Silk Road arranges $1.25-million financing2008-07-03 18:42 ET - News Release
Mr. Allen Palmiere reports
SILK ROAD RESOURCES ENTERS INTO COMMITMENT LETTER IN RESPECT OF PRIVATE PLACEMENT OF 7% UNSECURED CONVERTIBLE DEBENTURE
Silk Road Resources Ltd. has entered into a commitment letter with Patriarco Holdings Ltd. in connection with a non-brokered private placement of a 7-per-cent unsecured convertible debenture for total gross proceeds to the company of $1.25-million. The offering will close in two or more tranches with the first tranche being for $500,000 to occur on or about July 10, 2008, and the second tranche being for $750,000 to occur on or about Aug. 11, 2008.
The corporation intends to use the proceeds from the sale of the debenture for drilling at the corporation's properties in China and for general working capital purposes.
Interest accrued in connection with the debenture shall be payable semi-annually through the issuance of common shares of the corporation at the prevailing market price of the common shares on the TSX Venture Exchange at the time of issuance. The debenture will mature three years following the initial closing date. Any outstanding principal amount of the debenture will be payable in common shares on the maturity date at the conversion price of $1 per common share. The holder of the debenture shall have the right, exercisable at any time on or before the maturity date to convert all or any portion of the then outstanding debenture into common shares at the conversion price of $1 per common share.
The issuance of the common shares in respect of either interest payments or principal amount repayment due is subject to receipt of all necessary corporate and regulatory approvals, including the approval of the TSX-V.
Pursuant to Multilateral Instrument (MI) 61-101, the issuance of the debenture is a related-party transaction as Patriarco currently holds, directly or indirectly, 4,585,530 common shares representing approximately 18.03 per cent of the issued and outstanding shares of the company. The company is exempt from the formal valuation requirement of MI 61-101 in connection with issuing the debenture in reliance on Section 5.5(c) of MI 61-101 as no securities of the company are listed or quoted for trading on the Toronto Stock Exchange, the New York Stock Exchange, the American Stock Exchange, the Nasdaq stock market or a stock exchange outside of Canada and the United States. Additionally the company is exempt from obtaining minority shareholder approval in connection with entering into of the debenture in reliance on Section 5.7(1)(a) as the fair market value of the offering does not exceed 25 per cent of the market capitalization of the company. The company, however, may be required to obtain disinterested shareholder approval in connection with the issuance of common shares in respect of either interest payments or principal amount repayment due if the issuance of such common shares would result in the creation of a new control person as such term is defined by the policies of the TSX-V.
We seek Safe Harbor.