Loan Agreement between Tengtu International Corp. and Orion Capital Incorporated dated November 17, 2000

Summary

Tengtu International Corp. (the Debtor) and Orion Capital Incorporated (the Creditor) have entered into a loan agreement where Orion will lend $500,000 to Tengtu. Tengtu will issue a promissory note and grant Orion a warrant to purchase 100,000 shares of Tengtu’s common stock at $0.50 per share, exercisable for five years. The agreement includes provisions for additional warrants if more favorable terms are given to future lenders, and requires Tengtu to provide registration rights for the shares. The loan is secured and subject to standard representations and warranties.

EX-10.22 10 0010.txt LOAN AGREEMENT LOAN AGREEMENT AGREEMENT made on this 17th day of November, 2000, by and between Tengtu International Corp., a Delaware corporation ("Debtor"), and Orion Capital Incorporated, a corporation organized under the laws of Ontario ("Creditor"). In consideration of the mutual covenants and promises contained in this agreement, Debtor and Creditor agree: 1. Loan Agreement. On the terms and subject to the conditions set forth in this Agreement, Creditor shall loan to Debtor, and Debtor shall borrow from Creditor, the sum of U.S.$500,000 (the "Loan"). 2. Loan Terms. In connection with the Loan, Debtor shall duly execute and deliver to Creditor a Promissory Note containing the terms, and substantially in the form, set forth in Exhibit A hereto (the "Note"). 3. Representations and Warranties. (A) Debtor hereby represents and warrants to Creditor as follows: (1) ORGANIZATION. Debtor is a corporation duly organized, validly existing and in good standing under the laws of Delaware, and has full corporate power and authority to conduct its business as and to the extent now conducted and to own, use and lease its assets and properties. Debtor has full corporate power and authority to execute and deliver this Agreement, the Note and the Warrant and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. (2) AUTHORITY; DUE AUTHORIZATION. The execution and delivery by Debtor of this Agreement, the Note and the Warrant, and the performance by Debtor of its obligations hereunder and thereunder, have been duly and validly authorized by the Board of Directors of Debtor, no other corporate action on the part of Debtor or its respective shareholders being necessary. This Agreement has been duly and validly executed and delivered by Debtor and constitutes, and upon the execution and delivery by Debtor of the Note and the Warrant, the Note and the Warrant will constitute, legal, valid and binding obligations of Debtor enforceable against Debtor in accordance with their terms. (3) NO CONFLICTS. The execution and delivery by Debtor of this Agreement do not, and the execution and delivery by Debtor of the Note and the Warrant, the performance by Debtor of its obligations under this Agreement, the Note and the Warrant and the consummation of the transactions contemplated hereby or thereby will not: 1 (I) conflict with or result in a violation or breach of any of the terms, conditions or provisions of the certificate of incorporation or by-laws (or other comparable corporate charter document) of Debtor; (II) conflict with or result in a violation or breach of any term or provision of any law or order applicable to Debtor or any of its assets and properties; or (III) (a) conflict with or result in a violation or breach of, (b) constitute (with or without notice or lapse of time or both) a default under, (c) require Debtor or any other person or entity to obtain any consent, approval or action of, make any filing with or give any notice to any person or entity as a result or under the terms of, or (d) result in the creation or imposition of any lien upon Debtor or any of its assets or properties under, any contract or license to which Debtor is a party or by which any of its assets and properties is bound. (4) WARRANT. The issuance of the Warrant (as defined below) is not subject to any preemptive rights or rights of first refusal under the Delaware General Corporation Law or otherwise created by the Company. The shares of common stock issuable upon exercise of the Warrant have been duly and validly reserved for issuance and are not subject to any preemptive rights or rights of first refusal under the Delaware General Corporation Law or otherwise created by the Company, and when issued upon exercise of the Warrant in accordance with its terms such shares will be duly authorized, validly issued, fully paid and nonassessable. (B) Each individual that is a party to this Agreement hereby represents and warrants to Creditor as follows: (1) AUTHORITY. Such individual has full power and authority to execute and deliver, to perform his or her obligations under, and to consummate the transactions contemplated by this Agreement. This Agreement is a valid and legally binding obligation of such individual, enforceable against it in accordance with its terms. (2) OWNERSHIP OF COMMON STOCK. Such individual (x) is an "affiliate" of Debtor (as that term is defined in Rule 144 under the Securities Act of 1933, as amended), (y) solely owns (beneficially and of record) the number of shares of Common Stock set forth in Schedule 1 hereto, free and clear of all liens and other encumbrances, and (z) has owned such shares for a least one year prior to the date hereof. Such individual is not a party or subject to any stockholder agreement or other arrangement of any kind with respect to the shares of Common Stock. (C) Creditor hereby represents and warrants to Debtor that it is an "accredited investor" as that term is defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended. 2 4. Covenants. (1) Warrants. In consideration of Creditor's funding of the Loan, Debtor shall, within ten (10) business days of the Loan Date, issue to Creditor a warrant to purchase 100,000 shares (the "Warrant") of its $.01 par value per share common stock (the "Common Stock"). The Warrant and any documentation relating thereto shall contain customary terms and conditions (including, without limitation, customary antidilution provisions) and shall be in form and substance acceptable to Creditor. The exercise price of the Warrant shall be U.S.$.50 and the Warrant shall be exercisable for a period of five (5) years from the date of issuance.. In the event that (i) Debtor receives a loan with a term of less than one year from another creditor, (ii) on or before March 31, 2001, (iii) such creditor receives warrants to purchase Common Stock in connection with such loan and (iv) the warrant exercise price times the number of warrants received is greater than 10% of the principal loan amount, Creditor shall receive additional warrants such that Creditor and the new creditor receive the same number of warrants in proportion to the principal loan amount in accordance with the following example. In addition, if any other terms or conditions of the warrants issued to such other creditor are more favorable to such creditor than the terms of the Warrant, then the Warrant shall promptly be amended to incorporate the more favorable terms. The additional warrants shall also have a term of five years. Example: Debtor receives a loan of $500,000 and the creditor receives warrants to purchase 300,000 shares of Common Stock with an exercise price of $.50. Calculations Exercise price of warrants received by new creditor times the number of warrants received by new creditor ($.50 x 300,000) = $150,000 ("Warrant Dollar Amount") New Creditor Warrant Percentage = Warrant Dollar Amount ($150,000) divided by principal amount of new loan ($500,000) = 30% Excess Percentage = New Creditor Warrant Percentage minus 10% = 20% Additional Warrants = Excess Percentage (20%) times principal amount of Creditor's Loan ($500,000) divided by exercise price of Creditor's warrants ($.50) = 200,000 3 (2) Registration Rights. Debtor shall, within ten (10) business days of the Loan Date, enter into an agreement in form and substance satisfactory to Creditor, granting to Creditor unlimited piggyback registration rights with respect to the Warrant (and any additional warrants) and the shares of Common Stock issuable upon exercise of the Warrant. (3) Security. To induce Creditor to enter into this Agreement and to extend credit hereunder and to secure payment when due (whether at stated maturity, by acceleration or otherwise) of the principal and interest under the Note, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the individuals identified in Schedule 1 hereto hereby jointly and severally guarantees the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of Debtors obligations under this Agreement and the Note and pledges and grants to Creditor a security interest in all of such individual's right, title and interest in the number of shares of Common Stock identified opposite such individuals name on Schedule 1 hereto (the "Stock") and agrees to deliver to Creditor, within ten days of the date hereof, the stock certificates (with stock powers executed in blank) representing such shares and a guarantee, pledge and security agreement relating thereto containing customary terms and conditions and otherwise in form and substance satisfactory to Creditor. The Stock shall be free and clear of all liens or other encumbrances (other than as contemplated by this Agreement) and shall immediately be eligible to be freely resold by Creditor in accordance with the security agreement and under Rule 144 promulgated under the Securities Act of 1933, as amended. The security agreement will provide, among other things, that Creditor shall have the right to sell the Stock, or such portion of the Stock necessary to satisfy any principal and accrued interest amounts not paid on the due date thereof and that the balance of the Stock, or cash proceeds, if any, in excess of the outstanding principal and accrued interest, shall then be returned to Debtor. If all principal and interest shall have been paid by Debtor, either at the end of the term of the Note, or before such time, the Stock shall be returned to Debtor within 10 business days of the receipt of the final payment from Debtor. 4 5. General. (1) Assignability. This Agreement may be assigned by Creditor only. (2) Governing Law; Jursidiction. Any dispute, disagreement, conflict of interpretation or claim arising out of or relating to this Agreement, or its enforcement, shall be governed by the laws of the State of New York. The Debtor and each individual party to this Agreement hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the Note, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the Note in any court referred to above. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices below. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. 5 (3) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. (4) Headings. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. (5) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms. (6) Waiver. Either party's failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of any such provision or provisions, or prevent that party thereafter from enforcing each and every other provision of this Agreement. (7) Notices. All notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile, as follows: If to Debtor: C/o Hecht & Steckman, P.C. 60 East 42nd Street, Suite 501 New York, NY 10165-5101 Attention: Darren L. Ofsink Facsimile No: 212 ###-###-#### 6 If to any individual shareholder: C/o Hecht & Steckman, P.C. 60 East 42nd Street, Suite 501 New York, NY 10165-5101 Attention: Darren L. Ofsink Facsimile No: 212 ###-###-#### If to Creditor: Orion Capital Incorporated Sherway Executive Center 310 North Queen Street Suite 103N Etobicoke, Ontario M9C 5K4 Canada Attention: John Perkins Facsimile No.: 416 ###-###-#### Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto. 7 In Witness Whereof, the parties hereto have executed this Agreement as of the date set forth above. DEBTOR TENGTU INTERNATIONAL CORP. By: Name: Title: INDIVIDUALS: - ----------------------------- Zhang Fan Qi - ----------------------------- Hai Nan - ----------------------------- Jing Lian - ----------------------------- Xiaofeng Lin - ----------------------------- Pak Cheung 8 CREDITOR ORION CAPITAL, INCORPORATED By: Name: Title: 9 SCHEDULE 1 Name Number of Shares Certificate Numbers - ---- ---------------- ------------------- Zhang Fan Qi 200,000 882, 883, 884 and 885 Hai Nan 200,000 725 Jing Lian 200,000 722 Xiaofeng Lin 200,000 812 Pak Cheung 200,000 45 10