EXHIBIT10.6
BRIDGE LOAN AGREEMENT
This Bridge
Loan Agreement is made as of February 19, 2008 (the “
Effective Date ”) among S3 Investment Company, Inc., a
California corporation (the “ Company ” or
“ SIVC” ), and the investors listed on the
SCHEDULE OF INVESTORS attached hereto (the “
Investors” ).
The Company
is currently in need of funds to help finance the operations of its
Redwood Capital, Inc. subsidiary until the closing of the next
round of RTO financings for its Chinese clients, but these clients
will not be able to complete any such transaction without monthly
infusions of short-term working capital. In order to provide
for this need, the Investors and the Company are now entering into
a bridge loan in the aggregate amount of up to $800,000 (the
“ Commitment Amount ”), and related
transactions, on the terms of this Agreement.
In
consideration of the mutual covenants contained in this
Agreement,
it is agreed as follows:
1. Initial Bridge
Transaction .
Concurrently with execution of this
Agreement, each Investor will deliver to the Company funds equal to
the "Initial Loan Amount" listed on the Schedule of Investors.
Upon receipt of the funds, the Company will issue to each
Investor a Class B Senior Promissory Note in the form attached as
Exhibit A (which, with any notes on substantially the same
terms that may be issued to any or all of the Investors, are herein
called the “ Class B Notes” ), in a principal
amount equal to the "Initial Loan Amount" listed on the Schedule of
Investors. The Investors may invest additional amounts during
each Additional Closing (as defined below) and pursuant to Section
2.2 below.
2. Closing(s)
.
2.1
The Closing . The purchase
and sale of the Class B Notes will take place at the offices of
Crone Rozynko, LLP, 101 Montgomery Street, Suite 1950, San
Francisco California 94104, at 11:00 a.m. Pacific time, on February
19, 2008, or at such other time and place as the Company and the
Investors who have agreed to purchase a majority of the aggregate
principal amount of the Class B Notes listed on the Schedule of
Investors, mutually agree upon (which time and place are referred
to as the “ Closing ”). At the Closing, each
Investor will deliver to the Company payment in full for the Class
B Note in the amount set forth opposite such Investor’s name
listed on the Schedule of Investors, which such Investor agrees to
purchase at the Closing by (i) a check payable to the
Company’s order, (ii) wire transfer of funds to the Company,
or (iii) any combination of the foregoing. At the Closing,
the Company will deliver to each Investor a duly executed Class B
Note in the principal amount set forth opposite such
Investor’s name on the Schedule of Investors.
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2.2
Additional Closing(s)
.
(a)
Conditions of Additional
Closing(s) . On each
date on which the Company documents to the Investor’s
satisfaction the completion of the milestone event set forth below,
which dates shall be no less than one month from the previous
funding, the Company may, at one or more additional closings (each
an “Additional Closing” ), issue and sell to the
Investors additional Class B Notes in proportion to each Investor
to the Class B Notes sold at the Closing, and such Class B Notes
having an aggregate principal amount of up to $720,000, provided,
however, that achievement of the milestone event at each such
Additional Closing shall have been previously approved by a
majority of the aggregate principal amount of the Class B
Notes:
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Funded
|
Funding Amount
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Milestone Event
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YES
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$115,000
|
Establishment of the BVI entities to facilitate the Chinese reverse
takeover (“RTO”) public listing of Haijie, WITU or
other client acceptable to Investors.
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$130,000
|
Execution of a WOFE Joint Venture Agreement between Redwood
Capital, Inc. and Haijie, WITU, Boyuan or other client acceptable
to Investors.
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$125,000
|
Completion of the Business Plan for Haijie, Boyuan (Est. 7/20),
WITU or other client acceptable to Investors.
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$150,000
|
Completion of a PCAOB-approved audit for a Redwood Capital client
such as Haijie, Wuhan International Trade University
(“WITU”), Boyuan or other client acceptable to
Investors.
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$100,000
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Another (i) Execution of a WOFE Joint Venture Agreement between
Redwood Capital, Inc. and Haijie, WITU or other client acceptable
to Investors or (ii) Haijie, WITU, Boyuan or other client
acceptable to Investors obtaining a term sheet from a lead investor
for its RTO funding.
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$100,000
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Haijie, WITU, Boyuan or other client acceptable to Investors
obtaining a term sheet from a lead investor for its RTO
funding.
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(b)
Pre-Closing Delivery of
Funds .
The Company and the Investors acknowledge
that certain Investors may deliver checks or wire transfers to the
Company in anticipation of Closing or any Additional Closing
hereunder, and the Company agrees that it will hold such funds in
escrow on behalf of the Investors until the Closing conditions in
Section 7 of this Agreement have been satisfied with regard to such
Closing. If such Closing does not occur within five (5) business
days of delivery of such funds, the Company will return on the next
business day to any Investor the entire payment.
3. Subordination.
(a)
All indebtedness (other than Senior Indebtedness (as defined
below)) of the Company is hereby made subordinate and junior to the
Indebtedness (as defined below). Upon
(1)
any distribution of all or substantially all of the assets of
the Company, or
(2) any payment or distribution of
assets of the Company of any kind or character, whether in cash,
property, or securities, to creditors in connection with any
dissolution, winding-up, total or partial liquidation or
reorganization of the Company, excluding the contemplated stock
dividend of ENHD shares which the Company intends to distribute to
SIVC shareholders and as allowed for in the milestone events of the
Senior Indebtedness, all principal and interest due or to become
due upon all Senior Indebtedness and Indebtedness will first be
paid in full before any person will be entitled to receive any
payments or retain any assets so paid or distributed; the Investors
irrevocably authorize and direct the Company to effect all payments
required by this sentence.
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(b)
For purposes of this Agreement, “ Senior
Indebtedness” means all principal, premium, interest,
costs and other amounts due in respect of the Senior Notes due
January 28, 2009 (and all renewals, extensions, refundings,
refinancings and replacements of such obligations) (the “
Senior Notes ”) issued pursuant to the Bridge Loan
Agreement dated January 28, 2009 among the Company and the
investors listed therein; and “ Indebtedness”
means all principal, premium, interest, costs and other amounts due
in respect of the Class B Notes (and all renewals, extensions,
refundings, refinancings and replacements of such
obligations).
4. Representations and
Warranties of The Company .
The Company hereby represents and
warrants to each Investor that, except as set forth in the Schedule
of Exceptions (the “ Schedule of Exceptions ”)
attached to this Agreement as Exhibit B (which Schedule of
Exceptions shall be deemed to be representations and warranties to
the Investors by the Company under this Section 4), the statements
in the following paragraphs of this Section 4 are all true and
complete as of immediately prior to the Closing and Additional
Closing:
4.1
Organization, Good Standing, and
Qualification .
The Company is a corporation duly
organized, validly existing and in good standing under the laws of
the State of California and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed
to be conducted. The Company is duly qualified to transact business
and is in good standing in each jurisdiction in which the failure
so to qualify would have a material adverse effect on its business
or properties. The Company has all requisite corporate power and
authority to own its properties, to carry on its business as now
conducted, and to enter into and perform its obligations under this
Agreement and the agreements and instruments contemplated by
it.
4.2
Capitalization
. The authorized capitalization of the
Company immediately prior to the Closing is as follows:
(a)
Common Stock .
5,000,000,000 shares of Common
Stock
(the “ Common Stock ”), 1,300,000,000 of which
were issued and outstanding. The Company has reserved 12,000,000
shares of Common Stock for issuance upon conversion of the
Preferred Stock and 1,100,000,000 shares of Common Stock for
issuance upon conversion of, and payments of interest on, the
Senior Notes.
(b)
Preferred Stock
.
100,000,000 shares of Preferred Stock
(the
“ Preferred Stock ”), 12,000,000 of which have
been as designated Series A Preferred, all of which are issued and
outstanding.
(c)
Other Rights to Acquire
Stock . Except for (i) the
conversion privileges of the Senior Notes, (ii) the Common Stock
issuable on conversion of the Senior Notes or in payment of
interest on the Senior Notes and Class B Notes, and (iii) the
conversion privileges of the Preferred Stock; there are no options,
warrants, conversion privileges or other rights (or agreements for
any such rights) outstanding to purchase or otherwise obtain from
the Company any of the Company’s securities.
4.3
Authorization
.
All corporate action on the part of the
Company necessary for the authorization, execution and delivery of
this Purchase Agreement, the Put Agreement attached hereto as
Exhibit C (the “ Put Agreement ”) and the
performance of all obligations of the Company hereunder, and the
authorization, issuance and delivery of each Class B Note has been
taken or will be taken prior to the relevant Closing. This Purchase
Agreement, the Put Agreement and the Class B Notes, when executed
and delivered by the Company, shall constitute valid and legally
binding obligations of the Company, enforceable in accordance with
their terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors’ rights
generally, and (ii) as limited by laws relating to the availability
of specific performance, injunctive relief, or other equitable
remedies
4.4
Valid Issuance
.
The Class B Notes and the shares of the Common
Stock issuable in payment of interest on the Class B Notes (the
“ Shares”, and collectively with the Class B
Notes, the “ Securities ”), when issued, sold,
and delivered in accordance with the terms of the this Agreement
and Class B Note, will be duly and validly issued, fully paid and
non-assessable and, based in part upon the representations of the
Investors in this Purchase Agreement, will be issued in compliance
with all applicable federal and state securities laws.
4 .5
Compliance with Other
Instruments . The Company
is not in violation or default of any provisions of any instrument,
judgment, order, writ, decree or contract to which it is a party or
by which it is bound. The execution, delivery and performance of
the Purchase Agreement and the Put Agreement, the consummation of
the transactions contemplated hereby and the authorization,
issuance and delivery of the Securities will not result in any such
violation or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree or
contract, or an event which results in the creation of any lien,
charge or encumbrance upon any assets of the Company. The
Company: (a) has entered into the bridge transaction after
careful consideration of all alternatives; (b) is aware of the
potential return to the Investors pursuant to the bridge
transaction; (c) acknowledges that the amount of the potential
return to the Investors appropriately reflects the risk inherent in
the bridge transaction; and (d) hereby covenants not to assert a
defense of usury to any action by an Investor to collect any amount
due under a Class B Note.
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