GIFTED TIME HOLDINGS LIMITED PROMISSORY NOTE
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THIS
NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. IT MAY NOT BE SOLD, OFFERED
FOR
SALE, PLEDGED OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
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GIFTED
TIME HOLDINGS LIMITED
| $[___________] |
December
__, 2006
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[___________________],
British Virgin
Islands
|
FOR
VALUE
RECEIVED, GIFTED
TIME HOLDINGS LIMITED,
a
British Virgin Islands company (“Company”),
promises to pay to [______________] (“Investor”),
or
its registered assigns, in lawful money of the United States of America the
principal sum of _________________ ($__________), or such lesser amount as
shall
equal the outstanding principal amount hereof, together with interest from
the
date of this Note on the unpaid principal balance at a rate equal to ten percent
(10.0%) per annum, computed on the basis of the actual number of days elapsed
and a year of 360 days.
The
Principal indebtedness evidenced hereby and all other amounts outstanding
hereunder shall be due and payable as follows: (i) the principal amount of
$_______ together with any then unpaid and accrued interest thereon and other
amounts payable hereunder, shall be due and payable on the earlier to occur
of
(a) ten business days following the closing of acquisition of the shares of
the Company by HLS Systems International Ltd. (the “Business Combination”), (b)
the Tranche B Maturity Date (as defined below), or (c) when, upon or after
the occurrence of an Event of Default (as defined below), such amounts are
declared due and payable by Investor or made automatically due and payable
in
accordance with the terms hereof; and (ii) the remaining $__________ of
principal, plus all accrued and unpaid interest thereon, and all other amounts
due hereunder, shall be due and payable on (a) the date (the “Tranche B Maturity
Date”) that is the earliest of (1) one year following the date that HLS Systems
International Ltd. (“HLS”) acquires all or substantially all of the shares of
Company, (2) 60 days following the redemption (as provided in the warrant
agreement) of the publicly traded warrants assumed by HLS concurrently with
the
closing of the Business Combination in substitution for the warrants issued
by
Chardan North China Acquisition Corporation, or (3) 18 months following the
date
that the agreement(s) governing the closing of the Business Combination
terminate without a closing of the Business Combination, or (b) when, upon
or
after the occurrence of an Event of Default, such amounts are declared due
and
payable by Investor or made automatically due and payable in accordance with
the
terms hereof. To the extent required to do so, Company shall cause its
subsidiaries to dividend to Company amounts sufficient to satisfy in full all
monetary obligations due hereunder.
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If
any
payment of interest or any other amount owing to Investor by Company as provided
herein is not made within ten days after the due date, Company shall pay
Investor a late payment fee equal to the lesser of five percent (5.0%) of the
amount of such late payment or the maximum amount permitted by applicable law.
After the occurrence and during the continuance of an Event of Default, the
Obligations shall bear interest at a rate equal to twelve percent (12.0%) per
annum.
This
Note
is one of the “Notes” issued pursuant to the Purchase Agreement of even date
herewith (as amended, modified or supplemented, the “Purchase
Agreement”)
between Company and the Investors (as defined in the Purchase
Agreement).
The
following is a statement of the rights of Investor and the conditions to which
this Note is subject, and to which Investor, by the acceptance of this Note,
agrees:
1. Definitions.
As used
in this Note, the following capitalized terms have the following
meanings:
(a) “Act”
shall
mean the Securities Act of 1933, as amended.
(b) “Company”
includes the corporation initially executing this Note and any Person which
shall succeed to or assume the obligations of Company under this
Note.
(c) “Event
of Default”
has
the
meaning given in Section
3
hereof.
(d) “Guaranty
and Pledge Agreement”
shall
mean the Guaranty and Pledge Agreement of even date herewith executed by
[____________] in favor of the Investors (as defined in the Purchase Agreement),
as amended, modified or otherwise supplemented from time to time.
(e) “Investor”
shall
mean the Person specified in the introductory paragraph of this Note or any
Person who shall at the time be the registered Investor of this
Note.
(f) “Investor
Notes”
shall
mean all Notes issued pursuant to the Note Purchase Agreement and all notes
issued in substitution thereof.
(g) “Lien”
shall
mean, with respect to any property, any security interest, mortgage, pledge,
lien, claim, charge or other encumbrance in, of, or on such property or the
income therefrom, including, without limitation, the interest of a vendor or
lessor under a conditional sale agreement, capital lease or other title
retention agreement, or any agreement to provide any of the foregoing, and
the
filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction.
(h) “Majority
in Interest”
shall
mean holders of more than half of the aggregate current outstanding principal
amount of the Investor Notes.
(i) “Material
Adverse Effect”
shall
mean a material adverse effect on (a) the business, assets, operations,
prospects or financial or other condition of Company; (b) the ability of Company
to pay or perform the Obligations in accordance with the terms of this Note
and
the other Transaction Documents and to avoid an Event of Default, or an event
which, with the giving of notice or the passage of time or both, would
constitute an Event of Default, under any Transaction Document; or (c) the
rights and remedies of Investor under this Note, the other Transaction Documents
or any related document, instrument or agreement.
2
(j) “Purchase
Agreement”
has
the
meaning given in the introductory paragraph hereof.
(k) “Obligations”
shall
mean and include all loans, advances, debts, liabilities and obligations,
howsoever arising, owed by Company to Investor of every kind and description
(whether or not evidenced by any note or instrument and whether or not for
the
payment of money), now existing or hereafter arising under or pursuant to the
terms of this Note, the Purchase Agreement and the other Transaction Documents,
including, all interest, fees, charges, expenses, attorneys’ fees and costs and
accountants’ fees and costs chargeable to and payable by Company hereunder and
thereunder, in each case, whether direct or indirect, absolute or contingent,
due or to become due, and whether or not arising after the commencement of
a
proceeding under Title 11 of the United States Code (11 U. S. C.
Section 101 et seq.),
as
amended from time to time (including post-petition interest) and whether or
not
allowed or allowable as a claim in any such proceeding.
(l) “Person”
shall
mean and include an individual, a partnership, a corporation (including a
business trust), a joint stock company, a limited liability company, an
unincorporated association, a joint venture or other entity or a governmental
authority.
(m) “Pro
Rata Share”
shall
mean when calculating an Investor’s portion of any distribution or amount, that
distribution or amount (expressed as a percentage) equal to a fraction (i)
the
numerator of which is the current outstanding principal amount of the Note
and
(ii) the denominator of which is the current aggregate outstanding principal
amount of all Investor Notes.
(n) “Transaction
Documents”
shall
mean this Note, each of the other Investor Notes, the Note Purchase Agreement
and the Guaranty and Pledge Agreement.
2. Prepayment.
This
Note may be prepaid. Any prepayment shall be accompanied by all accrued and
unpaid interest to the date of prepayment. Any prepayment shall be credited
against and reduce the next amounts otherwise due hereunder.
3. Events
of Default.
The
occurrence of any of the following shall constitute an “Event of Default” under
this Note and the other Transaction Documents:
(a) Company
shall fail to pay any principal of or interest on this Note or any other
monetary Obligations within ten days after the date due;
(b) Company
shall fail to comply with any other provision of this Note or any other
Transaction Document, which failure is not cured within fifteen days after
notice from Investor to Company that such failure has occurred;
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(c) any
warranty, representation, statement, report or certificate made or delivered
to
Investor by Company or on Company’s behalf shall be untrue or misleading in a
material respect as of the date given or made;
(d) there
shall be a change in the record or beneficial ownership of an aggregate of
more
than 30% of the outstanding shares of stock of Company, in one or more
transactions, compared to the ownership of outstanding shares of stock of
Company in effect on the date hereof, except for the closing of the Business
Combination or changes that have the prior written consent of
Investor;
(e) a
default
or event of default shall occur under any agreement to which Company is a party
resulting in a right by such party, whether or not exercised, to accelerate
the
maturity of any indebtedness and such acceleration would have a Material Adverse
Effect;
(f) dissolution,
termination of existence, or insolvency of Company; or Company fails to meet
its
debts as they mature; or appointment of a receiver, trustee or custodian, for
all or any material part of the property of, assignment for the benefit of
creditors by, or the commencement of any proceeding by or against Company under
any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect (except that, in the case of a proceeding commenced against
Company, Company shall have 45 days after the date such proceeding was commenced
to have it dismissed); or
(g) the
occurrence of a Material Adverse Effect.
4. Rights
of Investor upon Default.
Upon
the occurrence or existence of any Event of Default (other than an Event of
Default referred to in Section
3(f))
and at
any time thereafter during the continuance of such Event of Default, Investor
may, with the consent of a Majority in Interest, by written notice to Company,
declare all outstanding Obligations payable by Company hereunder to be
immediately due and payable without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived. Upon the
occurrence or existence of any Event of Default described in Section
3(f),
immediately and without notice, all outstanding Obligations payable by Company
hereunder shall automatically become immediately due and payable, without
presentment, demand, protest or any other notice of any kind, all of which
are
hereby expressly waived. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default and subject to the consent
of a
Majority in Interest, Investor may exercise any other right power or remedy
granted to it by the Transaction Documents or otherwise permitted to it by
law,
either by suit in equity or by action at law, or both.
5. Successors
and Assigns.
Subject
to the restrictions on transfer described in Sections
7 and
8
below,
the rights and obligations of Company and Investor of this Note shall be binding
upon and benefit the successors, assigns, heirs, administrators and transferees
of the parties.
6. Waiver
and Amendment.
Any
provision of this Note may be amended, waived or modified upon the written
consent of Company and Investors constituting a Majority in
Interest.
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7. Transfer
of this Note.
With
respect to any offer, sale or other disposition of this Note, Investor will
give
written notice to Company prior thereto, describing briefly the manner thereof,
together with a written opinion of Investor’s counsel, or other evidence if
reasonably satisfactory to the Company, to the effect that such offer, sale
or
other distribution may be effected without registration or qualification (under
any applicable law then in effect). Upon receiving such written notice and
reasonably satisfactory opinion, if so requested, or other evidence, Company,
as
promptly as practicable, shall notify Investor that Investor may sell or
otherwise dispose of this Note, all in accordance with the terms of the notice
delivered to Company. If a determination has been made pursuant to this
Section 7
that the
opinion of counsel for Investor, or other evidence, is not reasonably
satisfactory to Company, Company shall so notify Investor promptly after such
determination has been made. Each Note thus transferred shall bear a legend
as
to the applicable restrictions on transferability in order to ensure compliance
with the Act, unless in the opinion of counsel for Company such legend is not
required in order to ensure compliance with the Act. Company may issue stop
transfer instructions to its transfer agent in connection with such
restrictions. Subject to the foregoing, transfers of this Note shall be
registered upon registration books maintained for such purpose by or on behalf
of Company. Prior to presentation of this Note for registration of transfer,
Company shall treat the registered Investor hereof as the owner and Investor
of
this Note for the purpose of receiving all payments of principal and interest
hereon and for all other purposes whatsoever, whether or not this Note shall
be
overdue and Company shall not be affected by notice to the
contrary.
8. Assignment
by Company.
Neither
this Note nor any of the rights, interests or obligations hereunder may be
assigned, by operation of law or otherwise, in whole or in part, by Company
without the prior written consent of Investor.
9. Notices.
All
notices, requests, demands, consents, instructions or other communications
required or permitted hereunder shall in writing and faxed, mailed or delivered
to each party at the respective addresses of the parties as set forth in the
Purchase Agreement, or (with respect to Company) at such other address or
facsimile number as Company shall have furnished to Investor in writing. All
such notices and communications shall be effective (a) when sent by Federal
Express or other overnight service of recognized standing, on the business
day
following the deposit with such service; (b) when mailed, by international
and
air mail postage prepaid and addressed as aforesaid upon receipt; (c) when
delivered by hand, upon delivery; and (d) when faxed or sent by email, upon
confirmation of receipt.
10. Pari
Passu Notes.
Investor acknowledges and agrees that the payment of all or any portion of
the
outstanding principal amount of this Note and all interest hereon shall be
pari
passu in
right
of payment and in all other respects to the other Investor Notes or pursuant
to
the terms of such Notes. In the event Investor receives payments in excess
of
its Pro Rata Share of Company’s aggregate concurrent payments to the Investors
of all of the Investor Notes, then Investor shall hold in trust all such excess
payments for the benefit of the Investors of the other Notes and shall pay
such
amounts held in trust to such other Investors upon demand by such
Investors.
5
11. Usury.
In the
event any interest is paid on this Note which is deemed to be in excess of
the
then legal maximum rate, then that portion of the interest payment representing
an amount in excess of the then legal maximum rate shall be deemed a payment
of
principal and applied against the principal of this Note.
12. Waivers.
Company
hereby waives notice of default, presentment or demand for payment, protest
or
notice of nonpayment or dishonor and all other notices or demands relative
to
this instrument.
13. Governing
Law; Jurisdiction; Venue.
This
Note and all acts and transactions hereunder and all rights and obligations
of
the Investor and Company shall be governed by the internal laws (and not the
conflict of laws rules) of the British Virgin Islands. Company (a) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at the Investors’ option, be litigated in courts located within
the British Virgin Islands; (b) consents to the jurisdiction and venue of
any such court and consents to service of process in any such action or
proceeding by personal delivery or any other method permitted by law; and
(c) waives any and all rights Company may have to object to the
jurisdiction of any such court, or to transfer or change the venue of any such
action or proceeding.
IN
WITNESS WHEREOF,
Company
has caused this Note to be issued as of the date first written
above.
GIFTED
TIME HOLDINGS LIMITED
a
British
Virgin Islands company
By:
________________________________
Name:
______________________________
Title:
_______________________________
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