Document:

ex1.htm

Exhibit 10.1

 

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

 

THE ISSUE PRICE OF THIS NOTE IS $61,000.00

THE ORIGINAL ISSUE DISCOUNT IS $$7,000.00

 

 

	
Principal Amount: $61,000.00 
	
Issue Date: November 13, 2014 

	
Purchase Price: $54,000.00 
	
 

 

 

CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED, XCELMOBILITY INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of KBM WORLDWIDE, INC., a New York corporation, or registered assigns (the “Holder”) the sum of $61,000.00 together with any interest as set forth herein, on November 17, 2015 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

 

 

 

 

 

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

 

The following terms shall apply to this Note:

 

ARTICLE I. CONVERSION RIGHTS

 

1.1 Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

 

 

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1.2 Conversion Price.

 

(a) Calculation of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 70% multiplied by the Market Price (as defined herein) (representing a discount rate of 30%). “Market Price” means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, Pink Sheets electronic quotation system or applicable trading market (the “OTC”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTC is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets”. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

 

 

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(b) Conversion Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer to purchase

50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined as set forth in this Section 1.2(a). For purposes hereof, “Adjusted Conversion Price Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

 

1.3 Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

  

 

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If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

 

1.4 Method of Conversion.

 

(a) Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

 

(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

 

(c) Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid. 

 

 

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(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.

 

(e) Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

 

(f) Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

 

 

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(g) Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances

shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.

 

1.5 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

 

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS

NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

  

 

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The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

1.6 Effect of Certain Events.

 

(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

 

 

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(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

 

(d) Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.

 

 

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The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

 

Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

 

(e) Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

  

 

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(f) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

 

1.7 Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.

 

1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this Note.

  

 

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1.9 Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth on the table immediately following this paragraph (the “Prepayment Periods”), the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the order of the Holder as specified by the Holder in writing to the Borrower, at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional Prepayment Amount”) equal to the percentage (“Prepayment Percentage”) as set forth in the table immediately following this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

	
Prepayment Period
	
Prepayment Percentage

	
1.The period beginning on the Issue Date and ending on the date which is thirty (30) days following the Issue Date.
	
112%

	
2.The period beginning on the date which is thirty-one (31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date
	
117%

	
3.The period beginning on the date which is sixty-one (61) days following the Issue Date and ending on the date which is ninety (90) days following the Issue Date
	
122%

	
4.The period beginning on the date that is ninety-one (91) day from the Issue Date and ending one hundred twenty (120) days following the Issue Date
	
127%

	
5.The period beginning on the date that is one hundred twenty-one (121) day from the Issue Date and ending one hundred fifty (150) days following the Issue Date
	
132%

	
6.The period beginning on the date that is one hundred fifty-one (151) day from the Issue Date and ending one hundred eighty (180) days following the Issue Date
	
137%

 

 

12

 

 

After the expiration of one hundred eighty (180) following the date of the Note, the Borrower shall have no right of prepayment.

 

 

ARTICLE II. CERTAIN COVENANTS

 

2.1 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.

 

2.2 Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

 

 

13

 

 

2.3 Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to repay this Note.

 

2.4 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

 

2.5 Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.

 

 

ARTICLE III. EVENTS OF DEFAULT

 

If any of the following events of default (each, an “Event of Default”) shall occur:

 

3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.

 

3.2 Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.

  

 

14

 

 

3.3 Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.

 

3.4 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

3.5 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

 

3.6 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

 

3.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

 

 

15

 

 

3.8 Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC (which specifically includes the Pink Sheets electronic quotation system) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

 

3.9 Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

 

3.10 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

 

3.11 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

 

3.12 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).

 

3.13 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

3.14 Reverse Splits.     The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

 

3.15 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

 

 

16

 

 

3.16 Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

 

Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

  

 

17

 

 

 

If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

 

ARTICLE IV. MISCELLANEOUS

 

4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

  

 

18

 

 

 

If to the Borrower, to: XCELMOBILITY INC.

2225 East Bayshore Road - Suite 200

Palo Alto, CA 94303

Attn: RENYAN GE, Chief Executive Officer facsimile:

 

 

With a copy by fax only to (which copy shall not constitute notice):

[enter name of law firm]

Attn: [attorney name] 

[enter address line 1]

[enter city, state, zip]

facsimile: [enter fax number]

 

 

If to the Holder:

KBM WORLDWIDE, INC.

80 Cuttermill Road – Suite 410

Great Neck, NY 11021

Attn: Seth Kramer, President

e-mail: info@kbmworldwide.com

 

 

With a copy by fax only to (which copy shall not constitute notice): Naidich Wurman Birnbaum & Maday, LLP

Att: Judah A. Eisner, Esq.

Attn: Bernard S. Feldman, Esq. facsimile: 516-466-3555

e-mail: dyork@nwbmlaw.com

 

4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

  

 

19

 

 

4.5 Cost of Collection.     If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

 

4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

 

4.8 Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

 

 

20

 

 

4.9 Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.

 

4.10 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

 

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this November 13, 2014.

 

	
XCELMOBILITY INC. 
	
 

	
 
	
 
	
 

	
By: 
	
 
	
 

	
 
	
RENYAN GE 
	
 

	
 
	
Chief Executive Officer 
	
 

 

 

21

 

 

EXHIBIT A -- NOTICE OF CONVERSION

 

 

 

 

The undersigned hereby elects to convert $________________________principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of XCELMOBILITY INC., a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of November 13, 2014 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

 

Box Checked as to applicable instructions:

 

	
 
	
[  ]
	
The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

	 	 	 
	 	 	Name of DTC Prime Broker:
	 	 	Account Number:
	 	 	 
	 	[ ]	The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:
	 	 	 
	 	 	
KBM WORLDWIDE, INC.

80 Cuttermill Road – Suite 410

Great Neck, NY 11021

Attention: Certificate Delivery

e-mail: info@kbmworldwide.com

	 	 	 
	 	 	Date of Conversion:                                                          _________________
	 	 	Applicable Conversion Price:                                        $_________________
	 	 	Number of Shares of Common Stock to be Issued
	 	 	Pursuant to Conversion of the Notes:                       _________________
	 	 	Amount of Principal Balance Due remaining
	 	 	Under the Note after this conversion:                       _________________

 

	 	 	KBM WORLDWIDE, INC.	 
	 	 	 	 	 
	 	 	By:	 	 
	 	 	Name:	  Seth Kramer	 
	 	 	Title:	  President	 
	 	 	Date:	 	 

 

 

22EXHIBIT 10.15 MASTER CREDIT AGREEMENT

EXHIBIT 10.15

	
			
	 
	 
	Master no. 0254-L0030759

	 
	 
	(for internal bank use only)

	 
	 
	 

	Master Credit Agreement
UBS Corporate Financing
	 
	 UBS AG
 P.O. Box 1964, 9000 St. Gallen 
 Tel. +41-71-221 83 10
www.ubs.com

 
 
1.        Borrower
L. Kellenberger & Co. AG
Heiligkreuzstrasse 28
9009 St. Gallen
(hereinafter referred to as the ‘Borrower’)
 
 
2.        Lender
UBS AG
Am Bahnhofplatz
9000 St. Gallen
(hereinafter referred to as ‘UBS’)
 
 
3.        Credit facility
UBS grants the Borrower a credit facility in a maximum amount of 7 000 000 CHF
(seven million Swiss Francs).
 
 
4.        Financing purpose
To finance current assets for operating purposes.
 
 
5.        Availability
Subject to the terms and conditions of this Credit Agreement, this credit facility is available in the following forms:
 
Up to a maximum amount of 3 000 000 CHF.
		
	•
	as a current account overdraft in CHF and/or any freely-available and convertible currency

		
	•
	as UBS fixed advances with terms of 1 - 12 months in an amount of at least 250 000 CHF and/or in the equivalent in   any freely-available and convertible currency.

 
Up to a maximum amount of 7 000 000 CHF.
		
	•
	for issuing advance payment guarantees in form and substance acceptable to UBS with a maximum term of one year, for issuing other guarantees with a maximum term of two years. The issuing of letter of Indemnities is not allowed.

		
	•
	for opening of documentary credits in a form acceptable to UBS for a period of up to one year.

 
Upon the Borrower’s request UBS is in exceptional cases ready to examine the issuing of guarantees and/or documentary credits with terms exceeding one or two years.
 
 
6.        Interest rates and commission
 
6.1      UBS current accounts
The interest rate currently applicable for use with CHF is 5.75% p.a. Rates for any freely-available and convertible currency upon request.
 

Plus credit commission in the amount of 0.25% per quarter based on the average debit balance.
 
At the end of each calendar quarter, a closing statement showing interest and commission charges shall be provided. UBS shall have the right to adjust interest and commission rates to changing market conditions at any time with immediate effect.

6.2      UBS fixed advances
For any advance with a term of up to and including 6 months, principal and interest shall be calculated and charged as a single payment at maturity.
 
For any advance with a term of more than 6 months, interest shall be calculated and charged quarterly at the end of each calendar quarter. Principal and interest shall be calculated and charged at maturity.
 
The base interest rate shall be calculated according to Euromarket rates for the relevant term and currency, plus a UBS margin.
 
The interest rate shall be fixed two bank working days prior to any advance being drawn down or renewed, for the corresponding term and currency. The instructions for drawdown or renewal must be received by UBS at least two bank working days before such drawdown or renewal. Where such instructions are unavailable, advances falling due shall not be renewed and both principal and interest shall be debited from the relevant current account.
 
6.3      Guarantees/documentary credits
Commissions and fees shall be fixed by UBS on a case-by-case basis, and shall depend in particular on the nature, size, term and complexity of the transaction as well as the Borrower’s credit rating.
 
UBS shall have the right to adjust its commissions at any time during the term of a guarantee, subject to a notice period of 90 days. UBS shall notify the Borrower of such adjustment in writing.
 
6.4      Interest calculation
Interest shall be calculated on a 365/360 basis, i.e. the actual number of days per month divided by a 360-day year.
 
7.        Security
The forms of security listed below shall serve UBS as security for all claims including all past due and current interest, commission, etc.:
 
		
	1.
	Transfer of 

mortgage note (‘Namenschuldbrief’) by way of security in the nominal value of 7 000 000 CHF, in 1st rank of priority, at Land Register Biel, no. 9443, Mohnweg 5, 2500 Biel/Bienne, pursuant to the separate form «Transfer of Title as Collateral».
 
The above-mentioned securities serve UBS only for current account overdraft and UBS fixed advances up to a maximum amount of 3 000 000 CHF.
 
8.        Term
Until further notice.

9.         Termination
 
9.1       Ordinary termination
The Borrower shall have the right to terminate this Credit Agreement at any time with immediate effect.
 
UBS shall have the right to terminate this Credit Agreement at any time with immediate effect, and to refuse to make funds available to the Borrower under the credit facility at its discretion, without having to provide any reasons.
 
Any termination shall cancel the unused portion of the credit facility with immediate effect. To the extent that the credit facility has been drawn down, any outstanding amounts shall become due and payable as follows:
 
		
	•
	UBS current account 

immediately

2

		
	•
	UBS fixed advance 

               on expiration of the agreed term
 
Any guarantees and documentary credits issued by UBS shall remain in effect with no changes until their expiration in accordance with the terms and conditions applicable on a case-by-case basis, and the Borrower shall remain fully liable.
 
9.2         Extraordinary termination
The Borrower shall have the right to terminate this Credit Agreement extraordinarily at any time by observing a period of 30 days’ advance notice, and to repay any outstanding amounts drawn down under the same in whole or in part. In the event that the outstanding amount becomes due as a result of an extraordinary termination during a current fixed interest period or on a date other than the original due date, an indemnity pursuant to paragraph 1 of «Indemnity in the event of an extraordinary termination» is due and payable on the due date of the premature repayment.
 
UBS shall have the right to terminate this Credit Agreement at any time with immediate effect, and to declare all outstanding amounts including accrued interest, commission, fees, etc. immediately due and payable, irrespective of the term of any credit facility granted, if:
 
		
	1.
	the Borrower or a Group company («Group company» shall hereinafter mean any company within the meaning of Art. 663e, para. 1 of the Swiss Code of Obligations that may be deemed to belong to the Borrower’s consolidated group of companies) is more than 30 calendar days in arrears with payment of interest, commission and/or principal payments owed to UBS or a third party (including any parties that may have acquired claims under the credit granted), or fails to reduce overdrafts by repayment or providing sufficient additional security within the time period set therefor by UBS.

		
	2.
	the Borrower or one of its Group companies is/are required by official order (in particular in the area of environmental protection) to undertake remedial measures which are deemed by UBS as having a potentially material effect on the Borrower’s ability to perform its financial obligations.

		
	3.
	in the opinion of UBS a material reduction in the value of security is imminent or has occurred.

		
	4.
	there has been a change of ownership/controlling interests in relation to the Borrower which UBS deems to be material.

		
	5.
	the Borrower or a Group company changes its/their legal or commercial structure, e.g. through liquidation, sale of a substantial part of its assets, change of its objects or business activities, merger or restructuring, provided that the relevant event is deemed by UBS as having a potentially material effect on the Borrower’s ability to perform its financial obligations.

		
	6.
	with regard to the Borrower or a Group company bankruptcy proceedings or a stay of bankruptcy proceedings are filed and/or an application for court or out-of-court creditor protection is made.

		
	7.
	the Borrower or a Group company has suspended payments or the earnings or asset position of the Borrower or a Group company is deemed by UBS to have deteriorated significantly.

		
	8.
	there is a change of ownership of the whole or any part of any mortgaged real estate property.

		
	9.
	the Borrower or a Group company is in breach of any other obligations arising under this Credit Agreement.

  
Should the credit facility have been utilized in the form of guarantees and documentary credits at the time of the extraordinary termination, the Borrower undertakes to release UBS immediately from such contingent obligations or to provide security by pledging marketable assets up to the full amount of those commitments plus a customary bank margin.
 
 
10.         Indemnity in the event of an extraordinary termination
In the event of an extraordinary termination by the Borrower an indemnity must be paid. This indemnity shall be calculated on the basis of the difference interest rate applied until the end of the fixed interest period, whereas the difference interest rate shall be the difference between the agreed interest rate and the interest rate obtainable at the time of the premature repayment on an investment in the money or capital market with a corresponding remaining term. If the interest rate is higher than the 

3

investment rate, the resulting difference shall be charged to the Borrower; if the interest rate is less than the investment rate, the resulting difference shall be credited to the Borrower.
 
In the event that UBS terminates this agreement extraordinarily, the Borrower shall be liable to indemnify UBS for all losses UBS has suffered and/or costs incurred as a result, for any amount utilized under the Credit Agreement with a fixed interest period, in particular but not limited to, any indemnity which shall be calculated on the basis of the difference interest rate applied until the end of the fixed interest period, whereas the difference interest rate shall be the difference between the agreed interest rate and the interest rate obtainable at the time of the premature repayment on an investment in the money or capital market with a corresponding remaining term. UBS reserves the right to claim additional compensation.
 
 
11.         Representations and warranties
The Borrower represents and warrants that:

		
	1.
	 the Borrower has not created any security interest in respect of its own obligations and/or the obligations of third parties other than security given under this Credit Agreement or in the context of other credit agreements with UBS and/or any security given in favour of other creditors with respect to which the Borrower has expressly notified UBS.

		
	2.
	no event has occurred which would entitle UBS to effect extraordinary termination, and no legal action is pending which could have a material adverse effect on the Borrower or its assets.

12.         Positive covenants
The Borrower undertakes to insure against fire and damage from the elements in an amount deemed sufficient in the opinion of UBS, those buildings and any appurtenances thereto located on the mortgaged property, which are not otherwise subject to compulsory insurance, with an insurance company domiciled in Switzerland. Upon request by UBS, the Borrower shall produce the policy and the receipts proving payment of the premium.
 
13.                  Negative covenants
The Borrower undertakes, without prior written consent from UBS,
 
		
	1.
	not to enter into or assume any obligations (incl. contingent liabilities) which are secured by a right of lien, transfer of title as collateral or any other encumbrance upon its current or future assets.

		
	2.
	not to secure existing obligations (incl. contingent liabilities) in the above-mentioned manner (Exception: The pledge of collaterals at Credit Suisse).

		
	3.
	not to grant any security for obligations (incl. contingent liabilities) of a third party.

		
	4.
	not to prioritize any third party claims over UBS claims out of or in connection with this Credit Agreement (pari passu).

In addition, the Borrower undertakes:
 
		
	5.
	to refrain from using the credit under this Agreement, either in whole or in part, in order to grant loans or any other type of financing to any other Group company or to a third party.

		
	6.
	to ensure that for the entire term of this Credit Agreement, any real estate property financed by UBS shall not be used for any purpose other than that originally stipulated, without the prior consent of UBS.

		
	7.
	not to grant intercompany loans to any other Hardinge Group companies except for intercompany loans up to the amount of 10 000 000 CHF in the aggregate.

                     
14.                      Financial ratios
The Borrower undertakes to maintain at all times during the entire term of this Credit Agreement the key ratios listed below:
 
		
	1.
	Equity ratio in the consolidated annual financial statement of at least 35%. 

4

		
	a.
	The equity ratio is calculated as follows: equity capital (share capital, statutory and free reserves, profit carried forward as well as shareholder loans with subordinated priority less goodwill, losses carried forward and loans to shareholders) in relation to total assets, not including any contingent liabilities.

 
 
15.                      Information undertaking

For the entire term of this Credit Agreement, the Borrower undertakes to provide the following information to UBS:
 
		
	1.
	annually one copy of the balance sheet, the profit and loss statement and, if required by law, an audit report compliant with the legal requirements by no later than four months following the end of the financial year and consolidated annual report of Hardinge group.

    
In the event of a change in circumstances UBS reserves the right to demand an audit report or to increase the requirements the audit report has to fulfill.

		
	2.
	one copy of the budget, including the investment budget, by no later than 30 calendar days prior to commencement of the relevant fiscal year.

		
	3.
	one copy of the quarterly reporting incl. balance sheet and profit and loss statement, statement of cash flow US-Gaap and development of order backlog by no later than one month following the end of the financial quarter, first due on 30 September 2009.

  
UBS treats this information as confidential.
 
The Borrower undertakes, for the entire term of this credit facility, to immediately inform UBS of any material changes, in particular of the occurrence, or likely occurrence, of any circumstances which might constitute grounds for extraordinary termination.
 
16.        Conditions precedent
No utilisation may be drawn down until all copies of the documents listed below have been received by UBS, executed in the required form, and UBS has received the agreed security in legally valid form:
 
		
	•
	one copy of this Credit Agreement

		
	•
	Transfer of Title as Collateral

		
	•
	Repledging of your Collateral

In the event that UBS has not received all of the documents and/or security, in the required form, within one month of the date of execution of this Credit Agreement, UBS shall be authorized to rescind this Credit Agreement without granting any extension of the deadline for receiving the said documents and/or security.
 
17.        Miscellaneous provisions
 
17.1     General conditions
The «General Conditions» of UBS shall form an integral part of this Credit Agreement.
 
17.2     Order in which security shall be realized
In the event that several items of security have been provided to UBS, UBS shall, if and when realizing the security, decide at its discretion to what extent and in which order the items shall be realized, and how the proceeds from such realization shall be allocated to the individual drawdowns.
 
18.        Transfer
UBS shall have the right to offer for transfer, or to transfer, in whole or in part, its rights under this Credit Agreement, including any security provided in respect of the credit facility, such as mortgage notes and any other security, to any third parties in Switzerland or abroad. UBS may at any time provide all third parties, including rating agencies, which may be parties to such transfer, with access to all information and data relevant to the transfer, and shall be exempted in this regard from the statutory obligation to maintain banking secrecy. Insofar as third parties are not subject to Swiss legislation on banking secrecy, 

5

information and data shall only be disclosed if the said parties undertake to maintain secrecy and, in turn, ensure that this obligation is binding upon any further contracting parties.
 
All assignees shall be entitled to reassign the rights acquired, provided that each subsequent assignee also undertakes to maintain secrecy. UBS (and any party acquiring rights as a result of any transfer made in accordance with this Clause) may, without having to obtain consent from the Borrower, assign any limit obligation agreed under this Credit Agreement, and/or any other obligations arising hereunder, to the assignee in respect thereof, together with any claims under the credit granted. Any party acquiring such obligations must either be a company affiliated with UBS, or a Swiss or foreign financial institution (bank, insurance company, or similar). UBS shall be released from any obligation to the extent that it transfers same.
  
In accordance with and pursuant to this provision, UBS shall be also entitled to transfer the Contract as a whole to such an assignee (change of contracting party). Each assignee shall be entitled to further transfer the entire Contract to a next assignee.
 
19.        Applicable law, place of performance, jurisdiction and debt enforcement
This Credit Agreement shall be governed by and construed in accordance with Swiss law. The place of performance of all obligations and exclusive place of jurisdiction for any disputes arising out of or in connection with this Credit Agreement shall be St. Gallen. This is also the place of debt enforcement for the Borrower if domiciled abroad. UBS reserves the right, however, to take legal action against the Borrower before the authority of the latter’s domicile.
 
 
This Agreement was executed in two original copies and replaces the Agreement dated 5 November 2008.
 
 

	
				
	Ref. F916-FCC
	 
	UBS AG
	 

	 
	 
	 
	 

	 
	 
	 
	 

	St. Gallen, 27 October 2009
	 
	/s/ Gerhard Koster
	/s/ Marcel Fercher

	Place/Date
	 
	Gerhard Koster
	Marcel Fercher

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	Agreed
	 

	  Borrower
	 
	L. Kellenberger & Co. AG
	 

	 
	 
	 
	 

	 
	 
	 
	 

	St. Gallen, 30 October 2009
	 
	/s/ Jurg Kellenberger
	/s/ Peter Huersch

	Place/Date
	 
	Signature(s)
	 

 

 

6

General Credit Facility Agreement
 
This General Credit Facility Agreement (“this Agreement”) is entered into by Hardinge Machine Tools B.V., Taiwan Branch (“the Applicant”) and Mega International Commercial Bank Co., Ltd. (“the Bank”) in consideration of various credit facility transactions between the parties.  It is hereby agreed that any and all credit facility transactions between the parties shall be governed by the following terms and conditions in addition to the executed individual credit facility letter and other agreements:
 
Article 1: Types of Credit Facilities
 
The types of credit facilities as ticked below shall be extended under this Agreement (please tick the appropriate boxes):
 
	
							
	x
	 
	Bank loans for purchase of raw materials
	 
	o
	 
	Overdrafts

	 
	 
	 
	 
	 
	 
	 

	x
	 
	Bank loans for export business
	 
	o
	 
	Authorized bill guarantees

	 
	 
	 
	 
	 
	 
	 

	x
	 
	Bank loans for working capital
	 
	o
	 
	Authorized bill acceptance

	 
	 
	 
	 
	 
	 
	 

	o
	 
	Discounts
	 
	o
	 
	Authorized guarantees

 
Article 2: Total Amount of Credit Facility
 
The total amount of the credit facilities extended hereunder shall be NT$100,000,000 or its equivalent in other foreign currencies.
 
The total amount of the credit facilities referred to in the preceding paragraph shall mean the limit on the sum of all the drawings actually made under all the facilities referred to in Article 1 hereof.  The total amount of all the drawings made under all the facilities herein shall not exceed the total amount of credit facilities set forth in this Article.
 
The amount of each of the credit facilities shall mean the individual amount of that facility.  The drawings made by the Applicant under that particular type of facility shall not exceed the individual amount of that facility.
 
Any credit balance under former credit facility agreements shall be added to the total amount and individual amount in the two preceding paragraphs as applicable.
 
In the event that the drawn amount exceeds the individual amount of each facility or total amount of all facilities due to fluctuating exchange rates or other reasons, the Applicant shall repay the portion exceeding the individual amount or total amount immediately.
 
Article 3: Drawdown Period
 
The drawdown period for all types of facilities hereunder shall commence from October 30th, 2009 and end on October 29th, 2010.  Subject to the terms and conditions hereof, the Applicant may, within the drawdown period, apply to the Bank for approval of making a drawdown in accordance with the requirements agreed between the parties.
 
Article 4: Base Interest Rate and Adjustment
 
The base rate of the Bank shall be the interbank overnight interest rate plus the Bank’s operational costs and reasonable profits.  The Bank may adjust its operational costs and reasonable profits based on the market conditions, funding costs and its business operations.
 
The Applicant agrees that in the event that the interest rate for each facility hereunder is computed on the basis of the base rate plus certain margins (where the Bank’s base rate is 2.5% per annum at the time of the signing of this Agreement), the base rate shall be immediately adjusted according to that adjusted by the Bank.  The Applicant further agrees that in the event of any adjustments after the signing of this Agreement, such adjustments shall be binding on the Applicant provided that they have been publicly announced by the Bank at its place of business.

1

 
Article 5: Penalty and Default Interest
 
If the Applicant fails to repay the principal(s) or pay interest on the due date, it shall pay, staring from the due dates thereof, a penalty calculated at 10% of the applicable interest rate for the first six months of delay, or 20% of the applicable interest rate for the period starting from the seventh month of delay.
 
If the Applicant fails to repay the principal(s) in accordance with this Agreement, it shall pay, in addition to the penalty prescribed in the preceding paragraph, a default interest on the unpaid principal(s) at the rate of the sum of 1% per annum the applicable interest rate.  If the Bank has provided any guarantees, in addition to the penalty prescribed in the preceding paragraph, the aggregate sum of 1% per annum and the base rate of the Bank shall be imposed on the Applicant as default interest from the date on which the Bank performs the guarantee obligations hereunder.
 
Article 6: Exchange Risk
 
For those debts incurred by the Applicant in foreign currencies, the Applicant may elect to pay the debts due in any foreign currency or New Taiwan dollars.  The Applicant agrees that if the debts it owes to the Bank are to be repaid in New Taiwan dollars, the Bank may elect the spot exchange rate prevailing on the due day or the payment day; provided, however, that if the Applicant intends to prepay the debts, it must obtain the prior consent of the Bank.
 
Article 7: Terms and Conditions of Each Type of Facilities

		
	•
	Bank loans for purchase of raw materials

		
	1.
	Purpose of Loan: For the purchases of raw materials and assets or payments of intangible transaction payments.

		
	2.
	Credit Line: NT$100,000,000 or its equivalent in other foreign currencies (revolving).

		
	3.
	Calculation and Payment of Interest:

		
	a.
	Calculation of Interest:

		
	i.
	US dollars: 6-month LIBOR plus 1.5% per annum and then to be divided by 0.946.

		
	ii.
	NT dollars: the Bank’s base rate, floating, subject to adjustments as set forth in Article 4 above.

		
	iii.
	Other foreign currencies: the Bank’s funding costs plus 1% per annum and then to be divided by 0.946, floating.

		
	b.
	Payment Method of Interest:

		
	i.
	Interest shall be paid on a monthly basis.  The monthly period for accruing interest shall start from the 21 st  day of each month and end on the 20 th  day of the following month.  Interest on loan in foreign currency may be converted into New Taiwan dollars at the spot selling exchange rate of the Bank prevailing at the time of conversion.

		
	c.
	Interest shall accrue from the day on which the Bank advances the loan(s) or the foreign bank pays the money.

		
	d.
	In the event of the Bank’s acceptance of drafts issued by the Applicant, the Applicant shall pay processing fees in accordance with the following fee schedule and method:

		
	4.
	Maturity Date

		
	a.
	The Applicant agrees to repay the loan within 180 days of advancing the loan by the Bank.

2

		
	b.
	In the event of the Bank’s acceptance of drafts (issued by the Applicant), the period between the acceptance date and the expiry date thereof shall not exceed 180 days.  When such loan becomes due and payable, it shall be repaid by the Applicant or with a separate loan extended by the Bank; provided, however, that the periods covering the entire loan shall not exceed 180 days in total.

		
	c.
	For domestic goods purchased by the Applicant, subject to the prior consent of the Bank, the Applicant may authorize the Bank to issue domestic L/Cs or to accept or pay for the drafts or other certificates issued by the Applicant for the beneficiary of such L/Cs; provided, however, that the loan must be repaid within 150 days of the Bank’s issuance, acceptance, or payment thereof.

		
	d.
	If the goods that have been purchased under this facility are sold earlier than scheduled, the loan shall be repaid early.

		
	5.
	Method, Terms and Conditions of Drawdowns

		
	a.
	Each application for a letter of credit shall be deemed a drawdown on the loan hereunder.  After the Applicant deposits a security bond in the amount required by the Bank, the Applicant may apply to the Bank for a drawdown by submitting a loan drawdown application or an application for a letter of credit together with relevant transaction documents.

		
	b.
	If the Applicant pays a third party for goods through methods other than a letter of credit, including D/P, D/A, O/A, T/T or other means, it may, subject to the Bank’s consent, submit a loan drawdown application and transaction documents to apply to draw down an amount equivalent to  % of the value of the transaction(s) concerned; provided, however, that the repayment period for each loan shall not exceed    days.

		
	6.
	If it is so required in the processing procedure, the Applicant may, subject to the Bank’s consent, use the exclusive chop registered with the competent authorities for import/export instead of the chop or signature that appears on the credit facility agreement.

		
	7.
	Subject to the Bank’s consent, the currency hereof may be converted into another currency; provided, however, that no further conversion shall be made after it is converted into New Taiwan dollars. If any payment is to cover both the principal and interest, the Applicant shall, simultaneously upon the currency conversion, pay the interest then accrued on the loan. 

The conversion date and rate shall be otherwise agreed between the parties. In the event that the amount exceeds the individual amount of this facility due to currency conversion, the Applicant shall pay the portion exceeding the individual amount immediately.

		
	8.
	 If the negotiated value of the letters of credit hereunder exceeds the total amount of the Bank’s loans that have been extended to the Applicant at the time when the letters of credit are issued and the Bank agrees to provide a further loan, the excessive portion shall also be included the drawn amount hereunder and the Applicant shall be responsible for the repayment thereof.

		
	9.
	For the procedures, liabilities and obligations in association with the letters of credit hereunder, the Applicant agrees that the Uniform Customs and Practice for Documentary Credits promulgated by the International Chamber of Commerce and the relevant clauses for interpreting trade terms in international rules shall apply and form a part of this Agreement.

		
	10.
	The goods under the letters of credit hereof shall be insured at the Applicant’s expense based on terms and conditions satisfactory to the Bank, with the Bank as a preferred beneficiary.

 
		
	•
	Bank loans for export business

		
	1.
	Purpose of Loan: For the Applicant’s export of goods or services.

		
	2.
	Credit Line: NT$100,000,000 or its equivalent in other foreign currencies (revolving).

3

		
	3.
	Calculation and Payment of Interest: Same as those for bank loans for purchase of raw materials.

		
	4.
	Maturity Date: The due date of each loan shall be the expiry day of the relevant document required for borrowing the loan; provided, however, that the loan shall be repaid within 180 days of the extension of the loan.

		
	5.
	Method, Terms and Conditions of Drawdowns

		
	a.
	The Applicant may apply to draw down on the loan by submitting the loan drawdown application along with the documents set forth in (b) and (c) below two business days before the scheduled advance date.

		
	b.
	 The Bank agrees that a loan shall be extended to the Applicant after the amounts stated in irrevocable letters of credit with the Applicant being named as the beneficiary, export purchase orders, sale and purchase contracts, D/A, D/P or other documents are converted into New Taiwan dollars in accordance with the agreed limit and exchange rate.  The Applicant shall submit the originals of said documents (including amendments thereto) to the Bank and shall repay the loan that is converted in New Taiwan dollars in accordance with the Bank’s spot rate prevailing at the time of conversion or the rate agreed between the parties at the time when the Bank handles the negotiation or acceptance of such documents.

		
	c.
	Subject to the Bank’s consent, the Applicant may use a D/A, D/P, or other documents for borrowing loans within the limit set by the Bank in the currency stated therein.

		
	6.
	The Applicant shall perform the obligations under the aforementioned letters of credit, export purchase orders, or sale and purchase contracts, and shall not modify or cancel them without the Bank’s written consent.

		
	•
	Bank loans for working capital

		
	1.
	Purpose of Loan: For the Applicant’s regular working capital.

		
	2.
	Credit Line: NT$40,000,000 (revolving).

		
	3.
	Calculation and Payment of Interest: Interest shall be calculated at the Bank’s base rate, subject to adjustments as set forth in Article 4 above.  Interest shall be paid on a monthly basis.  The monthly interest period shall start from the 21st day of each month and end on the 20th day of the following month.

		
	4.
	Maturity Date: The Applicant shall repay each loan within 180 days of advancing the loan by the Bank.

		
	5.
	Method, Terms and Conditions of Drawdowns: It should be handled in accordance with the relevant loan drawdown application.   

		
	•
	Discounts

		
	1.
	Purpose of Loan: For the Applicant’s assignment of the undue and unaccepted drafts or notes it has obtained received from business transactions for the Bank’s discounts.

		
	2.
	Credit Line: NT$                               (revolving/non-revolving).

		
	3.
	Calculation and Payment of Interest:

		
	4.
	Maturity Date: The period between the date of granting the discounts by the Bank and the expiry dates of the notes and drafts shall not exceed             days.  The expiry dates of the discounted notes and drafts shall be deemed the repayment date.

		
	5.
	Method, Terms and Conditions of Drawdowns:

4

		
	6.
	The Applicant shall submit to the Bank the usance drafts or notes received from business transactions conducted by the Applicant two business days before the drawdown along with the relevant sale and purchase contract, supply contract, invoices and documents evidencing the nature of the transactions.  Subject to the Bank’s  approval, the loan to be extended shall be               % of the value of the discounted drafts and notes.

		
	7.
	In the event that the discounted drafts and notes are issued outside the jurisdiction where the Bank is situated, interest shall be accrued until the Bank collects the money under such drafts and notes.  The expenses for accepting such drafts and notes shall be borne by the Applicant.

		
	8.
	With respect to the drafts and notes for which the Applicant applies for discounts from the Bank, the Applicant agrees that if the loan is unpaid when due or the drafts and notes cannot be accepted or presented for payment, the Applicant shall, upon receiving the Bank’s notice, repay the loan immediately, including the principal, default interest, penalties and all relevant expenses and compensate the Bank for its loss, if any.  Even if the discounted drafts and notes are flawed or forged, the notice requirement is not duly met, or the statute of limitations has expired, the Applicant shall repay the loan in accordance with the terms and conditions hereof.

 
		
	•
	Overdrafts

		
	1.
	Purpose of Loan: For the Applicant’s overdrafts under the checking account of No.     with the Bank.

		
	2.
	Credit Line: NT$                            (revolving/non-revolving).

		
	3.
	Calculation and Payment of Interest:

		
	4.
	When the sum of the principal and interest exceeds the limit of this facility, the Applicant shall pay the exceeding portion immediately.   

		
	•
	Authorized bill acceptance

		
	1.
	Purpose of Loan: For the Applicant’s application with the Bank for the Bank’s acceptance of the drafts issued by the Applicant.

		
	2.
	Credit Line: NT$                              (revolving/non-revolving).

		
	3.
	Processing Fees:

		
	4.
	Acceptance Period: With respect to the drafts for which the Applicant applies for the Bank’s acceptance, the period between the expiry date thereof and the acceptance date shall not exceed 180 days; provided, however, that if the drafts are issued for repayment of the loan borrowed for purchasing raw materials hereunder, the expiry date thereof shall not go beyond the due date for repaying such loan.

		
	5.
	When applying for draft acceptance, the Applicant shall submit the drafts indicating the Bank as the payee and the Bank’s place of business as the location of payment along with the authorization letter for draft acceptance and other transaction documents for the Bank’s approval and acceptance.  When applying for acceptance, the Applicant shall separately issue drafts at amounts and expiry dates same as those to be accepted for preparation of compensation.  If, after the Bank’s payment of the accepted drafts, the drafts for preparation of compensation cannot be accepted for payment, the Applicant should repay the loan in full immediately.

		
	6.
	For those drafts accepted by the Bank, the Applicant shall authorize a broker acceptable to the Bank to sell the drafts.  The Applicant also agrees that the Bank may, at the broker’s request, deliver to the broker the drafts duly affixed with the necessary chops one business day before the issuance date of the drafts.

 
		
	•
	Authorized Guarantees

		
	1.
	Purpose of Loan: For the Applicant’s application with the Bank for the Bank’s provision of guarantees for the purposes designated by the Applicant.

5

		
	2.
	Credit Line: NT$                                (revolving/non-revolving).

		
	3.
	Processing Fees:

		
	4.
	Scope of Guarantees:

		
	5.
	Application Method: The Applicant shall submit a guarantee drawdown application and the relevant guarantee letter for the Bank’s approval provided that the guarantee to be provided falls within the aforementioned scope of guarantee.

		
	6.
	In the event that the guarantees are provided in the form of letters of credit, the Uniform Customs and Practice for Documentary Credits and the International Standby Practice promulgated by the International Chamber of Commerce shall apply.

		
	7.
	When the Bank performs its guarantee obligations, it shall make independent judgments based on the papers provided by the guarantee beneficiary without considering the goods, services or other actions covered by the guarantees.

		
	8.
	As soon as the guarantee beneficiary requests the Bank to perform its guarantee obligations, the Applicant shall repay the loan immediately.  In the event that foreign currencies are required, the Applicant shall be sole responsible for repaying the loan in the designated foreign currencies.

  
Article 8: Miscellaneous 

		
	1.
	The Applicant shall obtain the approval of the board of directors of Hardinge Machine Tools B.V. (“Parent Company”) and an authorization letter from its chairman (for this Agreement).  The signatures of the chairman and directors attending the meeting (approving this Agreement) shall be authenticated by an ROC representative office or certificated by a local branch of the Bank.

		
	2.
	The Applicant agrees that the drawdowns hereunder shall be made only if the application documents bear the chops as designated in the board resolution of the Parent Company, which shall be limited to the chops of the branch and the manager as shown in the Applicant’s Branch Registration Form issued by the Ministry of Economic Affairs.

		
	3.
	Upon the expiry of the drawdown period set forth in Article 3 hereof, unless either party notifies the other party of its intention not to renew this Agreement, this Agreement shall be automatically extended once for another year; provided, however, that the Bank may terminate this Agreement or reduce the credit line granted herein in the event that the Applicant’s assets or creditability is in bad condition and that the Applicant fails to improve the situation within a reasonable period set by the Bank.

	
		
	Mega International Commercial Bank Co., Ltd.

	s/s C. H. Tsai

	Responsible Person: C.H. Tsai,

	Manager of Nantou Branch

	Address: No. 45, Wenchen Street, Nantou City

 
 The Applicant hereby certifies that the Applicant has read all the above terms and conditions within a reasonable period of time and fully understood them before signing this Agreement.  Hardinge Machine Tools B.V., Taiwan Branch
 
	
	
	Branch Manager and Litigious Agent:

	s/s J. R. Ho

	J.R. Ho

	 

	 

	Address: No. 4, Tse-Chiang San Road, Nantou City

6

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