EXHIBIT 10.130
$12,000,000 CONVERTIBLE SECURED PROMISSORY NOTE DATED
AUGUST 8, 1996 ISSUED BY THE HARTCOURT COMPANIES, INC.
PURCHASE AND SALE AGREEMENT
DATED: 8, August 1996
PARTIES:
1. "Hartcourt"
The Hartcourt Companies, Inc., a corporation organised under the laws of
the United States, State of Utah.
2. "NuOasis"
NUOASIS INTERNATIONAL INC., a corporation organised under the laws of the
Commonwealth of the Bahamas.
RECITALS:
1.1 NuOasis is the owner and developer of a commercial real estate project
located in mainland China commonly known as the Peony Gardens Property,
more fully described in Schedule "1" annexed hereto (the "Property"); and,
1.2 Hartcourt wishes to purchase the Property.
OPERATIVE PROVISIONS:
1. PURCHASE AND SALE
1.1 Upon the terms and subject to the conditions of this Agreement, on the
Closing Date, NuOasis agrees to sell and transfer the Property to
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ agrees to purchase and accept the Property for
the consideration set forth in this Agreement.
1.2 In exchange for the Property, ▇▇▇▇▇▇▇▇▇ shall pay to NuOasis the sum
of Twenty Two Million Dollars (USD22,000,000), hereinafter referred to
as the "Purchase Price", consisting of a Convertible Secured
Promissory Note in the principal amount of Twelve Million Dollars
(USD12,000,000) in the form annexed hereto as Schedule 2 (the
"Hartcourt Note") and the greater of Two Million (2,000,000) shares of
Hartcourt common stock or that number of shares of Hartcourt common
stock having a market value equal to Ten Million Dollars
(USD10,000,000) at Closing (the "Shares"). For the purpose of this
Agreement, "Market Value" shall mean fifty percent (50%) of the thirty
(30) days moving average closing "bid" price for Hartcourt common
stock as quoted by the United States National Association of
Securities Dealers Electronic Bulletin Board immediately preceding the
Closing Date.
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2. CLOSING
2.1 The closing of the delivery and transfer of the Property (the
"Closing") shall occur at the offices of Hartcourt on a date ("Closing
Date") to be mutually agreed upon by ▇▇▇▇▇▇▇▇▇ and NuOasis after (i)
exchange of all books, records, financial information, documents, and
other materials deemed necessary to completion of the transaction
contemplated under this Agreement, and (ii) completion of all review
periods provided for in this Agreement. Exchange of documents under
this Agreement shall begin as soon as possible after execution hereof.
In any case, the Closing Date shall be no later than 30th September
1996.
2.2 At the Closing, the following transactions shall occur and documents
shall be exchanged, all of which shall be deemed to occur
simultaneously:
2.2.1 NuOasis will deliver, or cause to be delivered, to Hartcourt:
2.2.1.1 the documents necessary to establish the interest in the
Property and to transfer ownership of NuOasis' right, title
and interest in and to the Property to Hartcourt, in form
and substance acceptable to Hartcourt;
2.2.1.2 such other documents, instruments, and/or certificates,
if any, as are required to be delivered pursuant to the
provisions of this Agreement, or which are reasonably
determined by the parties to be required to effectuate the
transactions contemplated in this Agreement, or as otherwise
may be reasonably requested by ▇▇▇▇▇▇▇▇▇ in furtherance of
the intent of this Agreement.
2.2.1.3 certificates or other conveyance documents acceptable to
NuOasis transferring the Purchase Price to NuOasis;
2.3 From time to time after the Closing, upon the reasonable request of
any party, the party to whom the request is made shall deliver such
other and further documents, instruments, and/or certificates as may
be necessary to more fully vest in the requesting party the
consideration provided for in this Agreement or to enable the
requesting party to obtain the rights and benefits contemplated by
this Agreement.
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3. REPRESENTATIONS AND WARRANTIES OF HARTCOURT
Hartcourt represents and warrants to NuOasis that:
3.1 Hartcourt is a corporation, validly existing and in good standing
under the laws of the United States, State of Utah, with the power and
authority to carry on its business as now being conducted. The
execution and delivery of this Agreement and the consummation of the
transaction contemplated in this Agreement have been, or will be prior
to Closing, duly authorized by all requisite action on the part of
Hartcourt. This Agreement has been duly executed and delivered by
▇▇▇▇▇▇▇▇▇ and the Hartcourt Note the Shares to be issued by ▇▇▇▇▇▇▇▇▇
hereunder will constitute validly issued shares and a binding, and
enforceable obligation of the corporation.
3.2 To the best of ▇▇▇▇▇▇▇▇▇'s knowledge and belief, the execution and
performance of this Agreement will not violate, or result in a breach
of, or constitute a default in, any provisions of applicable law, any
agreement, instrument, judgment, order or decree to which Hartcourt is
a party or to which it is subject so as to give rise to a claim by
anyone against the Hartcourt Note or Shares which would in any way
effect the enforceability or validity of this Agreement or ▇▇▇▇▇▇▇▇▇'s
ability to conclude the transaction contemplated under this Agreement.
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3.3 The Shares. The Shares to be issued pursuant to this Agreement will be
issued at Closing, free and clear of liens, claim, and encumbrances,
and Hartcourt can issue such shares without the consent or approval of
any person, firm, corporation, or government authority.
3.4 Capitalization. The capitalization of Hartcourt is attached hereto and
incorporated herein as Schedule "3".
3.5 Financial Information. Hartcourt has provided NuOasis, or will provide
prior to Closing, copies of its Annual Report containing audited
financial statements for the years ending 31st December 1994 and 1995,
and all other information included in such reports or delivered to
NuOasis pursuant to this Agreement, shall be referred to as the
"Hartcourt Financials". Except as set forth in the Hartcourt
Financials, Hartcourt has no obligations or liabilities (whether
accrued, absolute, contingent, liquidated or otherwise, including
without limitation any tax liabilities due or to become due) which are
not fully disclosed and adequately provided for excepting current
liabilities incurred and obligations under agreements entered into in
the usual and ordinary course of business since the date of the
Hartcourt Financials, none of which (individually or in the aggregate)
are material except as expressly indicated there use is not a
guarantor or otherwise contingently liable for any material amount of
indebtedness. Except as indicated in the Hartcourt Financials, there
exists no default under the provisions of any instrument evidencing
any indebtedness or of any agreement in relation thereto.
3.6 Litigation. To the best knowledge and belief of ▇▇▇▇▇▇▇▇▇, except as
disclosed in the Hartcourt Financials or pursuant to this Agreement,
there is neither pending nor threatened, any action, suit or
arbitration to which its Hartcourt property, assets or business is or
is likely to be subject and in which an unfavorable outcome, ruling or
finding will or is likely to have a material adverse effect on the
condition, financial or otherwise, or create a material liability on
the part of Hartcourt, or which would conflict with this Agreement or
any action taken or to be taken in connection with it.
3.7 Tax Matter. To the extent that its tax filings, liabilities, payments,
or provisions for payment could give rise to a claim against or affect
the right of ownership to the Shares, Hartcourt has filed or will file
all federal, state, and local income, excise, property, and other tax
returns, forms, or reports, which are due or required to be filed by
it and has paid, or made adequate provision for payment of all taxes,
interest, penalty fee, assessment, or deficiencies shown to be due or
claimed to be due or which have or may become due on or in respect of
such returns or reports.
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3.8 Contracts. Except as disclosed pursuant to this Agreement, or in the
Hartcourt Financials, there are no contracts, actual or contingent
obligations, agreement, franchises, license agreements, or other
commitments between Hartcourt third parties which are material to its
business, financial condition, or results of operation, taken as a
whole. For purposes of the preceding sentence, the term "material"
refers to any obligation or liability which by its terms calls for
aggregate payments of more than Ten Thousand Dollars (USD10,000).
3.9 Material Contract Breaches: Defaults. To the best of Hartcourt's
Knowledge and relief, it has not materially breached, nor has it any
knowledge of any pending or threatened claims or any legal basis for a
claim that it has materially breached, any of the terms or conditions
of any agreements, contracts, or commitments to which it is a party or
is bound and which might give rise to a claim by anyone against the
Note or the Shares, and there is no event of default or other event
which, with notice or lapse of time or both, would constitute a
default in any material rise to a claim against the Note or the Shares
in respect of which ▇▇▇▇▇▇▇▇▇ has not taken adequate steps to prevent
such a default from occurring.
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3.10 Securities Laws. Hartcourt is a public company and represents that, to
the best of its knowledge, except as disclosed in the Hartcourt
Financials, it has no existing or threatened liabilities, claims,
lawsuits, or basis for the same with respect to this original stock
issuance to its founders, its initial public offering, or any dealings
with its stockholders, the public, the brokerage community, the United
States Securities And Exchange Commission ("SEC"), any U.S. state
regulatory agencies, or other person. Hartcourt is currently a
non-reporting company and is not required to file quarterly or yearly
reports. Hartcourt is in the process of filing its Form 10 with the
SEC. Hartcourt is currently published in Standard and Poors and is
cleared therefore for secondary trading in Standard and Poors approved
states.
3.11 Brokers. ▇▇▇▇▇▇▇▇▇ has agreed to pay a finder's fee with respect to
the transaction contemplated in this Agreement to Asian International
Development Ltd. ("AID"), its assignees or nominees, and to Guangoong
Investments Ltd. ("GIL"), its assignees or nominees in an amount to be
negotiated. To the best of ▇▇▇▇▇▇▇▇▇'s knowledge, no other person or
entity is entitled, or intends to claim that it is entitled, to
receive any fees or commissions in connection with this transaction,
further agrees to indemnify and hold harmless NuOasis against
liability to AID, ▇▇▇ or any broker claiming fees of any kind or
nature.
3.12 Approvals. Except as otherwise provided in this Agreement, to
▇▇▇▇▇▇▇▇▇'s best knowledge and belief no authorization, consent, or
approval of, or registration or filing with any governmental
authority, or any other person, is required to be obtained or made by
connection with ▇▇▇▇▇▇▇▇▇'s execution, delivery, or performance of
this Agreement.
3.13 Full disclosure. The information concerning set forth in this
Agreement, and in the Hartcourt Financials, is, to the best of
▇▇▇▇▇▇▇▇▇'s knowledge and belief, complete and accurate in all
material respects and does not contain any untrue statement of a
material fact or omit to state a material fact required to make the
statements made, in light of the circumstances under which they were
made, not misleading.
3.14 Date of Representations and Warranties. Each of the representations
and warranties of set forth in this Agreement is true and correct at
and as of the Closing Date, with the same force and effect as though
made at and as of the Closing Date, except for changes permitted or
contemplated by this Agreement.
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4. REPRESENTATIONS AND WARRANTIES OF NUOASIS
NuOasis represents and warrants to Hartcourt that:
4.1 NuOasis is the owner of the Property and will certify in form and
substance acceptable to Hartcourt at Closing.
4.2 NuOasis is a corporation duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of Bahamas, with the
corporate power and authority to carry on its business as now being
conducted. In addition, NuOasis is duly qualified to do business in
each jurisdiction in which the nature of its business requires it to
be so qualified, except to the extent that the failure to so qualify
does not have a material adverse effect on the business of NuOasis,
taken as a whole. The execution and delivery of this Agreement and the
consummation of the transactions contemplated in this Agreement have
been, or will be prior to Closing, duly authorized by all requisite
corporate actions on the part of NuOasis, to the extent, if any, that
such authorizations are necessary. This Agreement has been duly
executed and delivered by NuOasis and constitutes the valid, binding,
and enforceable obligation of NuOasis.
4.3 NuOasis has provided to Hartcourt, or will provide prior to Closing,
appraisals, construction costs and budgets, and all other information
related to the Property in the possession of NuOasis, or available for
NuOasis. Such information shall be referred to as the "Property
Reports". All financial statements and reports included in the
Property Reports and prepared by NuOasis, are prepared in accordance
with generally acceptable accounting standards and present fairly the
condition of the Property. Except as indicated, there exists no
default under the provisions of any instrument evidencing NuOasis'
ownership of the Property and NuOasis is not a guarantor or otherwise
contingently liable for any material amount of indebtedness relating
thereto.
4.4 To the best knowledge and belief of NuOasis, there is neither pending
nor threatened, any action, suit, arbitration, proceeding (whether
federal, state, local or foreign) or claim to which NuOasis or the
Property is or is likely to be named as a party in which an
unfavorable outcome, ruling or finding will or is likely to have a
material adverse effect on the condition, financial or otherwise, of
the Property, or create any material liability on the part of owners
of the Property, or which would conflict with this Agreement or any
action taken or to be taken in connection with it.
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4.5 To NuOasis's best knowledge and belief, no authorization, consent, or
approval of, or registration or filing with, any governmental
authority or any other person is required to be obtained or made by
NuOasis in connection with the execution, delivery, or performance of
this Agreement.
4.6 The information concerning NuOasis set forth in this Agreement and in
the Property Reports is, to the best of NuOasis's knowledge and
belief, complete and accurate in all material respects and does not
contain any untrue statement of a material fact or omit to state a
material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF NUOASIS
All obligations of NuOasis under this Agreement are subject to the
fulfillment, prior to or as of the Closing Date, of each of the following
conditions:
5.1 The representations and warranties by ▇▇▇▇▇▇▇▇▇ set forth in this
Agreement shall be true and correct at and as of the Closing Date,
with the same force and effect as though made at and as of the Closing
Date, except for changes permitted or contemplated by this Agreement.
5.2 Hartcourt shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed
or complied with by it prior to or at the Closing.
5.3 Hartcourt shall have taken all corporate and other action necessary to
issue the Shares and the Hartcourt Note constituting the Purchase
Price to NuOasis pursuant to this Agreement.
5.4 All instruments and documents delivered to NuOasis pursuant to the
provisions of this Agreement shall be satisfactory to NuOasis and its
legal counsel.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF HARTCOURT
All obligations of NuOasis under this Agreement are subject to the
fulfillment, prior to or as of the Closing Date, of each of the following
conditions:
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6.1 The representations and warranties by NuOasis set forth in this
Agreement shall be true and correct with the same force and effect as
though made at and as of the Closing Date, except for changes
permitted or contemplated by this Agreement.
6.2 NuOasis shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed
or complied with by it prior to or at the Closing.
6.3 NuOasis shall have taken all corporate and other action necessary to
transfer NuOasis ownership and title to the Property to Hartcourt.
6.4 Before Closing, NuOasis will have delivered the Property Reports to
Hartcourt. NuOasis shall specifically provide to Hartcourt schedules
of all costs related to the Property as of 31st March, 1996 and all
other documents necessary to substantiate to ▇▇▇▇▇▇▇▇▇'s sole
satisfaction the agreed value of not less than Twenty Two Million
Dollars (USD22,000,000). Upon receipt and review of the Property
Reports, ▇▇▇▇▇▇▇▇▇ shall have fifteen(15) business days to raise
objections to the information contained in the Property Reports, which
shall be accomplished by submission of a written list of such
objections to NuOasis, and to conduct a valuation of the Property. If
there are objections, or if the valuation of the Property, as
determined by ▇▇▇▇▇▇▇▇▇, or a recognised independent appraiser acting
for Hartcourt, is less than Twenty-Two Million Dollars(USD22,000,000),
then Hartcourt shall have the option to terminate this Agreement
without penalty. Alternatively, Hartcourt may elect, in its sole
discretion, to waive objections and proceed with Closing.
6.5 All instruments and documents delivered to Hartcourt pursuant to the
provisions of this Agreement shall be satisfactory to Hartcourt and
its legal counsel. NuOasis shall provide to Hartcourt prior to Closing
evidence satisfactory to ▇▇▇▇▇▇▇▇▇ that the representations of NuOasis
herein and the interest in the Property is legally created and duly
enforceable.
7. TERMINATION
7.1 This Agreement may be terminated at any time prior to the Closing Date
without liability on the part of either Hartcourt or NuOasis:
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7.1.1 by mutual consent of ▇▇▇▇▇▇▇▇▇ and NuOasis;
7.1.2by Hartcourt or NuOasis, (unless the action or proceeding
referred to is caused by a breach or default on the part of
Hartcourt or NuOasis of any of their representations, warranties,
or obligations under this Agreement), if there shall be any
actual or threatened action or proceeding by or before any court
or any other governmental body which shall seek to restrain,
prohibit, or invalidate the transactions contemplated by this
Agreement and which, in the judgment of Hartcourt or NuOasis,
made in good faith and based upon the advice of legal counsel,
makes it inadvisable to proceed with the transactions
contemplated by this Agreement;
7.1.3by NuOasis or Hartcourt (as the case may be) if, as provided
herein upon ▇▇▇▇▇▇▇▇▇'s disapproval of the Value of the Property
or NuOasis' disapproval of the Value of the Shares or the
financial condition of Hartcourt, including but not limited to
its capitalisation, at any time prior to Closing.
8. TERMINATION WITH CAUSE
If this Agreement is terminated for breach or otherwise for cause, the
non-breaching party shall be reimbursed by the other party of all expenses
and costs related to this Agreement in the amount of Fifty Thousand Dollars
(USD50,000).
9. MISCELLANEOUS PROVISIONS
9.1 All representations, warranties, and covenants made by any party in
this Agreement shall survive the Closing hereunder and the
consummation of the transactions contemplated hereby for three (3)
years from the Closing Date. ▇▇▇▇▇▇▇▇▇ and NuOasis are executing and
carrying out the provisions of this Agreement in reliance on the
representations, warranties, and covenants and agreements contained in
this Agreement or at the Closing of the transactions herein provided
for including any investigation upon which it might have made or any
representations, warranty, agreement, promise, or information, written
or oral, made by the other party or any other person other than as
specifically set forth herein.
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9.2 All costs and expenses in the proposed sale and transfer described in
this Agreement shall be borne by the following manner:
9.2.1each party has been represented by its own attorney(s) in this
transaction, shall pay the fees of its own attorney(s), except as
may be expressly set forth herein to the contrary.
9.2.2each party shall bear its reasonable shares of all other Closing
costs and expenses arising from this Agreement.
9.3 At any time and from time to time, after the effective date, each
party will execute such additional instruments and take such action as
may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
9.4 Any failure of any party to this Agreement to comply with any of its
obligations, agreements, or conditions hereunder may be waived in
writing by the party to whom such compliance is owed. The failure of
any party to this Agreement to enforce at any time any of the
provisions of this Agreement shall in no way be construed to be a
waiver of any such provision or a waiver of the right of such party
thereafter to enforce each and every such provision. No waiver of any
breach of or non-compliance with this Agreement shall be held to be a
waiver of any other or subsequent breach or non-compliance.
9.5 All notices and other communications hereunder shall either be in
writing and shall be deemed to have been given if delivered in person,
sent by overnight delivery service or sent by facsimile transmission,
to the parties hereto, or their designees, as follows:
To Hartcourt: The Hartcourt Companies, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
Artesia, California 90703
Telephone: ▇▇ ▇▇▇ ▇▇▇-▇▇▇▇
Facsimile: ▇▇ ▇▇▇ ▇▇▇-▇▇▇▇
To NuOasis: NuOasis International Inc.
First Directors Limited
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇
Telephone: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Facsimile: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
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9.6 The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9.8 Notwithstanding that this Agreement was negotiated and is being
contracted for in the Bahamas and any conflict-of-law provision to the
contrary, the Agreement shall be governed by the laws of the
Commonwealth of the Bahamas.
9.9 This Agreement shall be binding upon the parties hereto and inure to
the benefit of the parties, their respective heirs, administrators,
executors, successors, and assigns.
9.10 This Agreement contains the entire agreement between the parties
hereto and supersedes any and all prior agreements, arrangements, or
understandings between the parties relating to the subject matter of
this Agreement. No oral understandings, statements, promises, or
inducements contrary to the terms of this Agreement exist. No
representations, warranties, covenants, or conditions, express or
implied, other than as set forth herein, have been made by any party.
9.11 If any part of this Agreement is deemed to be unenforceable the
balance of the Agreement shall remain in full force and effect.
9.12 This Agreement may be amended only by a written instrument executed by
the parties or their respective successors or assigns.
9.13 A facsimile, telecopy or other reproduction of this Agreement may be
executed by one or more parties hereto and such executed copy may be
delivered by facsimile of similar instantaneous electronic
transmission device pursuant to which the signature of or on behalf of
such party can be seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes. At the
request of any party hereto, all parties agree to execute an original
of this Agreement as well as any facsimile, telecopy or other
reproduction hereof.
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9.14 Time is of the essence of this Agreement and of each and every
provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
THE HARTCOURT COMPANIES INC.
/s/ ▇▇▇▇ ▇▇▇▇
By:-------------------------------
Name: ▇▇▇▇ ▇▇▇▇
Title: President
NuOASIS INTERNATIONAL INC.
By:-------------------------------
Name:
Title:
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SCHEDULE "1"
to the
Purchase and Sale Agreement
Dated July 1996
THE PROPERTY
1 - 1
SCHEDULE "2"
to the
Purchase and Sale Agreement
Dated July 1996
CONVERTIBLE SECURED PROMISSORY NOTE
THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), BUT HAVE
BEEN ISSUED IN RELIANCE UPON REGULATION S PROMULGATED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD
OR OTHERWISE TRANSFERRED TO A "U.S. PERSON" (AS DEFINED IN REGULATION S) OR TO
ANY PERSON WITH A UNITED STATES ADDRESS DURING THE RESTRICTED PERIOD FOLLOWING
ISSUANCE OF THE SECURITIES. FOLLOWING EXPIRATION OF THE RESTRICTED PERIOD, ANY
RESALE OR TRANSFER OF THE SECURITIES TO A U.S. PERSON OR INTO THE UNITED STATES
MUST BE MADE IN ACCORDANCE WITH REGULATION S, PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT.
2 - 1
CONVERTIBLE SECURED PROMISSORY NOTE
U.S. $12,000,000 August 8, 1996
Artesia, California
FOR VALUE RECEIVED, The Hartcourt Companies, Inc., a corporation
organised under the laws of the United States, State of Utah, with its principal
place of business in Artesia, California ("Maker"), hereby promises to pay to
NuOasis International, Inc., a company organised under the laws of the
Commonwealth of the Bahamas ("Payee"or "Holder") the principal sum Twelve
Million Dollars (US$12,000,000) with principal and accrued interest at the rate
of eight percent (8%) per annum due and payable 30 days after demand or August
31, 1997, whichever first occurs (the "Due Date"). This Convertible Secured
Promissory Note (the "Note") is issued by Maker pursuant to the Purchase and
Sale Agreement of even date (the "Purchase Agreement").
To secure the payment of this Note, Maker hereby grants to the Holder
pursuant to a Security Agreement dated of even date between Maker and Holder a
security interest in the property set forth in Exhibit "A" hereto (the
"Collateral"). Upon default, the Holder may resort to any remedy against the
Collateral available to a secured party under the United States Uniform
Commercial Code, or laws of the Peoples Republic of China. Notwithstanding
anything to the contrary herein, this Note is without recourse. ▇▇▇▇▇ and Holder
agree to look solely to the Collateral for satisfaction in the event of default.
All documents and instruments now or hereafter evidencing and/or
securing the indebtedness evidenced hereby or any part thereof, including but
not limited to this Note and the Security Agreement of even date, are sometimes
collectively referred to herein as the "Security Documents."
All agreements in this Note and all other Security Documents are
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the indebtedness evidenced hereby or
otherwise, shall the amount agreed to be paid hereunder for the use, forbearance
or detention of money exceed the highest lawful rate permitted under applicable
usury laws. If, for any circumstance whatsoever, fulfillment of any provision of
this Note or any other Security Document at the time performance of such
provision shall be due shall involve exceeding any usury limit prescribed by law
which a court of competent jurisdiction may deem applicable hereto, then, ipso
facto, the obligations to be fulfilled shall be reduced to allow compliance with
such limit, and if, from any circumstance whatsoever, Payee shall ever receive
as interest an amount which would exceed the highest lawful rate, the receipt of
such excess shall be deemed a mistake and shall be canceled automatically or, if
theretofore paid, such excess shall be credited against the principal amount of
the indebtedness evidenced hereby to which the same may lawfully be credited,
and any portion of such excess not capable of being so credited shall be
refunded immediately to Maker. Maker and ▇▇▇▇▇ affirm that the indebtedness
evidenced represents the partial consideration for the Property being acquired
by Maker pursuant to the Purchase Agreement.
Maker shall pay to Holder all reasonable costs, expenses, charges,
disbursements and attorneys' fees incurred by ▇▇▇▇▇▇ following an Event of
Default in collecting, enforcing or protecting this Note or any other Security
Document, whether incurred in or out of court, including appeals and bankruptcy
proceedings.
2 - 2
If Maker utilizes the Collateral in any way to secure financing, Maker
agrees to pay the net proceeds of such financing to Holder to the extent of the
principal balance of the Note, and all accrued and unpaid interest, before
distributing any of such financing proceeds for other purposes.
CONVERSION FEATURES OF THE NOTE
This Note is convertible into shares of the Maker's common stock as
hereinafter provided. At the election of Holder, the Note is convertible into
the greater of that number of shares of common stock of Maker with a current
market value at the date of conversion equal to the unpaid principal balance due
on the Note. "Market Value" for the purpose of this Note shall mean fifty
percent (50%) of the moving average bid price of such shares for the ten (10)
business days immediately preceeding notice of conversion.
EXTENSION OF THE DUE DATE
In the event the Maker hereof makes any principal reduction payments on
this Note on or before October 31, 1996, then the Due Date of this Note shall be
extended as follows: For each One Million Dollars (US$1,000,000) of principal
reduction payments made on the Note, the Due Date shall be extended by thirty
(30) days.
EVENTS OF DEFAULT
Each of the following events or occurrences shall constitute an "Event
of Default" hereunder: (a) if default is made in the payment of any monetary
amount payable hereunder, under the terms of any Security Document, or under the
terms of any other obligation of Maker to Payee hereunder, within ten (10) days
following the date the same is due; (b) if default is made in the performance of
any other promise or obligation described herein, in any Security Document, or
in any other document evidencing or securing any indebtedness of Maker to Payee
following ten (10) days prior notice to Maker of such default and the failure of
Maker to cure such default within ten (10) day period; (c) if Maker shall
execute an assignment of any of its property for the benefit of creditors, fail
to meet any obligations herein described, be unable to meet its debts as they
mature, suspend its active business or be declared insolvent by any court,
suffer any judgment or decree to be rendered against it in an amount greater
than US$10,000, suffer a receiver to be appointed for any of its property,
voluntarily seek relief or have involuntary proceedings brought against it under
any provision now in force or hereinafter enacted of any law relating to
bankruptcy, or forfeit its charter, dissolve, or terminate its existence; (d) if
any writ of attachment, garnishment or execution shall be issued against Maker;
(e) if any tax lien be assessed or filed against Maker; (f) if any warranty,
representation or statement made or furnished to Payee by or on behalf of Maker,
including but not limited to any information provided to Payee in conjunction
with the Purchase Agreement.
Upon the occurrence of any Event of Default, which is not cured within
ten (10) days after notice of such default is given by Holder or at any time
thereafter when any Event of Default may continue, Holder may, at its option and
in its sole discretion, declare the entire balance of this Note to be
immediately due and payable, and upon such declaration all sums outstanding and
unpaid under this Note shall become and be in default, matured and immediately
due and payable, without presentment, demand, protest or notice of any kind to
Maker or any other person, all of which are hereby expressly waived, anything in
this Note or any other Security Document to the contrary notwithstanding.
2 - 3
▇▇▇▇▇ and Maker hereby agree to trial by court and irrevocably agree to
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
Note or any other Security Document, the relationship created thereby, or the
origination, administration or enforcement of the indebtedness evidenced and/or
secured by this Note or any other Security Document.
This Note has been delivered to Payee and accepted by Payee in the
Commonwealth of the Bahamas and shall be governed and construed generally
according to the laws of said jurisdiction except to the extent that creation,
validity, perfection or enforcement of any liens or security interests securing
this Note are governed by the laws of another jurisdiction. Venue of any action
brought pursuant to this Note or any other Security Document, or relating to the
indebtedness evidenced hereby or the relationships created by or under the
Security Documents shall, at the election of the party bringing the action, be
brought in a United States federal court of appropriate jurisdiction located in
or having jurisdiction over the Maker. Maker and ▇▇▇▇▇ each waives any objection
to the jurisdiction of or venue in any such court and to the service of process
issued by such court and agrees that each may be served by any method of process
pursuant to the laws of the Commonwealth of the Bahamas or, if applicable, as
described in the United States Federal Rules of Civil Procedure. Maker and Payee
each waives the right to claim that any such court is an inconvenient forum or
any similar defense.
If, in any jurisdiction, any provision of this Note shall, for any
reason, be held to be invalid, illegal, or unenforceable in any respect, such
holding shall not affect any other provisions of this Note, and this Note shall
be construed, to the extent of such invalidity, illegality or unenforceability
(and only to such extent) as if any such provision had never been contained
herein. Any such holding of invalidity, illegality or unenforceability in one
jurisdiction shall not prevent valid enforcement of any affected provision if
allowed under the laws of another relevant jurisdiction.
As used in this Note, the term "person" shall include, but is not
limited to, natural persons, corporations, partnerships, trusts, joint ventures
and other legal entities, and all combinations of the foregoing natural persons
or entities, and the term "obligation" shall include any requirement to pay any
indebtedness and/or perform any promise, term, provision, covenant or agreement
included or provided for in this Note or any other Security Document.
This Note and any and all certificates issued in replacement thereof or
in exchange therefor, will bear a restrictive transfer legend in the following
form:
"THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), BUT HAVE
BEEN ISSUED IN RELIANCE UPON REGULATION S PROMULGATED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD
OR OTHERWISE TRANSFERRED TO A "U.S. PERSON" (AS DEFINED IN REGULATION S) OR TO
ANY PERSON WITH A UNITED STATES ADDRESS DURING THE RESTRICTED PERIOD FOLLOWING
ISSUANCE OF THE SECURITIES. FOLLOWING EXPIRATION OF THE RESTRICTED PERIOD, ANY
RESALE OR TRANSFER OF THE SECURITIES TO A U.S. PERSON OR INTO THE UNITED STATES
MUST BE MADE IN ACCORDANCE WITH REGULATION S, PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT."
2 - 4
Executed by the undersigned the year and day first above written.
The Hartcourt Companies, Inc.
a Utah corporation
By:------------------------------------
Name:
Title:
2 - 5
EXHIBIT "A"
to the
Convertible Secured Promissory Note
dated August 8, 1996
THE COLLATERAL
A - 1
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 ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, 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 ▇▇▇▇▇▇▇▇'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.
A - 2
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 ▇▇▇▇▇▇'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
A - 3
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 ▇▇▇▇.
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.
▇. ▇▇▇▇▇▇ 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.
A - 4
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.
A - 5
▇. ▇▇▇▇▇▇'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.
▇. ▇▇▇▇▇▇ of Jury Trial. Secured Party and ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ on the date indicated above.
The Hartcourt Companies, Inc.
a Utah corporation
By:-------------------------------
Name:
Title:
A - 6
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