EXHIBIT 10.65
HOST AMERICA CORPORATION AND CERTAIN OF ITS SUBSIDIARIES
MASTER SECURITY AGREEMENT
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
Date: June 23, 2004
To Whom It May Concern:
1. To secure the payment of all Obligations (as hereafter defined),
Host America Corporation, a Colorado corporation (the "Company"), each of
the other undersigned parties (other than Laurus Master Fund, Ltd,
"Laurus")) and each other entity that is required to enter into this
Master Security Agreement (each an "Assignor" and, collectively, the
"Assignors") hereby assigns and grants to Laurus a continuing security
interest in all of the following property now owned or at any time
hereafter acquired by any Assignor, or in which any Assignor now have or
at any time in the future may acquire any right, title or interest (the
"Collateral"): all cash, cash equivalents, accounts (including, without
limitation, the Accounts (as defined below)), deposit accounts
(including, without limitation, (x) the Restricted Account (the
"Restricted Account") maintained at North Fork Bank (Account Name: Host
America Corporation, Account Number: 2704051727) referred to in the
Restricted Account Agreement and (y) [Add deposit accounts related to
soft lockbox accounts]), inventory, equipment, goods, documents,
instruments (including, without limitation, promissory notes), contract
rights, general intangibles (including, without limitation, payment
intangibles and an absolute right to license on terms no less favorable
than those current in effect among our affiliates), chattel paper,
supporting obligations, investment property (including, without
limitation, all equity interests owned by any Assignor), letter-of-credit
rights, trademarks, trademark applications, tradestyles, patents, patent
applications, copyrights, copyright applications and other intellectual
property in which any Assignor now have or hereafter may acquire any
right, title or interest, all proceeds and products thereof (including,
without limitation, proceeds of insurance) and all additions, accessions
and substitutions thereto or therefore. In the event any Assignor wishes
to finance the acquisition in the ordinary course of business of any
hereafter acquired equipment and have obtained a commitment from a
financing source to finance such equipment from an unrelated third party,
Laurus agrees to release its security interest on such hereafter acquired
equipment so financed by such third party financing source. Except as
otherwise defined herein, all capitalized terms used herein shall have
the meaning provided such terms in the Securities Purchase Agreement
referred to below.
2. The term "Obligations" as used herein shall mean and include all
debts, liabilities and obligations owing by each Assignor to Laurus
arising under, out of, or in connection with: (i) that certain Securities
Purchase Agreement dated as of the date hereof by and between the Company
and Laurus (the "Securities Purchase Agreement") and (ii) the Related
Agreements
referred to in the Securities Purchase Agreement (the Securities Purchase
Agreement and each Related Agreement, as each may be amended, modified,
restated or supplemented from time to time, are collectively referred to
herein as the "Documents"), and in connection with any documents,
instruments or agreements relating to or executed in connection with the
Documents or any documents, instruments or agreements referred to therein
or otherwise, and in connection with any other indebtedness, obligations
or liabilities of any Assignor to Laurus, whether now existing or
hereafter arising, direct or indirect, liquidated or unliquidated,
absolute or contingent, due or not due and whether under, pursuant to or
evidenced by a note, agreement, guaranty, instrument or otherwise, in
each case, irrespective of the genuineness, validity, regularity or
enforceability of such Obligations, or of any instrument evidencing any
of the Obligations or of any collateral therefor or of the existence or
extent of such collateral, and irrespective of the allowability,
allowance or disallowance of any or all of the Obligations in any case
commenced by or against any Assignor under Title 11, United States Code,
including, without limitation, obligations or indebtedness of each
Assignor for post-petition interest, fees, costs and charges that would
have accrued or been added to the Obligations but for the commencement of
such case.2.
3. Each Assignor hereby jointly and severally represents, warrants
and covenants to Laurus that:
(a) it is a corporation, partnership or limited liability
company, as the case may be, validly existing, in good standing and
organized under the respective laws of its jurisdiction of
organization set forth on SCHEDULE A, and each Assignor will provide
Laurus thirty (30) days' prior written notice of any change in any
of its respective jurisdiction of organization;
(b) its legal name is as set forth in its respective
Certificate of Incorporation or other organizational document (as
applicable) as amended through the date hereof and as set forth on
SCHEDULE A, and it will provide Laurus thirty (30) days' prior
written notice of any change in its legal name;
(c) its organizational identification number (if applicable)
is as set forth on Schedule A hereto, and it will provide Laurus
thirty (30) days' prior written notice of any change in any of its
organizational identification number;
(d) it is the lawful owner of the respective Collateral and it
has the sole right to grant a security interest therein and will
defend the Collateral against all claims and demands of all persons
and entities;
(e) it will keep its respective Collateral free and clear of
all attachments, levies, taxes, liens, security interests and
encumbrances of every kind and nature ("Encumbrances"), except (i)
Encumbrances securing the Obligations, (ii) non-consensual
Encumbrances being contested in good faith and by appropriate
proceedings for which adequate reserves have been established to the
extent required by generally accepted accounting principles and
(iii) to the extent said Encumbrance does not secure indebtedness in
excess of $50,000 and such Encumbrance is removed or otherwise
released within ten business (10) days of the creation thereof;
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(f) it will, at its and the other Assignors joint and several
cost and expense keep the Collateral in good state of repair
(ordinary wear and tear excepted) and will not waste or destroy the
same or any part thereof other than ordinary course discarding of
items no longer used or useful in its or such other Assignors'
business;
(g) it will not without Laurus' prior written consent, sell,
exchange, lease or otherwise dispose of the Collateral, whether by
sale, lease or otherwise, except for the sale of inventory in the
ordinary course of business and for the disposition or transfer in
the ordinary course of business during any fiscal year of obsolete
and worn-out equipment or equipment no longer necessary for its
ongoing needs, having an aggregate fair market value of not more
than $50,000 and only to the extent that:
(i) the proceeds of any such disposition are used to
acquire replacement Collateral which is subject to Laurus'
first priority perfected security interest, or are used to
repay Obligations or to pay general corporate expenses; and
(ii) following the occurrence of an Event of Default
which continues to exist the proceeds of which are remitted to
Laurus to be held as cash collateral for the Obligations;
(h) it will insure or cause the Collateral to be insured
naming Laurus' as loss payee and additional insured, against loss or
damage by fire, theft, burglary, pilferage, loss in transit and such
other hazards as Laurus shall specify in amounts and under policies
by insurers acceptable to Laurus and all premiums thereon shall be
paid by such Assignor and the policies delivered to Laurus. If any
such Assignor fails to do so, Laurus may procure such insurance and
the cost thereof shall be promptly reimbursed by the Assignors,
jointly and severally, and shall constitute Obligations;
(i) it will at all reasonable times allow Laurus or Laurus'
representatives free access to and the right of inspection of the
Collateral during normal business hours upon prior notice;
(j) such Assignor (jointly and severally with each other
Assignor) hereby indemnifies and saves Laurus harmless from all
loss, costs, damage, liability and/or expense, including reasonable
attorneys' fees, that Laurus may sustain or incur to enforce
payment, performance or fulfillment of any of the Obligations and/or
in the enforcement of this Master Security Agreement or in the
prosecution or defense of any action or proceeding either against
Laurus or any Assignor concerning any matter growing out of or in
connection with this Master Security Agreement, and/or any of the
Obligations and/or any of the Collateral except to the extent caused
by Laurus' own gross negligence or willful misconduct (as determined
by a court of competent jurisdiction in a final and nonappealable
decision) or failure to comply with applicable law; and
(k) On or prior to the 30th day following the Closing Date, each
Assignor (other than Selectforce, Inc.) will irrevocably direct all of
its present and future Account Debtors (as defined below) and other
persons obligated to make payments constituting Collateral to make such
payments directly to the lockboxes maintained by such Assignor (the
"Lockboxes") with Fleet National Bank [Insert Address] or such other
financial institution accepted by Laurus in writing as may be selected by
the Company (the "Lockbox Bank"). Upon receipt of such payments, the
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Lockbox Bank has agreed to deposit the proceeds of such payments in those
certain deposit accounts maintained at the Lockbox Bank and evidenced by
the following account names and account numbers: (i) Account Name: Host
, Account Number : 9485371811, (ii) Account Name: Lindley Food Service
Corporation, Account Number: 9485371926, and (iii) Account Name:
GlobalNet Energy Investors, Inc., Account Number 9485371950, or such
other deposit accounts accepted by Laurus in writing (collectively, the
"Lockbox Deposit Accounts"). Furthermore, Selectforce, Inc. agrees to,
as promptly as practicable but in no event later than five (5) business
days following receipt of any payment from any Account Debtor, to deposit
the proceeds of such payment into a deposit account maintained by
SelectForce at the Lockbox Bank and evidenced by the following account
name and account number: Account Name: SelectForce, Inc., Account
Number: 9485372398 (the "SelectForce Deposit Account"). On or prior to
the Closing Date, each Assignor shall and shall cause the Lockbox Bank to
enter into all such documentation acceptable to Laurus pursuant to which,
among other things, the Lockbox Bank agrees to, following notification by
Laurus (which notification Laurus shall only give following the
occurrence and during the continuance of an Event of Default), comply
only with the instructions or other directions of Laurus concerning the
Lockbox and the Lockbox Deposit Accounts (it being understood that Laurus
shall use commercially reasonable efforts to notify the Company of any
such notification given by Laurus to the Lockbox Bank; provided that any
failure to by Laurus to provide any such notification shall not affect
Laurus' rights under this Master Security Agreement in any respect). All
of each Assignor's (other than Selectforce, Inc.) invoices, account
statements and other written or oral communications directing,
instructing, demanding or requesting payment of any Account of any such
Assignor or any other amount constituting Collateral shall conspicuously
direct that all payments be made to the Lockbox or such other address as
Laurus may direct in writing. If, notwithstanding the instructions to
Account Debtors as set forth above, any Assignor (including, without
limitation, Selectforce, Inc.) receives any payments from any Account
Debtor directly, such Assignor shall immediately remit such payments to
the appropriate Lockbox Deposit Account in their original form with all
necessary endorsements. Until so remitted, the Assignors shall hold all
such payments in trust for and as the property of Laurus and shall not
commingle such payments with any of its other funds or property. For the
purpose of this Master Security Agreement, (x) "Accounts" shall mean all
"accounts", as such term is defined in the Uniform Commercial Code as in
effect in the State of New York on the date hereof, now owned or
hereafter acquired by any Assignor and (y) "Account Debtor" shall mean
any person or entity who is or may be obligated with respect to, or on
account of, an Account.
4. The occurrence of any of the following events or conditions
shall constitute an "Event of Default" under this Master Security
Agreement:
(a) Breach of any covenant, warranty, representation or
statement made or furnished to Laurus by any Assignor or on any
Assignor's benefit was false or misleading in any material respect
when made or furnished, and if subject to cure, shall not be cured
within thirty (30) days;
(b) the loss, theft, substantial damage, destruction, sale or
encumbrance to or of any of the Collateral or the making of any
levy, seizure or attachment thereof or thereon except to the
extent:
(i) such loss is covered by insurance proceeds which are
used to replace the item or repay Laurus; or
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(ii) said levy, seizure or attachment does not secure
indebtedness in excess of $100,000 and such levy, seizure or
attachment has not been removed, bonded or otherwise released
within sixty (60) days of the creation or the assertion
thereof; or
(b) an Event of Default shall have occurred under, and as
defined in, either of the Notes.
5. Upon the occurrence of any Event of Default and at any time
thereafter, Laurus may declare all Obligations immediately due and
payable and Laurus shall have the remedies of a secured party provided in
the Uniform Commercial Code as in effect in the State of New York, this
Agreement and other applicable law. Upon the occurrence of any Event of
Default and at any time thereafter, Laurus will have the right to take
possession of the Collateral and to maintain such possession on our
premises or to remove the Collateral or any part thereof to such other
premises as Laurus may desire. At Laurus' election, following the
occurrence of an Event of Default which is continuing, (x) Laurus may
notify each Assignor's Account Debtors of Laurus' security interest in
the Accounts, collect them directly and charge the collection costs and
expenses thereof to the Assignors joint and several account and (y)
direct the Lockbox Bank to send all monies contained, or in the future
deposited into, the Lockbox Account, to a deposit account maintained by
Laurus (with any such monies received by Laurus to be applied in
accordance with the terms of this Master Security Agreement) (it being
understood that Laurus shall use commercially reasonable efforts to
notify the Company of any action taken by it as set forth in this
sentence; provided that any failure to by Laurus to provide any such
notification shall not affect Laurus' rights under this Master Security
Agreement in any respect). Upon Laurus' request, each of the Assignors
shall assemble or cause the Collateral to be assembled and make it
available to Laurus at a place designated by Laurus. If any notification
of intended disposition of any Collateral is required by law, such
notification, if mailed, shall be deemed properly and reasonably given if
mailed at least ten (10) days before such disposition, postage prepaid,
addressed to any Assignor either at such Assignor's address shown herein
or at any address appearing on Laurus' records for such Assignor. Any
proceeds of any disposition of any of the Collateral shall be applied by
Laurus to the payment of all expenses in connection with the sale of the
Collateral, including reasonable attorneys' fees and other legal expenses
and disbursements and the reasonable expense of retaking, holding,
preparing for sale, selling, and the like, and any balance of such
proceeds may be applied by Laurus toward the payment of the Obligations
in such order of application as Laurus may elect, and each Assignor shall
be liable for any deficiency. For the avoidance of doubt, following the
occurrence and during the continuance of an Event of Default, Laurus
shall have the immediate right to withdraw any and all monies contained
in the Restricted Account and apply same to the repayment of the
outstanding balance of Term Note B and any of the obligations related
thereto (in such order of application as Laurus may elect).
6. If any Assignor defaults in the performance or fulfillment of
any of the terms, conditions, promises, covenants, provisions or
warranties on such Assignor's part to be performed or fulfilled under or
pursuant to this Master Security Agreement, Laurus may, at its option
without waiving its right to enforce this Master Security Agreement
according to its terms, immediately or at any time thereafter and without
notice to any Assignor, perform or fulfill the same or cause the
performance or fulfillment of the same for each Assignor's joint and
several account and at each Assignor's joint and several cost and
expense, and the cost and expense thereof (including reasonable
attorneys' fees) shall be added to the Obligations and shall
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be payable on demand with interest thereon at the highest rate permitted
by law, or, at Laurus' option, debited by Laurus from the Restricted
Account referred to in the Restricted Account Agreement.
7. Each Assignor appoints Laurus, any of Laurus' officers,
employees or any other person or entity whom Laurus may designate,
effective only upon the occurrence and continuance of an Event of
Default, as our attorney, with power to execute such documents in each of
our behalf and to supply any omitted information and correct patent
errors in any documents executed by any Assignor or on any Assignor's
behalf; to file financing statements against us covering the Collateral
(and, in connection with the filing of any such financing statements,
describe the Collateral as "all assets and all personal property, whether
now owned and/or hereafter acquired" (or any substantially similar
variation thereof)); to sign our name on public records; and to do all
other things Laurus deem necessary to carry out this Master Security
Agreement. Each Assignor hereby ratifies and approves all acts of the
attorney taken after the effectiveness of the appointment as aforesaid,
and neither Laurus nor the attorney will be liable for any acts of
commission or omission, nor for any error of judgment or mistake of fact
or law other than gross negligence or willful misconduct (as determined
by a court of competent jurisdiction in a final and non-appealable
decision). This power being coupled with an interest, effective as
aforesaid, is irrevocable so long as any Obligations remains unpaid.
8. No delay or failure on Laurus' part in exercising any right,
privilege or option hereunder shall operate as a waiver of such or of any
other right, privilege, remedy or option, and no waiver whatever shall be
valid unless in writing, signed by Laurus and then only to the extent
therein set forth, and no waiver by Laurus of any default shall operate
as a waiver of any other default or of the same default on a future
occasion. Laurus' books and records containing entries with respect to
the Obligations shall be admissible in evidence in any action or
proceeding, shall be binding upon each Assignor for the purpose of
establishing the items therein set forth and shall constitute prima facie
proof thereof. Laurus shall have the right to enforce any one or more of
the remedies available to Laurus, successively, alternately or
concurrently. Each Assignor agrees to join with Laurus in executing
financing statements or other instruments to the extent required by the
Uniform Commercial Code in form satisfactory to Laurus and in executing
such other documents or instruments as may be required or deemed
necessary by Laurus for purposes of affecting or continuing Laurus'
security interest in the Collateral.
9. This Master Security Agreement shall be governed by and
construed in accordance with the laws of the State of New York and cannot
be terminated orally. All of the rights, remedies, options, privileges
and elections given to Laurus hereunder shall inure to the benefit of
Laurus' successors and assigns. The term "Laurus" as herein used shall
include Laurus, any parent of Laurus', any of Laurus' subsidiaries and
any co-subsidiaries of Laurus' parent, whether now existing or hereafter
created or acquired, and all of the terms, conditions, promises,
covenants, provisions and warranties of this Agreement shall inure to the
benefit of each of the foregoing, and shall bind the representatives,
successors and assigns of each Assignor. Laurus and each Assignor hereby
(a) waive any and all right to trial by jury in litigation relating to
this Agreement and the transactions contemplated hereby and each Assignor
agrees not to assert any counterclaim in such litigation, (b) submit to
the nonexclusive jurisdiction of any New York State court sitting in the
borough of Manhattan, the city of New York and (c) waive any objection
Laurus or each Assignor may have as to the bringing or maintaining of
such action with any such court.
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10. All notices from Laurus to any Assignor shall be sufficiently
given if mailed or delivered to such Assignor's address set forth below.
11. This Master Security Agreement and the security interests
granted by the Assignors hereunder shall terminate upon the provision by
Laurus of written confirmation to the Company that (x) all indebtedness
obligations (excluding, in any event, the Warrant) owed by any Assignor
to Laurus have been repaid in full (including, without limitation, all
principal, interest and fees related to the Notes and any other
indebtedness outstanding at such time and owed to Laurus) and (y) all
commitments by Laurus to fund any indebtedness have been terminated in
their entirety.
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Very truly yours,
HOST AMERICA CORPORATION
By: /s/ David Murphy
--------------------------------
Name: David Murphy
------------------------------
Title: CFO
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Address: 2 Broadway
Hamden, CT 06518
LINDLEY FOOD SERVICE CORPORATION
By: /s/ Geoffrey Ramsey
--------------------------------
Name: Geoffrey Ramsey
------------------------------
Title: CEO
-----------------------------
Address: 201 Wallace St.
New Haven, CT 06511
SELECTFORCE, INC.
By: /s/ Geoffrey Ramsey
--------------------------------
Name: Geoffrey Ramsey
------------------------------
Title: CEO
-----------------------------
Address: 200 NW 66th
Oklahoma City, OK 73113
GLOBALNET ENERGY INVESTORS, INC.
By: /s/ Geoffrey Ramsey
--------------------------------
Name: Geoffrey Ramsey
------------------------------
Title: CEO
-----------------------------
Address: 1840 Hutton Dr.
Carrollton, TX 75006
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ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By: /s/ David Grin
--------------------------------
Name: David Grin
------------------------------
Title: Managing Partner
-----------------------------
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SCHEDULE A
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Entity Jurisdiction of Organization Identification
Organization Number
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[Insert Assignors]
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