EXHIBIT 10.4
KIWA BIO-TECH PRODUCTS GROUP CORP.
(OTC BB:KWBT.OB)
AND
YOUNG SAN XXX AND SONG N. BANG, JOINTLY
CONVERTIBLE NOTE AGREEMENT
SEPTEMBER 2004
THIS AGREEMENT is dated on September 23, 2004
BETWEEN:-
(1) KIWA BIO-TECH PRODUCTS GROUP CORP., 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) YOUNG SAN XXX, a US citizen, whose residential address is at 000
Xxxxxxxx Xx., Xxxxxxxx, XX00000, AND SONG N. BANG, a US citizen, whose
residential address is at 000 X. Xxxxxx Xxx. #00, Xxx Xxxxxx, XX 00000
(jointly the "LENDER").
WHEREAS:-
The Lender has agreed to advance to the Borrower the sum of US$350,000 ($300,000
from YOUNG SAN XXX and $50,000 from SONG N. BANG) 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 of US$350,000.
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: 00-80918063
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
At Lender's option the loan may be converted into Common Shares of the Borrower
upon the terms set out in Clause 4 (Conversion).
3 REPAYMENT/INTEREST
Due upon the execution of this Agreement, the Borrower shall make an interest
payment of US$17,500 in cash and issue 1,050,000 three year warrants, each
convertible into one share of common stock based on the conversion price
specified in Clause 4 (Conversion). The interest payment and warrants are
non-refundable.
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The Borrower has committed itself to repaying US$350,000 in cash to the Lender
within six months (Maturity) from the execution of this Agreement. This article,
however, can't bind the Lender in excersing any warrants.
Mr. Xxx Xx, the undersigned, shall personally guarantee US$350,000 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.
Additionally, If this loan is not paid in full at the maturity, Xx. Xxx Xxx
agrees to immediately transfer the ownership of all KIWA's common stock, which
he owns or 50% of total number of shares outstanding, whichever is greater at
the time of the maturity date.
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 of US$0.20 per share.
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.
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.
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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
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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 NEGATIVE PLEDGE: The Borrower will not, 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.
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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.
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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,
XX00000, XXX
Tel: 0-000-000-0000 Fax: 0-000-000-0000
to the Lender at :
000 Xxxxxxxx xx. Xxxxxxxx, XX 00000
Tel: 0-000-000-0000
and
000 x. Xxxxxx Xxx. #00, Xxx Xxxxxx, XX 00000
Tel: 0-000-000-0000 Fax: 0-000-000-0000
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.
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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 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 United States of America 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.
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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.
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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
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"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 preferred shares of US$0.25 each in the capital
of the Borrower
CONSTRUCTION: Any reference to:
"INDEBTEDNESS" includes, with respect to any Person (the
"RELEVANT PERSON"), any obligation (whether present or future,
actual or contingent, secured or unsecured, as principal,
surety or otherwise) (a) of the Relevant Person for the
payment or repayment of money or (b) of any other Person for
the payment or repayment of money secured by Security on
assets of the Relevant Person, whether or not the Relevant
Person is liable in respect of any obligation so secured
something having a "MATERIAL ADVERSE EFFECT" on the Borrower
is to it having a material adverse effect on such person's
financial condition or business or on the consolidated
financial condition or business of the Borrower and its
subsidiaries or (b) on such person's ability to perform and
comply with any of such person's obligations under this
Agreement. The Lender shall have the absolute discretion in
determining whether there is any Material Adverse Effect and
any such decision shall be binding on the Borrower
any "OBLIGATION" of any Person under any document shall be
construed as a reference to an obligation expressed to be
assumed by or imposed on it under that document (and
"CREATED", "DUE", "OWING", "PAYABLE" and "RECEIVABLE" shall be
similarly construed)
a "PERSON" includes any individual, company, corporation,
firm, partnership, joint venture, undertaking, association,
organisation, trust, state or agency of a state (in each case,
whether or not having separate legal personality)
"SUBSIDIARY" shall have the meaning given to it in the
Companies Ordinance (Chapter 32 of the Laws of the United
States of America)
"US DOLLARS" and "US$" means lawful currency of the United
States of America
Headings shall be ignored in construing this Agreement.
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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: CHAIRMAN AND CEO
for and on behalf of
KIWA BIO-TECH PRODUCTS GROUP CORPORATION
SIGNED by: /S/ YOUNG SAN XXX
---------------------
Name: YOUNG SAN XXX
SIGNED by: /S/ SONG N. BANG
---------------------
Name: SONG N. BANG
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