EXHIBIT 10.64
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 B
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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. The original principal amount of this Note that constitutes
a Release Amount (as defined below) and is subject to amortizing payments
pursuant to Section 1.2 below is hereinafter referred to as the
"Amortizing Principal Amount", the remaining original principal amount of
this Note is hereinafter referred to as the "Non-Amortizing Principal
Amount" and the entire outstanding principal amount of this Note is
hereinafter referred to as the "Principal Amount".
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 1.1(b), 4.12 and 5.6
hereof, (x) interest payable on the Amortizing Principal Amount shall
accrue at a rate per annum (the "Amortizing Interest Rate") equal to the
"prime rate" published in The Wall Street Journal from time to time, plus
one percent (1.0%) and (y) interest payable on the Non-Amortizing
Principal Amount shall accrue at a rate per annum (the "Non-Amortizing
Interest Rate" and, together with the Amortizing Interest Rate, the
"Interest Rate") equal to one percent (1.0%). In connection with the
calculation of the Amortizing Interest Rate, 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 Amortizing Interest
Rate shall not be less than five (5) percent (5.0%). Interest
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shall be calculated on the basis of a 360 day year. Interest shall
accrue but not be payable during the period commencing on the date hereof
and ending on June 30, 2004. Commencing on July 1, 2004, interest on the
Principal Amount (as defined below) shall be payable monthly, in arrears,
but calculated for the actual number of day elasped commencing on July 1,
2004 and on the first day of each consecutive calendar month thereafter
(each, a "Repayment Date") and on the Maturity Date, whether by
acceleration or otherwise.
1.1 (b) AMORTIZING INTEREST RATE ADJUSTMENT. The Amortizing
Interest Rate shall be subject to adjustment 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"). If on any
Determination Date (i) the Borrower shall have registered under the
Securities Act of 1933, as amended (the "Securities Act"), the shares of
Common Stock underlying each of the conversion of this Note and the
exercise of the Warrant issued 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) consecutive trading
days immediately preceding such Determination Date exceeds the then
applicable Fixed Conversion Price by at least twenty five percent (25%),
the Amortizing 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 Amortizing Interest Rate or the
Non-Amortizing Interest Rate, as the case may be, be less than zero
percent (0%).
1.2 MINIMUM MONTHLY PRINCIPAL PAYMENTS. Amortizing payments of the
original aggregate principal amount outstanding under this Note (the
"Principal Amount") equal to the amount of funds that have been released
to the Borrower from the Restricted Account (as defined in the Restricted
Account Agreement) for the purposes set forth in the Restricted Account
Side Letter (other than a release that occurs as a result of a conversion
of an outstanding Principal Amount) (each, a "Release Amount"; the date
on which any such Release Amount is released, a "Release Date") shall
begin with respect to each such Release Amount on the first Repayment
Date occurring on the later of (x) 90 or more days following each
respective Release Date and (y) January 1, 2005, and shall recur on each
succeeding Repayment Date thereafter until the Amortizing Principal
Xxxxxx has been repaid in full, whether by the payment of cash or by the
conversion of such principal into Common Stock pursuant to the terms
hereof. Subject to Section 2.1 and Article 3 below, on each Repayment
Date, the Borrower shall make payments to the Holder in an amount equal
to (x) the aggregate Amortizing Principal Amount subject to amortizing
payments at such time pursuant to the immediately preceding sentence
divided by (y) the sum of (I) the number of Repayment Dates (including
such Repayment Date) remaining until the Maturity Date plus (II) one (1)
(such amount, the "Monthly Principal Amount"), together with any accrued
and unpaid interest then due on such Amortizing Principal Amount plus any
and all other amounts which are then owing under this Note that have not
been paid (the Monthly Principal Amount, together with any accrued and
unpaid interest on the Amortizing Principal Amount and any accrued and
unpaid interest on the Non-Amortizing Principal Amount and such other
amounts, collectively, the "Monthly Amount").
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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. Not
later than the fifth (5th) business day prior to each Repayment Date (the
"Notice Date"), the Holder may deliver to Borrower a written notice in
the form of Exhibit B attached hereto directing the Borrower to pay 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, subject to Section 2.1(b), the Borrower shall pay the Monthly
Amount due on such Repayment Date in cash. In the event the Borrower
shall be required to pay any portion of the Monthly Amount in cash, the
Borrower shall pay to the Holder in respect to such payment an amount
equal to 102% of the principal portion of such Monthly Amount (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 any Monthly Amount into 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 $5.48.
(b) MONTHLY AMOUNT CONVERSION GUIDELINES. Subject to Sections
2.1(a), 2.2 and 3.2 hereof, on each Notice Date, the Holder shall be
obligated to convert the Monthly Amount due on the related 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) consecutive trading days immediately preceding such Notice Date is
greater than or equal to 110% of the Fixed Conversion Price, provided,
however, that the portion of the Monthly Amount to be converted shall not
exceed twenty-five percent (25%) of the aggregate dollar trading volume
of the Common Stock for the twenty two (22)-trading-day period
immediately preceding such Notice Date(the "Conversion Date"). Any such
conversion shall be set forth in a Repayment Notice delivered to the
Borrower. Any part of the principal portion of the Monthly Amount due on
a Repayment Date which must be paid in cash shall be paid in cash at
the rate of 102% of such principal portion of the Monthly Amount
otherwise due on such Repayment Date, within three (3) business days of
the applicable Repayment Date (with the amount in excess of 100% of the
Monthly Amount to be considered additional interest with respect to this
Note).
(c) APPLICATION OF CONVERSION AMOUNTS. Any amounts converted
by the Holder pursuant to Section 2.1(b) shall be deemed to constitute
payments of, or applied against, (i) first, outstanding fees, (ii)
second, accrued interest on the Amortizing Principal Xxxxxx, (iii) third,
accrued interest on the Non-Amortizing Principal Xxxxxx and (iv) fourth,
the Amortizing Principal Xxxxxx.
2.2 NO EFFECTIVE REGISTRATION. Notwithstanding anything to the
contrary herein, no
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amount payable hereunder 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 satisfaction of such obligations exists, or (ii) an
exemption from registration of the Common Stock is available pursuant to
Rule 144 of the Securities Act, and (b) 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.
2.3 OPTIONAL REDEMPTION OF AMORTIZING PRINCIPAL AMOUNT. The
Borrower will have the option of prepaying the outstanding Amortizing
Principal Amount ("Optional Amortizing Redemption"), in whole or in part,
by paying to the Holder a sum of money equal to one hundred twenty-five
percent (125%) of the unpaid Amortizing Principal Amount to be redeemed
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 "Amortizing Redemption Amount") on the day written notice of
redemption (the "Notice of Amortizing Redemption") is given to the
Holder. The Notice of Amortizing Redemption shall specify the date for
such Optional Amortizing Redemption (the "Amortizing Redemption Payment
Date"), which date shall be not less than seven (7) business days after
the date of the Notice of Amortizing Redemption (the "Redemption
Period"). A Notice of Amortizing Redemption shall not be effective with
respect to any portion of the Amortizing Principal Amount for which the
Holder has a pending election to convert pursuant to Section 3.1, or for
conversions initiated or made by the Holder pursuant to Section 3.1
during the Redemption Period. The Amortizing Redemption Amount shall be
determined as if such Xxxxxx's conversion elections had been completed
immediately prior to the date of the Notice of Amortizing Redemption. On
the Amortizing Redemption Payment Date, the Amortizing Redemption Amount
shall be paid in good funds to the Holder. In the event the Borrower
fails to pay the Amortizing Redemption Amount on the Amortizing
Redemption Payment Date as set forth herein, then such Notice of
Amortizing Redemption will be null and void.
2.4 OPTIONAL REDEMPTION OF NON-AMORTIZING PRINCIPAL AMOUNT. The
Borrower will have the option of repaying the outstanding Non-Amortizing
Principal Amount ("Optional Non-Amortizing Redemption"), in whole or in
part, by paying the Holder a sum of money equal to one hundred ten
percent (110%) of the Non-Amortizing Principal Amount to be redeemed,
together with accrued but unpaid interest thereon (the "Non-Amortizing
Redemption Amount") on the day written notice of redemption (the "Notice
of Non-Amortizing Redemption") is giving to the Holder. The Notice of
Non-Amortizing Redemption shall specify the date for such Optional
Non-Amortizing Redemption (the "Non-Amortizing Redemption Date"), which
date shall be not less than seven (7) business days after the date of the
Notice of Non-Amortizing Redemption (the "Non-Amortizing Redemption
Period"). A Notice of Non-Amortizing Redemption shall not be effective
with respect to any portion of the Non-Amortizing Principal Amount for
which the Holder has a pending election to convert pursuant to Section
3.1, or for conversions initiated or made by the Holder pursuant to
Section 3.1 during the Non-Amortizing Redemption Period. The
Non-Amortizing Redemption Amount shall be determined as if the Holder's
conversion elections had been completed immediately prior to the date of
the Notice of Non-Amortizing Redemption. On the
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Non-Amortizing Redemption Date, the Non-Amortizing Redemption Amount
shall be paid (i) in good funds to the Holder, (ii) by furnishing the
Holder written direction to notify the bank holding the Restricted
Account to release from the Restricted Account and deliver to the Holder
a sum of money equal to the Non-Amortizing Redemption Amount, or (iii) if
the amount on deposit in the Restricted Account is less than the
Non-Amortizing Redemption Amount, by furnishing the Holder written
direction to notify the bank holding the Restricted Account to release
all amounts on deposit in the Restricted Account to the Holder and
delivering to the Holder good funds in an amount equal to the balance of
the Non-Amortizing Redemption Amount.
ARTICLE III
CONVERSION RIGHTS
3.1. HOLDER'S CONVERSION RIGHTS. Subject to Section 2.2, 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 pursuant to Section 3.3.
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 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
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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 pursuant to this Article III shall be determined
by dividing that portion of the Principal Amount and interest and fees to
be converted, if any, by the then applicable Fixed Conversion Price. In
the event of any conversions of outstanding obligations under this Note
in part pursuant to this Article III, such conversions shall be deemed to
constitute conversions (i) first, of the Monthly Amount for the current
calendar month, (ii) then of the accrued interest on the Non-Amortizing
Principal Xxxxxx, (iii) then, of outstanding Non-Amortizing Principal
Amount and (iv) after the Non-Amortizing Principal Amount has been paid
in full, of outstanding Amortizing Principal Amount by applying the
conversion amount to Monthly 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:
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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.
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.
3.5 ISSUANCE OF REPLACEMENT NOTE. Upon any partial conversion of
this Note, a replacement Note containing the same date and provisions of
this Note shall, at the written request of the Holder, be issued by the
Borrower to the Holder for the outstanding Principal Amount of this Note
and accrued interest which shall not have been converted or paid. Subject
to the provisions of Article IV, the Borrower will pay no costs, fees or
any other consideration to the Holder for the production and issuance of
a replacement Note.
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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 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.
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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).
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.
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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.
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
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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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