EXHIBIT 4.17
Loan Agreement, dated September 24, 2004, among
0724000 BC Ltd. ,
Marsa Gold Corp.,
Aitas Mining Company and
Bulkakshu Mining Company,
as amended January 18, 2005.
LOAN AGREEMENT
THIS LOAN AGREEMENT ("AGREEMENT") is entered into as of September 24,
2004, by and between MAGELLAN GOLD CORP., a Nevada corporation ("LENDER"), MARSA
GOLD ("MARSA"), a corporation organized under the laws of the Krygyz Republic,
AITAS MINING COMPANY ("AITAS"), a corporation organized under the laws of
Republic of Kazakhstan, and BULAKASHU MINING COMPANY ("BORROWER"), a corporation
organized under the laws of the Kyrgyz Republic.
WHEREAS, Aitas and Marsa (collectively, the "Vendors") are the
registered and beneficial owners of all of the issued securities of Borrower;
WHEREAS, the Lender, the Vendors and Borrower have negotiated the terms
of a share exchange transaction (the "TRANSACTION") in which the Lender will
acquire all of the issued and outstanding shares of Borrower over a period of
time in exchange for cash and common shares in the capital of Lender, the terms
of which are established in a Letter Agreement of even date with this Loan
Agreement (the "LETTER AGREEMENT"), a copy of which is attached to this
Agreement as Schedule "A";
WHEREAS, the Letter Agreement contemplates that part of the
consideration for the Transaction will consist of the Lender advancing a bridge
loan (the "LOAN") to Borrower in the amount of US$110,000 (United States) (the
"LOAN AMOUNT") to be used for the purposes, and to be made and funded on the
terms and conditions stated in the Letter Agreement and in this Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants
summarized in the Letter Agreement and contained in this Agreement, the parties
hereto do hereby agree as follows:
1. RECITALS
1.1 The Recitals set forth above are acknowledged to be true and are
incorporated into this Agreement by this reference.
2. THE LOAN AND SECURITY
2.1 Subject to the prior satisfaction of the Loan Conditions (defined in
Article 3 below), the Lender agrees to lend the Loan Amount to
Borrower. The repayment of the Loan, the interest rate payable thereon
and certain other terms of the Loan shall be as set forth in the
promissory note (the "NOTE") evidencing the Loan which shall be in the
form attached to this Agreement as Schedule "B". The Note will be
delivered to the Lender together with an executed original of this
Agreement.
2.2 The Note will be secured by the joint and several personal guarantee
from each of the Vendors (the "GUARANTEES"). The Guarantees will, in
turn be secured by a pledge from the Vendors of all of the issued and
outstanding securities of Borrower. Prior to or at the Closing, each of
the Vendors shall give to the Lender a Security Agreement
(collectively, the "GSAS") granting a security interest in all of the
present and after acquired securities of Borrower to secure performance
of all obligations under their respective Guarantees and shall deliver
to the Lender all of the certificates representing those interests,
duly endorsed for transfer to Lender, to be held by Lender pursuant to
the GSAs. The security interests granted in the GSAs shall be superior
to all other charges on all of the securities now or hereafter issued
by Borrower.
3. THE LOAN CONDITIONS
3.1 The Lender's obligation to make the Loan is subject to satisfaction of
the following conditions precedent (the "LOAN CONDITIONS") on or before
the Closing Date (defined in Section 4.1 of this Agreement):
(a) approval of the Transaction by the boards of directors of the
Borrower and each of the Vendors;
(b) approval by the Lender of a budget specifying how the proceeds
of the Loan will be expended (the "BUDGET"); and
(c) receipt of any requisite third party and regulatory approvals
and consents in respect of the Loan.
4. USE OF PROCEEDS.
4.1 On the later of (i) the date of this Agreement or (ii) the day upon
which the last of the Loan Conditions has been satisfied (the "CLOSING
DATE"), the Lender shall fund the Loan to the Borrower in the following
stages:
(a) U.S. $50,000 within 24 hours of the Closing Date;
(b) U.S. $30,000 six weeks after the Closing Date; and
(c) U.S. $30,000 ten weeks after the Closing Date.
4.2 The Borrower shall use the Loan Amount in accordance with the Budget.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
5.1 To induce the Lender to enter into this Agreement and to make the Loan,
the Vendors and the Borrower jointly and severally represent and
warrant to the Lender, and promise to and agrees with the Lender as of
the date of this Agreement, on the Closing Date, and thereafter until
repayment or forgiveness of all of the obligations (the "OBLIGATIONS")
imposed by this Agreement or by any of the Note, Guarantees or the GSAs
(collectively, the "LOAN DOCUMENTS") as follows:
(a) Each Vendor and the Borrower is as of the Closing Date and
will continue after the Closing Date to be:
(i) a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of
its incorporation,
(ii) duly qualified to do business and in good standing in
each other jurisdiction where its ownership or lease
of property or the conduct of its business requires
such qualification,
(iii) in compliance with its charter and by-laws, and
(iv) in compliance in all material respects with all
applicable law and regulation;
(b) Each Vendor and the Borrower has and will continue to have:
(i) the requisite corporate power and authority and the
legal right to own, pledge, mortgage or otherwise
encumber and operate its properties, to lease the
property it operates under lease, and to conduct its
business as now, heretofore or proposed to be
conducted, and
(ii) all licenses, permits, franchises, rights, powers,
consents or approvals from or by all persons or
governmental authorities having jurisdiction over
each of them, as applicable, which are necessary or
appropriate for the conduct of its business;
(c) The execution, delivery and performance by the Borrower of
this Agreement and by each of the Vendors of the Loan
Documents, and the creation of all security interests provided
for herein and therein:
(i) are and will continue to be within such person's
corporate power;
(ii) have been and will continue to be duly authorized by
all necessary corporate action;
(iii) are not and will not be in contravention of any
provision of such person's charter or by-laws;
(iv) do not and will not violate any law or regulation, or
any order or decree of any court or other
governmental authority;
(v) do not and will not conflict with or result in the
breach or termination of, constitute a default under
or accelerate any performance required by, any
indenture, mortgage, deed of trust, lease, agreement
or other instrument to which such person is a party
or by which such person or any of its property is
bound;
(vi) do not and will not result in the creation or
imposition of any lien, security interest or other
encumbrances upon any of the assets of the Borrower
or the Vendors other than those granted to the Lender
in connection herewith or therewith; and
(vii) do not and will not require the consent or approval
of any governmental authority or any other person;
(d) At the Closing Date, each Loan Document shall have been duly executed
and delivered for the benefit of or on behalf of the respective
signatory thereof, and each such Loan Document shall then be and will
continue to be a legal, valid and binding obligation of such person,
enforceable against it in accordance with its terms;
(e) None of the Vendors or Borrower has any contingent liabilities which
have not been disclosed to Lender which would have a material adverse
effect, nor has any of them incurred any indebtedness, lease
obligations or contingent obligations which would have a material
adverse effect, other than indebtedness incurred by it or credit
extended to it in the ordinary course of business or as otherwise
disclosed to the Lender. Neither of the Vendors nor Borrower shall
create, incur, assume or permit to exist, any indebtedness, lease
obligation or contingent obligation except the obligations set forth in
the Loan Documents and the Letter Agreement.
(f) the Borrower agrees that it will not, and the Vendors agree to cause
the Borrower to refrain from issuing any further securities of the
Borrower, whether in the nature of debt or equity, except as
contemplated in this Agreement;
(g) the Vendors have voted their shares in Borrower, which represents all
of the issued and outstanding securities of Borrower, in favor of the
Transaction;
(h) the Borrower holds and will continue to hold good and marketable title
to all of its assets except for transfers permitted under the Loan
Documents and none of the assets of the Borrower or the Vendors are or
will be subject to any liens, security interests or other encumbrances,
except (i) those granted to the Lender in connection herewith; (ii)
liens for taxes or assessments or other governmental charges or levies
not yet due and payable; (iii) pledges or deposits securing obligations
under worker's compensation, unemployment insurance, social security or
public liability laws or similar legislation; (iv) pledges or deposits
securing contracts (other than contracts for the payment of money) or
leases to which the Borrower is a party as lessee made in the ordinary
course of business; (v) deposits securing public or statutory
obligations of the Borrwer; (vi) inchoate and unperfected workers',
mechanics', suppliers' or similar liens arising in the ordinary course
of business; or (vii) carriers', warehousing or other similar
possessory liens arising in the ordinary course of business and
securing indebtedness not yet due and payable in an outstanding
aggregate amount not in excess of $25,000 (Canadian) at any time
(collectively, the "PERMITTED ENCUMBRANCES").
(i) the Vendors own, beneficially and of record, 100% of the outstanding
capital of Borrower and there are no outstanding subscriptions,
contracts, options, rights, warrants or convertible securities, or
other obligations to issue, sell or otherwise dispose of, purchase,
redeem or acquire any shares of the Borrower.
(j) the License, as that term is defined in the Letter Agreement, is in
good standing and the Vendors and Borrower will continue to maintain it
in good standing for so long as the Loan remains outstanding.
6. CROSS-DEFAULT
6.1 Each of the Loan Documents will be deemed to provide that an event of
default under any of them shall constitute an event of default under
all of them. An event of default under any of the Loan Documents shall
also constitute an event of default under this Agreement.
6.2 If:
(a) any of the Vendors or the Borrower breaches any material
provision of the Letter Agreement; or
(b) the Letter Agreement is terminated for any reason,
the Loan shall become immediately due and payable, together with all
accrued interest incurred thereon; provided, however, that the
obligation to repay the Loan shall at all times be subject to the "put"
option in favor of the Vendors described in Section 10 of the Letter
Agreement.
7. MISCELLANEOUS COVENANTS
7.1 Each of the Vendors hereby confirms to and agrees for the benefit of
the Lender that, so long as the Borrower remains obligated or indebted
to the Lender, the Vendors shall hold their interests in Borrower in
accordance with the respective interests and priorities of the Lender
under this Agreement.
7.2 The Vendors and Borrower shall do, perform, execute and deliver all
acts, deeds and documents as may be necessary from time-to-time to give
full force and effect to the intent of this Agreement. The Vendors and
Borrower do hereby appoint the Lender to make any registrations or
filings as may be necessary or desirable with respect to this
Agreement, including the registration of any financing change statement
with any personal property registry or equivalent maintained in any
applicable jurisdiction.
Any notice required or permitted to be given pursuant to this Agreement
shall be given pursuant to the Notice provisions established in Section
28 of the Letter Agreement.
7.3 This Agreement may be executed in several counterparts, each of which
when so executed shall be deemed to be an original, and such
counterparts together shall constitute one and the same instrument and
shall be effective as of the date specified on the first page of this
Agreement.
7.4 Delivery of an executed copy of this Agreement by electronic facsimile
transmission or other means of electronic communication capable of
producing a printed copy will be deemed to be execution and delivery of
this Agreement as of the date set forth on page one of this Agreement.
7.5 This Agreement shall enure to the benefit of and be binding upon the
parties and their respective successors, executors and personal
representatives, and assigns, and shall be governed by the laws of the
Province of British Columbia.
7.6 This Agreement shall continue in full force and effect until the date
on which it is terminated by a written termination signed and delivered
by the Lender.
7.7 This Agreement, together with any schedules attached to this Agreement
and any other agreements and documents to be delivered pursuant to or
in connection with this Agreement or the Letter Agreement, constitute
the entire agreement of all the parties with respect to the subject
matter of this Agreement and supersedes all prior agreements,
undertakings, negotiations and discussions, whether written or oral, of
the parties. There are no representations, warranties, conditions,
undertakings or agreements of any kind between the parties in
connection with the subject matter of this Agreement, except as
specifically set out in this Agreement or in any schedule or other
agreement or documents delivered pursuant to this Agreement.
7.8 All covenants, agreements, liabilities, and obligations entered into or
imposed upon the Borrower and/or the Vendors hereunder will be deemed
to be both joint and several.
7.9 Notwithstanding any contrary agreement, if the rate of interest payable
in respect of any of the credit advanced hereunder would in the absence
of this provision exceed the maximum annual rate permitted by law, then
the rate of interest payable in respect thereof will be limited to the
rate equal to one percent per annum less than such maximum rate.
7.10 The obligation of the Borrowers to make all payments hereunder will be
absolute and unconditional and will not be affected by any
circumstance, including, without limitation:
(a) any set-off, compensation, counterclaim, recoupment, defence,
or other right which either of the Borrowers may have against
the Lender, or anyone else for any reason whatsoever;
(b) any insolvency, bankruptcy, reorganization, or similar
proceedings by or against any of the Vendors or Borrower.
7.11 The Borrower hereby waives, to the extent permitted by applicable law,
any and all rights which it may now have or which at any time hereafter
may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit, or surrender this Agreement except in accordance with the
express terms hereof.
8. SEVERABILITY
8.1 If any covenant or other provision of this Agreement is invalid,
illegal, or incapable of being enforced by reason of any rule of law or
public policy, then such covenant or other provision will be severed
from and will not affect any other covenant or other provision of this
Agreement, and this Agreement will be construed as if such invalid,
illegal, or unenforceable covenant or provision had never been
contained in this Agreement. All other covenants and provisions of this
Agreement will, nevertheless, remain in full force and effect and no
covenant or provision will be deemed dependent upon any other covenant
or provision unless so expressed herein.
9. TIME OF THE ESSENCE
9.1 Time is of the essence of this Agreement.
IN WITNESS WHEREOF, intending to be legally bound, the Borrower has caused this
Agreement to be duly executed as of the date first above written.
BULAKASHU MINING COMPANY
By: /s/ Xxxx Xxx
--------------------------
Authorized Signatory
MARSA GOLD
By:/s/ Xxxxxxx Vedeshkin-Ryabov
----------------------------
Authorized Signatory
AITAS MINING COMPANY
By: /s/ Nurlan Dildabekov
--------------------------
Authorized Signatory
MAGELLAN GOLD CORP.
By: /s/ Xxxxxxx Xxxxxxxx
--------------------------
Authorized Signatory
