Exhibit 10.11
LOAN AGREEMENT
This Loan Agreement (the "Agreement") is made and entered into as of the
10th day of October, 2000 between Honview International Limited, a Hong Kong
corporation ("Honview"), and Migration Developments Limited, a British Virgin
Islands corporation ("Migration"). For purposes of this Agreement, each of
Honview and Migration may be referred to individually as a "Party" and both
Honview and Migration may be referred to collectively as the "Parties".
Recitals
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A. Honview has agreed to lend cash needs to Migration up to a maximum
amount of US$8 million (the "Loan").
B. Migration desires to borrow amounts from Honview and has agreed to repay
those amounts according to the terms and conditions of this Agreement.
Agreement
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In consideration of the premises and of the mutual promises and covenants
contained in this Agreement, the Parties agree as follows:
1. Loan. Honview agrees to lend Migration its cash needs, from time to
time, at any time until January 1, 2004 up to an aggregate principal amount of
US$8 million pursuant to the terms and conditions set forth in this Agreement
and the Convertible Promissory Note (the "Note") attached to and made a part of
this Agreement as Exhibit A. If the Company becomes a wholly owned subsidiary of
COL China Online International Inc., a Delaware corporation ("COL"), then any
amounts loaned to Honview prior to the effective date of COL's Registration
Statement on Form SB-2 (the "Registration Statement") may be paid at the option
of the Holder hereof, by converting, at any time after October 10, 2001, part or
all the unpaid principal amount of the Loan into shares of $.001 par value
common stock of COL (the "Common Stock"), at a price equal to the greater of
$1.20 per share or 90 percent of the Average Weighted Trading Price, as defined
below, for the 20 trading days preceding the date of notice of exercise of
conversion. Any amounts loaned to Honview after the effective date of COL's
Registration Statement may be paid, at the option of the Holder hereof, by
converting, at any time after October 10, 2001, part or all the unpaid principal
amount of the Loan into shares of Common Stock, at a price equal to the greater
of $1.20 per share or 110 percent of Weighted Average Trading Price of the
Common Stock for the 20 trading days preceding the date of the Loan. For
purposes of this Agreement, "Weighted Average Trading Price" shall mean the
average trading price determined by multiplying the number of shares involved in
each individual trade during the period of determination by the sale price for
that trade and dividing the sum of all those amounts by the total number of
shares traded during the relevant period of determination. Repayment of this
Loan shall be made pursuant to the terms of the Note. At the time of each
advance pursuant to this Agreement, Honview shall annotate the Note to indicate
the amount of the advance and the date of the advance.
2. Migration's Warranties. Migration represents and warrants to Honview as
follows: (a) Migration has full power and authority to execute this Agreement
and the Note; (b) Migration is duly organized and in good standing under the
laws of the British Virgin Islands; and (c) Migration has full authority and
power to own its properties and to operate its business as now conducted.
3. Condition Precedent To The Loan. The obligation of Honview to make any
advance is subject to the satisfaction of the following conditions precedent:
(a) Honview shall have received on or before the date of this
Agreement, duly authorized, executed and delivered by each person that is a
party thereto, in form and substance reasonably satisfactory to Honview, each of
(i) the Note and (ii) this Agreement.
(b) (i) The representations and warranties of Migration contained in
Section 2 of this Agreement and, in all material respects, in the Note, shall be
true and correct on the date of this Agreement and as of the date (the "Advance
Date") on which each advance is to be made; (ii) no Default or Event Of Default
shall have occurred and be continuing on the date of this Agreement or the
Advance Date either before or after giving effect to the making of the advance
or any subsequent advance; and (iii) no events or state of affairs which could
reasonably be expected to result (or has resulted) in a "Material Adverse
Effect" (as defined below) on Migration and its subsidiaries shall have occurred
since July 1, 2000. For purposes of this Agreement, a Material Adverse Effect
means (A) a material adverse effect on the business, assets, operations or
condition (financial or otherwise) or prospects of Migration and its
subsidiaries taken as a whole, or (B) material impairment of the ability of
Migration or any of its subsidiaries to perform timely any of its respective
obligations under this Agreement or the Note, or (C) material impairment of the
rights of or benefits available to Honview under this Agreement and Note; and
(c) Such other conditions precedent which Honview may reasonably have
required.
5. Events Of Default. The occurrence of any of the following events shall
be deemed to be an Event Of Default under this Agreement and the Note:
(a) Failure of Migration to make any payment when due; or
(b) Failure of Migration to perform any other agreement of Migration
contained in the Note or this Agreement; or
(c) Any representation or warranty made by Migration in the Note or
this Agreement shall prove to have been incorrect when made in any material
respect; or
(d) Migration or any subsidiary of Migration shall be adjudicated
insolvent, or shall generally not pay, or admit in writing its inability to pay,
its debts as they mature, or make a general assignment for the benefit of
creditors, or any proceeding shall be instituted by Migration or any subsidiary
of Migration seeking to adjudicate it insolvent, seeking liquidation,
dissolution, winding-up, reorganization, arrangement, adjustment, protection,
release or composition of it or its debts under any bankruptcy or other debtor
relief law, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for any substantial part
of its properties, or any of Migration or any subsidiary of Migration shall take
any corporate action in furtherance of any of the actions set forth above in
this Section 5(d); or
(e) Any proceeding of the type referred to in Section 5(d) is filed,
or any such proceeding is commenced against Migration or any subsidiary of
Migration and such proceeding remains in effect for 60 days, or any of Migration
or any subsidiary of Migration by any act indicates its approval thereof,
consent thereto or acquiescence thereof, and consents thereto or acquiesces
therein, or an order for relief is entered in an involuntary case under the
Bankruptcy Law of the United States, or an order, judgment or decree is entered
appointing a trustee, receiver, custodian, liquidator or similar official or
adjudicating any of Migration or any subsidiary of Migration insolvent, or
approving the petition in any such proceedings, and such order, judgment or
decree remains in effect for 60 days; or
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(f) A final judgment or order for the payment of money in excess of
$50,000 and not covered by insurance shall be rendered against Migration or any
subsidiary of Migration and the same shall not be discharged (or provision shall
not be made for such discharge) or a state of execution thereof shall not be
procured, within 30 days from the date of entry thereof, or Migration or any
subsidiary of Migration shall not, within said period of 30 days or such longer
period during which execution of the same shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal.
6. Remedies. In the event of an Event Of Default, the Loan may, at the
option of Honview and without demand or notice of any kind, be declared and
thereupon immediately shall become due and payable and Honview may exercise any
rights or remedies available to it under the Note or this Agreement or under
applicable law. No delay on the part of Honview in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
Honview of any right or remedy shall preclude other or further exercise thereof
or the exercise of any other right or remedy.
7. Miscellaneous.
7.1 Benefits And Assignment. The provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the Parties and
their respective successors and assigns. Migration and Honview agree that this
Agreement is made solely for the benefit of Migration, and Honview, and their
respective successors and assigns, including the surviving entity in the event
of a merger, consolidation, or other business reorganization, and no other
person shall acquire or have any right under or by virtue of this Agreement.
7.2 Governing Law. The laws of the State of Delaware shall govern all
issues concerning the construction, validity and interpretation of this
Agreement.
7.3 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto or contemplated hereby constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated except by a written instrument signed
by the party against whom enforcement of any such amendment, waiver, discharge
or termination is sought.
7.4 Notices. All notices, requests, demands, directions and other
communications ("Notices") concerning this Agreement shall be in writing and
shall be mailed or delivered personally or sent by telecopier or facsimile to
the applicable Party at the address of such Party set forth below in this
Section 7.4. When mailed, each such Notice shall be sent by first class,
certified mail, return receipt requested, enclosed in a postage prepaid wrapper,
and shall be effective on the fifth business day after it has been deposited in
the mail. When delivered personally, each such Notice shall be effective when
delivered to the address for the respective Party set forth in this Section 7.4.
When sent by telecopier or facsimile, each such Notice shall be effective on the
day on which it is sent provided that it is sent on a business day and further
provided that it is sent prior to 5:00 p.m., local time of the Party to whom the
Notice is being sent, on that business day; otherwise, each such Notice shall be
effective on the first business day occurring after the Notice is sent. Each
such Notice shall be addressed to the Party to be notified as shown below:
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MIGRATION: Migration Developments Limited
ATTN: Wong Chi Keung
Suite 1408 Lippo Sun Plaza
28 Canton Road
Kowloon, Hong Kong
Facsimile: 852-2730-4291
HONVIEW: Honview International Limited
ATTN: Chan Kam Che
Suite 1408 Lippo Sun Plaza
28 Canton Road
Kowloon, Hong Kong
Facsimile: 852-2730-4291
Any Party may change its respective address for purposes of this
Section 7.4 by giving the other Party Notice of the new address in the manner
set forth above.
7.5 Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be enforceable against the Parties actually
executing such counterparts and all of which together shall constitute one
instrument.
7.6 Severability. If any provision of this Agreement, or its
application to any person or circumstances, is invalid or unenforceable, then
the remainder of this Agreement or the application of such provision to other
persons or circumstances, shall not be affected thereby. Further, if any
provision or application hereof is invalid or unenforceable then a suitable and
equitable provision shall be substituted therefor in order to carry out so far
as may be valid or enforceable the intent and purposes of the invalid and
unenforceable provision.
7.7 Captions. Captions and headings used herein are for convenience of
reference only and shall not limit or control the meaning of any provisions
hereof.
IN WITNESS WHEREOF this Agreement is executed on the dates set forth below
to be effective as of the date written on the first page of this Agreement.
MIGRATION DEVELOPMENTS LIMITED
Date: October 13, 2000 By:/s/ Wong Chi Keung
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Wong Chi Keung, Director
HONVIEW INTERNATIONAL LIMITED
Date: October 13, 2000 By:/s/ Chan Kam Che
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Chan Kam Che, Director
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Exhibit A
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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNDER STATE SECURITIES LAWS. THE
TRANSFER OF THIS NOTE SHALL NOT BE PERMITTED UNTIL AND
UNLESS THE PROPOSED TRANSFER IS COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT OR UNTIL AND UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF LEGAL COUNSEL WHICH IS ACCEPTABLE TO
THE COMPANY THAT THIS NOTE MAY LEGALLY BE SOLD OR OTHERWISE
TRANSFERRED WITHOUT SUCH REGISTRATION.
Convertible Promissory Note
$________ ______________, 2000
1. Promise To Pay
FOR VALUE RECEIVED, Migration Developments Limited, a British Virgin
Islands corporation (the "Company"), hereby promises to pay to the order of
Honview International Limited (the "Holder"), the principal amount of
$___________, in accordance with the provisions of this Convertible Promissory
Note (the "Note").
2. Payment
Repayment of the principal amount of the Note shall be required to be made
only in amounts equal to 20 percent of the Company's pre-tax profits, if any,
for each fiscal year of the Company that begins on or after July 1, 2001. If the
Company becomes a wholly owned subsidiary of COL China Online International
Inc., a Delaware corporation ("COL"), then the pre-tax profits and fiscal year
described in the preceding sentence shall be those of COL, with the pre-tax
profits of COL to be determined on a fully consolidated basis in accordance with
U.S. generally accepted accounting principles. The payments shall be made upon
the earlier to occur of (a) 10 business days after the Company's receipt from
its outside independent auditors of the independent auditor's report concerning
the Company's financial statements as of the end of, and for, the fiscal year
for which the calculation is to be made, and (b) 150 days after the end of the
fiscal year for which the calculation is to be made. The calculation of profit
shall be in accordance with generally accepted accounting principles,
consistently applied, and shall be based on the audited financial statements, if
they are available. If audited financial statements are not available, then the
calculation of profit shall be based on the Company's unaudited financial
statements. In addition, the principal amount of this Note may be prepaid by the
Company, in whole or in part without premium or penalty, at any time upon 30
days prior notice to the Holder.
3. Conversion
If the Company becomes a wholly owned subsidiary of COL, then at any time
after the Company becomes a wholly owned subsidiary until this Note has been
paid in full (the "Conversion Period"), the Holder shall have the right to
convert, in the manner set forth herein, part or all the unpaid principal amount
of this Note into shares (the "Conversion Shares") of the $.001 par value common
stock of COL (the "Common Stock"), at a price equal to the greater of $1.20 per
share or 90 percent of the Average Weighted Trading Price, as defined below, for
the Common Stock for the 20 trading days preceding the date of notice of
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exercise of conversion. For purposes of this Note, "Weighted Average Trading
Price" shall mean the average trading price determined by multiplying the number
of shares involved in each individual trade during the period of determination
by the sale price for that trade and dividing the sum of all those amounts by
the total number of shares traded during the relevant period of determination.
If there is no Weighted Average Trading Price because there is no reasonably
ascertainable trading price for the Common Stock, then there shall be no right
of conversion.
In order to convert this Note, Holder shall deliver to the Company at the
address set forth below, or at any other address of which the Company gives
notice pursuant to Section 11 below, this Note together with an irrevocable
written notice of Holder's conversion of this Note. This notice of conversion
shall be substantially in the form of the Notice To Convert attached to and made
a part of this Note as Schedule A (the "Notice To Convert"). Although the
conversion of this Note shall be irrevocable upon delivering the Notice To
Convert, the conversion shall not be deemed to be effective until a certificate
or certificates representing the Conversion Shares are issued to Holder. At the
time of delivering the Notice To Convert to the Company, Holder shall reaffirm
all representations, acknowledgements and warranties contained in this Note. No
fractional shares or scrip representing fractional shares will be issued upon
any conversion in respect of any fraction of a share that would otherwise be
issuable upon the surrender of this Note for conversion.
If the Company has not received the Notice To Convert together with this
Note during the Conversion Period, the Company shall pay the Holder the entire
principal amount of this Note.
4. Default
4.1 Upon the occurrence of any of the events of default defined below, the
Holder of this Note may by written notice to the Company declare the entire
unpaid principal amount of the Note due and payable and the same shall, unless
such defaults shall be cured within ten days after such notice, become due and
payable upon the expiration of such ten-day period, without presentment, demand,
protest, or other notice of any kind, all of which are expressly waived.
4.2 The following shall constitute events of default:
(a) Failure to make the due and punctual payment of the principal of
this Note which default is not cured within 30 days after such
default; or
(b) The Company shall commence any voluntary proceeding under
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
Company shall be adjudicated insolvent or bankrupt by a decree of
a court of competent jurisdiction; or the Company shall petition
or apply for, acquiesce in, or consent to, the appointment of any
receiver or trustee of the Company or for all or a substantial
part of the property of the Company; or the Company shall make an
assignment for the benefit of creditors; or the Company shall
admit in writing to its inability to pay its debt as they mature;
or
(c) There shall be commenced against the Company any proceeding
relating to the Company 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, and such proceeding shall
remain undismissed for a period of 60 days or the Company by any
act indicates its consent to, approval of, or acquiescence in,
any such proceeding; or a receiver or trustee shall be appointed
for the Company for all or a substantial part of the property of
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the Company and any such receivership or trusteeship shall remain
undischarged for a period of 60 days; or a warrant of attachment,
execution, or similar process shall be issued against any
substantial part of the property of the Company and the same
shall not be dismissed or bonded within 60 days after levy.
5. Investment Restriction
The issuance of this Note and the Conversion Shares issuable upon
conversion of this Note (collectively, the "Securities") have not been
registered under any federal or state securities laws in reliance upon an
exemption from registration. The Holder may not sell, offer for sale, transfer,
pledge or hypothecate the Securities in the absence of an effective registration
statement covering such transaction under all applicable federal and state
securities laws, unless the sale, offer of sale, transfer, pledge or
hypothecation is exempt from registration under all applicable federal and state
securities laws or unless the contemplated transaction otherwise complies with
all such laws. In acquiring the Note and the Conversion Shares, if any, the
Holder represents and warrants to the Company that the Holder is acquiring the
Note and the Conversion Shares for his own account for investment purposes only
and not with a view to its sale or distribution. This Note and any certificate
representing Conversion Shares issued upon the conversion of this Note shall be
stamped or imprinted with a restrictive legend in accordance with this
paragraph.
6. Reaffirmation Of Representations
By surrendering this Note for conversion, Holder shall reaffirm all
representations, acknowledgements and warranties contained in this Note as of
the date of the surrender.
7. Common Stock Issuable Upon Conversion
The Company covenants and agrees that it has the requisite authority to
issue the Note and all Conversion Shares that may be issued upon the conversion
of the Note. The Company will, during the term of this Note, reserve and keep
available, out of COL's Common Stock, the number of shares of Common Stock
included in the Conversion Shares into which this Note may be converted.
8. Waiver
No failure on the part of the Company or the Holder to exercise, and no
delay in exercising any right hereunder, shall operate as a waiver of such
right; nor shall any single or partial exercise by the Company or the Holder of
any right preclude the exercise of any other right. The remedies of the Company
and the Holder herein provided are cumulative and not exclusive of any remedies
provided herein or by law.
9. Entire Agreement; Amendments
This Note embodies the entire agreement between the Company and the Holder
relating to the Note and supersedes all prior agreements and understandings
relating thereto. This Note may be amended by an agreement in writing signed by
the Holder of this Note.
10. No Third Party Beneficiaries
The Company and the Holder agree that this Note is solely for the benefit
of the Company and the Holder, and their respective successors and assigns, and
no other person shall acquire or have any rights under or by virtue of this
Note.
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11. Notices
All notices, requests, demands, directions and other communications
("Notices") concerning this Agreement shall be in writing and shall be mailed or
delivered personally or sent by telecopier or facsimile to the applicable party
at the address of such party set forth below in this Section 11. When mailed,
each such Notice shall be sent by first class, certified mail, return receipt
requested, enclosed in a postage prepaid wrapper, and shall be effective on the
fifth business day after it has been deposited in the mail. When delivered
personally, each such Notice shall be effective when delivered to the address
for the respective party set forth in this Section 11. When sent by telecopier
or facsimile, each such Notice shall be effective on the day on which it is sent
provided that it is sent on a business day and further provided that it is sent
prior to 5:00 p.m., local time of the party to whom the Notice is being sent, on
that business day; otherwise, each such Notice shall be effective on the first
business day occurring after the Notice is sent. Each such Notice shall be
addressed to the party to be notified as shown below:
The Company: Migration Developments Limited
ATTN: Wong Chi Keung
Suite 1408 Lippo Sun Plaza
28 Canton Road
Kowloon, Hong Kong
Facsimile: 852-2730-4291
Holder: Honview International Limited
ATTN: Chan Kam Che
Suite 1408 Lippo Sun Plaza
28 Canton Road
Kowloon, Hong Kong
Facsimile: 852-2730-4291
Either party may change its respective address for purposes of this Section
11 by giving the other party Notice of the new address in the manner set forth
above.
12. Severability
If any obligation or portion of this Note is determined to be invalid or
unenforceable under law, it shall not affect the validity or enforcement of the
remaining obligations or portions hereof.
13. Governing Law
This Note shall be deemed to be made under the laws of the State of
Delaware and for all purposes shall be construed in accordance with the laws of
said state.
14. Headings
The headings for the paragraphs of this Note are inserted for convenience
only, and shall not constitute a part hereof.
IN WITNESS WHEREOF, the Company has executed and delivered this Note on the
date first above written.
MIGRATION DEVELOPMENTS LIMITED
By:
-----------------------------------
Wong Chi Keung, Director
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Schedule A
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MIGRATION DEVELOPMENTS LIMITED
Notice To Convert
The undersigned Holder of a Note dated ______________, 2000 (the "Note")
from Migration Developments Limited (the "Company") hereby surrenders the Note
and notifies the Company of the undersigned's conversion of the principal amount
of the Note into the Conversion Shares, as defined in the Note. The undersigned
understands that (i) the undersigned will be issued Conversion Shares and that
the Conversion Shares have not been registered under the Securities Act of 1933,
as amended (the "Securities Act"); (ii) the transfer of the Conversion Shares
issued will be restricted by the Securities Act; (iii) the Conversion Shares
issued will be subject to the restrictions set forth in Section 5 of the Note;
and (iv) the certificates representing the Conversion Shares will contain a
legend restricting their transfer or other disposition. The undersigned further
understands that, as a condition of conversion, the undersigned must reaffirm,
as of the date of this Notice To Convert, the representations and warranties
made by the undersigned in the Note and specifically does so by signing this
Notice To Convert.
HONVIEW INTERNATIONAL LIMITED
Dated: By:
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(Printed name and title)
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