Exhibit 10.2
KIWA BIO-TECH PRODUCTS GROUP CORP.
(OTC BB:KWBT.OB)
AND
XXXXXXXX XXX
SECURED PROMISSORY
NOTE AGREEMENT
MAY 2005
This Agreement is dated on May 30, 2005
Between:-
(1) KIWA BIO-TECH PRODUCTS GROUP CORPORATION, a company incorporated under
the laws of the State of Delaware in the United States of America whose
registered office is at 00000 Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxx xx
Xxxxxxxx, XX 00000, XXX (the "Borrower"); and
(2) Xxxxxxxx Xxx, a US citizen, whose residential address is at 00 Xxxx
Xxxxxx, Xxx Xxxxxx, XX 00000 XXX. (the "Lender").
WHEREAS:-
The Lender has agreed to advance to the Borrower the sum to US$70,000 on the
terms hereinafter stated.
IT IS AGREED as follows:-
1 INTERPRETATION
In this Agreement, except to the extent the context otherwise requires, terms
defined and references construed in Schedule 1 shall have the meaning and
construction given to them in that Schedule.
2 AMOUNT OF LOAN
Lender grants to Borrower a loan up to US$70,000.
The loan, net of interest payment and transaction expenses, shall be paid by
checks payable to KIWA BIO-TECH PRODUCTS GROUP CORPORATION or be wired into
Borrower's designated account as the following:
Beneficiary's name: KIWA BIO-TECH PRODUCTS GROUP CORPORATION
Account Number: 00-00000000
Receiving Bank's Name: XXXX XXXX XXXX, XXX XXXXXX XXXXXX #00
Bank Address: 000 Xxxxxxxxxx Xx., Xxx Xxxxxx, XX 00000
Bank Telephone: 000-000-0000
Receiving Bank's ABA: 0000-0000-0
Swift Address: XXXXXX00XXX
3 REPAYMENT/INTEREST
The Note will have a 12% (per annum) coupon attached which shall be paid monthly
up to the three month anniversary with an option for renewal for another three
months. Upon the three month anniversary or the six months anniversary of the
note will bear no interest unless the Company is in default as described in this
Agreement.
The Borrower will issue to the Lender a warrant that entitles the Lender to
purchase up to 350,000 of common stock based on the conversion price specified
in Clause 4 (Conversion). The Borrower shall have the right to exercise the
warrants within next 24 months.
The Borrower has committed itself to repaying US$70,000 in cash to the Lender
within three months (Maturity) from the execution of this Agreement. The
Borrower has an option to extend for another three months with 1 week advance
notice. This article, however, can't bind the Lender in excersing any warrants.
Mr. Xxx Xx, the undersigned, shall personally guarantee US$70,000 and make his
credit report available for Lender's review after having signed the loan
documents and prior to the loan wired into Borrower's account to evaluate the
execution of this loan. As such, the Lender is granted the right to redeem this
amount from Xxx Xx in the event that the Borrower becomes insolvent.
The Borrower in its sole discretion shall have the right to redeem in whole or
in part the Note with a three (3) day advance notice to the Lender. The
redemption price shall be equal to 125% of the face amount redeemed plus any and
all accrued and unpaid interest ("Redemption Amount").
4 CONVERSION
4.1 Conversion
At the option and instruction of the Lender, the Lender shall at
any time make an application to exercise any warrants for the
issuance of shares of the Borrower's common stock. The Lender
shall have the right to Exercise the warrants based on a
conversion price equal to the closing quote of the Borrower's
shares listed on OTC Bulletin Board on the date of drawing the
fund.
4.2 Mechanics
4.2.1 Shares issued upon Exercise will be registered within
six months or as soon as practicable on behalf of such
Person or Persons as the Lender shall direct at the
Borrower's expense. .The lender shall have unlimited
piggyback right.
4.2.2 The Borrower shall procure that all taxes and capital,
stamp, issue and registration duties (if any) arising
in connection with the Exercise.
4.2.3 The Borrower shall procure that on or as soon as
possible after conversion evidence satisfactory to the
Lender shall be delivered to the Lender in respect of
its legal title to the Shares and that definitive
certificates are delivered to the Lender in respect of
the Shares as soon as practicable.
4.2.4 Fractions of Shares will not be made available and any
cash adjustment to be made shall be paid to the Lender.
4.2.5 The Borrower shall promptly notify the Lender in
written form of any potential changes in majority
holding or events that would have a substantial impact
on the Borrower's asset structure or business control
(which are collectively called "changes in majority
holding"). This notification and other proper
assistance shall be promptly delivered to the Lender so
as to allow it to make decisions as to whether to
exercise its right of converting the loan according to
Article 4. In case of failure to promptly deliver the
notification to the Lender, the Lender reserves the
right to request a proper adjustment on the conversion
price so as to keep consistent with the result of
conversion prior to the changes in majority holding.
4.3 Conversion of the Note
At the option and written instruction of the Lender, upon the
maturity of the secured promissory note (the "Note") as
specified on clause 3, the Lender shall have the right to
convert the balance of the Note and the accrued interests to
common stocks of the Company. The conversion price is based on
the closing quote of the Borrower's share price on the OTC
Bulletin Board with 25% discount on the date of conversion.
5 TAXES
All sums payable by the Borrower under this Agreement shall be paid free of any
restriction or condition and free and clear of and (except to any extent
required by law) without any deduction or withholding, whether on account of
tax, by way of set-off or otherwise.
6 REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Lender as follows:
6.1 Status: The Borrower is a company duly incorporated and validly
existing under the laws of the location where its registered
officer is located or is a person who is qualified as an
accredited investor as defined in Regulation D of the Securities
Act of 1933, with power to enter into, exercise its rights and
perform its obligations under this Agreement.
6.2 Authorisations and Consents: All action, conditions and things
required to be taken, fulfilled and done (including the
obtaining of any necessary consents, the making of
registrations, and the like) in order:-
6.2.1 to enable the Borrower lawfully to enter into, exercise
its rights and perform and comply with the Borrower's
obligations under this Agreement;
6.2.2 to ensure that those obligations are valid, legally
binding and enforceable;
6.2.3 to ensure that those obligations rank and will at all
times rank in accordance with Clause 8.1 ; and
6.2.4 to make this Agreement admissible in evidence in the
courts of the United States of America have been taken,
fulfilled and done.
6.3 Non-Violation etc.: The entry into, exercise of rights and/or
performance of obligations under this Agreement by the Borrower
does not and will not violate, or exceed any borrowing or other
power or restriction granted or imposed by:-
6.3.1 any law to which the Borrower or any member of the
Group is subject or
6.3.2 the Borrower's or any member of the Group's Memorandum
or Articles of Association or Article of Incorporation
or
6.3.3 any other agreement to which the Borrower or any member
of the Group is a party or which is binding on the
Borrower, or any member of the Group or any of their
respective assets,
or results in the existence of, or obliges the Borrower or any
member of the Group to create, any Security over such assets.
6.4 Obligations Binding: The Borrower's obligations under this
Agreement are valid, binding and enforceable.
6.5 Litigation: So far as it is aware, no litigation, arbitration or
administrative proceeding is current, pending or threatened:-
6.5.1 to restrain the Borrower's entry into, exercise of its
rights under and/or performance or enforcement of or
compliance with its obligations under this Agreement or
6.5.2 which has or could have a Material Adverse Effect on
the Group.
6.6 Winding-up: No meeting has been convened for the Borrower's or
any member of the Group's Winding-up, and, so far as they are
aware, no petition, application or the like is outstanding for
such person's Winding-up.
6.7 No Withholding: The Borrower will not be required to make any
deduction or withholding from any payment due under this
Agreement.
7 UNDERTAKINGS
The Borrower undertakes that, so long as any sum remains payable under
this Agreement:-
7.1 Ranking of Obligations: The payment obligations under this
Agreement rank and will at all times rank at least equally and
rateably in all respects with all the Borrower's other unsecured
Indebtedness other than such Indebtedness as would, by virtue
only of the operation of law, be preferred in the event of its
Winding-up.
7.2 Pledge: The Note will be secured by the property, plant and
equipment and other assets of the Company and its subsidiary in
China (the "Security"), subordinate to bank debt, and it will
ensure that no other member of the Group will create or have
outstanding any Security on or over its or their respective
assets, except for:
7.2.1 liens arising solely by operation of law (or by an
agreement evidencing the same) in the ordinary course
of business in respect of Indebtedness which either (a)
has been due for less than 7 days or (b) is being
contested in good faith and by appropriate means;
7.2.2 any Security created in the ordinary course of business
in respect of Indebtedness of the Group;
7.2.3 any other Security created or outstanding with the
Lender's prior consent.
7.3 Disposals:
7.3.1 The Borrower will not, (whether by a single transaction
or a number of related or unrelated transactions and
whether at one time or over a period of time) sell,
transfer, lease out, lend or otherwise dispose of
(whether outright, by a sale-and-repurchase or
sale-and-leaseback arrangement, or otherwise and
whether to any of its subsidiaries or any other Person)
all or substantially all of its assets nor any part of
its assets which, either alone or when aggregated with
all other disposals required to be taken into account
under this Clause 8, is material in relation to the
assets of the Borrower or any member of the Group (a
"Disposal"),. For the avoidance of doubt a Disposal at
fair market value shall be permitted under this Clause.
7.3.2 The following Disposals shall not be taken into account
under this Clause:
Disposals in the ordinary course of trading.
The payment of cash as consideration for the
acquisition of any asset at arm's length and on normal
commercial terms.
The temporary application of funds not immediately
required in the relevant Person's business in the
purchase or making of short-term investments, or the
realisation of such investments.
Any Disposal which the Lender has agreed in writing
shall not be taken into account.
7.4 Change of Business: The Borrower will ensure that there is no
material change in the nature of the Borrower's business
(whether by a single transaction or a number of related or
unrelated transactions, whether at one time or over a period of
time and whether by disposal, acquisition or otherwise).
7.5 Change in control: The Borrower will not do or omit to do
anything which would or might result in a change in control of
the Borrower or any member of the Group.
7.6 Accounts: As soon as available and in any event within 150 days
after the end of each of its financial years (beginning with the
current one), the Borrower will deliver to the Lender a copy of
its audited accounts as at the end of and for that financial
year.
7.7 Information to Shareholders or Creditors: At the same time as
sent to the Borrower's shareholders or creditors, it will
deliver to the Lender a copy of any circular, document or other
written information sent to the Borrower's shareholders or
creditors as such. The Lender may make a written application for
the information relating to the potential changes in majority
holding or the Borrower's financing results provided by the
Borrower.
8 DEFAULT
8.1 Events of Default
Without prejudice to the provisions of Clause 8 above the Lender
reserves the right (by sending notice in writing to the
Borrower) to demand repayment within 30 days of any funds
advanced under the Facility at any time after any of the
following Events of Default occurs:-
8.1.1 Non-payment
The Borrower fails to pay any sum exceeding US$10,000
due under this Agreement in the manner required and if
such failure is not remedied within 30 Business Days
after the due date for payment of such amount.
8.1.2 Breach of Representation
Any representation, warranty or statement by the
Borrower under or in connection with this Agreement, is
not complied with in any material respect or is or
proves to have been incorrect in any material respect
when made.
8.1.3 Breach of Undertaking
The Borrower fails to perform or comply in any material
respect with any of the obligations assumed by it in
Clause 6 or 7 above.
8.1.4 Insolvency
The Borrower becomes insolvent, is unable to pay its
debts as they fall due, stops, suspends or threatens to
stop or suspend payment of all or a material part of
its debts, begins negotiations or proposes or makes a
general assignment or composition with or for the
benefit of their creditors or a moratorium is agreed or
declared in respect of or affecting all or a material
part of the indebtedness of the Borrower or such person
ceases or threatens to cease to carry on its business
or operations.
8.1.5 Commencement of Legal Proceedings
The commencement of any legal or enforcement
proceedings against the Borrower which could have in
the opinion of the Lender a Material Adverse Effect on
the Borrower.
8.1.6 Material Adverse Change
The Lender determines that a material adverse change
has occurred in the financial conditions or operations
of the Borrower since the date hereof and that such
change has materially affected and prejudiced the
prospects of repayment of the Loan or the value of the
rights of conversion contained in Clause 4.
9 MISCELLANEOUS
9.1 Notices
Each notice or other communication regarding this Agreement
shall be sent by fax or other means and shall be sent:
to the Borrower at:
00000 Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxx xx Xxxxxxxx,
XX 00000, XXX
Tel: 0-000-000-0000 Fax: 0-000-000-0000
to the Lender at :
00 Xxxx Xxxxxx, Xxx Xxxxxx, XX 00000 XXX.
Tel: 000-0000000
or to such other fax number or address or marked for such other
attention as the relevant party may from time to time notify the
other for the purpose of this Agreement.
9.2 Any such notice or communication from the Lender to the Borrower
shall be deemed received by the Borrower when sent (if by telex
or fax), or when delivered (if by letter), to the appropriate
number or address and shall be effective notwithstanding any
change of telex number, fax number or address or that it be
returned undelivered.
9.3 Any notice or communication to the Lender shall be deemed
received by it when actually received by it (except that, if
received on a non-Business Day or after its normal banking
hours, it shall be deemed received on the next Business Day
after such actual receipt). Any notice or other communication
shall be irrevocable.
9.4 Waivers and Remedies
No failure by the Lender to exercise or delay by it in
exercising any right or remedy under this Agreement will operate
as a waiver thereof, nor will any single or partial exercise by
the Lender of any right or remedy under this Agreement preclude
any other or further exercise thereof or the exercise of any
other right or remedy.
9.5 Assignment
The Borrower cannot directly or indirectly transfer, entrust or
dispose this Agreement or any rights, obligations and benefits
involving the Borrower as stipulated in this Agreement without
any written consent from the Lender. Any transfer concerned
shall be deemed invalid. The Lender reserves the right to
transfer or entrust this Agreement or any rights, obligations
and benefits involving the Lender as stipulated in this
Agreement.
10 PARTIAL INVALIDITY
The illegality, invalidity or unenforceability of any provision of this
Agreement under the law of any jurisdiction shall not affect its
legality, validity or enforceability under the law of any other
jurisdiction nor the legality, validity or enforceability of any other
provision.
11 GOVERNING LAW AND JURISDICTION
11.1 This Agreement shall be governed by and construed in accordance
with the laws of the state of New York, the United States of
America.
11.2 In relation to any legal action or proceedings arising out of or
in connection with this Agreement ("Proceedings"), each party
irrevocably submits to the jurisdiction of the courts of the
state of New York and waives any objection to Proceedings in any
such court on the grounds of venue or on the grounds that the
Proceedings have been brought in an inconvenient forum.
11.3 Those submissions shall not affect the right of any other party
to take Proceedings in any other jurisdiction nor shall the
taking of Proceedings in any jurisdiction preclude any party
from taking Proceedings in any other jurisdiction.
12 Confidentiality
This Agreement, including the terms and conditions hereunder, is confidential
and Borrower shall not disclose it to any third party without prior written
consent from Lender.
13 Entire Agreement
This Agreement, including the attachments, constitutes the entire understanding
and agreement between the Parties with respect to the transactions contemplated
herein and supersedes all prior or contemporaneous oral or written
communications with respect to the subject matter hereof, all of which are
merged herein. No modification of this Agreement shall be binding unless it is
in writing and is executed by both parties.
14 Effectiveness
Both parties agree this Agreement shall be a legally enforceable contract after
it being signed by both parties.
The signed Agreement shall be kept by both parties.
SCHEDULE 1
Interpretation
Definitions:
"Business Day" means a day (other than Saturday or Sunday) on
which commercial banks are open for business in the United
States of America
"Event of Default" means one of the events mentioned in Clause 9
"Group" means, at any particular time, the Borrower and its
subsidiaries or the holding company of the Borrower (and member
of the Group shall be construed accordingly)
"Potential Event of Default" means any event or circumstance
which, if it continued after the giving of any notice, the
expiry of any grace period, and/or the making of any
determination by the Lender, provided for in Clause 15, would
become an Event of Default
"Repayment Date" means the date subject to Clause 3 in this
Agreement
"Shares" means common stock of the Borrower
Construction: Any reference to:
"Indebtedness" includes, with respect to any Person (the
"Relevant Person"), any obligation (whether present or future,
actual or contingent, secured or unsecured, as principal, surety
or otherwise) (a) of the Relevant Person for the payment or
repayment of money or (b) of any other Person for the payment or
repayment of money secured by Security on assets of the Relevant
Person, whether or not the Relevant Person is liable in respect
of any obligation so secured
something having a "Material Adverse Effect" on the Borrower is
to it having a material adverse effect on such person's
financial condition or business or on the consolidated financial
condition or business of the Borrower and its subsidiaries or
(b) on such person's ability to perform and comply with any of
such person's obligations under this Agreement. The Lender shall
have the absolute discretion in determining whether there is any
Material Adverse Effect and any such decision shall be binding
on the Borrower
any "obligation" of any Person under any document shall be
construed as a reference to an obligation expressed to be
assumed by or imposed on it under that document (and "created",
"due", "owing", "payable" and "receivable" shall be similarly
construed)
a "Person" includes any individual, company, corporation, firm,
partnership, joint venture, undertaking, association,
organisation, trust, state or agency of a state (in each case,
whether or not having separate legal personality)
"subsidiary" shall have the meaning given to it in the Companies
Ordinance (Chapter 32 of the Laws of the United States of
America)
"US Dollars" and "US$" means lawful currency of the United
States of America
Headings shall be ignored in construing this Agreement.
IN WITNESS whereof and acknowledging acceptance and agreement of the foregoing,
BORROWER and LENDER affix their signatures hereto.
SIGNED by: /s/ Xxx Xx
--------------------------
Name: Xxx Xx
Title: CEO and Chairman of the Board
for and on behalf of
KIWA BIO-TECH PRODUCTS GROUP CORPORATION
SIGNED by: /s/ Xxxxxxxx Xxx
--------------------------
Name: Xxxxxxxx Xxx
