Contract
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 AND THE COMMON SHARES ISSUABLE
UPON CONVERSION OF THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO HOUSE OF BRUSSELS
CHOCOLATES INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
FOR VALUE
RECEIVED, HOUSE OF BRUSSELS CHOCOLATES INC., a Nevada corporation (the
“Company”),
promises to pay to LAURUS MASTER FUND, LTD., c/o M&C Corporate Services
Limited, P.O. Box 309 GT, 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, on order, the sum of Three Million
Five Hundred Thousand Dollars ($3,500,000), together with any accrued and unpaid
interest hereon, on March 29, 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 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 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 (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 be
less than six percent (6%).
1.2 Contract
Rate Adjustments and Payments. The
Contract Rate shall be 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 200 basis points (200 b.p.) (2%) 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 be less than
zero percent (0%). Interest shall be (i) calculated on the basis of a 360 day
year, and (ii) payable monthly, in arrears, commencing on April 1, 2005 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.
1.3 Principal
Payments.
Amortizing payments of the aggregate principal amount outstanding under this
Note at any time (the “Principal
Amount”) shall
be made by the Company on August 1, 2005 and on the first business day of each
succeeding month thereafter until 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 $109,375.00 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.
(a) Payment
in Cash or Common Stock. 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 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 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
$0.88.
(b) Monthly
Amount Conversion Conditions. Subject
to Sections 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 thirty five percent (35%) 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
2.2 No
Effective Registration.
Notwithstanding anything to the 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 (“Optional
Redemption”) by
paying to the Holder a sum of money equal to one hundred twenty percent (120%)
of the Principal Amount outstanding at such time 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.
3
ARTICLE
III
HOLDER’S
CONVERSION RIGHTS
3.1 Optional
Conversion. Subject
to the terms set forth in this Article III, the Holder shall have the right, but
not the obligation, to convert all or any portion of the 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 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 and
issuable to the Holder upon exercise of the Warrants. 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 without any notice to the Company upon the
occurrence and during the continuance of an Event of Default, or upon 75 days
prior notice to the Company.
3.3 Mechanics
of Xxxxxx’s Conversion. In the
event that the Holder 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 (“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”). A
form of Notice of Conversion is annexed hereto as Exhibit
A.
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.
4
3.4 Late
Payments. The
Company understands that a delay in the 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, 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 $500 per business day after the
Delivery Date. Notwithstanding the foregoing, the Company will not owe the
Holder any late payments if the delay in the delivery of the Conversion Shares
beyond the Delivery Date is solely out of the control of the Company and the
Company is actively trying to cure the cause of the delay. 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 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 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 happening of certain events while this
conversion right remains outstanding, as follows:
(a) Reclassification. If the
Company 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 (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 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
or any preferred stock issued by the Company in shares of Common Stock, the
Fixed Conversion Price 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.
(c) Share
Issuances. Subject
to the provisions of this Section 3.6, if the Company 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 Sections 3.6(a) or (b) above; (ii) pursuant
to options, warrants, or other obligations to issue shares outstanding on the
date hereof as disclosed to the 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 Company or (iv) shares issued in
connection with a settlement or judgment of the litigation styled Xxxxxxx
Xxxxxxxxxxx and Xxxxxxx Xxxxxx v. House of Brussels Chocolates, Inc., et
al; Case
No. A482600, in the District Court of Xxxxx County, Nevada, so long as such
shares are restricted and do not become freely or publicly traded in any respect
prior to the one year anniversary of the issuance thereof) 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. For
purposes hereof, the issuance of any security of the Company convertible into or
exercisable or exchangeable for Common Stock shall result in an adjustment to
the Fixed Conversion Price upon the issuance of such securities.
5
(d) Computation
of Consideration. For
purposes of any computation respecting consideration received pursuant to
Section 3.6(c) above, the following shall apply:
(i) in the
case of the issuance of shares of Common Stock for cash, the consideration shall
be the amount of such cash, provided that in no case shall any deduction be made
for any commissions, discounts or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection therewith;
(ii) in the
case of the issuance of shares of Common Stock for a consideration in whole or
in part other than cash, the consideration other than cash shall be deemed to be
the fair market value thereof as determined in good faith by the Board of
Directors of the Company (irrespective of the accounting treatment thereof); and
(iii) upon any
such exercise, the aggregate consideration received for such securities shall be
deemed to be the consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to be received by
the Company upon the conversion or exchange thereof (the consideration in each
case to be determined in the same manner as provided in subsections (i) and (ii)
of this Section 3.6(d)).
3.7 Reservation
of Shares. During
the period the conversion right exists, the Company will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of Conversion Shares upon the full conversion of this Note. The
Company represents that upon issuance, the Conversion Shares will be duly and
validly issued, fully paid and non-assessable. The Company 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 the Conversion
Shares upon the conversion of this Note.
3.8 Registration
Rights. The
Holder has been granted registration rights with respect to the Conversion
Shares as set forth in a Registration Rights Agreement.
3.9 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
Company to the Holder for the principal balance of this Note and interest which
shall not have been converted or paid. Subject to the provisions of Article IV
of this Note, the Company shall not pay any costs, fees or any other
consideration to the Holder for the production and issuance of a new
Note.
6
ARTICLE
IV
EVENTS
OF DEFAULT
4.1 Events
of Default. The
occurrence of any of the following events set forth in this Section 4.1 shall
constitute an event of default (“Event
of Default”)
hereunder:
(a) Failure
to Pay. The
Company fails to pay when due any installment 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 five (5) days
following the date upon which any such payment was due.
(b) Breach
of Covenant. The
Company or any of its Subsidiaries 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, 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.
(d) Other
Indebtedness. The
occurrence of any default or event of default (or similar term) under any
indebtedness of the Company or any of its Subsidiaries which permits the holder
of such indebtedness to accelerate such indebtedness, solely to the extent that
the principal amount of any such indebtedness exceeds, when taken together,
$100,000 in the aggregate and such default or event of default (or similar term)
has not been cured or waived by the holder of such indebtedness on or prior to
the fifteenth (15th) day
after the occurrence thereof;
(e) Bankruptcy. The
Company or any of its Subsidiaries shall (i) apply for, consent to or
suffer to exist the appointment of, or the taking of possession by, a receiver,
custodian, trustee interim receiver, receiver and manager, 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
United States or Canadian Federal bankruptcy laws (including without limitation,
the Bankruptcy and Insolvency Act (Canada) or the Companies’ Creditors
Arrangement Act) (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, or fail 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;
(f) Judgments. An
attachment or levy is made upon the Company or any of its Subsidiary’s assets
having an aggregate value in excess of $100,000 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;
7
(g) Insolvency. The
Company or any of its Subsidiaries shall admit in writing its inability, or be
generally unable to pay its debts as they become due or cease operations of its
present business;
(h) Change
in Control.
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 Parent (other than a “Person” or
“group” that beneficially owns 35% or more of such outstanding voting equity
interests of the Parent on the date hereof) or (ii) the Board of Directors of
the Parent shall cease to consist of a majority of the Board of Directors of the
Parent on the date hereof (or directors appointed by a majority of the Board of
Directors of the Parent in effect immediately prior to such
appointment);
(i) Indictment;
Proceedings. The
indictment or threatened indictment 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;
(j) Related
Agreements. (i) An
Event of Default shall occur under and as defined in any Related Agreement, the
Security Agreement or any Ancillary Agreement referred to in the Security
Agreement, (ii) the Company or any of its Subsidiaries shall breach any term or
provision of the Purchase Agreement or any Related Agreement in any material
respect which is not cured within any applicable cure or grace period, (iii) the
Company or any of its Subsidiaries attempts to terminate, challenges the
validity of, or its liability under, the Purchase Agreement or any Related
Agreement, (iv) any proceeding shall be brought to challenge the validity,
binding effect of the Purchase Agreement or any Related Agreement or (v) the
Purchase Agreement or any Related Agreement 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);
(k) Stop
Trade. An SEC
stop trade order or Principal Market trading suspension of the Common Stock
shall be in effect for five (5) consecutive days or five (5) days during a
period of ten (10) consecutive days, excluding in all cases a suspension of all
trading on a Principal Market, provided that the Company 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; or
(l) Failure
to Deliver Common Stock or Replacement Note. The
Company’s failure to deliver Common Stock to the Holder pursuant to and in the
form required by this Note and the Purchase Agreement and, if such failure to
deliver Common Stock shall not be cured within two (2) business days (or up to
five (5) business days with respect to no more than two (2) delays in any
calendar year, so long as such delay is soley out of the control of the Company)
or the Company is required to issue a replacement Note to the Holder and the
Company shall fail to deliver such replacement Note within seven (7) business
days.
8
4.2 Default
Interest.
Following the occurrence and during the continuance 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 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.
4.3 Default
Payment.
Following the occurrence and during the continuance of an Event of Default, the
Holder, at its option, may demand repayment in full of all obligations owing by
Company to the Holder under this Note, the Purchase Agreement and/or any 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 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 115% 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 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 4.3.
ARTICLE
V
MISCELLANEOUS
5.1 Conversion
Privileges. The
conversion privileges set forth in Article III shall remain in full force and
effect immediately from the date hereof until the date this Note is paid in full
and irrevocably terminated.
5.2 Cumulative
Remedies. The
remedies under this Note shall be cumulative.
5.3 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.
5.4 Notices. Any
notice herein required or permitted to be given shall be in writing and provided
in accordance with the terms of the Purchase Agreement.
5.5 Amendment
Provision. The
term “Note” and all references 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
as such successor instrument may be amended or supplemented.
9
5.6 Assignability. This
Note shall be binding upon the Company 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 Security
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.
5.7 Cost
of Collection. In case
of any Event of Default under this Note, the Company shall pay the Holder
reasonable costs of collection, including reasonable attorneys’
fees.
5.8 Governing
Law, Jurisdiction and Waiver of Jury Trial.
(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 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.
10
5.9 Severability. 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 enforceability of any other provision of this Note.
5.10 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 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.
5.11 Security
Interest and Guarantee. The
Holder has been granted a security interest (i) in certain assets of the Company
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 Company under this Note are guaranteed by certain
Subsidiaries of the Company pursuant to the Guaranty dated as of the date
hereof.
5.12 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.
[Balance
of page intentionally left blank; signature page follows]
11
IN
WITNESS WHEREOF, the
Company has caused this Secured Convertible Term Note to be signed in its name
effective as of this 29th day of March, 2005.
|
By: |
____________________________ | |
|
Name: | ||
|
Title: | ||
|
WITNESS: |
||
|
__________________________________ |
||
12
EXHIBIT
A
NOTICE
OF CONVERSION
(To be
executed by the Holder in order to convert all or part of
the
Secured Convertible Term Note into Common Stock)
[Name and
Address of Holder]
The
undersigned hereby converts $_________ of the principal due on [specify
applicable Repayment Date] under the Secured Convertible Term Note dated as of
March __, 2005 (the “Note”) issued
by House of Brussels Chocolates Inc. (the “Company”) by
delivery of shares of Common Stock of the Company on and subject to the
conditions set forth in the Note.
|
1. |
Date
of Conversion |
_______________________ |
|
2. |
Shares
To Be Delivered: |
_______________________ |
|
LAURUS
MASTER FUND, LTD. | |
|
By:_______________________________ | |
|
Name:_____________________________ | |
|
Title:______________________________ |
