Exhibit 10.1

 

CONVERTIBLE PROMISSORY NOTE

 

 

Amount: US $ 40,000 Date: May 21, 2013

 

 

FOR VALUE RECEIVED, American Sands Energy Corp. (the “Debtor” or “Company”),
hereby promises to pay in lawful money of the United States to the order of
Elizabeth Harley Swindells Trust, or its successors or assigns (“Lender”) at
such place as the holder hereof may from time to time designate in writing, the
principal sum of Forty Thousand Dollars ($40,000), together with interest on the
unpaid principal balance hereof from the date hereof until paid in full.

 

  1. PAYMENTS OF PRINCIPAL AND INTEREST.

 

Unless converted as provided below, Debtor will pay this Note in full, together
with interest, on the earlier of June 30, 2014 (“Due Date”), together with all
accrued and unpaid interest. This Note shall bear interest at the rate of six
percent (6%) per annum. Debtor will pay Lender at such place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to interest and then to principal.

 

  2. EVENT OF DEFAULT.

 

The occurrence of the following shall be deemed to be an event of default (an
“Event of Default”) hereunder: (a) Company fails to convert this Note, as
provided below, or fails to pay when due any sums payable hereunder; (b) Company
files a voluntary petition in bankruptcy or a petition or answer seeking
liquidation, reorganization or an arrangement with its creditors; (c) Company
applies for, or consents to, the appointment of a receiver, trustee or
liquidator, admits in writing its inability to pay its debts or makes a general
assignment for the benefit of its creditors; (d) Company defaults in the
performance under any term, covenant, condition, or obligation contained herein;
(e) Company fails to perform any other obligation under this Note, or (f) the
representations of the Company under this Note prove to be untrue.

 

  3. ACCELERATION AND LATE CHARGE.

 

3.1           Upon the occurrence of an Event of Default and without further
notice to Debtor, all unpaid principal, plus all accrued interest and other
amounts due hereunder, shall become immediately due and payable.

 

3.2           Any amount which is not paid when due hereunder shall thereafter,
in addition to the other amounts payable hereunder by reason thereof, bear
interest at a rate equal to twelve percent (12%) per annum (or such lesser rate
as is the maximum rate permitted by applicable laws) commencing the date fifteen
(15) days after the due date until paid.

 

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  4. ATTORNEYS FEES.

 

Should suit be brought to enforce, interpret or collect any part of this Note,
the Lender shall be entitled to recover, as an element of the costs of suit and
not as damages, reasonable attorneys’ fees and all other costs of enforcement
and collection.

 

  5. CONVERSION.

 

5.1           Conversion Right. The Lender shall convert this Note in connection
with an equity or debt financing of $2 million or more (“Bridge Financing”).
Lender shall convert all, but not less than all, of the principal amount of the
Note and accrued interest thereon (the “Note Value”) into (a) the number of
shares of common or preferred stock or (b) the debt instruments (collectively
referred to as the “Conversion Securities”) of the Company equal to (a) in the
case of common or preferred shares, the Note Value divided by the price of a
common or preferred shares in the Bridge Financing (subject to adjustment as
provided in the Notes) or (b) in the case of a debt offering, an amount equal to
the outstanding balance of the Note due hereunder. In either case, the
Conversion Securities shall be of the same class and/or series, and shall
entitle the Lender to the same rights and privileges, as the equity or debt
issued in the Bridge Financing.

 

5.2           No Fractional Shares. No fractional shares of the Company’s Common
Stock will be issued upon conversion of this Note. In lieu of any fractional
share to which the Lender would otherwise be entitled upon conversion of this
Note, the Company shall round such share up to a whole share.

 

5.3           Mechanics and Effect of Conversion. Upon conversion, the Lender
shall (a) surrender this Note, duly endorsed, at the principal offices of the
Company, and (b) execute a subscription agreement and all other documents
required to executed by other investors in such financing round ( the
“Subscription Agreement”) with typical investor representations, including
representations required to establish Lender’s status, or any assign, as an
“Accredited Investor,” as defined in Rule 501 of Regulation D promulgated
pursuant to the 1933 Act. At its expense, the Company will, as soon as
practicable thereafter, and in any event within thirty (30) business days
thereafter, issue and deliver to Lender, the type of Conversion Securities into
which this Note converts which Lender is entitled to receive upon such
conversion (bearing the securities legend set forth on this Note and any other
legends that may be required by applicable state or federal securities law in
the opinion of legal counsel for Company), together with any other securities or
property to which the Lender is entitled upon such conversion under the terms of
this Note, including a check payable to the order of the Lender for any cash
amounts payable as provided above as a result of the conversion of this Note
into a fractional share of Equity Stock. Upon full conversion of the entire
unpaid balance of this Note, the Company will be released from all its
obligations and liabilities under this Note.

 

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5.4           When Conversion Effected. A conversion of the unpaid balance of
this Note shall be deemed to have been effected immediately prior to the close
of business on the business day on which the Note and the Subscription Agreement
are surrendered to the Company as provided above, and at such time, the person
in whose name such Conversion Securities are issued as provided herein shall be
deemed to be the record holder of such securities as of such date for all
purposes.

 

6.             NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of
its Articles of Incorporation or bylaws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Note, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such actions as may
be necessary or appropriate in order to protect the rights of the Lender against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of stock
receivable on the exercise of this Note above the amount payable therefor on
such exercise, (b) will at all times reserve and keep available a number of its
authorized shares of Equity Stock or such other securities as may be issuable on
conversion of this Note (and on the conversion or exercise of such other
securities), free from all preemptive rights thereon, which will be sufficient
to permit the full conversion of this Note, and (c) shall take all such action
as may be necessary or appropriate in order that said shares of Equity Stock (or
such other securities) that may be issued pursuant to the conversion of this
Note will, upon issuance, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.

 

7.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Lender that:

 

7.1           Authorization. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Note, the performance of all obligations of the
Company hereunder, and the authorization, issuance (or reservation for issuance)
and delivery of the shares to be issued upon conversion of the Note has been
taken.

 

7.2           Valid Issuance of Stock. The Equity Stock, when issued, sold and
delivered in accordance with terms of this Note, will be duly and validly
issued, fully paid and nonassessable.

 

8.             SENIOR NOTE. This Note will be senior to all outstanding
obligations of the Company.

 

9.             LOSS OR MUTILATION. On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note and, in the case of any such loss, theft or destruction
of this Note, on delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Note, the Company at its expense will execute
and deliver, in lieu thereof, a new Note of like tenor.

 

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10.           NO RIGHTS OR LIABILITY AS A STOCKHOLDER. This Note does not by
itself entitle the Lender to any voting rights or other rights as a stockholder
of the Company. In the absence of affirmative action by the Lender to purchase
Equity Stock by conversion of this Note, no provisions hereof, and no
enumeration herein of the rights or privileges of the Lender shall cause the
Lender to be a stockholder of the Company.

 

11.           NOTICES. All notices referred to in this Note shall be in writing
and shall be deliverable personally or by certified or registered mail, return
receipt requested, postage prepaid and will be deemed, to have been given when
so delivered or mailed (i) to the Company, at its principal executive offices
and (ii) to the Lender, at such address as appears in the records of the Company
(unless otherwise indicated by Lender).

 

In Witness Whereof, the Company has executed this Note as of the date first
above written.

 

 

 

American Sands Energy Corp.    

 

 

  By /s/ William C. Gibbs   Its Chief Executive Officer              

 

Elizabeth Harley Swindells Trust    

 

 

  By /s/ Terry Haught   Its Trustee              

 

 

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