Knights Bridge Capital
00 Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx, XX XX, Xxxxxxx
Tel: 000-000-0000/Fax: 000-000-0000
CathayOnline Inc.
Financing Terms Agreement
December 12, 2000
1. Issuer: CathayOnline Inc. (CAOL or Company) a Nevada corporation with its
principal office located at:
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Email: xxxxxx@xxxxxxxxxxxx.xxx
2. Purchaser: Knights Bridge Capital and other purchasers (collectively
Purchaser(s)). All Purchaser(s) shall be accredited investors as Defined by
Rule 501 of Regulation D.
3. Securities: (a) Convertible Notes (Note(s)) convertible into shares of the
common stock of (Common Stock). The Note(s) shall have a maturity date of
twelve months; the unconverted principal balance and any accrued and unpaid
interest shall be due and payable in cash on such date. The maturity date
of the Note(s) shall be automatically extended for up to 18 one-month
periods, unless the Purchaser(s) or any subsequent holder, (Holder(s))
notifies the Company in writing not less than ten (10) days prior to any
expiration that the Note(s) will not be extended.
4. Investment Amount
$500,000
5. Conversion Terms
The CAOL Note(s) are convertible into shares of Common Stock (Conversion
Shares) at any time after the Closing Date (as defined In Section 14 (b)
herein). The effective date (Effective Date) of each conversion shall be
the date set forth on the conversion notice (Conversion Notice), provided
such Conversion Notice is received by Stone Tower Inc. as escrow agent
(Escrow Agent) and the Company, via U.S. mail, facsimile,
5. Conversion Terms cont'd
overnight courier, or hand delivery no later than the fifth business day
after such date. The price at which the CAOL Note(s) shall be converted
(Conversion Price) shall be the lower of (i) the average closing bid price
of Company's Common Stock for the five days prior to the Effective Date of
the Conversion Notice or (ii) the closing bid price as quoted on NASDAQ
Level II on the Closing Date.
6. Prepayment:
The CAOL Note(s) may not be prepaid, in whole or in part, without the
written consent of Holder(s).
7. Interest:
Ten percent (10%) annual rate, payable monthly in arrears in cash (or CAOL
common stock (Interest Shares) at the option of CAOL, only if such Interest
Shares have been registered and are freely tradable by Holder(s)). Interest
shall accrue from the Closing Date and shall be payable on the first
business day of each month commencing January 2, 2001. If interest is paid
in CAOL common stock the stock shall be valued at the lower of (i) the
Average Price for the five trading days immediately preceding the date the
interest payment is due; or (ii) the Average Price for the five trading
days immediately preceding the date the Interest Shares are delivered to
Holder(s).
8. Placement Fee
Maximum twelve and one half percent (12.5%) of the investment amount.
9. Securities Act Exemption
The CAOL Note(s) are being issued without registration under the Securities
Act of 1993 (Securities Act) in reliance on the exemption provided by
Section 4 (1) of the Securities Act.
10. Securities Act Registration:
(a) CAOL shall file an amendment to its registration statement on Form SB2
under the Securities Act including the Conversion Shares and the Interest
Shares (Registration Statement Amendment) as soon as reasonably
practicable, but not more than fifteen (15) days, after the Closing Date
(Filing Date Deadline) and shall use its best efforts to cause such
Registration Statement Amendment to be declared effective not later than
February 15, 2001 (Effective Date Deadline). (b) Until the earlier of (i)
two years from the Closing Date or the date upon which all of the
Registerable shares have been sold, CAOL shall maintain the effectiveness
of the Registration Statement and/or shall maintain its status as a current
filer under the Securities Exchange Act of 1934, so that Purchaser(s)
and/or Holder(s) of Registerable Securities may sell such securities
without restriction (except for the prospectus delivery requirements of the
Securities Act of 1993 and/or Form 144 filing, 10. Securities Act manner of
sale and volume limitation provision of Rule 144), Registration during such
period. Cont'd
11. Limitations:
No Purchaser or subsequent Holder of CAOL Note(s) shall be permitted to
convert any CAOL note(s) to the extent that such conversion would cause any
Holder to be the beneficial owner of more than 5% of the then outstanding
CAOL Common Stock, at that given time. This limitation shall not be deemed
to prevent any Holder from acquiring more than an aggregate of 5% of the
Common Stock, so long as such Holder does not beneficially own more than 5%
of CAOL Common Stock, at any given time. The Holder(s) shall not be
entitled to vote any Conversion shares. The prohibition against voting
shall terminate upon the bona fide transfer of any Conversion Shares to a
third party who is not an affiliate of any Holder(s).
12. Transferability:
The CAOL Note(s) shall be freely transferable by the Purchasers or any
Holder(s) provided such transfer is in compliance with applicable United
States and state securities laws.
13. Escrow of Common Stock:
(a) to facilitate the delivery of the Conversion Shares upon any conversion
of the CAOL Note(s) in whole or in part , CAOL will issue an aggregate of
10,000,000 shares (twenty certificates of 500,000 shares each) of CAOL
Common Stock (Escrow Shares) in the name of Knights Bridge Capital and will
deliver the certificates for such shares without legend to the Escrow Agent
within five (5) business days of the mutual execution of this Agreement.
(b) CAOL will deliver on behalf of the Escrow Agent at the address listed
below certificates without legend in the name of Knights Bridge Capital for
such Escrow Shares:
Per the instructions of the Escrow Agent
(c) Escrow Agent shall advise the holder of the securities that upon
receipt of the Escrow Shares or any Additional Escrow Shares (as defined in
Section 13 (d) herein), to deposit the Escrow Shares and any Additional
Escrow Shares into the account of Knights Bridge Capital with the sole
signatory on such account to be Stone Tower Inc.
13. Escrow of Common Stock Cont'd
At the request of the broker, CAOL will take all necessary actions to cause
the Escrow Shares to be transferred promptly into the street name of the
broker securities depository.
(d) If at any time, or from time to time, the Escrow Agent is holding less
than 200% of the number of Escrow Shares required to convert the remaining
CAOL Notes(s) (based on the then Conversion Price) the Escrow Agent and/or
Holder(s) may request in writing that the Company deposit enough additional
shares of common Stock with the Escrow Agent (Additional Escrow Shares) so
that the Escrow Agent is holding 200% of the number of Escrow Shares
required to convert such remaining CAOL Note(s). In no event shall such
number of shares exceed 20,000,000. The failure of the Company to deliver
such Additional Escrow Shares within ten business days of such a demand
shall be a material default of this Agreement and in addition to any other
remedies, including without limitation specific performance (to which
Holder(s) are hereby entitled), shall entitle the Holder(s) to an immediate
distribution of Escrow shares in an amount equal to 500,000 Escrow Shares
plus an additional 50,000 Escrow Shares for each day after the tenth
business day such failure to deliver the additional Escrow Shares
continues. (Such distribution shall be made by the Escrow Agent to the
Holder(s) pro-rata to the principal amount of CAOL Note(s) held by each
Holder.) CAOL acknowledges that its obligation for any Additional Escrow
Shares is additional compensation to Purchaser(s) for the risk of potential
failure or refusal of CAOL to deliver Additional Escrow Shares, and is not
a penalty.
(e) Upon the earlier of (i) thirty (30) days after the date upon which the
last remaining CAOL Note(s) has been fully converted into Conversion Shares
with interest paid in full; or (ii) the full payment of the remaining
principal and interest balance of the CAOL Note(s) the Escrow Agent shall
return any remaining Escrow Shares to CAOL.
(f) If at any time the Escrow Agent is required to deliver to Purchaser(s)
or Holder(s) Escrow Shares that have not been registered or may not be sold
under Rule 144, the Escrow Agent shall cause CAOL's transfer agent to place
a standard restrictive legend on the certificates for such shares prior to
transfer and delivery to Holder(s).
14. Escrow of CAOL Note(s):
(a) To facilitate the delivery of the Note(s) the Company shall deliver to
the Escrow Agent at the address set forth in Section 13(b) within five (5)
business days of the mutual execution of
14. Escrow of CAOL Note(s) Cont'd
this Agreement twenty (20) CAOL Notes, which have been duly executed by the
Company but which are blank as to name and address of the Purchaser(s),
principal amount and date of issuance (Issue Date).
(b) The Escrow Agent shall upon receipt of good funds for the purchase of a
CAOL Note(s) fill in the name and address of the Purchaser(s), principal
amount and Issue Date. The Escrow Agent shall deliver the completed Note(s)
to the Purchaser(s) and the escrowed funds together with a copy of the
completed Note(s) to the Company. Upon issuance of the entire $500,000 of
Notes the Escrow Agent shall return any remaining unissued blank Notes to
Company.
15. Purchase of CAOL Note(s):
(a) Purchaser(s) shall deposit with the Escrow Agent said funds for any
draw down against the Notes for the purchase of the CAOL Note(s) within
five (5) business days of the receipt by the Escrow Agent of the unlegended
certificate(s) for the Escrow Shares registered in the name of Stone Tower
Inc., the executed blank Notes and a legal opinion acceptable to
Purchaser(s) in Form and substance from counsel to CAOL.
(b) The Escrow Agent shall wire the purchase price for the CAOL Note(s) to
CAOL in weekly installments of up to $50,000 in accordance with written
instructions and shall deliver the CAOL Notes(s) to Knights Bridge Capital
within five business days of confirmation that the Escrow Shares have been
transferred into the "street name" of the broker's (as determined in
Section 13( c ) herein) securities depository. The date upon which the
purchase price for the CAOL Note(s) is wired to CAOL is the "Closing Date."
16. Representations, Warranties and Covenants of CAOL:
CAOL makes the following representations, warranties and covenants:
(a) Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of
the State of Nevada and has the requisite corporate power to own, lease and
operate its properties and assets and to conduct its business as it is now
being conducted.
(b) Authorization: Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement and to issue
and sell the CAOL Note(s), and the
16. Representations, Warranties and Covenants of CAOL cont'd:
Conversion Shares, in accordance with the terms hereof. The execution,
delivery and performance of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action, and no
further consent or authorization of the Company or its Board of Directors
or stockholders is required. This Agreement has been duly executed and
delivered by the Company. The Agreement constitutes valid and binding
obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of creditor's rights and remedies, or by other
equitable principles of general application.
( c) Capitalization: CAOL represents and warrants that it has 100,000,000
shares of Common Stock authorized; and no more than 31,185,258 shares have
been issued and are outstanding; and that it has no shares of preferred
stock authorized and that no shares of preferred stock are issued and
outstanding; no more than 45,641,221 shares of Common Stock are reserved
for issuance pursuant to stock options and warrants; and no shares of
common stock are reserved for conversion of preferred stock, or for any
other purpose. CAOL further advises that it pursuant to another financing
agreement it has issued 6,500,000 shares currently held in escrow as
security for $250,000 of convertible notes and additional warrants to
purchase up to 1,500,000 common shares.
(d) Issuance of Conversion Shares. The Conversion Shares have been duly
authorized by all necessary corporate action and when delivered to
Holder(s) in accordance with the terms thereof will be validly issued and
outstanding, full paid and non-assessable.
17. Representations and Warranties of Knights Bridge Capital
Knights Bridge Capital hereby makes the following representations and
warranties to the Company:
(a) Accredited Purchaser. Knights Bridge Capital is an accredited investor
as defined in Regulation D promulgated under the Securities Act.
(b) Organization, Good Standing and Power. Knights Bridge Capital is a
corporation organized, validly existing and in
17. Representations and Warranties of Knights Bridge Capital cont'd:
good standing under the laws of the Cayman Islands and has the requisite
power to own, lease and operate its properties and assets and to conduct
its business as it is now being conducted.
( c) Authorization; Enforcement. Knights Bridge Capital has the requisite
power to enter into and perform this Agreement and to purchase the CAOL
Note(s) in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by Knights Bridge Capital and the
consummation by it of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary action, and no further
consent or authorization of Knights Bridge Capital, is required. This
Agreement has been duly executed and delivered by Knights Bridge Capital.
This Agreement constitutes, or shall constitute when duly executed and
delivered by all parties thereto, a valid and binding obligation of Knights
Bridge Capital enforceable against Knights Bridge Capital in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of creditor's rights and remedies or by other
equitable principles of general application.
18. Default
Normal and customary events of default: non-payment of interest,
bankruptcy, breach of representations, warranties and covenants, etc.
19. Binding Agreement
The parties shall be legally bound by the above terms and shall execute
such further documents as may be required to implement The provisions of
this Agreement, including without limitation, An Escrow Agreement, and the
CAOL Note(s).
Agreed to and Accepted by:
CathayOnline Inc.
By:
Xxxxx Xxxxxx Date
By:
Knights Bridge Capital Date
Escrow Agent:
Stone Tower Inc.
Date
EXHIBIT A
JOINT ESCROW INSTRUCTIONS
Dated as of the date of the
Financing Terms Agreement
To which These Joint Escrow
Instructions Are Attached
Stone Tower Inc.
00 - Xxxx Xxxxxx, 0xx Xxxxx
P.O. Box HM 3051
Xxxxxxxx, XX NX, Bermuda
Dear Sirs:
As escrow agent for CathayOnline Inc. (CAOL) and Knights Bridge Capital
as named in the Financing Terms Agreement between CAOL, Knights Bridge Capital
and Escrow Agent to which a copy of these Joint Escrow Instructions is attached
as EXHIBIT A (Agreement), you (Escrow Agent) are hereby authorized and directed
to hold and disburse the Escrow Shares, Additional Escrow Shares and funds
deposited with Escrow Agent by Purchaser(s) delivered to the Escrow Agent
pursuant to the terms of the Agreement (Escrow Property):
1. The Escrow Agent's duties hereunder may be altered, amended,
modified or revoked only by a writing signed by CAOL, Knights Bridge Capital and
the Escrow Agent.
2. The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed by
the Escrow Agent to be genuine and to have been signed or presented by the
property party or parties. The Escrow Agent shall not be personally liable for
any act the Escrow Agent may do or omit to do hereunder as Escrow Agent while
acting in good faith, except for fraud, willful misconduct, or gross negligence,
and any act done or omitted by the Escrow Agent pursuant to the advice of the
Escrow Agent's attorneys-at-law shall be evidence of such good faith.
3. The fees, if any, and disbursements of the Escrow Agent chargeable
in respect of services provided in the capacity as Escrow Agent pursuant to this
Escrow Agreement will be the responsibility of the Seller.
4. The Escrow Agent is hereby expressly authorized to disregard any and
all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
5. The Escrow Agent shall not be liable in any respect on account of
the identity, authorities or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
6. The Escrow Agent shall be entitled to employ such legal counsel and
other experts as the Escrow Agent may deem necessary properly to advise the
Escrow Agent in connection with the Escrow Agent's duties hereunder, may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefore. The Escrow Agent has acted as legal counsel for Seller
in connection with the Agreement and may continue to act as legal counsel for
Seller, from time to time, notwithstanding its duties as Escrow Agent hereunder.
The Purchaser hereby waives any and all claims and allegations of conflict in
relation to the Escrow Agent's continued representation of the Seller as her
attorney.
7. The Escrow Agent's responsibilities as Escrow Agent hereunder shall
terminate if the Escrow Agent shall resign by written notice to the Seller and
the Purchaser. In the event of such resignation, the Purchaser and the Seller
shall appoint a successor Escrow Agent.
8. If the Escrow Agent reasonably requires other or further instruments
in connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
9. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the Escrow
Property held by the Escrow Agent hereunder, the Escrow Agent is authorized and
directed in the Escrow Agent's sole discretion (1) to retain in the Escrow
Agent's possession without liability to anyone all or any part of the said
Escrow Property until such disputes shall have been settled either by mutual
written agreement of the parties concerned or by a final order, decree or
judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but the Escrow Agent shall be under no
duty whatsoever to institute or defend any such proceedings or (2) to delver the
Escrow Property held by the Escrow Agent hereunder to a state or federal court
having competent subject matter jurisdiction in accordance with the applicable
procedure therefore.
10. The Seller and the Purchaser agree jointly and severally to
indemnify and hold harmless the Escrow Agent from any and all claims,
liabilities, costs or expenses in any way arising from or relating to the duties
or performance of the Escrow Agent hereunder other than any such claim,
liability, cost or expense to the extent the same shall have been determined by
final, unappealable judgment of a court of competent jurisdiction to have
resulted from fraud, gross negligence or willful misconduct of the Escrow Agent.
11. In the event of any action or proceeding brought by any party
against another this Agreement and/or the Financing Terms Agreement, the
prevailing party or parties shall be entitled to recover all expenses incurred
through the date of final collection, including without limitation, all
attorneys' fees.
12. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given upon personal delivery, overnight courier, facsimile or three business
days after deposit in the United States Postal Service, by registered or
certified mail with postage and fees prepaid, addressed to each of the other
parties thereunto entitled at the addresses listed below their signature, or at
such other addresses as a party may designate by ten days advance written notice
to each of the other parties hereto.
13. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns and
shall be governed by the laws of the State of Georgia without giving effect to
principles governing the conflicts of laws. A facsimile transmission of these
instructions signed by the Escrow Agent shall be legal and binding on all
parties hereto.
14. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings provided in the Agreement.
CathayOnline Inc.
By:
Name, Title & Date
CathayOnline Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000 Tax I.D.
(000) 000-0000 Phone
(000) 000-0000 Fax
Knights Bridge Capital
By:
Name, Title & Date
Knights Bridge Capital
00 Xxxx Xxxxxx, 0xx Xxxxx
P.O. Box HM 3051
Xxxxxxxx, XX NX, Bermuda
Tel: 000-000-0000
Fax: 000-000-0000
Escrow Agent
Stone Tower Inc.
00 Xxxx Xxxxxx, 0xx Xxxxx
P.O. Box HM 3051
Xxxxxxxx, XX NX, Bermuda
Tel: 000-000-0000
Fax: 000-000-0000
CATHAYONLINE, INC.
CONVERTIBLE NOTE
$15,000 February 15, 2001
FOR VALUE RECEIVED, the undersigned, CathayOnline, Inc., a Nevada
corporation (Company), hereby promises to pay to the order of Knights Bridge
Capital, or its lawful assigns (Purchaser), in lawful money of the United States
of America, and in immediately available funds, the principal sum of $15,000.
The principal hereof and any unpaid accrued interest thereon shall be due and
payable on or before 5:00 p.m., Eastern Standard Time, on November 30, 2001
(unless the payment date is accelerated as provided in Section 4 hereof,
extended as provided in Section 2 hereof, or unless this Note is converted as
set forth in Section 1 hereof). Payment of all amounts due hereunder shall be
made at the address of the Purchaser provided for in Section 5 hereof. The
Company further promises to pay interest at the rate of ten percent per annum
payable monthly on the outstanding principal balance hereof, such interest to be
payable in arrears commencing on April 2, 2001 and on the maturity date.
Interest shall be payable in cash (or Common Stock (Interest Shares) at the
option of the Company, only if such Interest Shares have been registered for
resale and are freely tradable. If interest is paid in CAOL common stock the
stock shall be valued at the lower of (i) the Average Price for the five trading
days immediately preceding the date the interest payment is due; or (ii) the
Average Price for the five trading days immediately preceding the date the
Interest Shares are delivered to Holder(s).
This Note is one of a series of Notes issued by the Company pursuant to a
Financing Terms Agreement between the Company and Knights Bridge Capital dated
as of December 12, 2000 (Financing Terms Agreement). Capitalized terms herein
shall have the same meaning as in the Financing Terms Agreement. THE PROVISIONS
OF THE FINANCING TERMS AGREEMENT ARE INCORPORATED HEREIN BY REFERENCE.
In connection with any conversion of the Note into any Conversion Shares,
the Company has placed into escrow with St. George's Trust Company Limited (the
Escrow Agent) an aggregate of 10,000,000 shares of Common Stock (Escrow Shares)
pursuant to the terms of Joint Escrow Instructions dated as of December 12,
2000. THE PROVISIONS OF THE JOINT ESCROW INSTRUCTIONS ARE INCORPORATED HEREIN BY
REFERENCE.
1. CONVERSION. The Purchaser or any subsequent holder or holders (Holder(s)
of this Note is entitled, at its option, at any time and in whole or in part,
until maturity hereof (as extended by Holder(s)) to convert the principal amount
of this Note or any portion of the principal amount hereof into Shares of Common
Stock at lower of (a) the average of the closing bid price (Closing Bid Price)
of the Company's Common Stock for the five-day trading period ending on the day
prior to the Effective Date (Average Price) times (x); or (b) the Closing Bid
Price on the Closing Date.
In the event a Registration Statement Amendment covering the Conversion
Shares is not filed by the Filing Date Deadline and/or shall not become
effective by the Effective Date Deadline (a) for the first month or part thereof
after the Filing Date Deadline that the Registration Statement Amendment has not
been filed; and/or (b) for the first month or part thereof after the Effective
Date Deadline that the Registration Statement Amendment has not become
effective; for each additional month or part thereof commencing one month after
the Effective Date Deadline, for up to two years from the Closing Date, that the
Registration Statement Amendment has not been made effective with a current
prospectus available, or the Registration Statement Amendment ceases to be
effective with a current prospectus available; or the Conversion Shares cannot
be sold pursuant to SEC Rule 144 (d) (subject only to Form 144 filing, manner of
sale and volume limitation provisions of Rule 144).
For purposes of this Note, the Closing Bid Price shall be the closing bid
price of the Common Stock as reported by the National Association of Securities
Dealers Automated Quotation System Level II (Nasdaq), or the closing bid price
in the over-the-counter market; or, in the event the Common Stock is listed on a
stock exchange, the closing bid price value per share shall be the closing price
on the exchange, as reported in the Wall Street Journal. The shares of Common
Stock issued upon conversion of the Note are herein referred to as Conversion
Shares. Such conversion shall be effectuated by surrendering the Note to be
converted to the Escrow Agent, with the form of Conversion Notice attached
hereto as Exhibit 1, executed by the Holder(s) of this Note evidencing such
Holder(s)' intention to convert this Note or a specified portion hereof (as
above provided). The Effective Date shall be the date set forth on the
Conversion Notice, provided such Conversion Notice is received by the Escrow
Agent and the Company, via U.S. mail, overnight courier, hand delivery or
facsimile, no later than the fifth business day after such date.
Upon recording the amount converted and amount of indebtedness remaining
under the Note, set forth in the Conversion Notice on the grid comprising the
last page of the Note (Principal Reduction Grid), the Escrow Agent shall send a
copy of the revised Principal Reduction Grid to the Company and shall send a
copy of the revised Principal Reduction Grid to the Holder(s). Escrow Agent
shall also deliver the Conversion Shares to Holder(s)
The Company has authorized and has reserved and covenants to continue to
reserve, free of preemptive rights and other similar contractual rights of
stockholders, a sufficient number of its authorized but unissued shares of
Common Stock to satisfy the rights of conversion of the holder or holders
(Holder(s)) of this Note.
2. EXTENSION OF MATURITY DATE. The maturity date shall be automatically
extended for up to eighteen (18) one-month periods, unless the Holder(s)
notifies the Company in writing not less than 10 days prior to any expiration
that the Notes will not be extended.
3. PREPAYMENT. This Note shall not be prepaid, in whole or in part, without
the prior written consent of the Holder(s).
4. DEFAULT. The occurrence of any one of the following events shall
constitute an Event of Default:
(a) The non-payment, when due, of any principal or interest pursuant to
this Note;
(b) The material breach of any representation or warranty in this Note, the
Financing Terms Agreement or in the Joint Escrow Instructions. In the event the
Holder(s) becomes aware of a breach of this Section 4(b), the Holder(s) shall
notify the Company in writing of such breach and the Company shall have five
business days after notice to cure such breach;
(c) The breach of any covenant or undertaking in this Note, the Financing
Terms Agreement or in the Joint Escrow Instructions, not otherwise provided for
in this Section 5;
(d) A default shall occur in the payment when due (subject to any
applicable grace period), whether by acceleration or otherwise, of any
indebtedness of the Company or an event of default or similar event shall occur
with respect to such indebtedness, if the effect of such default or event
(subject to any required notice and any applicable grace period) would be to
accelerate the maturity of any such indebtedness or to permit the holder or
holders of such indebtedness to cause such indebtedness to become due and
payable prior to its express maturity;
(e) The failure of the Company to file any report or amendment to a report
under the Securities Exchange Act of 1934 more than ten days after such report
or amendment was required to be filed.
(f) The commencement by the Company of any voluntary proceeding under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
receivership, dissolution, or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect; or the adjudication of the Company as
insolvent or bankrupt by a decree of a court of competent jurisdiction; or the
petition or application by the Company for, acquiescence in, or consent by the
Company to, the appointment of any receiver or trustee for the Company or for
all or a substantial part of the property of the Company; or the assignment by
the Company for the benefit of creditors; or the written admission of the
Company of its inability to pay its debts as they mature; or
(g) The commencement against the Company of any proceeding relating to the
Company under any bankruptcy, reorganization, arrangement, insolvency,
adjustment of debt, receivership, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect, provided, however, that
the commencement of such a proceeding shall not constitute an Event of Default
unless the Company consents to the same or admits in writing the material
allegations of same, or said proceeding shall remain undismissed for 20 days; or
the issuance of any order, judgment or decree for the appointment of a receiver
or trustee for the Company or for all or a substantial part of the property of
the Company, which order, judgment or decree remains undismissed for 20 days; or
a warrant of attachment, execution, or similar process shall be issued against
any substantial part of the property of the Company.
Upon the occurrence of any Default or Event of Default, the Holder(s) may,
by written notice to the Company, declare all or any portion of the unpaid
principal amount due to Holder(s), together with all accrued interest thereon,
immediately due and payable, in which event it shall immediately be and become
due and payable, provided that upon the occurrence of an Event of Default as set
forth in paragraph (f) or paragraph (g) hereof, all or any portion of the unpaid
principal amount due to Holder(s), together with all accrued interest thereon,
shall immediately become due and payable without any such notice.
5. NOTICES. Notices to be given hereunder shall be in writing and shall be
deemed to have been sufficiently given if sent by first class or certified mail,
overnight courier, delivered personally or sent by facsimile transmission.
Notice shall be deemed to have been received on the date and time of personal
delivery, delivery by overnight courier, certified mail or facsimile
transmission.
Notices shall be given to the following addresses:
If to the Company:
CathayOnline, Inc.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxx Xxxxxx, President
If to the Purchaser:
Knights Bridge Capital
00 Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxx
Fax: 000-000-0000
Tel: 000-000-0000
If to the Escrow Agent:
St. George's Trust Company Limited
00 Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxx
Fax: 000-000-0000
Tel: 000-000-0000
6. LIMITATION. Notwithstanding any other provision of this Note (including,
without limitation, all Exhibits hereto) to the contrary, no individual
Holder(s) of this Note or any portion of this Note shall be required to accept
(through the issuance to such person of Interest Shares or otherwise), or be
permitted to exercise any of the conversion rights to receive securities of the
Company, if such action would result in the Holder(s) becoming at any particular
time the beneficial owner of an aggregate of more than 5% of the then
outstanding Common Stock of the Company, as calculated pursuant to Section 13 of
the Securities Exchange Act of 1934 (the Exchange Act) and Regulation 13D-G
promulgated thereunder. The foregoing shall not prohibit the Holder(s) from
receiving any remaining amounts owed under this Note to such Purchaser or
Holder(s) from the Company, or to receive in the aggregate securities exceeding
such amount, so long as Holder(s) does not have beneficial ownership of an
aggregate of more than 5% of the outstanding Common Stock at any given time.
7. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. The Company consents to
the jurisdiction of any court of the State of Nevada and of any federal court
located in Nevada. The Company waives personal service of any summons, complaint
or other process in connection with any such action or proceeding and agrees
that service thereof may be made, as the Purchaser or Holder(s) may elect, by
certified mail directed to the Company at the location provided for in Section 6
hereof, or, in the alternative, in any other form or manner permitted by law.
8. GOVERNING LAW. THIS NOTE HAS BEEN PURCHASED IN THE STATE OF NEVADA AND
SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEVADA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY
THEREIN, WITHOUT GIVING EFFECT TO THE RULES OR PRINCIPLES OF CONFLICTS OF LAW.
9. ATTORNEYS FEES. In the event the Holder(s) hereof shall refer this Note
to an attorney for collection, the Company agrees to pay all the costs and
expenses incurred in attempting or effecting collection hereunder or enforcement
of the terms of this Note, including reasonable attorney's fees, whether or not
suit is instituted.
10. CONFORMITY WITH LAW. It is the intention of the Company and of the
Holder(s) to conform strictly to applicable usury and similar laws. Accordingly,
notwithstanding anything to the contrary in this Note, it is agreed that the
aggregate of all charges which constitute interest under applicable usury and
similar laws that are contracted for, chargeable or receivable under or in
respect of this Note, shall under no circumstances exceed the maximum amount of
interest permitted by such laws, and any excess, whether occasioned by
acceleration or maturity of this Note or otherwise, shall be canceled
automatically, and if theretofore paid, shall be either refunded to the Company
or credited on the principal amount of this Note.
IN WITNESS WHEREOF, the Company has signed and sealed this Note as of the
date set forth above.
CathayOnline, Inc.
By:
---------------------------------------
(Signature)
(name)
(title)
PRINCIPAL REDUCTION GRID
Date Principal Principal Converted Adjusted Principal Conversion Shares
Delivered
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