Exhibit 10.4
CONVERTIBLE LOAN AGREEMENT
THIS CONVERTIBLE LOAN AGREEMENT made as of the 17th day of December, 2010, (the
"EFFECTIVE DATE").
BETWEEN:
AMERICAN PARAMOUNT GOLD CORP. of 130 King Street West, Suite 3670
Toronto, Ontario, Canada, M5X 1A9
(hereinafter referred to as the "COMPANY")
AND:
MONACO CAPITAL INC. of 7 New Road, Second Floor, #6 Belize City,
Belize
(hereinafter referred to as the "LENDER")
WHEREAS:
A. The Company and the Lender entered into a Convertible Loan Agreement on
April 22, 2010 (the "Original Agreement");
B. The Company and the Lender wish to replace the Original Agreement in its
entirety with this Agreement;
C. Lender desires to loan funds to the Company pursuant to the terms of this
Agreement in the principal amount of up to Five Million Dollars
(US$5,000,000) (the "LOAN");
D. The Loan is convertible (the "CONVERSION") into securities of the Company
consisting of common shares of the Company with a par value of $0.001 (the
"SHARES");
E. The Lender understands and acknowledges to the Company that this Agreement
is being made pursuant to an exemption (the "EXEMPTION") from registration
provided by Section 4(2) of the United States Securities Act of 1933, as
amended (the "SECURITIES ACT") and Rule 903 of Regulation S of the
Securities Act for the private offering of securities; and
F. The Company desires to borrow funds from Lender on the terms and conditions
set forth in this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements herein contained, the receipt of which is hereby
acknowledged by each of the parties hereto, the parties hereto covenant and
agree each with the other (the "AGREEMENT") as follows:
1. AGREEMENT
1.1 This Agreement hereby replaces the Original Agreement in its entirety.
2. REPRESENTATIONS AND WARRANTIES OF THE LENDER
2.1 The Lender represents and warrants to, and covenants and agrees with the
Company that:
(a) the Lender makes the Loan to the Company and acquires the Shares and
Conversion Right (both as defined herein) in reliance upon the
Exemption from registration provided by Section 4(2) of the Securities
Act and Rule 903 of Regulation S of the Securities Act for the private
offering of securities;
(b) the Lender is eligible to make the Loan to the Company and acquire the
Shares and Conversion Right in the Company under Regulation S, and all
statements set forth in the Declaration of Regulation S Eligibility,
attached hereto as 0, are true and correct and may be relied upon by
the Company; further, all information, representations and warranties
contained in this Agreement, or that have been otherwise given to the
Company, are correct and complete as of the date hereof, and may be
relied upon by the Company;
(c) the Lender is aware of the significant economic and other risks
involved in making the Loan to the Company and in acquiring the Shares
and acquiring and/or exercising the Conversion Right;
(d) the Lender has consulted with its own securities advisor as to its
eligibility to acquire the Shares and acquire and/or exercise the
Conversion Right under the laws of its home jurisdiction and
acknowledges that the Company has made no effort and takes no
responsibility for the consequences to the Lender as a non-U.S.
investor acquiring the Shares and this Conversion right and, in
particular, in purchasing U.S.-based securities upon exercise, if any,
of the Conversion Right;
(e) no federal or state agency has passed upon, or make any finding or
determination as to the fairness of this investment, and that there
have been no federal or state agency recommendations or endorsements of
the investment made hereunder;
(f) the Lender acknowledges that:
(i) there are substantial restrictions on the sale or transferability
of any Shares acquired upon exercise of the Conversion Right and
understands that, although the Company is a reporting company,
the Lender is, upon acquiring the Shares upon exercising the
Conversion Rights, purchasing unregistered securities;
(ii) the Lender may not be able to liquidate this investment in the
event of any financial emergency and will be required to bear the
economic risk of this investment for a lengthy or even indefinite
period of time;
(iii)the Company is not contractually obligated to register under the
Securities Act any Shares acquired upon an exercise of the
Conversion Right; and
(iv) any Shares acquired by the Lender upon exercise of the Conversion
Right may never be sold or otherwise transferred without
registration under the Securities Act, unless an exemption from
registration is available.
2
(g) the Lender, alone or with its advisor, has enough knowledge and
experience in financial and business matters to make it capable of
evaluating the merits and risks of investing in the Company;
(h) the Lender makes the Loan to the Company and acquires the Shares and
the Conversion Right as principal for its own account and not for the
benefit of any other person;
(i) the Lender understands that any certificates representing any Shares
acquired by the Lender upon exercise of the Conversion Right will have
a resale legend on them that will read substantially as follows:
THE SECURITIES COVERED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"). THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT, AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISPOSITION THEREOF, AND MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR
THE ACCOUNT OR THE BENEFIT OF U.S. PERSONS (I) AS PART OF
THEIR DISTRIBUTION AT ANY TIME OR (ii) OTHERWISE UNTIL ONE
YEAR AFTER THE LATER OF THE COMMENCEMENT OF THE OFFERING OF
SUCH SECURITIES OR THE CLOSING DATE OF THE SALE AND TRANSFER
THEREOF, EXCEPT IN EITHER CASE IN ACCORDANCE WITH REGULATION
S (OR RULE 144A, IF AVAILABLE) UNDER THE ACT. TERMS USED
ABOVE HAVE THE MEANING GIVEN TO THEM BY REGULATION S.
(j) the Lender has good and sufficient right and authority to enter into
this Agreement and to carry out the transactions contemplated by this
Agreement on the terms and conditions contained herein.
2.2 The representations, warranties, covenants and agreements of and by the
Lender contained in, or delivered pursuant to, this Agreement shall be true
at and as of the Effective Date and shall remain in full force and effect
throughout the term of this Agreement.
3. THE LOAN
3.1 Subject to the terms of this Agreement, the Lender hereby agrees to loan to
the Company, and the Company hereby agrees to borrow from the Lender, the
sum of up to US$5,000,000.
3.2 The Company hereby agrees that the Lender had previously forwarded
$500,932.50 to the Company in principal pursuant to the Original Agreement
(the "Original Loan") and that such amount, including all accrued interest,
be treated as if issued under the terms of this Agreement.
3.3 Immediately following the execution of this Agreement, the Lender shall
deliver to the Company $100,000 of the Loan amount by certified cheque or
money order made payable to the Company, or by wire transfer to the
Company's bank account (the "ADVANCEMENT DATE"), and thereafter such
amounts as may be requested by the Company, subject to the concurrence of
the lender, up to the total Loan amount.
3
3.4 Unless repaid earlier, any funds forwarded by the Lender under this
Agreement shall be payable in full by 5:00 p.m. local time in Toronto,
Ontario, one year from the Effective Date (the "DUE DATE"). If such day
falls on a Sunday or statutory holiday, then by 5:00 p.m. local time in
Toronto, Ontario, on the first business day after the Due Date.
3.5 The Loan shall bear interest at the rate of 10% per annum, payable on the
Due Date, (the "INTEREST") calculated on the principal amount of the Loan
outstanding.
3.6 The Company shall be entitled to prepay any sum up to the full amount of
the Loan and accrued Interest then outstanding at any time, upon the
payment of such amount and an additional 10% of such amount.
3.7 At any time after an Advancement Date, if the Company has not paid the Loan
and accrued Interest in full, the Lender may by providing written notice
(the "NOTICE") and the Declaration attached hereto as 0 to the Company,
exercise its rights of Conversion in respect of either a portion of or the
total outstanding amount of the Loan as of that date into Shares of the
Company (the "CONVERSION RIGHT"), on the following terms:
(a) The number of Shares issuable under the Conversion Right (the
"CONVERSION RATE") shall be determined by dividing (x) that portion of
the outstanding principal balance and accrued Interest under the Loan
on such date that the Lender elects to convert by (y) the Conversion
Price (as defined below) then in effect on the date on which the
Lender faxes the Notice of conversion, duly executed, to the Company
(the "CONVERSION Date"). With respect to partial conversions of this
Loan, the Company shall keep written records of the amount of this
Loan converted as of each Conversion Date.
(b) The term "CONVERSION PRICE" shall mean volume weighted average price
for the Company's 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, or
applicable trading market (the "OTCBB") as reported by a reliable
reporting service ("Reporting Service") mutually acceptable to Lender
and the Company (i.e. Bloomberg) or, if the OTCBB 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" by the National Quotation Bureau, Inc.
3.8 Within seven (7) days of Notice by the Lender exercising its Conversion
Rights hereunder, the Company shall deliver a Share Certificate to the
Lender representing the number of Shares acquired by the Lender pursuant to
the Conversion Rate set out in subparagraph 2.7 of this Agreement.
4. COVENANTS AND AGREEMENTS OF THE LENDER
4.1 The Lender covenants and agrees with the Company that the Lender shall not
make demand for payment of the Loan prior to the Due Date, except as
otherwise required herein, unless the Loan has become due and payable in
accordance with the provisions of this Agreement.
4
4.2 In order to ensure eligibility to receive the Shares, the Lender must
provide the Declaration attached hereto as 0.
5. DEFAULT
5.1 If one or more of the following events shall occur, namely:
(a) the Company fails to pay any Principal or accrued Interest amounts
when due and fails to repay the Loan on the Due Date;
(b) the Company makes an assignment for the benefit of its creditors or
files a petition in bankruptcy or is adjudicated insolvent or bankrupt
or petitions or applies to any tribunal for any receiver, receiver
manager, trustee, liquidator or sequestrator of or for the Company or
any of the Company's assets or undertaking, or the Company makes a
proposal or compromise with its creditors or if an application or a
petition similar to any of the foregoing is made by a third party
creditor and such application or petition remains unstayed or
undismissed for a period of thirty (30) days;
(c) an order of execution against any of the Company's assets remains
unsatisfied for a period of ten (10) days;
(d) the Company fails to observe and comply with any material term,
condition or provision of this Agreement or any other agreement or
document delivered hereunder, and such failure continues unremedied
for a period of thirty (30) days;
(e) any representations, warranties, covenants or agreements contained in
this Agreement or any document delivered to the Lender hereunder are
found to be untrue or incorrect as at the date thereof; or
(f) any lender (including the Lender) of any mortgage, charge or
encumbrance on any of the Company's assets and undertaking does
anything to enforce or realize on such mortgage, charge or
encumbrance;
then the Loan to the date of such default shall, at the option of the
Lender, immediately become due and payable without presentment, protest or
notice of any kind, all of which are waived by the Company.
6. INDEPENDENT LEGAL ADVICE
6.1 The Lender acknowledges that:
(a) Macdonald Tuskey, Corporate and Securities Lawyers received
instructions from the Company and does not represent the Lender;
(b) the Lender has been requested to obtain its own independent legal
advice on this Agreement prior to signing this Agreement;
(c) the Lender has been given adequate time to obtain independent legal
advice;
(d) by signing this Agreement, the Lender confirms that it fully
understands this Agreement; and
5
(e) by signing this Agreement without first obtaining independent legal
advice, the Lender waives its right to obtain independent legal
advice.
7. GENERAL
7.1 For the purposes of this Agreement, time is of the essence.
7.2 The parties hereto shall execute and deliver all such further documents and
instruments and do all such acts and things as may either before or after
the execution of this Agreement be reasonably required to carry out the
full intent and meaning of this Agreement.
7.3 This Agreement shall be construed in accordance with the laws of the State
of Nevada.
7.4 This Agreement may be assigned by the Lender subject to any assignee making
requisite representations to meet applicable securities law exemptions;
this Agreement may not be assigned by the Company.
7.5 This Agreement may be signed by the parties in as many counterparts as may
be deemed necessary, each of which so signed shall be deemed to be an
original, and all such counterparts together shall constitute one and the
same instrument.
7.6 All notices, requests, demands or other communications hereunder shall be
in writing and shall be "deemed delivered" to a party on the date it is
hand delivered to such party's address first above written, or to such
other address as may be given in writing by the parties hereto.
(Execution Page Follows)
IN WITNESS WHEREOF the parties have hereunto set their hands effective as of the
date first above written.
AMERICAN PARAMOUNT GOLD CORP.
Per: /s/ "Hugh H. Aird"
---------------------------------------
Hugh H. Aird, President
MONACO CAPITAL INC.
Per: /s/ "Andrew Godfrey"
---------------------------------------
Andrew Godfrey
6
SCHEDULE A
DECLARATION OF REGULATION S ELIGIBILITY
Regulation S of the Securities Act is available for the use of non-U.S. Persons
only. This Declaration must be answered fully and returned to AMERICAN PARAMOUNT
GOLD CORP. to ensure the Company is in compliance with the Securities Act. All
information will be held in the strictest confidence and used only to determine
investor status. No information will be disclosed other than as required by law
or regulation, other demand by proper legal process or in litigation involving
the company or its affiliates, controlling persons, officers, directors,
partners, employees, attorneys or agents.
I, ON BEHALF OF MONACO CAPITAL INC. ("MONACO"), HEREBY AFFIRM AND DECLARE THAT:
1. Monaco is not a resident of the United States of America.
2. Monaco is not purchasing securities for the benefit of a resident of the
United States of America.
3. Monaco is not purchasing securities in the name of a company incorporated
in the United States of America or for the benefit of a company
incorporated in the United States of America.
4. Monaco is not purchasing securities in my capacity as Trustee for a
U.S.-based Trust.
5. Monaco is not purchasing securities in my capacity as the Executor or
Administrator of the Estate of a U.S. resident.
6. Monaco is not a U.S. resident purchasing securities through a brokerage
account located outside of the United States of America, nor am I using a
non-U.S. brokerage account to purchase securities for the benefit of
individuals or corporate entities resident within the United States of
America.
7. Monaco is not purchasing the securities in an attempt to create or
manipulate a U.S. market.
8. Monaco is purchasing the securities as an investment and not with a view
towards resale.
9. I will only resell the securities to other non-U.S. residents in accordance
with Rule 905 of Regulation S, or to U.S. residents in accordance with the
provisions of Rule 144 following the expiration of six months from the
Advancement Date, as defined in the Convertible Loan Agreement dated
concurrently herewith.
10. Monaco is permitted to purchase the securities under the laws of its home
jurisdiction.
11. I understand that if I knowingly and willingly make false statements as to
my eligibility to purchase or resell securities under Regulation S, I may
become subject to civil and criminal proceedings being taken against me by
the United States Securities and Exchange Commission.
___________________________
DATED: ______________, 2010 Signature
___________________________
Print Name:
Authorized Signatory
7