EXHIBIT 10.131
SECURITY AGREEMENT DATED AUGUST 8, 1996 BETWEEN NUOASIS
INTERNATIONAL INC. AND THE HARTCOURT COMPANIES INC.
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is executed as of this 8th day
of August, 1996, by The Hartcourt Companies, Inc., a Utah corporation
(hereinafter referred to as the "Debtor"), with its principal place of business
located at 00000 Xxxxx Xxxxxxx Xxxx., Xxxxxxx, Xxxxxxxxxx 00000, in favor of
NuOasis International Inc., a corporation organised under the laws of the
Commonwealth of the Bahamas, its successors and assigns (hereinafter referred to
as the "Secured Party").
WHEREAS, the following recitals of fact are a material part of this
Agreement; and,
WHEREAS, Secured Party is granting credit to Debtor pursuant to a
Convertible Secured Promissory Note (the "Note") dated of even date which is
required to be secured by the property described in Exhibit "A" to the Note (all
of which documents and instruments evidencing and/or securing indebtedness of
Debtor to Secured Party are collectively referred to herein, along with this
Agreement, as the "Security Documents"). Secured Party is unwilling to grant
credit to Debtor unless Debtor grants to Secured Party the security interest
granted herein according to the terms and conditions hereof.
1. In consideration of the granting of credit to Debtor by Secured Party,
Debtor hereby grants to Secured Party a security interest (hereinafter
referred to as the "Security Interest") in the property described on
Exhibit "A" attached hereto and made a part hereof, whether now owned
or hereafter acquired, including all proceeds and products thereof and
additions and accessions thereto (hereinafter referred to as the
"Collateral"). This Agreement and the rights hereby granted shall
secure the following (hereinafter collectively referred to as the
"Obligations"):
A. Principal and Interest. The principal amount of Borrower's
indebtedness to Secured Party with interest thereon as specified
in the Security Documents and any renewals, extensions or
modifications thereof; and
B. Expenses. The expense of all legal proceedings, including
attorneys' fees, brought by the Secured Party to enforce the Note
or this Agreement and all other costs and expenses paid or
incurred by the Secured Party in respect of or in connection with
the Collateral; and
C. Performance. The observance and performance by the Debtor of all
of the terms, provisions, covenants and obligations on its part
to be observed or performed under the Note and this Agreement;
and
D. Other. Any and all indebtedness, obligations and liabilities of
any kind and nature of the Debtor to Secured Party, direct or
indirect, absolute or contingent, due or to become due, now
existing or hereafter arising.
1
2. DEBTOR'S WARRANTIES, COVENANTS AND AGREEMENTS
Debtor hereby warrants, covenants and agrees that:
A. Purpose. The Collateral covered by this Agreement is used or purchased
for use primarily for business purposes. Although proceeds of
Collateral are covered by this Agreement, this shall not be construed
to mean that Secured Party consents to any sale of the Collateral,
except in ordinary course of business.
B. Transfer of Collateral Prohibited. Debtor will not, without obtaining
the prior written consent of Secured Party, transfer or permit any
transfer of the Collateral or any part thereof to be made, or any
interest therein to be created by way of a sale (except as permitted
above), or by way of a grant of a security interest, or by way of levy
or other judicial process.
C. Access and Inspection. Debtor will, at all reasonable times, allow
Secured Party or its representatives free and complete access to all
of the Debtor's records for such inspection and examination as Secured
Party deems necessary. Debtor shall also upon request of Secured Party
from time to time submit up-to-date schedules of the items comprising
the Collateral in such detail as Secured Party shall require.
D. Third Party Claims. Debtor at its cost and expense will protect and
defend this Agreement, all of the rights of Secured Party hereunder
and the Collateral against the claims and demands of all other
parties. Debtor will promptly notify Secured Party of any levy,
distraint or other seizure by legal process or otherwise of any part
of the Collateral, and of any threatened or filed claims or
proceedings that might in any way affect or impair any of the terms of
the Agreement.
E. Insurance. Debtor at its expense will obtain and maintain in force
insurance policies including fire and flood insurance, covering losses
or damage to the Collateral. The insurance policies to be obtained by
Debtor shall be in form and amounts acceptable to Secured Party.
Secured Party is hereby irrevocably appointed Debtor's attorney in
fact to endorse any check or draft that may be payable to the Debtor,
alone or jointly with other payees, so that the Secured Party may
collect the proceeds payable for any loss under such insurance. The
proceeds of such insurance, less any costs and expenses incurred or
paid by the Secured Party in the collection thereof, shall be applied
in Secured Party's sole discretion either toward the costs of the
repair or replacement of the items damaged or destroyed, or on account
of any sums secured hereby, whether or not then due or payable.
F. Notices. Debtor will give Secured Party immediate written notice of
any change in location of Debtor's place of business.
3. EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute and is
hereby defined to be an "Event of Default":
A. Breach of Security Agreement Any failure or neglect to observe or
perform any of the terms, provisions, promises, agreements or
covenants of this Agreement and the continuance of such failure or
neglect after notice thereof to the Debtor; or
2
B. Failure to Pay. Any failure of the Debtor to pay any amount of
principal and/or interest, or any other sum due under the Note within
ten (10) days following the date such amount became due and payable;
or
C. False Statements. Any warranty, representation or statement contained
in this Agreement or otherwise made or furnished to the Secured Party
by or on behalf of the Debtor shall be or shall prove to have been
false when made or furnished; or
D. Destruction or Demise of Collateral. Any loss, theft, substantial
damage, destruction of, or the attachment of an encumbrance to any of
the Collateral, or the voluntary or involuntary transfer of any of the
Collateral (and said Collateral is not immediately replaced, restored
or returned) or the transfer of possession thereof to anyone, or the
sale, creation of a security interest, lien, attachment, levy,
garnishment, distraint, or other process of, in or upon any of the
Collateral, and if such attachment or other similar process is not
bonded or released within thirty (30) days after levy.
E Breach of Conversion Rights. If the Debtor shall fail to honor the
Secured Party's conversion rights under the Note following thirty (30)
days prior notice to Debtor and following Secured Party's compliance
with all the procedures of Debtor for conversion and the failure of
Debtor to either tender the shares issuable upon conversion or to
notify Secured Party of additional third party requirements (i.e.
transfer agent) within said thirty (30) day period.
4. SECURED PARTY'S REMEDIES
Upon the occurrence of any Event of Default hereunder, Secured Party shall
have the following rights and remedies:
A. Acceleration and Possession. Secured Party may, at its option, declare
all or any part of the Obligations immediately due and payable and
Debtor shall on demand by Secured Party deliver the Collateral to the
Secured Party. Secured Party may, without further notice or demand and
without legal process, take possession of the Collateral wherever
found and, for this purpose, may enter upon any property occupied by
or in the control of Debtor.
B. All Remedies Available. Secured Party may pursue any legal remedy
available to collect all sums secured hereby and to enforce its title
in and right to possession of the Collateral, and to enforce any and
all other rights or remedies available to it, and no such action shall
operate as a waiver of any other right or remedy of the Secured Party
under the terms hereof or under applicable law.
C. Waiver of Defenses. Debtor waives any requirements of presentment,
protest, notices of protest, notices of dishonor, and all other
formalities. Debtor waives all rights and/or privileges it might
otherwise have to require Secured Party to proceed against or exhaust
the Collateral encumbered hereby or the Note or to proceed against any
guarantor of the Obligations or to pursue any other remedy available
to Secured Party in any particular manner or order under the legal or
equitable doctrine or principle of marshaling and/or suretyship and
further agrees that Secured Party may proceed against any or all of
the Collateral encumbered hereby in the event of default in such order
and manner as Secured Party in its sole discretion may determine. Any
Debtor that has signed this Agreement as a surety or accommodation
party, or that has subjected its property to this Agreement to secure
the indebtedness of another hereby expressly waives the benefits of
the provisions of any laws which could delay, defeat or render more
costly the Secured Party's realization upon the Collateral, waives any
defense arising by reason of any disability or other defense of Debtor
or by reason of the cessation from any cause whatsoever of the
liability of Debtor, and waives the benefit of any statutes of
limitation affecting the enforcement hereof.
3
D. Sale of Collateral. Secured Party may sell all or any part of the
Collateral at public or private sale either with or without having
such Collateral at the place of sale, and with notice to Debtor as
provided herein. The proceeds of such sale, after deducting therefrom
all expenses of Secured Party in taking, storing, repairing and
selling the Collateral (including attorneys' fees and court costs)
shall be applied to the payment of any part or all of the Obligations
and any other indebtedness or liability of Debtor to Secured Party,
and any surplus thereafter remaining shall be paid to any person that
may be legally entitled thereto. In the event of a deficiency between
such net proceeds from the sale of Collateral and the total amount of
Obligations owing by Debtor, Debtor will promptly upon demand pay the
amount of such deficiency to Secured Party.
E. Secured Party as Purchaser. At any sale, public or private, of the
Collateral or any part thereof, made in the enforcement of the rights
and remedies of Secured Party, Secured Party may purchase any part or
parts of the Collateral or all thereof offered at such sale.
F. Notice of Sale. Secured Party shall give Debtor reasonable notice of
any sale or other disposition of the Collateral or any part thereof.
Debtor agrees that notice shall be conclusively deemed to be
reasonable and effective if such notice is mailed by registered or
certified mail postage prepaid, to Debtor at Debtor's principal place
of business at least ten (10) days prior to such sale or other
dispositions.
G. Applicable Law Remedies. Secured Party shall have all the rights and
remedies afforded a Secured Party under applicable law.
5. MISCELLANEOUS PROVISIONS
A. Waivers and Cumulative Remedies. No Event of Default hereunder by
Debtor shall be deemed to have been waived by Secured Party except by
a writing to that effect signed by Secured Party and no waiver of any
such Event of Default shall operate as a waiver of any other Event of
Default on a future occasion, or as a waiver of that Event of Default
after written notice thereof and demand by Secured Party for strict
performance of this Agreement. All rights, remedies and privileges of
Secured Party hereunder shall be cumulative and not alternative, and
shall, whether or not specifically so expressed, inure to the benefit
of the Secured Party, its successors and assigns, and all obligations
of the Debtor shall bind its successors and legal representatives.
4
B. Debtor's Possession of Collateral. Until an Event of Default, the
Debtor may retain possession of the Collateral and may use it in any
lawful manner not inconsistent with this Agreement or with the
provisions of any policies of insurance thereon.
C. Waiver of Jury Trial. Secured Party and Debtor hereby agree to trial
by court and irrevocably waive jury trial in any action or proceeding
(including but not limited to any counterclaim) arising out of or in
any way related to or connected with this Agreement, the Note, the
relationship created thereby, or the origination, administration or
enforcement of the indebtedness evidenced and/or secured by this
Agreement.
D. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of this Agreement.
E. Written Amendment Required. No modification, rescission, waiver,
release or amendment of any provision of this Agreement shall be made
except by a written agreement subscribed by Debtor and Secured Party.
F. Full Force and Effect. This Agreement shall remain in full force and
effect until all of the indebtedness and any extensions or renewals
thereof shall be paid in full.
G. Successors and Assigns. Secured Party and Debtor as used herein shall
include the heirs, executors or administrators, or successors or
assigns of those parties. The provisions of this Agreement shall apply
to the parties according to the context hereof and without regard to
the number or gender of words and expressions used herein.
H. Financing Statements. A carbon, photographic or other reproduced copy
of this Agreement and/or any financing statement relating hereto shall
be sufficient for filing and/or recording as a financing statements.
Notwithstanding the foregoing, Debtor shall provide, shall execute and
shall cooperate with Secured Party in the execution and filing of such
financing statements, documents and instruments as Secured Party may
reasonably request in order to perfect the security interest granted
to Secured Party hereunder or otherwise to carry out the purposes of
this Agreement.
I. Governing Law. This Security Agreement and the transaction evidenced
hereby shall be construed under the laws of the United States, as the
same may from time to time be in effect.
IN WITNESS WHEREOF, this Agreement has been executed and delivered on
behalf of and in the name of Debtor on the date indicated above.
The Hartcourt Companies, Inc.
a Utah corporation
By:-------------------------------
Name:
Title:
5
SCHEDULE "3"
to the
Purchase and Sale Agreement
Dated August 8, 1996
CAPITALIZATION
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 110,001,000 shares of
capital stock, composed of 100,000,000 shares of common stock, par value $0.001
per share ("Common Stock"), 1,000 shares of Preferred Stock, par value $.01 per
share ("Original Preferred Stock"), and 10,000,000 shares of Preferred Stock,
par value $.01 per share ("Class A Preferred Stock").
COMMON STOCK
Voting Rights. Subject to the voting rights of holders of Original
Preferred Stock described below, each holder of shares of Common Stock is
entitled to one vote for each share of Common Stock for the election of
directors and on each other matter submitted to a vote of the stockholders of
the Company. Until December 31, 2010, holders of Common Stock, are entitled to
elect two-fifths (2/5) of the authorized number of members of the Board of
Directors. The holders of Common Stock have exclusive voting power on all
matters at any time no Preferred Stock with superior voting rights is issued and
outstanding.
Liquidation Rights. Upon liquidation, dissolution or winding up of the
Company, holders of shares of Common Stock are entitled to share ratably in
distributions of any assets after payment in full or provision for all amounts
due creditors and provision for any liquidation preference of any other class or
series of stock of the Company then outstanding.
Dividends. Dividends may be declared by the Board of Directors and paid
from time to time to the holders of Common Stock in cash, stock, or otherwise,
as may be determine by the Board of Directors, out of the net profits or surplus
of the Company.
ORIGINAL PREFERRED STOCK
Voting Rights. The holders of Original Preferred Stock are not entitled
to vote on any matters except those affecting the Original Preferred Stock, the
election of directors (to the extent described below) and as otherwise required
by law. Until December 31, 2010, holders of Original Preferred Stock, voting as
a single class, are entitled to elect three-fifths (3/5) of the authorized
number of members of the Board of Directors.
Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Company, holders of Original Preferred Stock are entitled to
be paid the full par value of the Original Preferred Stock, $.01 per share.
Conversion Rights. The holders of shares of Original Preferred Stock
are entitled to convert each share of Original Preferred Stock into 1,000 shares
of fully paid non-assessable Common Stock.
3 - 1
Dividends.The holders of shares of Original Preferred Stock are not
entitled to receive any dividends. Class A Preferred Stock
General. The 10,000,000 shares of authorized and unissued Class A
Preferred Stock may be issued pursuant to action by the Company's Board of
Directors and without further action by the Company's stockholders with such
designations, powers, preferences and other rights and qualifications,
limitations and restrictions thereof as the Board of Directors may designate,
including but not limited to: (i) the distinctive designation of each series and
the number of shares that will constitute such series; (ii) the dividend rate on
the shares of such series, any restriction, limitation or condition upon the
payment of such dividends, whether dividends shall be cumulative and the dates
on which dividends are payable; (iii) the prices at which, and the terms and
conditions on which, the shares of such series may be redeemed, if such shares
are redeemable; (iv) any preferential amount payable upon shares of such series
may be converted into other securities, if such shares are convertible; and (v)
the voting rights, including the right to vote as a class on designated matters
such as, but not limited to, the merger, consolidation or sale of substantially
all of the Company's assets, or the approval of designated action by a greater
than two thirds (2/3) affirmative vote, and if so, the terms and conditions
thereof and any limitations thereon.
3 - 2
