LOAN AGREEMENT
AGREEMENT made on this 10th day of
February, 2010, by and between China Silicon Corporation, a Delaware corporation
(“Debtor”) and Master Silicon Carbide Industries, Inc., a Nevada corporation
(“Creditor”). All references to Creditor herein shall also refer to
Creditor’s permitted assignees under this Agreement.
WITNESSETH:
WHEREAS,
Debtor and Creditor entered into a Letter of Intent for the acquisition of
Debtor by Creditor; and
WHEREAS,
pending the acquisition of Debtor by Creditor, Creditor has agreed to extend a
loan of One Million U.S. Dollars (US$1,000,000)(the “Loan Amount”) to
Debtor to fund working capital needs;
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 (the
“Loan”), and Debtor shall borrow from Creditor, the Loan
Amount.
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. Closing. Creditor
will, subject to the terms and conditions hereof, and in reliance upon the
written representations and warranties of Debtor, loan to Debtor and Debtor
shall borrow, at a single closing, the Loan Amount. The closing shall
be held (the “Closing”) at the offices of Guzov Ofsink, LLC, 000 Xxxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, on such date and at such time as agreed by
the parties.
4. Representations
and Warranties
a. Debtor
represents and warrants to Creditor as follows:
i. Organization. Debtor
is a entity duly organized, validly existing and in good standing under the laws
of the State 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 and the Note and to grant the security
interest set forth below and to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby.
ii. Authority; Due
Authorization. The execution and delivery by Debtor of this
Agreement and the Note (collectively, the “Transaction Documents”), and the
performance by Debtor of its obligations under the Transaction Documents to
which it is a party (the “Debtor Transaction Documents”), have been duly and
validly authorized by the Board of Directors of Debtor, and no other action on
the part of Debtor or its shareholder is necessary for the Debtor’s execution,
delivery and performance of the Debtor Transaction Documents. The
Debtor Transaction Documents have been duly and validly executed and delivered
by Debtor and constitute the legal, valid and binding obligations of Debtor
enforceable against Debtor in accordance with their terms.
iii. Governmental
Consents. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with any court,
governmental agency, regulatory authority or political subdivision thereof, or
any other entity, is required in connection with the execution, delivery and
performance by Debtor of the Debtor Transaction Documents.
b. Creditor
hereby represents and warrants to Debtor as follows:
i. Authority; Due
Authorization. The execution and delivery by Creditor of this
Agreement (collectively the “Creditor Transaction Documents”), and the
performance by Creditor of its obligations thereunder, have been duly and
validly authorized. The Creditor Transaction Documents have been duly
and validly executed and delivered by Creditor and constitute the legal, valid
and binding obligation of Creditor enforceable against Creditor in accordance
with their terms.
ii. Creditor
understands that the offering and sale of the Note (as defined below) is
intended to not require or be exempt from registration under the U.S. Securities
Act of 1933, as amended (the “Securities Act”) and/or regulations thereunder and
exempt from registration or qualification under any state or provincial law, and
in accordance therewith, and in furtherance thereof, Creditor represents,
warrants and agrees as follows:
(A) Creditor
acknowledges that all documents, records, and books pertaining to an investment
in the Note that the Creditor believes necessary for consideration and
evaluation of an investment therein have been made available for inspection by
Creditor, and Creditor’s attorney(ies), accountant(s), or
advisor(s);
(B) No
oral or written representations have been made other than as set forth in this
Agreement or the Note;
(C) Creditor
is not investing in the Note as a result of, or subsequent to, any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio, or
presented at any seminar or meeting, or any solicitation of a subscription by a
person other than a representative of Debtor;
(D) Creditor
recognizes that an investment in the Note involves substantial risks, including
loss of the entire amount of such investment, and has taken full cognizance of
and understands all of the risks related to the Note.
(E) Creditor
is an accredit investor as that term is defined by Rule 501 of Regulation D
under the Securities Act.
5. Covenants.
a. Affirmative
Covenants of Debtor.
i. Debtor covenants and agrees that Debtor
will so long as any indebtedness remains outstanding under this
Agreement:
(A) Duly perform the Debtor Transaction
Documents.
(B) Furnish Creditor with such information
as is required by the terms and conditions of the Transaction Documents or other
documents or instruments of security referred to in therein and such other
information as Creditor may reasonably request from time to
time.
(C) Promptly notify Creditor of any
condition or event that constitutes, or with the running of time or the giving
of notice will constitute, a default under any of the Transaction
Documents.
(D) At any time on the request of Creditor
to execute and deliver to Creditor, in form reasonably satisfactory to Creditor,
such additional documentation in respect of the indebtedness and liability and
obligations of Debtor to Creditor contemplated under the terms of the
Transaction Documents as Creditor shall reasonably deem necessary or desirable,
including, without limiting the generality of the foregoing, appropriate
security agreements and financing statements.
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b. Negative
Covenant of Debtor.
i. Debtor covenants and agrees that so long
as any indebtedness remains outstanding under this Agreement that Debtor will
not, without the prior written consent of Creditor:
(A) Make any material change in the general
business objects or purpose of Debtor.
(B) Sell, lease, transfer or dispose of all,
substantially all, or any material part of the assets or business of Debtor or
enter into any merger or consolidation, except in the ordinary course of
business.
(C) Guarantee, indorse or otherwise become
secondarily liable for or on the obligations of others, except by endorsement
for deposit in the ordinary course of business.
(D) Become or remain obligated for any
indebtedness for money loaned, or for any indebtedness incurred in connection
with the acquisition of any property, real or personal, tangible or intangible,
except:
(1) Indebtedness to
Creditor.
(2) Current trade, utility or
non-extraordinary accounts payable arising in the ordinary course of the
business of Debtor.
(3) Current indebtedness to financial
institutions
(E) Declare or pay any
dividends.
(F) Make or allow to remain outstanding any
investment in, or any loans or advances to, any person, firm, corporation or
other entity or association.
(G) Sell or assign any account, note or
trade acceptance receivable except to Creditor.
6. Security. To induce Creditor to enter into the
Transaction Documents 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 performance of Debtor’s obligations under the
Transaction Documents, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Debtor will execute
and deliver a security interest, granting a security interest to Creditor in all
of Debtor’s present and after-acquired personal property (the “Security
Interest”), including its joint venture interest in the People’s Republic of
China in Mangshi Sinice
Silicon Industry Co., Ltd.
which shall be subordinate only to the rights of the preferred stockholders of
Debtor; and
7. Expenses. Debtor shall pay all of Creditor’s
reasonable legal fees and other expenses incurred in connection with the
negotiation and preparation of this Agreement and conduct of due
diligence.
8. Default. Notwithstanding any other
provision of this Agreement or any of the other Transaction Documents, a breach
of any representation, warranty or covenant or a failure of performance by
Debtor, or the occurrence of an event of default under, any of the Transaction
Documents shall constitute a breach, failure of performance and event of default
under each and every Transaction Document, and shall entitle Creditor to all
rights and remedies available under the Transaction Documents, at law or in
equity.
9. General.
a. Assignability. This
Agreement may be assigned by Creditor only, without the consent of Debtor, by
delivery of written notice of same to Debtor within thirty (30) days after the
effective date of such assignment.
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b. Governing
Law; Jurisdiction. Any dispute, disagreement,
conflict of interpretation or claim arising out of or relating to this Agreement
and the Note, or their enforcement, shall be governed by the laws of the State
of New York. The parties hereby irrevocably and unconditionally
submit, for themselves and their property, to the nonexclusive jurisdiction of
the Courts of the State of New York, 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, or at the option of Creditor, removed
to the State of New York. 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 Note in or
removed to 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.
c. 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.
d. 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.
e. 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.
f. Waiver. Any 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.
g. 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:
China Silicon
Corporation
000 Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxx
00000
If to Creditor:
000 Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxx
00000
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.
h. Legal
Advice. Debtor acknowledges that it has had an opportunity to
review the Transaction Documents and all the collateral documents or instruments
delivered or instruments delivered thereunder with independent legal counsel and
that after having done so, acknowledges that it has read and understood all such
documents and agrees and intends to be legally bound by them in accordance with
their terms.
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i. Further Assurances.
Debtor will from time to time, whether before or after the occurrence of an
Event of Default, do all such acts and things and execute and deliver all such
amendments, supplements, deeds, transfers, assignments and instruments as
Creditor may reasonably require for perfecting Creditor’s security interest in
the collateral and in connection with any realization of same and for exercising
all powers, authorities and discretions conferred upon
Creditor. Debtor covenants and agrees with the Creditor to discharge
or cause to be discharged forthwith any encumbrances which may rank in priority
to the Creditor’s security interest in the collateral under the Security
Agreement.
In
Witness Whereof, the
parties hereto have executed this Agreement as of the date set forth
above.
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| CHINA SILICON CORPORATION | MASTER SILICON CARBIDE INDUSTRIES, INC. | ||||
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EXHIBIT
A
Form of
Promissory Note
THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), OR UNDER CANADIAN LAW, AND MAY NOT BE TRANSFERRED UNLESS REGISTERED
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS
AVAILABLE.
CHINA
SILICON CORPORATION
U.S.
$1,000,000
6%
PROMISSORY NOTE
Dated:
February 10, 2010
FOR VALUE RECEIVED, China Silicon
Corporation, a Delaware corporation (the “Company”), hereby
unconditionally promises to pay to Master Silicon Carbide Industries, Inc.
(together with its successors and assigns, the “Holder”) on December 31,
2010, the principal sum of One Million Dollars (which date is referred to as the
“Maturity Date”), and
to pay to the Holder interest on the unpaid principal amount of this Note as
provided in Article I
hereof. This is the Note referred to in the Loan Agreement by and
between the Company and Holder, dated as of the date
hereof. Capitalized terms used but not otherwise defined herein have
the respective meanings given to such terms in Article IV
hereof.
ARTICLE
I
PRINCIPAL
AND INTEREST
Section
1.1 Principal. The
entire unpaid principal amount of this Note shall be paid on December 31,
2010. Promptly following the payment in full of this Note, the Holder
shall surrender this Note to the Company for cancellation.
Section
1.2 Interest. Interest
shall accrue (compounded monthly) on the daily unpaid principal amount of this
Note, for each day during the period from and including the date hereof (the
“Commencement Date”) to
but excluding the date such Note shall be paid in full, at a rate of six percent
(6%) per annum (the “Interest Rate”) and shall be
payable on the last Business Day of each quarter.
ARTICLE
II
PAYMENTS
Section
2.1 Payments
Generally. All payments of principal and interest to be made
by the Company in respect of this Note shall be made in Dollars by delivery to
the Holder, at the address the Holder provides to the Company, not later than
12:00 noon new York Time on the date on which such payment shall be
due. If the due date of any payment in respect of this Note would
otherwise fall on a day that is not a Business Day, such due date shall be
extended to the next succeeding Business Day, and interest shall be payable on
any principal so extended for the period of such extension. All
payments by the Company under this Note will be made without setoff or
counterclaim and free and clear of, and without deductions for, any taxes, fees
or other expenses or claims of any kind.
6
Section
2.2 Prepayments. At
any time, and from time to time, the Company may, at its option, prepay this
Note (in an amount up to but not exceeding the unpaid principal amount hereof
and any accrued interest hereon) in whole or in part without premium or
penalty. All payments hereunder shall apply first to penalties, costs
and expenses of Creditor, then to interest, and then to principal.
Section
2.3 Refinancing. If
during the term of the Loan the Company completes one or more equity financings
or receives any funds or other consideration on account of accounts receivable
due from related parties, all net proceeds received by the Company shall be
forthwith paid over to the Holder and applied on account of the outstanding
balance hereunder, first to costs and charges, then to interest then accrued but
unpaid, and then to principal.
ARTICLE
III
EVENTS
OF DEFAULT
Section
3.1 Event of
Default. "Event of Default", wherever
used herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental
body):
(a) default
in the payment of any interest in respect of this Note within two (2) Business
Days after it becomes due and payable; or
(b) default
in the payment of the outstanding principal amounts of this Note on the Maturity
Dates set forth above; or
(c) a
default by the Company of any of its obligations under any of the Transaction
Documents or any failure in the satisfaction of the covenants set forth in any
of the Transaction Documents; or
(d) the
entry of a decree or order by a court having jurisdiction in the premises
adjudging the Company a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable bankruptcy law or appointing a
receiver, liquidator, assignee, trustee, sequestrator or other similar official
of the Company or of any substantial part of the property of the Company, or
ordering the winding up or liquidation of the affairs of the Company;
or
(e) the
institution by the Company of proceedings to be adjudicated a bankrupt or
insolvent, or the consent by the Company to the institution of bankruptcy or
insolvency proceedings against it, or the filing by the Company of a petition or
answer or consent seeking reorganization or relief under any applicable
bankruptcy law or the consent by the Company to the filing of such petition or
to the appointment of a receiver, liquidator, assignee, trustee, sequestrator or
similar official of the Company or of any substantial part of the property of
the Company, or the making by the Company of an assignment for the benefit of
creditors, or the admission by the Company in writing of its inability to pay
its debts generally as they become due, or the taking of corporate action by the
Company in furtherance of any such action.
Section
3.2 Acceleration of
Note. If an Event of Default occurs and is continuing, then
and in every such case the Holder may declare the outstanding principal amount
of this Note (including accrued interest as provided in Article I hereof) to be due
and payable immediately, by a notice in writing to the Company, and upon any
such declaration such principal shall become immediately due and
payable. Notwithstanding the foregoing, if an Event of Default
referenced in paragraph (d) or paragraph (e) of Section 3.1 occurs, the
outstanding principal amount of this Note (including accrued interest as
provided in Article I
hereof) shall automatically become due and payable immediately without any
declaration or other action on the part of the Holder.
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ARTICLE
IV
DEFINITIONS
Section
4.1 Definitions. The
following terms shall have the meanings set forth below:
“Business Day” means a day
other than Saturday, Sunday or any day on which banks located in the Province of
British Columbia are authorized or obligated to close.
“Dollars” and “$” means lawful money of the
United States of America.
“Maximum Rate” means the
highest non-usurious rate of interest (if any) permitted from day to day by
applicable law.
“Person” means any person or
entity of any nature whatsoever, specifically including an individual, a firm, a
company, a corporation, a partnership, a limited liability company, a trust or
other entity.
“Transaction Documents” shall
have the same meaning as in the Loan Agreement.
ARTICLE
V
USURY
LAWS
Section
5.1 Usury
Laws. Regardless of any provision contained in this Note,
Holder shall never be deemed to have contracted for, or be entitled to receive,
collect, or apply as interest on this Note (whether termed interest herein or
deemed to be interest by judicial determination or operation of law) any amount
in excess of the Maximum Rate, and, in the event that Holder ever receives,
collects, or applies as interest any such excess, such amount which would be
excessive interest shall be applied to the reduction of the unpaid principal
balance of this Note, and, if the principal balance of this Note is paid in
full, then any remaining excess shall forthwith be paid to the Company. In
determining whether or not the interest paid or payable under any specific
contingency exceeds the highest Maximum Rate, the Company and Holder shall, to
the maximum extent permitted under applicable law, (a) characterize any
non-principal payment (other than payments which are expressly designated as
interest payments hereunder) as an expense or fee rather than as interest, (b)
exclude voluntary or refinancing prepayments and the effect thereof, and (c)
spread the total amount of interest throughout the entire contemplated term of
this Note so that the interest rate is uniform throughout such
term.
ARTICLE
VI
MISCELLANEOUS
Section
6.1 Governing Law;
Jurisdiction. This Note shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to the
conflicts of laws provisions thereof.
Section
6.2 Successors. All
agreements of the Company in this Note shall bind its successors and permitted
assigns. This Note shall inure to the benefit of the Holder and its
permitted successors and assigns. The Company shall not delegate any
of its obligations hereunder without the prior written consent of
Holder.
Section
6.3 Amendment, Modification or
Waiver. No provision of this Note may be amended, modified or
waived except by an instrument in writing signed by the Company and the
Holder.
Section
6.4 Legend. This Note,
and any note issued in exchange or substitution for this Note, shall bear the
legend appearing on the first page hereof.
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Section
6.5 Notices. All
notices and other communications in respect of this Note (including, without
limitation, any modifications of, or requests, waivers or consents under, this
Note) shall be given or made in writing (including, without limitation, by
telecopy) at the addresses specified in the Loan Agreement. Except as
otherwise provided in this Note, 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.
Section
6.6 Delay or Omission 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 right, power or
privilege. All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise
available.
IN WITNESS WHEREOF, the Company has
caused this Note to be duly executed by an authorized officer thereof as of the
date and year first above written.
| CHINA SILICON CORPORATION | |||
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| Name: | |||
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