Exhibit 10.6
BUSINESS LOAN AND SECURITY AGREEMENT
$2,000,000 November 3, 1997
1. PREAMBLE. Business Loan and Security Agreement made by the
undersigned (the "Borrower") for the benefit of Mr. Ming-Sum
Xxxxx, whose address is set forth on the signature page hereto
(the "Lender"), with respect to a loan in the original principal
amount of $2,000,000 as evidenced by a secured convertible
promissory note in such amount from the Borrower of even date
herewith (the "Note"). Simultaneously with the execution hereof,
as partial consideration to the Lender for making the loan
hereunder, Zhi-Xxxx Xx, President and a principal stockholder of
Borrower, has delivered the Lender 100,000 shares of Common Stock
of the Borrower (the "Bonus Shares"). Pursuant to a Guaranty
Agreement of even date, Xx. Xx has guaranteed the obligations of
the Borrower hereunder and under the Note, and has pledged
400,000 shares of Convertible Preferred Stock of the Borrower
(the "Pledged Shares") as collateral for his obligations under
the Guaranty Agreement. The Pledged Shares have been delivered
to Brown, Rudnick, Freed & Gesmer, Counselors at Law ("Escrow
Agent"), to be held in Escrow pursuant to that certain Escrow
Agreement of even date between Escrow Agent, Borrower, Lender and
Xx. Xx. This Agreement and the Note are hereinafter collectively
referred to as the "Transaction Documents."
2. SECURITY.
(a) As security for Borrower's indebtedness and other
obligations now or at any time hereafter owing by Borrower to
Lender, whether or not any of such are liquidated, unliquidated,
secured, unsecured, direct, indirect, absolute, contingent or of
any other type, nature or description, including without
limitation those arising under this agreement, Borrower hereby
grants Lender a security interest in 20% of the ownership
interest of the Borrower in Shenzhen City Zhenghua Traffic and
Transportation Industrial and Development Company, Ltd.
(b) Borrower has not granted any security interest with
respect to Borrower's collateral hereunder, and such collateral
is free of all liens and encumbrances, except those Borrower is
granting to Lender herein.
3. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to and covenants with Lender as follows:
(a) the execution and delivery of each of the Transaction
Documents has been approved by all required corporate action and
does not violate or contravene any provision of Borrower's
corporate charter documents, by-laws or any other indenture or
contract to which Borrower is a party. Each of the Transaction
Documents is valid, binding and enforceable against Borrower in
accordance with their respective terms, and no consent of any
other party is required in connection with the execution,
delivery, performance or enforceability of any of the Transaction
Documents.
(b) Borrower has filed all federal, state, local and other
tax and similar returns required to be filed and has paid or
provided for the payment of all taxes and assessments due
thereunder.
(c) Borrower and each of the Borrower's subsidiaries is
duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of formation;
(d) any financial statements or projections Borrower has
delivered to Lender are true and correct in all material
respects, and have been prepared in accordance with generally
accepted accounting principles; and there has occurred no
material adverse change in Borrower's or any of its subsidiaries'
business or financial condition since the date of the most
recently delivered financial statements;
(e) there is no litigation pending or threatened against
Borrower or any of its subsidiaries, except as disclosed on
Borrower's financial statements or in a writing delivered to
Lender; and
(f) the issued and outstanding capital stock of the
Borrower is as set forth on Schedule 3(f) hereto, and, except as
set forth on such Schedule, there are no outstanding options,
warrants or other rights to acquire capital stock of the
Borrower.
4. AFFIRMATIVE COVENANTS. So long as any amount is unpaid
hereunder, Borrower will:
(a) keep proper books of account in a manner in accordance
with generally accepted accounting principles;
(b) permit, upon written notice and during normal business
hours, inspections and audits by Lender or by Lender's agents of
all books, records and papers in the custody or control of
Borrower or of others relating to any security for the
obligations hereunder or Borrower's or any of its subsidiaries
financial or business condition, including the making of copies
thereof and abstracts therefrom and inspection and appraisal of
any of Borrower's or its subsidiaries' assets;
(c) at the request of the Lender, deliver to Lender
financial information in such form and detail and at such times
as are satisfactory to Lender, including, without limitation,
Borrower's quarterly financial statements;
(d) promptly pay all taxes, assessments and other
governmental charges due from Borrower or its subsidiaries;
provided however, that nothing herein contained shall be
interpreted to require the payment of any such tax so long as its
validity is being contested in good faith and Borrower maintains
adequate reserves with respect to such tax;
(e) keep adequately insured at all times with responsible
insurance carriers against liability on account of damage to
persons or property;
(f) promptly inform Lender of the commencement of any
action, suit, proceeding or investigation against Borrower or any
of its subsidiaries, or the making of any counterclaim against
Borrower or any of its subsidiaries in any action, suit or
proceeding and of all liens against any of Borrower's or any of
its subsidiaries' property, and of the occurrence of any default
hereunder;
(g) pay all indebtedness to Lender and to third parties
when due; and
(h) maintain Borrower's and each of its subsidiaries'
corporate existence, comply with all applicable laws and
regulations and maintain all property useful and necessary in
Borrower's business in good repair and operating condition,
ordinary wear and tear excepted.
5. NEGATIVE COVENANTS. So long as any amount is unpaid
hereunder, Borrower will not, without Lender's prior written
consent:
(a) create, incur, assume or suffer to exist any security
interest, mortgage, pledge, lien or other encumbrance upon any of
the collateral hereunder, except in Lender's favor;
(b) sell, convey, lease or transfer any of Borrower's
assets other than in the ordinary course of business, or merge or
consolidate with or into any other company or corporation, except
with Lender's written consent;
(c) become a guarantor, surety or otherwise become liable
for the debts or other obligations of any person, firm or
corporation, except as an endorser of instruments for the payment
of money deposited to Borrower's account for collection in the
ordinary course of business;
(d) make any investments in or loans or advances to any
other person, firm or corporation (including, without limitation,
loans or advances to officers, partners or employees of Borrower
or any of its subsidiaries) except direct obligations of the
United States of America;
(e) purchase any of its capital stock or declare any
dividends thereon, without the written consent of Lender; and
(f) change the form in which Borrower conducts its
business, the location of such business, or the nature of the
business as conducted by Borrower on the date of this Agreement
or fail to maintain its business operation as a going concern.
6. DEFAULT. In addition to, and not by way of limitation of,
any of Lender's other rights hereunder, the entire unpaid balance
of all of Borrower's indebtedness to Lender, whether under this
Agreement, the Note or under any other instrument, document or
agreement with Lender, may be declared to be immediately due and
payable at Lender's sole election upon the happening of any one
of the following specified events of default (each an "Event of
Default"):
(a) Borrower's failure to make any payment when due
hereunder or under the Note, or to pay or perform any other
obligation to Lender, now existing or hereafter arising;
(b) Borrower's failure to pay any indebtedness to any
others when due, except where Borrower is reasonably and in good
faith asserting a legal defense in respect of its failure to pay
any such indebtedness when due;
(c) if any representation, warranty, statement or
certificate made to Lender by Borrower proves to have been or
becomes untrue;
(d) any change in the ownership of capital stock in the
Borrower which results in a change of control of the Borrower;
(e) with respect to the Borrower or any of its
subsidiaries, the commencement, whether voluntary or involuntary,
of a case under the United States Bankruptcy Code or any other
proceeding or action seeking reorganization, liquidation,
dissolution or other relief under federal bankruptcy or
insolvency statutes or similar laws, or seeking the appointment
of a receiver, trustee or custodian for the Borrower or all or a
part of Borrower's assets;
(f) if Borrower or any of its subsidiaries makes an
assignment for the benefit of creditors, or is unable to pay
debts as they mature; or
(g) any such event occurs with respect to any guarantor or
endorser of Borrower's obligations to Lender.
7. ADDITIONAL REMEDIES. Upon demand of payment of all amounts
due hereunder, or upon the occurrence of any Event of Default and
at any time thereafter, Lender shall have all of the rights and
remedies of a secured party upon default under the New York
Uniform Commercial Code, in addition to which Lender shall have
all of the following rights and remedies:
(a) to take possession and dispose of the collateral;
(b) the proceeds of any collection of the collateral shall
be applied toward any of Borrower's loan or loans in such order
and manner as Lender determines in Lender's sole discretion.
Borrower shall remain liable to Lender for any deficiency
remaining following such applications; and
8. FEES AND EXPENSES. Simultaneously with the execution
hereof, Borrower has paid Lender an origination fee equal to 4%
of the principal amount of the Note. Such origination fee has
been directly deducted from the proceeds of the loan delivered to
the Borrower, so that the proceeds delivered to the Borrower were
net of the origination fee. Borrower will reimburse Lender
promptly for any fees payable to the appropriate public officer
to perfect any lien or other security interest taken to secure
any indebtedness created pursuant hereto, or the premium, not in
excess of such filing fee, payable for insurance in lieu of such
filing. Borrower shall pay on demand all of Lender's expenses,
including, without limitation, attorneys' fees and disbursements,
incurred in connection with the loan made hereunder, and all
expenses which Lender may hereafter incur in connection with the
protection or enforcement of any of Lender's rights against
Borrower, any collateral, and any guarantor of Borrower's
obligations to Lender.
9. EQUITY PARTICIPATION. As additional consideration to the
Lender for making the loan hereunder, concurrently with the
execution and delivery of this Agreement, Zhi-Xxxx Xx, President
and a principal stockholder of the Borrower, has transferred to
the Lender 100,000 shares of Common Stock of the Borrower (the
"Bonus Shares").
10. REGISTRATION RIGHTS. At any time the Borrower proposes to
file a registration statement under the Act with respect to any
capital stock of the Borrower on any form, other than forms S-4
or S-8 or their then equivalents, then, the Borrower shall give
written notice of such proposed filing to the Lender at least
forty-five (45) days before the anticipated filing date, and such
notice shall offer to the Lender the opportunity to include in
such registration statement the number of Registrable Securities
(defined herein) which Lender may request. The Borrower shall
cause the managing underwriter of a proposed offering to offer
such shares of capital stock on the same terms and conditions as
the capital stock to be included therein by the Borrower. For
purposes of this Agreement, "Registrable Securities" means the
Bonus Shares, the Pledged Shares, and the shares of Common Stock
issuable or transferred pursuant to the Note. Any permitted
assignee of Lender shall also have the registration rights
granted hereunder with respect to Registrable Securities acquired
from Lender. References to Lender in this Agreement shall
include permitted assignees of the Lender.
Additional Obligations of the Borrower. Whenever the
Borrower is required to register shares of capital stock pursuant
to a request of the Lender hereunder, the Borrower shall:
(i) prepare for filing with the Securities and Exchange
Commission a registration statement, including a prospectus and
exhibits, amendments and supplements thereto and, prior to such
filing, furnish the same to Lender for review and comment;
(ii) file the registration statement with the Securities and
Exchange Commission and use commercially reasonably efforts to
cause such registration statement to become effective and remain
effective as provided herein;
(iii)prepare and file with the Securities and Exchange
Commission such amendments and supplements to said registration
statement and the prospectus used in connection therewith as may
be necessary to keep said registration statement effective and to
comply with the provisions of the Act with respect to the sale of
securities covered by said registration statement for the period
necessary to complete the proposed public offering, subject to
the terms hereof;
(iv) furnish to Lender such copies of the registration
statement including the preliminary and final prospectus and
copies of all exhibits, amendments and supplements thereto, as
well as such other documents as Lender may reasonably request to
facilitate the proposed public offering of capital stock;
(v) to use its best efforts to register or qualify the
capital stock covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as Lender may
request.
(vi) permit Lender and its counsel and other representatives
to inspect and copy such corporate documents and records as may
reasonably be requested by them;
(vii) furnish to Lender a copy of all documents filed
and all correspondence from or to the Securities and Exchange
Commission in connection with any such offering;
(viii) pay all expenses in connection with such
registration and offering (other than the fees and expenses of
Lender's counsel, if any), except that Lender shall bear all
underwriting commissions attributable to his or its shares so
registered; and
(ix) use its best efforts to file on a timely basis with the
Securities and Exchange Commission such information as the
Borrower may be obligated to file under Sections 13 or 15(d) of
the Securities Exchange Act of 1934, as then amended and in
effect.
Indemnification. Incident to any registration statement,
including any preliminary prospectus, prospectus, or any
amendments or supplements thereto (the "Registration Statement"),
or any application for exemption filed by the Borrower which
includes Registrable Securities, the Borrower will indemnify
Lender and its officers, directors, employees, stockholders,
partners and agents, as applicable, against all claims, losses,
damages and liabilities, including legal and other expenses
incurred in investigating or defending against the same, arising
out of any untrue statement of a material fact contained therein,
or by any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or arising out of any violation by the Borrower of
the Act, any state securities or "blue-sky" laws or any rule or
regulation thereunder in connection with such registration or
sale, except insofar as the same may have been caused by an
untrue statement or omission based upon, and in conformity with,
information furnished in writing to the Borrower by Lender
expressly for use therein.
Promptly after receipt by Lender or any of its respective
officers, directors, employees, stockholders, partners or agents,
of notice of the assertion or commencement of any action in
respect of which indemnity may be sought against the Borrower,
Lender shall notify the Borrower in writing of the assertion or
commencement thereof, and, subject to the provisions hereinafter
stated, the Borrower shall assume the defense of such action
(including the employment of counsel and the payment of all fees
and expenses) insofar as such action shall relate to any alleged
liability in respect of which indemnity may be sought against the
Borrower. Lender and its officers, directors, employees,
stockholders, partners and agents, as the case may be, shall have
the right to employ separate counsel in any such action and to
participate in the defense thereof, provided that the Borrower
shall have the right to control any such litigation, but the fees
and expenses of such separate counsel shall not be at the expense
of the Borrower unless the employment of such counsel has been
specifically authorized by the Borrower or unless counsel
retained by the Borrower has, in the reasonable opinion of
Lender's counsel, a conflict of interest with respect to its
representation of Lender. The Borrower shall not be liable to
indemnify any person for any settlement of any such action
effected without the Borrower's consent.
Contribution. If the indemnification provided for herein is
unavailable to an indemnified party thereunder (other than by
reason of exceptions provided therein) in respect of any claims,
losses, damages or liabilities, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified
party as a result of such claims, losses, damages or liabilities,
in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified party in
connection with the actions, statements or omissions which
resulted in such claims, losses, damages or liabilities, as well
as any other relevant equitable considerations. The relative
fault of such indemnifying party and such indemnified party shall
be determined by reference to, among other things, whether any
action in question, including any untrue statement or alleged
untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or
relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
action, statement or omission.
The parties hereto agree that it would not be just and
equitable if contribution hereunder were determined by pro rata
allocation or by any other method of allocation which does not
take into account the equitable considerations referred to in the
immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 12(f) of the
Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
11. WAIVER, CUMULATIVE REMEDIES. No delay or omission by Lender
in exercising or enforcing any of Lender's rights or remedies
shall operate as, or constitute a waiver thereof. No waiver by
Lender of any event of default or of any default under any other
agreement shall operate as a waiver of any other default
hereunder or under any other agreement. No exercise of any of
Lender's rights and remedies and no other agreement or
transaction of whatever nature entered into between Borrower and
Lender at any time, shall preclude any other exercise of Lender's
rights and remedies. No waiver by Lender of any of Lender's
rights and remedies on any one occasion shall be deemed a waiver
on any subsequent occasion, nor shall it be deemed a continuing
waiver. All of Lender's rights and remedies hereunder, and all
of Lender's rights and remedies, power, privileges, and
discretion under any other agreement or transaction are
cumulative and not alternative or exclusive and may be exercised
by Lender at such time or times and in such order of preference
as Lender in Lender's sole discretion may determine.
12. [RESERVED].
13. MISCELLANEOUS INFORMATION. It is agreed that references to
"Lender" shall mean the undersigned Lender and his heirs or
assigns, and references to "Borrower" or "the undersigned" shall
mean the undersigned Borrower and its successors and assigns.
Borrower will, in manner satisfactory to Lender, furnish other
documentation of a type and in such form as Lender may request
from time to time to further evidence or perfect the agreements
contemplated hereby.
14. APPLICABLE LAW. This agreement shall be construed and
interpreted in accordance with the laws of the State of New York,
without regard to the choice of law provisions thereof .
IN WITNESS WHEREOF, the Borrower and the Lender have executed
this Agreement as of the date first above written.
XX. XX
/s/Zhi-Xxxx Xx
Zhi-Xxxx Xx
BORROWER:
XXXXXX SCIENCE CORPORATION
By: /s/Zhi-Xxxx Xx
Zhi-Xxxx Xx, President, duly
authorized
LENDER:
/s/Ming-Sum Xxxxx
Mr. Ming-Sum Xxxxx
Xxxx X, 00/X, Xxxxx X
Xxxxx Xxxxx
19 Xxxxx Path
Homantin, Kowloon
Hong Kong
SCHEDULE 3(f)
Issued and outstanding capital stock and options, warrants
and other rights to acquire capital stock:
1. 13,000,000 shares of Common Stock are issued and
outstanding. 2,100,000 shares of Convertible Preferred Stock are
issued and outstanding. Each share of Convertible Preferred
Stock is convertible into five (5) shares of Common Stock. No
other shares of capital stock are issued and outstanding.
2. There are no outstanding options, warrants or other
rights to acquire capital stock of the Borrower.
CONVERTIBLE
PROMISSORY NOTE
$2,000,000 Xxxxxx Science Corporation
November 3, 1997
FOR VALUE RECEIVED, the undersigned, Xxxxxx Science Corporation,
with a principal place of business at 00 Xxxx 00xx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("Maker"), hereby promises to pay
to the order of Mr. Ming-Sum Xxxxx whose address is Xxxx X, 00/X,
Xxxxx X, Xxxxx Xxxxx, 19 Xxxxx Path, Homantin, Kowloon, Hong Kong
("Holder"), the sum of two million (U.S. $2,000,000) Dollars
together with interest on the unpaid principal amount from time
to time outstanding at a rate per annum equal to twelve (12%)
percent. Interest shall be payable monthly in arrears,
commencing November 15, 1997. The entire balance of principal,
accrued but unpaid interest, and other fees and charges shall be
due and payable on the earlier of (1) one hundred eighty (180)
days from the date hereof (the "Maturity Date") or (2) the
occurrence of an Event of Default, as defined below.
1. Interest. Interest and fees shall be calculated on the
basis of a 360-day year times the actual number of days elapsed.
In no event shall interest payable hereunder exceed the highest
rate permitted by applicable law. To the extent any interest
received by Holder exceeds the maximum amount permitted, such
payment shall be credited to principal, and any excess remaining
after full payment of principal shall be refunded to Maker.
2. Prepayment/Default Penalties. The principal balance of
this note may be paid at any time without penalty. Upon the
occurrence of an Event of Default and until such Event of Default
has been cured, the Holder shall be entitled to receive the
following penalty payments (in addition to regular interest
payments): (1) payment in cash, computed on a daily basis, at a
rate per annum equal to twelve (12%) percent of outstanding
principal and accrued interest and (2) 10,000 shares of Common
Stock of Maker (the "Default Shares") for each thirty (30) day
period, or any part thereof, during which there exists an Event
of Default. In the event the Lender is entitled to Default
Shares hereunder, Zhi-Xxxx Xx, President of Maker, shall, subject
to the terms hereof, transfer the Default Shares to the Lender.
In order to satisfy any obligation to the Lender hereunder or
under the Guaranty Agreement between Xx. Xx and Lender of even
date herewith, Xx. Xx has delivered an aggregate of 400,000
shares of Convertible Preferred Stock of Maker standing in his
name to Brown, Rudnick, Freed & Gesmer, Counselors at Law, as
escrow agent (the "Escrow Agent") to be held pursuant to that
certain Escrow Agreement between Escrow Agent, Xx. Xx, and Lender
of even date ("Escrow Agreement").
3. Costs and Expenses. Maker agrees to pay all costs and
expenses, including, without limitation, reasonable attorneys'
fees and expenses incurred, or which may be incurred, by Holder
in connection with the enforcement and collection of this Note
and any other agreements, instruments and documents executed in
connection herewith.
4. Waivers. Maker and all guarantors and endorsers hereby
waive presentment, demand, notice, protest, and all other demands
and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, and assent to
extensions of the time of payment or forbearance or other
indulgence without notice. No delay or omission of Holder in
exercising any right or remedy hereunder shall constitute a
waiver of any such right or remedy. A waiver on one occasion
shall not operate as a bar to or waiver of any such right or
remedy on any future occasion.
5. Events of Default. The entire unpaid principal and
interest balance shall, at the option of the Holder, become
immediately due and payable, without notice or demand, upon the
occurrence of any of the following events (an "Event of
Default"):
(i) failure to make any payment herein provided within
five (5) days of the due date.
(ii) the making of an assignment for the benefit of
creditors, trust mortgage, or composition with
creditors or other arrangement of similar import by the
Maker or any guarantor or endorser of this Note; the
commencement of any voluntary proceedings under any
bankruptcy or insolvency law, now or hereafter enacted,
by the Maker or any guarantor or endorser; the
commencement of any involuntary proceedings under any
bankruptcy or insolvency laws now or hereafter enacted
which are not discharged within 60 days after the
filing thereof, by or against the Maker or any
guarantor or endorser of the undersigned.
(iii) All payments due hereunder shall be made at
the address of the Holder as set forth below, or at
such other place as the Holder may designate from time
to time in writing.
6. [RESERVED].
7. Convertibility of Note. At any time after the Maturity
Date and prior to repayment in full of all amounts due hereunder,
the original principal amount of this Note (and all accrued but
unpaid interest thereon and any costs and expenses payable
hereunder) shall at the option of the Holder be convertible into
that number of fully-paid nonassessable shares of Common Stock of
the Maker (the "Shares") equal to the quotient of (i) the
original principal amount of this Note (and all accrued but
unpaid interest thereon and any costs and expenses payable
hereunder) and (ii) fifty percent (50%) of the average closing
bid price of the Common Stock, as quoted on the National
Association of Securities Dealers Inc.'s OTC Bulletin Board,
during the five (5) trading days immediately preceding the date
of conversion (the "Conversion Price").
8. Conversion of Note. Subject to Section 7, the
conversion rights represented by this Note may be exercised in
whole, but not in part, by the surrender of this Note and the
duly executed Notice of Conversion (the form of which is attached
as Exhibit A) at the principal office of the Maker. Upon
conversion, the Holder shall be entitled to receive, within a
reasonable time, a certificate or certificates, issued in the
Holder's name or in such name or names as the Holder may direct,
for the number of Shares so acquired. The Shares so acquired
shall be deemed to be issued as of the close of business on the
date on which this Note shall have been converted. Subsequent to
the conversion of this Note, the penalty provisions of paragraph
2 of this Note shall no longer be applicable.
9. Shares to be Issued; Reservation of Shares. The Maker
covenants that the Shares issuable upon the conversion of this
Note will, upon issuance in accordance herewith, be fully paid
and non-assessable, and free from all liens and charges with
respect to the issue thereof. During the period within which the
conversion rights represented by the Note may be exercised, the
Maker will at all times have authorized and reserved, for the
purpose of issuance upon exercise of the conversion rights
represented by this Note, a sufficient number of shares of its
Common Stock to provide for the exercise of the conversion right
represented by this Note.
10. No Fractional Shares. No fractional shares shall be
issued upon the conversion of this Note. In lieu thereof, a cash
payment shall be made equal to such fraction multiplied by the
fair market value of such shares of Common Stock, as determined
in good faith by the Maker's Board of Directors.
11. Adjustments of Conversion Price and Number of Shares.
If there shall be any change in the Common Stock of the Maker
through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split or other change in the corporate
structure of the Maker, appropriate adjustments shall be made by
the Board of Directors of the Maker (or if the Maker is not the
surviving corporation in any such transaction, the Board of
Directors of the surviving corporation) in the aggregate number
and kind of shares subject to this Note, and the number and kind
of shares and the price per share then applicable to shares
covered by this Note.
12. No Rights as Shareholders. This Note does not entitle
the Holder to any voting rights or other rights as a shareholder
of the Maker prior to conversion and surrender of this Note.
Notwithstanding the foregoing, the Maker agrees, upon the request
of the Holder, to transmit to the Holder such information,
documents and reports as are generally distributed to holders of
the capital stock of the Maker. Upon valid conversion and
surrender of this Note in accordance with the terms hereof, the
Holder or the Holder's designee, as the case may be, shall be
deemed a shareholder of the Maker.
13. Sale or Transfer of the Note and the Shares; Legend.
For purposes hereof, the "Shares" include the Default Shares (to
the extent "restricted" under Rule 144 of the Securities Act of
1933, as amended) and the shares issuable upon conversion of this
Note. The Note and the Shares shall not be sold or transferred
unless either (i) they first shall have been registered under the
Act and applicable State Securities laws, or (ii) such sale or
transfer is exempt from the registration requirements of the Act
and applicable State Securities laws. Each certificate
representing any Shares shall bear a legend substantially in the
following form, as appropriate:
THE SHARES EVIDENCED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO UNDER APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EXEMPTION UNDER APPLICABLE STATE SECURITIES LAWS.
Such Shares may be subject to additional restrictions on transfer
imposed under applicable state and federal securities law.
14. Modifications and Waivers. This Note may not be
changed, waived, discharged or terminated except by an instrument
in writing signed by the party against which enforcement of the
same is sought.
15. Notices. Any notice, request or other document
required or permitted to be given or delivered to the Holder or
the Maker shall be delivered, or shall be sent by certified or
registered mail, postage prepaid, to the Holder at its address
shown on the books of the Maker or in the case of the Maker, at
the address indicated above, or, if different, at the principal
office of the Maker.
16. Loss, Theft, Destruction or Mutilation of Note. The
Maker covenants with the Holder that upon its receipt of evidence
reasonably satisfactory to the Maker of the loss, theft,
destruction or mutilation of this Note or any stock certificate
and, in the case of any such loss, theft or destruction, and upon
surrender and cancellation of this Note or stock certificate, if
mutilated, the Maker will make and deliver a new Note or stock
certificate, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Note or stock certificate.
17. Representations and Warranties of Holder. By accepting
this Note, the Holder represents and warrants that he, she or it
is acquiring this Note and the Shares for his, her or its own
account, for investment and not with a view to, or for sale in
connection with, any distribution thereof or any part thereof.
Holder represents and warrants that he, she or it (a) is an
"accredited investor" as defined in Appendix A hereto (only
applicable to U.S. residents), (b) is experienced in the
evaluation of businesses similar to the Maker, (c) has such
knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of an investment in
the Maker, (d) has the ability to bear the economic risks of an
investment in the Maker, and (e) has been afforded the
opportunity to ask questions of and to receive answers from the
officers of the Maker and to obtain any additional information
necessary to make an informed investment decision with respect to
an investment in the Maker.
18. Binding Effect on Successors. This Note shall be
binding upon any corporation succeeding the Maker by merger,
consolidation or acquisition of all or substantially all of the
Maker's assets, and all of the obligations of the Maker relating
to the Shares issuable upon conversion of this Note shall survive
the conversion and termination of this Note and all of the
covenants and agreements of the Maker shall inure to the benefit
of the successors and assigns of the Holder.
19. Governing Law. This Note shall be construed and
enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of New York, without regard
to the choice of law principals thereof.
IN WITNESS WHEREOF, XXXXXX SCIENCE CORPORATION has caused
this Note to be executed by its officer thereunto duly
authorized.
ORIGINAL ISSUANCE DATE: As of November 3,1997
WITNESS: XXXXXX SCIENCE CORPORATION
/s/ Xxxxxx Xxx By:/s/ Zhi-Xxxx Xx
Name: Xxxxxx Xxx Zhi-Xxxx Xx, President,
Address: Xxxxx Xxxxx, XX 00000 duly authorized
/s/ Zhi-Xxxx Xx
Zhi-Xxxx Xx, individually, only
with respect to Paragraph 2
hereof.
NOTARIZATION
County: New York
State: New York
On this 3rd day of November, 1997, before me personally
appeared Zhi Xxxx Xx, to me known to be the person described in
and who executed the foregoing instrument, and acknowledged that
he executed the same as his free act and deed.
/s/ Xxxxx Xxxxxxx
Notary Public
My Commission Expires:
Notary Public, State of New York
No. 00-0000000
Commission Expires Nov. 30, 1997
EXHIBIT A
NOTICE OF CONVERSION
To: XXXXXX SCIENCE CORPORATION
1. The undersigned hereby elects to convert the attached
Note into ___ shares of Common Stock of XXXXXX SCIENCE
CORPORATION pursuant to the terms of the attached Note, and
tenders herewith the Note for cancellation.
2. Please issue a certificate or certificates representing
said shares in the name of the undersigned or in such other name
or names as are specified below.
3. The undersigned represents that the aforesaid shares of
Common Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale
in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling
such shares. The undersigned further represents that such shares
shall not be sold or transferred unless either (i) they first
shall have been registered under applicable state securities laws
or (ii) or an exemption from applicable state registration
requirements is available.
_____________________
(Name)
_____________________
(Address)
_____________________
(Signature)
_____________________
(Date)
APPENDIX A
[For U.S. Residents Only]
An "Accredited Investor" within the meaning of Regulation D under
the Securities Act of 1933 includes the following:
Organizations
(1) A bank as defined in section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in
section 3(a)(5)(A) of the Act, whether acting in its individual
or fiduciary capacity; a broker or dealer registered pursuant to
section 15 of the Securities Exchange Act of 1934; insurance
company as defined in section 2(13) of the Act; an investment
company registered under the Investment Company Act of 1940 or a
business development company as defined in section 2(a)(48) of
that act; a Small Business Investment Company licensed by the
U.S. Small Business Administration under section 301 (c) or (d)
of the Small Business Investment Act of 1958; an employee benefit
plan within the meaning of Title I of the Employee Retirement
Income Security Act of 1974, if the investment decision is made
by a plan fiduciary, as defined in section 3(21) of such act,
which is either a bank, savings and loan association, insurance
company, or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by
persons that are accredited investors.
(2) A private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000,
(ii) not formed for the specific purpose of acquiring the
Securities, (iii) whose purchase is directed by a person who,
either alone or with his purchaser representative, has such
knowledge and experience in financial and business matters that
he is capable of evaluating the merits and risks of the proposed
investment.
(4) A corporation, business trust, partnership, or an
organization described in section 501 (c)(3) of the Internal
Revenue Code, which was not formed for the specific purpose of
acquiring the Securities, and which has total assets in excess of
$5,000,000.
Individuals
(5) Individuals with income from all sources for each of
the last two full calendar years whose reasonably expected income
for this calendar year exceeds either of:
(i) $200,000 individual income; or
(ii) $300,000 joint income with spouse.
NOTE: Your "income" for a particular year may be calculated
by adding to your adjusted gross income as calculated for Federal
income tax purposes any deduction for long term capital gains,
any deduction for depletion allowance, any exclusion for tax
exempt interest and any losses of a partnership allocated to you
as a partner.
(6) Individuals with net worth as of the date hereof
(individually or jointly with your spouse), including the value
of home, furnishings, and automobiles, in excess of $1,000,000.
(7) Directors, executive officers or general partners of
the Issuer.
ESCROW AGREEMENT
ESCROW AGREEMENT dated as of November __, 1997 among
Zhi-Xxxx Xx, an individual whose address is c/x Xxxxxx Science
Corporation, 00 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000 ("Xx. Xx"), Xx. Xxxx-Sum Xxxxx, an individual whose
address is Xxxx X, 00/X, Xxxxx X, Xxxxx Xxxxx, 19 Xxxxx Path,
Homantin, Kowloon, Hong Kong, Xxxxxx Science Corporation, whose
address is 00 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000
(the "Borrower") and Brown, Rudnick, Freed & Gesmer, P.C.
("Escrow Agent").
WHEREAS, Borrower, of which Xx. Xx is President and a
principal stockholder, has entered into a Loan and Security
Agreement of even date herewith with Lender ("Loan Agreement")
and has issued Lender a Convertible Promissory Note of even date
("Note"), related to certain loans and extensions of credit
provided by Lender to the Borrower under the terms and conditions
set forth in the Loan Agreement (the Loan Agreement and the Note
are hereafter collectively referred to as the "Loan Documents");
WHEREAS, Xx. Xx has guaranteed the obligations of the
Borrower to the Lender under the Loan Documents pursuant to a
Guaranty Agreement of even date between Xx. Xx and Lender (the
"Guaranty Agreement");
WHEREAS, in order to secure Xx. Xx'x obligations under the
Guaranty Agreement and Loan Documents to each Lender, Xx. Xx has
executed a Stock Pledge Agreement, of even date, in favor of
Lender, pursuant to which Xx. Xx has pledged capital stock of the
Borrower (the "Pledged Shares");
WHEREAS, the parties desire that the Escrow Agent hold the
Pledged Shares in escrow in accordance with the terms hereof;
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Borrower, Lender and Xx. Xx hereby designate and
appoint Escrow Agent as the escrow agent for the purposes set
forth herein, and hereby authorize and direct the Escrow Agent to
hold the number of shares of Convertible Preferred Stock of the
Borrower (along with executed blank stock powers) specified on
Schedule I hereto (the "Shares"), pursuant to the terms set forth
herein.
2. The terms of this Escrow Agreement may be altered,
amended, modified or revoked only by the written consent of
Borrower, Lender, Xx. Xx and the Escrow Agent.
3. Escrow Agent shall only disburse the Shares in
accordance with written instructions, in form and substance
satisfactory to Escrow Agent, jointly executed by Xx. Xx and
Lender.
4. In the event that a dispute arises among the parties
involving any responsibility of the Escrow Agent hereunder,
Escrow Agent shall continue to hold the Shares until it has been
furnished with a statement in writing jointly signed by both
Lender and Xx. Xx, instructing Escrow Agent as to the manner in
which it is to dispose of the Shares. Upon receiving such
statement, Escrow Agent shall dispose of the Shares pursuant to
such statement and Borrower, Lender and Xx. Xx agree to hold
Escrow Agent harmless from any liability or responsibility
therefor. In the event that Escrow Agent is made a party, in
respect to the Shares or any of its responsibilities hereunder,
to any court action or arbitration proceedings, Escrow Agent
shall make no disposition of the Shares, except as required by a
court of competent jurisdiction, or by such arbitrators, and
Borrower, Lender and Xx. Xx shall hold Escrow Agent harmless from
and on account of any expenses which Escrow Agent may incur or
become liable to pay because of any such proceedings and the
holding of the Shares. In the event of a dispute as to the
disposition of any of the escrowed documents, Escrow Agent may
apply to any court of competent jurisdiction for a determination
of the rights of the parties with respect thereto, and shall be
relieved of any further liability on account hereof.
5. Escrow Agent assumes no obligation or responsibility
hereunder other than to make delivery of the Shares as provided
above. Escrow Agent shall not be bound by any agreement or
contract not expressly referenced herein, regardless of whether
Escrow Agent has knowledge thereof. Borrower, Lender and Xx. Xx
jointly and severally agree to assume liability for and do hereby
agree to indemnify, protect, save and hold harmless Escrow Agent
from and against any and all liabilities, obligations, losses,
damages, claims, actions, suits, costs and expenses of whatever
kind and nature, including attorneys' fees, imposed upon,
incurred by or asserted against Escrow Agent in any way related
to or arising out of this Escrow Agreement.
6. It is expressly understood by all parties that Brown,
Rudnick, Freed & Gesmer, P.C. acts as counsel to Borrower, and
that neither anything contained in this Escrow Agreement nor
Escrow Agent's execution hereof, shall in any way affect or
require termination of such representation of Borrower.
7. If the Escrow Agent reasonably requires other or
further instruments in connection with this Escrow Agreement or
obligations in respect hereto, the necessary parties hereto shall
join in furnishing such instruments.
8. Any notice required or permitted hereunder shall be
given in writing by registered or certified mail, at the
addresses set forth below.
9. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts. Unless otherwise defined herein,
all capitalized terms used herein shall have the meanings
ascribed to them in the Loan Agreement.
EXECUTED as an instrument under seal as of the date first
above written.
XX. XX:
/s/ Zhi-Xxxx Xx
Zhi-Xxxx Xx
Notice Address:
c/x Xxxxxx Science Corporation
00 Xxxx 00xx Xxxxxx 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
BORROWER:
XXXXXX SCIENCE
CORPORATION
By: /s/ Zhi-Xxxx Xx
Zhi-Xxxx Xx, President
Notice Address:
00 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Zhi-Xxxx Xx, President
LENDER:
/s/ Ming-Sum Xxxxx
Mr. Ming-Sum Xxxxx
Notice Address:
Xxxx X, 00/X, Xxxxx X
Xxxxx Xxxxx
00 Xxxxx Xxxx
Xxxxxxxx, Xxxxxxx
Xxxx Xxxx
ESCROW AGENT:
BROWN, RUDNICK, FREED
& GESMER, P.C.
By: /s/ Xxxx X. Xxxxxxx, Xx.
Xxxx X. Xxxxxxx, Xx.
Notice Address:
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxx, Xx.
SCHEDULE I
400,000 shares of Convertible Preferred Stock of Xxxxxx Science
Corporation (along with blank stock powers, with signature
guaranteed).
GUARANTY AGREEMENT
W I T N E S S E T H:
WHEREAS, Xxxxxx Science Corporation ("Obligor"), a Nevada
corporation, is entering into a Loan and Security Agreement dated
the date hereof with Mr. Ming-Sum Xxxxx (the "Lender") pursuant
to which certain loans and other extensions of credit have been
and will be made by the Lender to Obligor (the "Loan and Security
Agreement") and, in connection therewith, is delivering to Lender
a Convertible Promissory Note dated the date hereof (the "Note");
WHEREAS, the undersigned, Zhi-Xxxx Xx (the "Guarantor"), is
a principal stockholder and an officer of Obligor;
WHEREAS, as a condition to entering into the Loan and
Security Agreement and the Note, and making advances thereunder,
the Lender has required that Guarantor guarantee the full and
prompt payment and performance of all obligations of Obligor to
Lender, including, without limitation, obligations respecting all
loans made under the Loan and Security Agreement and the Note
(the Loan and Security Agreement and the Note are hereinafter
collectively referred to as the "Loan Documents");
WHEREAS, to secure his obligations to the Lender hereunder,
the Guarantor has executed and delivered to the Lender a Stock
Pledge Agreement dated the date hereof under which he has pledged
shares of Borrower to Lender;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and in
consideration of any and all loans, advances, and extensions of
credit now or hereafter made or extended by Lender to, for the
account of or on behalf of Obligor pursuant to and under the Loan
Documents and as an inducement for the Lender to make future
loans, advances and extensions of credit to Obligor, Guarantor
hereby unconditionally and absolutely guarantees to Lender the
full and prompt payment and performance by Obligor of all
obligations which Obligor now or hereafter may have to Lender,
whether now existing or hereafter arising, including without
limitation, all obligations which Obligor may now or hereafter
have to Lender under the Loan Documents, as the same may be
amended, extended, modified or renewed and the full and prompt
payment when due, subject to any applicable grace period, of all
principal, interest, charges and all other sums which Obligor may
now or hereafter owe to Lender arising under the Loan Documents
howsoever evidenced, whether secured or unsecured, and hereby
agrees to indemnify Lender against any losses Lender may sustain
and any expenses it may incur as a result of any default by
Obligor under the Loan Documents, or as a result of the
occurrence of any Event of Default under or as defined in the
Loan Documents, and/or as the result of the enforcement or
attempted enforcement by, or on behalf of, the Lender of any of
its rights against the Guarantor hereunder.
This Guaranty is a continuing, unconditional and absolute
guaranty of payment and performance. The obligations of the
Guarantor hereunder are primary, with no recourse necessary by
Lender against the Obligor or any collateral given to secure the
obligations guaranteed hereby prior to proceeding against the
Guarantor hereunder. If for any reason any installment or any
other sum or indebtedness now or hereafter owing by Obligor to
Lender under the Loan Documents shall not be paid promptly when
due, after the expiration of any applicable cure period,
Guarantor will forthwith pay such sum to Lender, without regard
to any counterclaim, set-off, deduction or defense of any kind
which Obligor or Guarantor may have or assert, and without
abatement, suspension, deferment or reduction on account of any
occurrence whatsoever. The Guarantor hereby waives notice of and
consents to all of the provisions of the Loan Documents, to any
amendments thereof, to any actions taken thereunder, and to the
execution by Obligor of the Loan Documents and of any other
agreements, documents and instruments now or hereafter executed
by Obligor in connection therewith. The Guarantor further waives
the following: notice of incurring of indebtedness and
obligations by Obligor; acceptance of this Guaranty by Lender;
presentment and demand for payment, protest, notice of protest
and notice of dishonor or non-payment of any instrument
evidencing the indebtedness or obligations to Obligor; any right
to require suit against Obligor or any other party before
enforcing this Guaranty; any right to have security applied
before enforcing this Guaranty; any right of subrogation to
Lender's rights against Obligor until Obligor's indebtedness and
obligations to Lender are paid in full; all defenses which might
constitute a legal or equitable discharge of a surety or
guarantor; and all other notices and demands otherwise required
by law which the Guarantor may lawfully waive. Guarantor agrees
that in the event this Guaranty is enforced by suit or otherwise,
Guarantor will reimburse Lender upon demand for all expenses
incurred in connection therewith, including without limitation,
reasonable attorneys' fees and expenses.
Guarantor's obligations hereunder shall not be released,
discharged, terminated or impaired in any manner whatsoever,
irrespective of the lack of any notice to or consent of the
Guarantor, by any of the following: (a) new agreements or
obligations of Obligor with or to Lender; (b) amendments,
indulgences, extensions, modifications, renewals or waivers of
default as to any existing or future agreements or obligations of
Obligor or third parties with or to Lender, or extensions of
credit by Lender to Obligor; (c) adjustments, compromises or
releases of any obligations of Obligor, Guarantor or other
parties, including any other guarantors, or exchanges, releases,
dispositions or sales of any security of Obligor, Guarantor or
other parties, including any other guarantors; (d) invalidity,
irregularity, defect, or unenforceability, for any reason, of any
provision of any of the Loan Documents, or of any instrument or
writing, or of any security or other guaranty, or acts or
omissions by Lender or Obligor; (e) failure to perfect any lien
securing the obligations of Obligor, Guarantor or other parties,
including any other guarantors; (f) interruptions in the business
relations between Lender and Obligor; (g) voluntary or
involuntary bankruptcy (including a reorganization in bankruptcy)
of Obligor or entry of an order for relief against or with
respect to the Obligor under Title 11 of the United States Code;
(h) composition, extension, moratoria or other forms of debtor
relief granted to Obligor pursuant to law presently in force or
hereafter enacted; (i) payment of any or all obligations and
indebtedness of Obligor in the event such payment is invalidated
or avoided by a trustee, custodian or receiver of Obligor; j) the
dissolution of Obligor; and (k) the reorganization, merger or
consolidation of Obligor into or with another entity, corporate
or otherwise, or the sale or disposition of all or substantially
all of the capital stock, business or assets of Obligor to any
other person or party.
For the purposes of this Guaranty and indemnity, all sums
owing to Lender by Obligor shall be deemed at Lender's election,
and without notice, to have become immediately due and payable if
Obligor defaults in any of its obligations or indebtedness to
Lender after expiration of any applicable cure period, or if
there shall occur an Event of Default as defined in any of the
Loan Documents, and the Guarantor shall thereupon promptly pay
Lender the entire amount of said indebtedness and obligations of
Obligor, and Lender shall, after the expiration of any applicable
cure period, be entitled to take any action deemed necessary or
advisable to enforce this Guaranty, including, without
limitation, the enjoining of any breach or threatened breach of
this paragraph.
Guarantor represents to Lender that after giving effect to
this Guaranty and the transactions contemplated by the Loan
Documents (and after taking into account all recoveries Lender is
likely to realize from Obligor on Obligor's obligations to
Lender): (i) the aggregate value of all of the assets and
properties of the Guarantor, at a fair valuation, will be greater
than the total amount which Guarantor is likely to be actually
required to pay on claims, including contingent claims; (ii) the
aggregate present fair saleable value of Guarantor's assets will
be greater than the amount that will be required to pay
Guarantor's probable liability on debts, including contingent
liabilities, as they become absolute and mature; (iii) Guarantor
has (and has no reason to believe that he will not have)
sufficient capital for the conduct of his business; and (iv)
Guarantor does not intend to incur, and does not believe that he
has incurred, debts beyond his ability to pay as they mature.
For purposes of any action or proceeding involving this
Guaranty or the Agreements or any other agreement or document
referred to therein, Guarantor hereby expressly submits to the
jurisdiction of all federal and state courts located in the State
of New York and consents that any order, process, notice of
motion or other application to or by any of said courts or a
judge thereof may be served within or without such court's
jurisdiction by registered mail or by personal service.
GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES (TO THE EXTENT PERMITTED BY APPLICABLE LAW) (I) ANY RIGHT
HE MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR
RELATING TO THIS GUARANTY OR THE AGREEMENTS AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY
AND (II) ANY RIGHT TO CONTEST THE APPROPRIATENESS OF ANY ACTION
BROUGHT IN ANY COURT WITHIN THE JURISDICTION MENTIONED IN THE
PRECEDING PARAGRAPH BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE AND FORUM NON CONVENIENS.
This Guaranty and all terms and conditions hereof shall be
binding upon Guarantor, its successors and assigns, and shall
inure to the benefit of Lender and its successors and assigns.
Legal rights and obligations hereunder shall be governed by and
construed in accordance with the laws of the State of New York.
Wherever the context so requires herein, the singular number
includes the plural, and the plural number includes the singular.
IN WITNESS WHEREOF, Guarantor has executed this instrument
and is effective as of the 3rd day of November, 1997.
WITNESS:
/s/ Xxxxxx Xxx /s/ Zhi-Xxxx Xx
Name: Xxxxxx Xxx Zhi-Xxxx Xx
Address: X0 Xxxxxxxx Xx
Xxxxx Xxxxx, XX 00000
COUNTY: NY
STATE: NY
On this 3rd day of November, 1997, before me personally
appeared Zhi-Xxxx Xx, to me known to be the person described in
and who executed the foregoing instrument, and acknowledged that
he executed the same as his free act and deed.
/s/ Xxxxx Xxxxxxx
Name Xxxxx Xxxxxxx
Notary Public State of New York
No. 00-0000000
Qualified in New York County
Commission Expires Nov. 30, 1997
STOCK PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of November 3, 1997, made by
Zhi-Xxxx Xx, an individual whose address is c/x Xxxxxx Science
Corporation, 00 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000 (the "Stockholder"), in favor of Mr. Ming-Sum Xxxxx (the
"Lender ").
WHEREAS, Xxxxxx Science Corporation ("Obligor"), a Nevada
corporation, is entering into a Loan and Security Agreement dated
as of the date hereof with Lender pursuant to which Lender is
extending credit to Obligor (the "Agreement"), as evidenced by
that certain Convertible Promissory Note (the "Note") dated as of
the date hereof in favor of the Lender;
WHEREAS, the Stockholder has executed and delivered to the
Lender a Guaranty Agreement (the "Guaranty Agreement"), dated as
of the date hereof, pursuant to which the Stockholder has
guaranteed the obligations of the Obligor to the Lender under the
Agreement and the Note;
WHEREAS, the Stockholder owns those shares of capital stock
of Obligor identified on Exhibit I hereto which are pledged to
Lender hereunder;
WHEREAS, the pledge hereunder is intended to secure the
performance of the Stockholder's obligations to the Lender under
the Guaranty Agreement;
WHEREAS, as a condition to the Lender entering into the
Agreement and accepting the Note, and in consideration of all
extensions of credit made and which may in the future be provided
to Obligor by Lender, the Stockholder has agreed to execute and
deliver the Guaranty Agreement and this Pledge Agreement;
NOW, THEREFORE, in consideration of these premises and for
other good and valuable consideration, the receipt of which is
hereby acknowledged, the Stockholder hereby agrees for the
benefit of the Lender as follows:
1. Defined Terms. Unless otherwise defined herein, the
following terms shall have the respective meanings set forth
below:
"Collateral" has the meaning specified in Section 2
hereof.
"Event of Default" shall mean failure to pay or perform
any of the Obligations when due, or an Event of Default
under the Agreement or the Note.
"Pledge Agreement" shall mean this Pledge Agreement, as
it may be amended, supplemented or otherwise modified.
"Obligations" shall mean (i) the prompt and complete
payment and performance when due of all of the Stockholder's
obligations under the Guaranty Agreement and the other
instruments and documents relating to or evidencing
obligations of Guarantor to Lender, whether as guarantor or
otherwise (collectively, the "Credit Documents"); (ii) the
prompt and complete payment and performance when due of any
and all other indebtedness, liabilities and obligations of
the Stockholder to the Lender, now existing or hereafter
incurred, direct or indirect, absolute or contingent,
secured or unsecured, matured or unmatured, joint or
several, liquidated or unliquidated.
"Pledged Stock" shall mean all of the shares of capital
stock of Xxxxxx Science Corporation listed on Exhibit I
hereto and any stock, options or rights received by the
Stockholder and subject to Section 3 hereof.
2. Pledge. The Stockholder hereby (a) pledges,
hypothecates, assigns and transfers to Brown, Rudnick, Freed &
Gesmer, Counselors at Law, as escrow agent ("Escrow Agent"), all
of the Pledged Stock to be held by Escrow Agent subject to the
terms of that certain Escrow Agreement dated the date hereof
between Lender, Stockholder and Escrow Agent ("Escrow
Agreement"), and hereby grants to the Lender a lien on, and
security interest in, the Pledged Stock and all proceeds thereof
(which shall be a first lien) and (b) delivers to Escrow Agent
the stock certificates evidencing the Pledged Stock identified on
Exhibit I hereto, together with appropriate undated stock powers
duly executed in blank, all as collateral security for the
payment and performance of the Obligations. All property at any
time pledged to the Lender hereunder (whether described herein or
not) and all income therefrom and proceeds thereof are herein
sometimes collectively called the "Collateral".
3. Dividends, Distributions, etc. If, while this Pledge
Agreement is in effect, the Stockholder becomes entitled to
receive or receives any stock certificate (including, without
limitation, any certificate representing a stock dividend or a
distribution in connection with any reclassification, increase or
reduction of capital or issued in connection with any
reorganization), option or rights, whether as an addition to, in
substitution of, or in exchange for, any shares of Pledged Stock
or otherwise, the Stockholder agrees to accept the same as agent
for the Lender, to hold the same in trust on behalf of and for
the benefit of the Lender and to deliver the same forthwith to
the Escrow Agent in the exact form received, with the endorsement
of the Stockholder when necessary and/or appropriate undated
stock or other powers duly executed in blank, to be held by the
Escrow Agent, subject to the terms of the Escrow Agreement, as
additional collateral security for the Obligations. Any sums
paid on or in respect of the Pledged Stock on the liquidation or
dissolution of the issuer thereof shall be paid over to the
Escrow Agent, to be held by the Escrow Agent, subject to the
terms and conditions of the Escrow Agreement, as additional
collateral security for the Obligations; and if any cash
dividends or any other distribution is made on or in respect of
the Pledged Stock or any property is distributed on or with
respect to the Pledged Stock, the cash or other property so
distributed shall be delivered to the Escrow Agent, to be held by
the Escrow Agent, subject to the terms and conditions of the
Escrow Agreement, as additional collateral security for the
Obligations. All sums of money and property so paid or
distributed in respect of the Pledged Stock that are received by
the Stockholder shall, until paid or delivered to the Escrow
Agent, be held by the Stockholder in trust as additional
collateral security for the Obligations.
1. Voting Rights. Prior to any sale of the Pledged Stock,
the Stockholder shall be entitled to vote the Pledged Stock and
to give consents, waivers and ratifications in respect thereof.
2. Rights of the Lender. The Lender shall not be liable
for failure to collect or realize upon the Obligations or any
collateral security or guaranty thereof, or any part thereof, or
for any delay in so doing, nor shall Lender be under any
obligation to take any action whatsoever with regards thereto.
Any or all shares of the Pledged Stock held by the Escrow Agent
hereunder may, if an Event of Default has occurred and is
continuing, and upon written notice by the Lender, be registered
in the name of the Lender or its nominee, for the benefit of the
Lender, and the Lender or its nominee may at any time thereafter,
without notice, exercise all voting and corporate rights of any
issuer of any and all rights of conversion, exchange,
subscription or any other rights, privileges or options
pertaining to any shares of the Pledged Stock as if the Lender
were the absolute owner thereof, including (without limitation)
the right to exchange, at its discretion, any and all of the
Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other readjustment of any issuer of any such
shares or upon the exercise by any such issuer or the Lender of
any right, privilege or option pertaining to any shares of the
Pledged Stock and, in connection therewith, to deposit and
deliver any and all of the Pledged Stock with any committee,
depository, transfer agent, registrar or other designated agency
on such terms and conditions as the Lender may determine, all
without liability except to account for property actually
received by it, but the Lender shall have no duty to exercise any
of the aforesaid rights, privileges or options and shall not be
responsible for any failure to do so or delay in so doing.
3. Unconditional Obligations. The obligations and
liabilities of the Stockholder hereunder shall not be conditioned
or contingent upon the pursuit by the Lender or any other person
at any time of any right or remedy against any other person that
may be or become liable in respect of all or any part of the
Obligations or against any collateral security or guaranty
therefor or right of offset with respect thereto. This Pledge
Agreement shall remain in full force and effect and be binding in
accordance with and to the extent of its terms upon the
Stockholder until all of the Obligations have been fully
satisfied and the Stockholder shall be free from any present or
future obligations under the Credit Documents.
4. Performance by Lender of Stockholder's Obligations. If
the Stockholder fails to perform or comply with any of its
agreements contained herein and the Lender, as provided for by
the terms of this Pledge Agreement, itself performs or complies,
or otherwise causes performance or compliance, with such
agreement, the reasonable expenses of the Lender incurred in
connection with such performance or compliance shall be borne and
paid by the Stockholder on demand and until so paid shall be
added to the principal amount of the Obligations and shall bear
interest (calculated on the basis of a 360-day year for the
actual days elapsed) from the date incurred until paid at the
highest rate applicable to any of the Obligations.
5. Remedies. If an Event of Default has occurred and is
continuing, then, and in any such event, the Lender may exercise,
in addition to all other rights and remedies granted to it in
this Pledge Agreement and in any other Credit Document, all
rights and remedies of a Lender under the Uniform Commercial Code
or other applicable law. Without limiting the generality of the
foregoing, the Stockholder expressly agrees that in any such
event, the Lender, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified
below of time and place of public or private sale) to or on the
Stockholder or any other person (all and each of which demands,
advertisements and/or notices are hereby expressly waived,
forthwith collect, receive, appropriate and realize on the
Collateral, or any part thereof, and forthwith sell, assign, give
option or options to purchase, contract to sell or otherwise
dispose of and deliver the Collateral, or any part thereof, in
one or more units, parcels, or lots at one or more public or
private sales, at any exchange or broker's board or at any of the
Lender's offices or elsewhere, on such terms and conditions as it
may deem advisable and at such prices as it may deem appropriate,
for cash or on credit or for future delivery without assumption
of any credit risk, with the right to the Lender upon any such
sale or sales, public or private, to purchase the whole or any
part of said Collateral so sold. Any purchaser at any such sale
or sales shall acquire the property sold absolutely free from any
claim or right on the part of Stockholder, and Stockholder hereby
waives (to the extent permitted by applicable law) all rights,
redemptions, stays and appraisal rights which Stockholder now
has, or may at any time in the future have, under any rule of law
or statute now existing or hereafter enacted. The net proceeds
of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and
expenses of every kind incurred therein or incidental to the
care, safekeeping or otherwise of any and all of the Collateral
or in any way relating to the rights of the Lender hereunder,
including reasonable attorneys' fees and legal expenses, shall be
applied to the payment of the Obligations in such order as the
Lender may determine, and, after all of the Obligations have been
paid in full and after payment of any other amount required by
any provision of law, including (without limitation) Section
9-504(l)(c) of the Uniform Commercial Code, the balance (if any)
of such proceeds shall be remitted to the Stockholder or as
otherwise required by a court of competent jurisdiction. To the
extent permitted by applicable law, the Stockholder waives all
claims, damages and demands against the Lender arising out of the
retention or sale of the Collateral unless resulting from such
Lender's willful misconduct. The Stockholder agrees that the
Lender need not give more than ten (10) days' notice (which
notice shall be deemed given on the earlier of mailing or
receipt) of the time and place of any public sale or of the time
after which a private sale or other intended disposition is to
take place and that such notice is reasonable notification of
such matters. No notification need be given to the Stockholder
if it has signed after default a statement renouncing or
modifying any right to notification of sale or other intended
disposition. The Lender may, without notice or publication,
adjourn any public or private sale, or cause such sale to be
adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be
made at the time and place to which such sale is so adjourned.
Stockholder shall remain liable for any deficiency if the net
proceeds of any sale or disposition of the Collateral are
insufficient to pay all Obligations.
6. Representations and Warranties. The Stockholder
represents and warrants to the Lender that:
(a) the execution, delivery and performance of this
Pledge Agreement, and the granting of liens pursuant hereto,
and the Escrow Agreement have been duly authorized by all
requisite action on its part, and do not require the consent
of any party;
(b) this Pledge Agreement and the Escrow Agreement
have been duly executed and delivered by the Stockholder and
are legal, valid and binding obligations, enforceable
against the Stockholder in accordance with their respective
terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforceability of
creditors' rights generally or by general principles of
equity;
(c) the Stockholder is the record and beneficial owner
of, and has good and valid title to, the Pledged Stock
described on Exhibit I hereto, and it will be owner of, and
have such title to, all other Pledged Stock described in
Section 3 hereof owned by it subject to no lien whatsoever
(except the liens created hereby);
(d) all the shares of Pledged Stock described on
Exhibit I hereto have been, and all shares of Pledged Stock
described in Section 3 hereof will be, duly and validly
issued for good and valuable consideration and are, or will
be, fully paid and non-assessable; and
(e) the pledge, assignment and delivery of the Pledged
Stock described on Exhibit I hereto creates, and the
delivery of any Pledged Stock described in Section 3 hereof
will create, a valid lien on, and perfected security
interest in, such Pledged Stock and the proceeds thereof,
subject to no prior lien or option or any agreement
purporting to grant to any third party a prior lien on the
Stockholder's property or assets that would include such
Pledged Stock.
7. Covenants. The Stockholder covenants and agrees with
the Lender that so long as any Obligations are outstanding:
(a) it will, upon the Lender's written request, defend the
Secured Parties' right, title and first priority security
interest in and to the Pledged Stock and the proceeds
thereof against the claims and demands of all persons
whomsoever;
(b) it will have or obtain promptly good title (subject to
no lien whatsoever, except the liens created by this Pledge
Agreement) to and right to pledge any other property at any
time hereafter pledged to the Lender as collateral security
hereunder and will likewise defend the Lender's right and
title thereto and liens thereon;
(c) it will not sell, assign, transfer, exchange or
otherwise dispose of, or grant any option with respect to
any of the Collateral, nor will it create, incur or permit
to exist any lien with respect to any of the Collateral, any
interest therein or any proceeds thereof (except for the
liens created by this Pledge Agreement); and
(d) it will not vote to enable any issuer of any Pledged
Stock, and will not otherwise agree to permit any issuer of
any Pledged Stock, to merge or consolidate with, or into,
any other corporation or issue any stock or other securities
of any nature in addition to or in exchange or substitution
for any Pledged Stock.
8. Sale of Collateral.
(a) The Stockholder recognizes that the Lender may be
unable to effect a public sale of any or all of the Pledged
Stock by reason of certain prohibitions contained in the
Securities Act and applicable state securities laws and may
be compelled to resort to one or more private sales thereof
to a restricted group of purchasers who will be obliged to
agree, among other things, to acquire such securities for
their own accounts for investment and not with a view to the
distribution or resale thereof. The Stockholder
acknowledges and agrees that any such private sale may
result in prices and other terms less favorable to the
seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that the private
(rather than public) nature of such sale shall be deemed to
be commercially reasonable. The Lender shall be under no
obligation to delay a sale of any of the Pledged Stock for
the period of time necessary to permit the issuer thereof to
register such securities for public sale under the
Securities Act or under applicable state securities laws,
even if such issuer would agree to do so.
(b) The Stockholder further agrees to do or cause to
be done all such other acts and things required to be done
by it to make such sale or sales of any portion or all of
the Pledged Stock valid and binding and in compliance with
any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts,
arbitrators or governmental instrumentalities, domestic or
foreign, having jurisdiction over any such sale or sales,
all at the Stockholder's expense. The Stockholder further
agrees that a breach of any of the covenants contained in
this Section 11 will cause irreparable injury to the Lender,
that the Lender has no adequate remedy at law in respect of
such breach and, as a consequence, agrees that each and
every covenant contained in this Section 11 shall be
specifically enforceable against the Stockholder, and the
Stockholder hereby waives (to the extent permitted by
applicable law) and agrees not to assert any defenses
against an action for specific performance of such covenants
except for a defense that no Event of Default has occurred.
9. Further Assurances. The Stockholder agrees that at any
time and from time to time, on the written request of the Lender,
the Stockholder will execute and deliver such further documents
and do such further acts and things as the Lender may reasonably
request in order to effectuate the purposes of this Pledge
Agreement.
10. Limitation on Lender's Duty in Respect of Collateral.
Beyond the safe custody thereof, the Lender shall not have any
duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of it or any income
thereon or as to the preservation of rights against prior parties
or any other rights pertaining thereto.
11. Notices. Except as otherwise specified herein, all
notices, requests, demands or other communications related to
this Pledge Agreement to or on the Stockholder or the Lender
shall be in writing (including teletransmissions), and shall be
given or made in accordance with the notice provisions set forth
in the Agreement.
12. Severability. Any provision of this Pledge Agreement
that is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
13. No Waiver, Cumulative Remedies. The Lender shall not
by any act, delay, omission or otherwise be deemed to have waived
any of its rights or remedies hereunder, and no waiver shall be
valid unless in writing, signed by the Lender, and then only to
the extent therein set forth. A waiver of any right or remedy
hereunder on any occasion shall not be construed as a bar to any
right or remedy that the Lender would otherwise have on any
future occasion. No failure to exercise nor any delay in
exercising, on the part of the Lender, any right, power or
privilege hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise of any right,
power or privilege hereunder or the exercise of any other right,
power or privilege. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
14. No Oral Modification, Successors, Governing Law. None
of the terms or provisions of this Pledge Agreement may be
waived, altered, modified or amended except by an instrument in
writing, duly executed by the Lender. This Pledge Agreement and
all obligations of the Stockholder hereunder shall be binding on
its successors and assigns and shall, together with the rights
and remedies of the Lender hereunder, inure to the benefit of the
Lender and its respective successors and assigns. This Pledge
Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York (United
States).
15. Submission to Jurisdiction, Waiver of Trial by Jury.
(a) For purposes of any action or proceeding involving
this Pledge Agreement or any other agreement or document
referred to herein, the Stockholder hereby expressly submits
to the jurisdiction of all federal and state courts located
in the State of New York (United States) and consents that
any order, process, notice of motion or other application to
or by any of said courts or a judge thereof may be served
within or without such court's jurisdiction by registered
mail or by personal service, provided a reasonable time for
appearance is allowed.
16. THE STOCKHOLDER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES (TO THE EXTENT PERMITTED BY APPLICABLE LAW)
(i) ANY RIGHT HE MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE
ARISING UNDER OR RELATING TO THIS PLEDGE AGREEMENT OR ANY OTHER
DOCUMENT OR AGREEMENT REFERRED TO HEREIN, AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY
and (ii) ANY RIGHT TO CONTEST THE APPROPRIATENESS OF ANY ACTION
BROUGHT WITHIN THE JURISDICTION MENTIONED IN PARAGRAPH (a) OF
THIS SECTION 18 BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS.
Fees and Expenses. Any and all reasonable fees, costs
and expenses of whatever kind or nature, including the reasonable
fees and legal expenses incurred by the Lender's counsel in
connection with the payment or discharge of any taxes, counsel
fees, maintenance fees, encumbrances or otherwise protecting,
maintaining or preserving the Collateral, or in defending or
prosecuting any actions or proceedings arising out of or related
to the Collateral, shall be borne and paid by the Stockholder on
demand and until so paid shall be added to the principal amount
of the Obligations and shall bear interest (calculated on the
basis of 360-day year for the actual days elapsed) from the date
incurred until paid at the highest rate applicable to any of the
Obligations.
17. Termination. This Agreement shall terminate when all
of the Obligor's obligations under the Agreement and the Note
have been fully paid, and all of the Obligations have been fully
paid, at which time Lender shall reassign and deliver to the
Stockholder the Collateral, or such part thereof as shall not
have been sold or otherwise applied by Lender pursuant to the
terms hereof, and shall still be held by Escrow Agent under the
Escrow Agreement, together with appropriate instruments of
reassignment. Any such reassignment shall be without recourse to
or warranty by Lender and at the expense of Stockholder.
18. Counterparts. This Pledge Agreement may be executed in
any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same
instrument.
19. Descriptive Headings. The captions in this Pledge
Agreement are for convenience of reference only and shall not
define or limit the provisions hereof.
IN WITNESS WHEREOF, the Stockholder has caused this Pledge
Agreement to be duly executed and delivered under seal as of the
date first written above.
WITNESS:
/s/Xxxxxx Xxx /s/ Zhi-Xxxx Xx
Xxxxxx Xxx Zhi-Xxxx Xx
COUNTY: __________NY_________________
STATE: _____________NY________________
On this ____ day of November, 1997, before me personally
appeared Zhi-Xxxx Xx, to me known to be the person described in
and who executed the foregoing instrument, and acknowledged that
he executed the same as his free act and deed.
Name
Notary Public
EXHIBIT I
PLEDGED STOCK
Issuer Class of Stock Number of Shares
Xxxxxx Science Convertible 400,000
Corporation Preferred Stock
