
or equal to 110% of the Fixed Conversion Price, provided, however, that
such conversions shall not exceed twenty five percent (25%) of the
aggregate dollar trading volume of the Common Stock for the twenty two
(22) trading day trading period immediately preceding delivery of a
Notice of Conversion to the Borrower (the "Conversion Criteria"). Any
part of the Monthly Amount due on a Repayment Date that is not converted
into shares of Common Stock shall be paid by the Borrower in cash on such
Repayment Date. Any part of the principal portion of the Monthly Amount
due on such Repayment Date which must be paid in cash shall be paid in
cash at the rate of 102% of the principal portion of such Monthly Amount
otherwise due on such Repayment Date (with the amount in excess of 100%
of the Monthly Amount to be considered additional interest with respect
to this Note), within three (3) business days of the applicable Repayment
Date.
2.2 NO EFFECTIVE REGISTRATION. Notwithstanding anything to the
contrary herein, none of the Borrower's obligations to the Holder may
be converted into Common Stock unless (i) either (x) 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 (y) an exemption from
registration of the Common Stock is available to pursuant to Rule 144 of
the Securities Act and (ii) no Event of Default hereunder exists and is
continuing, unless such Event of Default is cured within any applicable
cure period or is otherwise waived in writing by the Holder in whole or
in part at the Holder's option.
Any amounts converted by the Holder pursuant to this Section 2.2
shall be deemed to constitute payments of outstanding fees, interest and
principal arising in connection with Monthly Amounts for the remaining
Repayment Dates, in chronological order.
2.3 OPTIONAL REDEMPTION IN CASH. The Borrower will have the option
of prepaying this Note ("Optional Redemption") by paying to the Holder a
sum of money equal to one hundred twenty five percent (125%) of the
unpaid principal amount of this Note at the time of such prepayment
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 Related Agreement (the "Redemption Amount")
outstanding on the day written notice of redemption (the "Notice of
Redemption") is given to the Holder. The Notice of Redemption shall
specify 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 a pending election to convert pursuant to Section 3.1, or
for conversions initiated or made by the
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Holder pursuant to Section 3.1 during the Redemption Period. The
Redemption Amount shall be determined as if such Xxxxxx'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 Borrower fails to
pay the Redemption Amount on the Redemption Payment Date as set forth
herein, then such Redemption Notice will be null and void.
ARTICLE III
CONVERSION RIGHTS
3.1. HOLDER'S CONVERSION RIGHTS. The Holder shall have the right,
but not the obligation, to convert all or any portion of the then
aggregate outstanding principal amount of this Note, together with
interest and fees due hereon, into shares of Common Stock subject to the
terms and conditions set forth in this Article III. The Holder may
exercise such right by delivery to the Borrower of a written notice of
conversion not less than one (1) day prior to the date upon which such
conversion shall occur.
3.2 CONVERSION LIMITATION.
Notwithstanding anything contained herein to the contrary, the
Holder shall not be entitled to convert pursuant to the terms of the Note
an amount that would (a) be convertible into that number of shares of
Common Stock which, when added to the number of shares of Common Stock
otherwise beneficially owned by such Holder including those issuable upon
exercise of warrants held by such Holder would exceed 4.99% of the
outstanding shares of Common Stock of the Borrower at the time of
conversion or (b) exceed twenty five percent (25%) of the aggregate
dollar trading volume of the Common Stock for the five (5) day trading
period immediately preceding delivery of a Notice of Conversion to the
Borrower. For the 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
limitation described in this Section 3.2 shall automatically become null
and void without any notice to Borrower upon the occurrence and during
the continuance beyond any applicable grace period of an Event of
Default, or upon 75 days prior notice to the Borrower, except that at no
time shall the beneficial ownership exceed 19.99% of the Common Stock.
Notwithstanding anything contained herein to the contrary, the number of
shares of Common Stock issuable by the Borrower and acquirable by the
Holder at a price below $[insert market price] per share pursuant to the
terms of this Note, the Purchase Agreement or any Related Agreement,
shall not exceed an aggregate of 823,080 shares of the Borrower's Common
Stock (subject to appropriate adjustment for stock splits, stock
dividends, or other similar recapitalizations affecting the Common Stock)
(the "Maximum Common Stock Issuance"), unless the issuance of shares
hereunder in excess of the Maximum Common Stock Issuance shall first be
approved by the Borrower's shareholders. If at any point in time and
from time to time the number of shares of Common Stock issued pursuant to
the terms of this Note, the Purchase Agreement or any Related
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Agreement, together with the number of shares of Common Stock that would
then be issuable by the Borrower to the Holder in the event of a
conversion or exercise pursuant to the terms of this Note, the Purchase
Agreement or any Related Agreement, would exceed the Maximum Common Stock
Issuance but for this Section 3.2, the Borrower shall promptly call a
shareholders meeting to solicit shareholder approval for the issuance of
the shares of Common Stock hereunder in excess of the Maximum Common
Stock Issuance.
3.3 MECHANICS OF HOLDER'S CONVERSION. (a) In the event that the
Holder elects to convert this Note into Common Stock pursuant to this
Article III, the Holder shall give notice of such election by delivering
an executed and completed notice of conversion ("Notice of Conversion")
to the Borrower and such Notice of Conversion shall provide a breakdown
in reasonable detail of the Principal Amount, accrued interest and fees
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
Borrower within two (2) business days after the Conversion Date. Each
date on which a Notice of Conversion is delivered, or telecopied to the
Borrower in accordance with the provisions hereof shall be deemed a
Conversion Date (the "Conversion Date"). A form of Notice of Conversion
to be employed by the Holder is annexed hereto as Exhibit A.
(b) Pursuant to the terms of the Notice of Conversion, the Borrower
will issue instructions to the transfer agent (accompanied by an opinion
of counsel to the extent required by such transfer agent) within one (1)
business day of the date of the delivery to Borrower 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 Borrower 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 Borrower of the Notice of
Conversion. The Holder shall be treated for all purposes as the record
holder of such Common Stock, unless the Holder provides the Borrower
written instructions to the contrary.
3.4 CONVERSION MECHANICS.
(a) The number of shares of Common Stock to be 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
outstanding principal amount under this Note in part pursuant to this
Article III, such conversions shall be deemed to constitute conversions
of outstanding principal amount applying to Monthly
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Amounts for the remaining Repayment Dates in chronological order.
(b) The Fixed Conversion Price and number and kind of shares or
other securities to be issued upon conversion is subject to adjustment
from time to time upon the occurrence of certain events, as follows:
A. STOCK SPLITS, COMBINATIONS AND DIVIDENDS. If the shares of
Common Stock are subdivided or combined into a greater or smaller number
of shares of Common Stock, or if a dividend is paid on the Common Stock
in shares of Common Stock, the Fixed Conversion Price or the Conversion
Price, as the case may be, shall be proportionately reduced in case of
subdivision of shares or stock dividend or proportionately increased in
the case of combination of shares, in each such case by the ratio which
the total number of shares of Common Stock outstanding immediately after
such event bears to the total number of shares of Common Stock
outstanding immediately prior to such event.
B. During the period the conversion right exists, the Borrower will
reserve from its authorized and unissued Common Stock a sufficient number
of shares to provide for the issuance of Common Stock upon the full
conversion of this Note. The Borrower represents that upon issuance,
such shares will be duly and validly issued, fully paid and
non-assessable. The Borrower agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents
who are charged with the duty of executing and issuing stock certificates
to execute and issue the necessary certificates for shares of Common
Stock upon the conversion of this Note.
C. SHARE ISSUANCES. Subject to the provisions of this Section 3.4,
if the Borrower shall at any time prior to the conversion or repayment in
full of the Principal Amount issue any shares of Common Stock or
securities convertible into Common Stock to a person other than the
Holder (except (i) pursuant to Subsections A or B above; (ii) pursuant to
options, warrants, or other obligations to issue shares outstanding on
the date hereof as disclosed to Holder in writing; (iii) pursuant to
options that may be issued under any employee incentive stock option
and/or any qualified stock option plan adopted by the Borrower or (iv)
issuances of the Disclosed Acquisition Common Stock), for a consideration
per share (the "Offer Price") less than the Fixed Conversion Price in
effect at the time of such issuance, then the Fixed Conversion Price
shall be immediately reset to such lower Offer Price at the time of
issuance of such securities. For purposes hereof, the issuance of any
security of the Borrower convertible into or exercisable or exchangeable
for Common Stock shall result in an adjustment to the Fixed Conversion
Price at the time of issuance of such securities.
D. RECLASSIFICATION, ETC. If the Borrower at any time shall, by
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 immediately
prior to such reclassification or other change.
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3.5 ISSUANCE OF NEW NOTE. Upon any partial conversion of this
Note, a new Note containing the same date and provisions of this Note
shall, at the request of the Holder, be issued by the Borrower to the
Holder for the principal balance of this Note and interest which shall
not have been converted or paid. The Borrower will pay no costs, fees or
any other consideration to the Holder for the production and issuance of
a new Note.
ARTICLE IV
EVENTS OF DEFAULT
Upon the occurrence and continuance of an Event of Default beyond
any applicable grace period, the Holder may make all sums of principal,
interest and other fees then remaining unpaid hereon and all other
amounts payable hereunder immediately due and payable. In the event of
such an acceleration, five (5) business days after written notice from
Holder to Borrower (each occurrence being a "Default Notice Period") the
amount due and owing to the Holder shall be 125% of the outstanding
principal amount of the Note (plus accrued and unpaid interest and fees,
if any) (the "Default Payment"). If, with respect to any Event of
Default, the Borrower cures the Event of Default within any applicable
grace period, the Event of Default will be deemed to no longer exist and
any rights and remedies of Holder pertaining to such Event of Default
will be of no further force or effect. The Default Payment shall be
applied first to any fees due and payable to Holder pursuant to the Note
or the Related Agreements, then to accrued and unpaid interest due on the
Note and then to outstanding principal balance of the Note.
The occurrence of any of the following events set forth in Sections
4.1 through 4.10, inclusive, is an "Event of Default":
4.1 FAILURE TO PAY PRINCIPAL, INTEREST OR OTHER FEES. The Borrower
fails to pay when due any installment of principal, interest or other
fees hereon in accordance herewith, or the Borrower fails to pay when due
any amount due under any other promissory note issued by Borrower, 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.
4.2 BREACH OF COVENANT. The Borrower breaches any covenant or any
other term or condition of this Note or the Purchase Agreement in any
material respect, or the Borrower or any of its Subsidiaries breaches any
covenant or any other term or condition of any Related Agreement in any
material respect and, any such case, such breach, if subject to cure,
continues for a period of thirty (30) days after the occurrence thereof.
4.3 BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation
or warranty made by the Borrower in this Note or the Purchase Agreement,
or by the Borrower or any of its Subsidiaries in any Related Agreement,
shall, in any such case, be false or misleading in any material respect
on the date that such representation or warranty was made or deemed made.
4.4 RECEIVER OR TRUSTEE. The Borrower or any of its Subsidiaries
shall make an
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assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of
its property or business; or such a receiver or trustee shall otherwise
be appointed.
4.5 JUDGMENTS. Any money judgment, writ or similar final process
shall be entered or filed against the Borrower or any of its Subsidiaries
or any of their respective property or other assets for more than
$50,000, and shall remain unvacated, unbonded or unstayed for a period of
thirty (30) days.
4.6 BANKRUPTCY. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings or relief under any
bankruptcy law or any law for the relief of debtors shall be instituted
by or against the Borrower or any of its Subsidiaries.
4.7 STOP TRADE. An SEC stop trade order or Principal Market
trading suspension of the Common Stock shall be in effect for five (5)
consecutive trading days or five (5) trading days during a period of ten
(10) consecutive trading days, excluding in all cases a suspension of all
trading on a Principal Market, PROVIDED that the Borrower shall not have
been able to cure such trading suspension within thirty (30) days of the
notice thereof or list the Common Stock on another Principal Market
within sixty (60) days of such notice. The "Principal Market" for the
Common Stock shall include the NASD OTC Bulletin Board, NASDAQ SmallCap
Market, NASDAQ National Market System, American Stock Exchange, or New
York Stock Exchange (whichever of the foregoing is at the time the
principal trading exchange or market for the Common Stock, or any
securities exchange or other securities market on which the Common Stock
is then being listed or traded.
4.8 FAILURE TO DELIVER COMMON STOCK OR REPLACEMENT NOTE. The
Borrower shall fail (i) to timely deliver Common Stock to the Holder
pursuant to and in the form required by this Note, and Section 9 of the
Purchase Agreement, if such failure to timely deliver Common Stock shall
not be cured within two (2) business days or (ii) to deliver a
replacement Note to Holder within seven (7) business days following the
required date of such issuance pursuant to this Note, the Purchase
Agreement or any Related Agreement (to the extent required under such
agreements).
4.9 DEFAULT UNDER RELATED AGREEMENTS OR OTHER AGREEMENTS. The
occurrence and continuance of any Event of Default (as defined in the
Purchase Agreement or any Related Agreement) or any event of default (or
similar term) under any other indebtedness.
4.10 CHANGE IN CONTROL. (i) 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 Borrower or (ii) the Board of
Directors of the Borrower shall cease to consist of a majority of the
Board of Directors of the Borrower on the date hereof (or directors
appointed by a majority of the Board of Directors in effect immediately
prior to such appointment).
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DEFAULT RELATED PROVISIONS
4.11 PAYMENT GRACE PERIOD. Following the occurrence and
continuance of an Event of Default beyond any applicable cure period
hereunder, the Borrower shall pay the Holder a default interest rate of
two percent (2%) per month on all amounts due and owing under the Note,,
which default interest shall be payable upon demand.
4.12 CONVERSION PRIVILEGES. The conversion privileges set forth in
Article III shall remain in full force and effect immediately from the
date hereof and until this Note is paid in full.
4.13 CUMULATIVE REMEDIES. The remedies under this Note shall be
cumulative.
ARTICLE V
MISCELLANEOUS
5.1 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of 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.
5.2 NOTICES. Any notice herein required or permitted to be given
shall be in writing and shall be deemed effectively given: (a) upon
personal delivery to the party notified, (b) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient, if
not, then on the next business day, (c) five days after having been sent
by registered or certified mail, return receipt requested, postage
prepaid, or (d) one day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the
Borrower at the address provided in the Purchase Agreement executed in
connection herewith, and to the Holder at the address provided in the
Purchase Agreement for such Holder, with a copy to Xxxx X. Xxxxxx, Esq.,
000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, facsimile number
(000) 000-0000, or at such other address as the Borrower or the Holder
may designate by ten days advance written notice to the other parties
hereto. A Notice of Conversion shall be deemed given when made to the
Borrower pursuant to the Purchase Agreement.
5.3 AMENDMENT PROVISION. The term "Note" and all reference
thereto, as 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 issued pursuant to
Section 3.5 hereof, as it may be amended or supplemented.
5.4 ASSIGNABILITY. This Note shall be binding upon the Borrower
and its 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. This Note
shall not be assigned by the Borrower without the consent of the Holder.
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5.5 GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to
principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the
individual signing this Note on behalf of the Borrower agree to submit to
the jurisdiction of such courts. The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and costs.
In the event that any provision of this Note is invalid 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 unenforceability of any other provision of
this Note. Nothing contained herein shall be deemed or operate to
preclude the Holder from bringing suit or taking other legal action
against the Borrower in any other jurisdiction to collect on the
Borrower's obligations to Holder, to realize on any collateral or any
other security for such obligations, or to enforce a judgment or other
court in favor of the Holder.
5.6 MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to
establish 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 permitted by such law, any payments in excess of such
maximum shall be credited against amounts owed by the Borrower to the
Holder and thus refunded to the Borrower.
5.7 SECURITY INTEREST AND GUARANTEE. The Holder has been granted a
security interest (i) in certain assets of the Borrower and its
Subsidiaries as more fully described in the Master Security Agreement
dated as of the date hereof and (ii) pursuant to the Stock Pledge
Agreement dated as of the date hereof. The obligations of the Borrower
under this Note are guaranteed by certain Subsidiaries of the Borrower
pursuant to the Subsidiary Guaranty dated as of the date hereof.
5.8 Construction. Each party acknowledges that its legal counsel
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.
5.9 COST OF COLLECTION. If default is made in the payment of this
Note, the Borrower shall pay to Holder reasonable costs of collection,
including reasonable attorney's fees.
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, the Borrower has caused this Convertible Term
Note to be signed in its name effective as of this 23rd day of June,
2004.
HOST AMERICA CORPORATION
By: /s/ Xxxxx Xxxxxx
--------------------------------
Name: Xxxxx Xxxxxx
------------------------------
Title: CFO
-----------------------------
WITNESS:
/s/ Xxxxxxxx Xxxxxx
------------------------------
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EXHIBIT A
NOTICE OF CONVERSION
--------------------
(To be executed by the Holder in order to convert all or part of the Note
into Common Stock
[Name and Address of Holder]
The Undersigned hereby converts $_________ of the principal due on
[specify applicable Repayment Date] under the Convertible Term Note
issued by Host America Corporation dated June __, 2004 by delivery of
Shares of Common Stock of Host America Corporation on and subject to the
conditions set forth in Article III of such Note.
1. Date of Conversion _______________________
2. Shares To Be Delivered: _______________________
By:_______________________________
Name:_____________________________
Title:______________________________
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EXHIBIT B
CONVERSION NOTICE
-----------------
(To be executed by the Holder in order to convert all or part of a
Monthly Amount into Common Stock)
[Name and Address of Holder]
Holder hereby converts $_________ of the Monthly Amount due on [specify
applicable Repayment Date] under the Convertible Term Note issued by Host
America Corporation dated June __, 2004 by delivery of Shares of Common
Stock of Host America Corporation on and subject to the conditions set
forth in Article III of such Note.
1. Fixed Conversion Price: $_______________________
2. Amount to be paid: $_______________________
3. Shares To Be Delivered (2 divided by 1): __________________
4. Cash payment to be made by Borrower : $_____________________
Date: ____________ LAURUS MASTER FUND, LTD.
By:_______________________________
Name:_____________________________
Title:______________________________
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