EXHIBIT 10.2
LOAN AGREEMENT
THIS AGREEMENT dated for reference August 2, 2002 is between:
MIDDLEMARCH PARTNERS LIMITED, a United Kingdom company having
an office at 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxx X0X 0XX
(the "Lender")
AND:
AMERICAN NATURAL ENERGY CORPORATION, an Oklahoma corporation
having offices at Suite 404, 0000 Xxxxx Xxxx Xxxxxx, Xxxxx,
Xxxxxxxx 00000
(the "Borrower")
WHEREAS the Lender has agreed to lend to the Borrower the principal amount of
$500,000 (the "Loan") on the terms and subject to the conditions of this
Agreement.
AGREEMENTS
For good and valuable consideration, the receipt and sufficiency of which each
party acknowledges, the parties agree as follows:
1. LOAN ADVANCE. Subject to and upon the fulfilment of the conditions
precedent contained in paragraph 6 of this Agreement, the Lender shall
advance all of the principal amount of the Loan to the Borrower.
2. USE OF PROCEEDS. The Borrower covenants and agrees with the Lender that
the Loan funds will be used by the Borrower to finance working capital
requirements, and for no other purpose without the prior written
consent of the Lender.
3. TERM AND PREPAYMENT.
(a) Any outstanding balance of the Loan, including principal,
accrued interest, bonus and other costs or charges payable
hereunder (collectively the "Outstanding Balance"), shall be
immediately due and payable by the Borrower to the Lender on
the earlier of:
(i) December 6, 2002;
(ii) the completion of a successful take-over bid (as
defined under the Securities Act (British Columbia))
or change of control of the Borrower ("control" being
defined as ownership of or control or direction over,
directly or indirectly, 20% or more of the
outstanding voting securities of the Borrower); or
(iii) the occurrence of an Event of Default, as defined in
paragraph 10 hereof.
(b) If, after the advance of the Loan and prior to payment in full
of the Outstanding Balance, the Borrower or any of its
subsidiaries sell or otherwise dispose of any of their
material assets or close one or more equity or debt
financings, all net proceeds from such sale, disposition or
financing, up to the full amount of the Outstanding Balance,
shall be paid to the Lender within 3 business days of receipt
of the same, to be applied on account of the Loan. All
payments made by the Borrower shall be applied on account of
the Loan, first to interest and any other costs or charges
then owing, then to principal.
(c) The Borrower may repay the Loan at any time before maturity,
without notice or penalty.
4. INTEREST. Interest shall accrue on the Outstanding Balance from the
date of advance of the Loan at the rate of twelve percent (12%) per
annum, compounded monthly (effective annual rate of 12.68%), and be
payable monthly on the last business day of every month, as well as
after maturity, default and judgment.
5. BONUS. As additional consideration for the advance of the Loan,
immediately following the filing of the Borrower's AIF (as defined
below) and the completion of the other covenants contemplated in
subparagraph 8(a) below, subject to the prior approval of the TSX
Venture Exchange (the "Exchange"), the Borrower will issue and deliver
to the Lender 166,700 common shares in its capital, at a deemed price
of $0.30 per share (the "Bonus Shares"), subject to a maximum hold
period of four (4) months under applicable securities laws, together
with a copy of the Exchange's conditional approval letter for the
issuance of the Bonus Shares. If for any reason the Borrower has not
delivered the Bonus Shares to the Lender in accordance with the
foregoing by September 30, 2002, or if the Borrower is unable to obtain
Exchange approval for the issuance of the Bonus Shares, the Borrower
shall forthwith pay and deliver to the Lender a cash bonus of $50,000
in lieu of the Bonus Shares.
6. LENDER'S CONDITIONS PRECEDENT. As conditions precedent to the advance
of the Loan:
(a) the Borrower will:
(i) execute and deliver to the Lender a promissory note,
in the form attached hereto as Schedule "A" (the
"Note");
(ii) cause to be executed and delivered to the Lender a
limited recourse guarantee of the Borrower's
wholly-owned subsidiary, Gothic Resources Inc., a
Canada Business Corporations Act corporation
("Gothic"), in form and terms satisfactory to the
Lender and its counsel;
(iii) cause to be executed and delivered to the Lender a
share pledge agreement in form and terms satisfactory
to the Lender and its counsel (the "Pledge
Agreement"), providing for the pledge of 400,000
free-trading common shares in the capital of First
Calgary Petroleums Ltd. by Gothic; and
(iv) execute and deliver to the Lender a certified copy of
the Borrower's directors' resolutions authorizing the
Loan and the execution and delivery of all documents,
certificates or instruments contemplated herein, in
form satisfactory to the Lender and its counsel;
(b) the representations and warranties of the Borrower contained
in paragraph 7 shall be true and correct in all material
respects and the Borrower shall have complied with all
covenants required to be complied with by it prior to the
advance of the Loan by the Lender;
(c) the Lender shall have completed and in its sole and absolute
discretion, be satisfied with its due diligence review of the
Borrower; and
(d) the Lender shall have received the approval of its board of
directors, and shall in its sole and absolute discretion, be
satisfied as to the creditworthiness of the Borrower and the
adequacy of the collateral security provided herein.
If any of the foregoing conditions precedent are not satisfied or
waived by the Lender in writing on or before August 16, 2002, this
Agreement shall terminate, and the Lender shall be under no further
obligation to the Borrower in connection with the transaction
contemplated herein.
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7. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to
the Lender as follows:
(a) the Borrower is a body corporate incorporated or continued
under the laws of the State of Oklahoma, has not discontinued
or been dissolved under those laws;
(b) the Borrower has the power and authority to carry on its
businesses as now being conducted, and has the full power to
acquire, own, hold, lease and mortgage its assets including
real property and personal property;
(c) this Agreement has been, and the Note and all ancillary
instruments or documents issued and delivered hereunder by the
Borrower when executed, will have been duly authorized by all
necessary action of the Borrower and each constitutes or will
constitute a legal, valid and binding obligation of the
Borrower enforceable against it in accordance with their
terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting
the rights and remedies of creditors and to the general
principles of equity;
(d) the Borrower is not in breach of or in default under any
obligation in respect of borrowed money and the execution and
delivery of this Agreement, and the Note and all ancillary
instruments or documents issued and delivered hereunder, and
the performance of the terms hereof and thereof will not be,
or result in, a violation or breach of, or default under, any
law, agreement or instrument to which it is a party or may be
bound;
(e) except as disclosed in the Financial Statements (as defined
below) or in writing to the Lender prior to the date hereof,
no litigation or administrative proceedings before any court
or governmental authority are presently ongoing, or have been
threatened in writing, or to the best of the Borrower's
knowledge are pending, against the Borrower or any of its
assets or affecting any of its assets which could have a
material adverse effect on its business or assets;
(f) the Borrower's audited financial statements for the fiscal
year ended December 31, 2001 and the unaudited quarterly
financial statements for the three months ended March 31, 2002
(collectively, the "Financial Statements") fairly present the
financial affairs of the Borrower as of the date to which they
are made, they have been prepared in accordance with generally
accepted accounting principles consistently applied and in
conformity with the applicable guidelines of the Canadian
Institute of Chartered Accountants;
(g) there has been no adverse material change (actual,
contemplated or threatened) in the property, assets or
business of the Borrower or any of its subsidiaries since the
date of release of the Financial Statements, other than as
publicly disclosed by the Borrower prior to the date of this
Agreement;
(h) the Borrower is a reporting issuer under the Securities Acts
of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario,
Quebec, Newbrunswick, Nova Scotia, Xxxxxx Xxxxxx Island and
Newfoundland and is in compliance with its material
obligations under those Acts and under the rules, regulations
and policies of the Exchange and will use its best efforts to
maintain such status, without default, from the date hereof
until repayment in full of the Loan to the Lender;
(i) the Borrower is in compliance, in all material respects, with
its timely disclosure obligations under applicable Canadian
securities laws and, without limiting the generality of the
foregoing, there has not occurred any adverse material change
since March 31, 2002, and no adverse material fact exists in
relation to the Borrower, which in either case has not been
publicly disclosed;
(j) as at the date of this Agreement, except as disclosed in the
Financial Statements, in any filings within any governmental
body or securities regulatory authority or to the Lender in
writing and as contemplated by this Agreement, no holder of
outstanding shares in the capital of the Borrower will be
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entitled to any pre-emptive or any similar rights to subscribe
for any of the shares in the capital of the Borrower or other
securities of the Borrower, and (ii) no rights, warrants or
options to acquire, or instruments convertible into or
exchangeable for any shares in the capital of the Borrower are
outstanding;
(k) the Borrower has no direct or indirect subsidiary corporations
except as disclosed on Schedule "B" hereto;
(l) the Borrower's chief executive office is located at Xxxxx 000,
000 Xxxxxxxxx Xxxxxx, Xxxxxxxxx, XX X0X 0X0;
(m) the Borrower is not a "non-resident", as defined under the
Income Tax Act (Canada); and
(n) except as disclosed in the Financial Statements, the Borrower,
directly or through one or more of its subsidiaries, owns its
business, operations and assets, and holds good title thereto,
free and clear of all liens, claims or encumbrances
whatsoever, other than those in favour of the Lender.
8. POSITIVE COVENANTS. The Borrower covenants and agrees that so long as
any monies shall be outstanding under this Agreement, it will:
(a) on or before September 30, 2002, file an annual information
form ("AIF") in all jurisdictions in which the Borrower is a
reporting issuer and otherwise take all steps and proceeds as
may be required to qualify the Borrower as a "qualifying
issuer" as that term is defined in Multilateral Instrument
45-102 ("MI 45-102"), so as to permit the Borrower to issue
the Bonus Shares subject to a maximum hold period of four (4)
months under MI 45-102;
(b) at all times maintain its corporate existence and the
corporate existence of all other corporations owned or
controlled by it that own assets material to the Borrower's
business;
(c) duly perform its obligations under this Agreement;
(d) carry on and conduct its business in a proper business-like
manner in accordance with good business practice and will keep
or cause to be kept proper books of account in accordance with
generally accepted accounting principles;
(e) maintain in good standing its status as a reporting issuer
under laws of each jurisdiction to which it is subject as a
reporting issuer and the listing of its common shares on the
Exchange;
(f) furnish and give to the Lender within seven (7) business days
of delivery of a written demand from the Lender such reports,
certificates, financial statements, including monthly internal
financial and operational reports and documents and such other
information with respect to the Borrower as the Lender may
reasonably request;
(g) provide the Lender with written notice of any proposed
financing made by or to the Borrower;
(h) furnish and give to the Lender (if such is the case) notice
that there has occurred and is continuing an Event of Default
under this Agreement or any event which would constitute an
Event of Default hereunder or thereunder and specifying the
same; and
(i) perform and do all such acts and things as are necessary to
perfect and maintain the security provided to the Lender
pursuant to this Agreement.
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9. NEGATIVE COVENANTS. The Borrower covenants with the Lender that the
Borrower will not, without first obtaining the written consent of the
Lender:
(a) save and except for purchase money security interests, chattel
mortgages and equipment leases entered into in the ordinary
course of business, make, give, create or permit or attempt to
make, give or create any mortgage, charge, lien or encumbrance
that ranks equal to or in priority to the security interest of
the Lender over all or any part of the business, assets or
undertaking of the Borrower;
(b) allot and issue any new shares or any shares of any subsidiary
corporation, except pursuant to existing rights or obligations
to issue shares and except that it may grant stock options and
carry out private or public offerings of debt or equity for
cash or property in accordance with the policies and rules and
subject to the approval of the Exchange;
(c) declare or provide for any dividends or other payments based
on share capital;
(d) redeem or purchase any of its shares;
(e) make any sale of or dispose of any substantial part of the
Borrower's business, assets or undertaking, including its
interest in the shares or assets of any subsidiary, at less
than market value and if the Borrower disposes of the whole or
any substantial part of such business, assets or undertaking,
it will apply the proceeds thereof to the repayment of any
Outstanding Balance;
(f) save and except for purchase money security interests, chattel
mortgages and equipment leases entered into in the ordinary
course of business, borrow or cause any subsidiary to borrow
money from any person other than the Lender without first
obtaining the Lender's prior written consent, which shall be
conditional upon the receipt and delivery to the Lender of a
duly signed assignment and postponement of claim by such
person in favour of the Lender, in form and terms satisfactory
to the Lender; and
(g) guarantee the obligations of any other person (other than
subsidiary corporations), directly or indirectly.
10. EVENTS OF DEFAULT. Each and every of the events set forth in this
paragraph shall be an event of default ("Event of Default"):
(a) if the Borrower fails to make any payment of principal,
interest or bonus when due hereunder, and such failure
continues for two (2) business days after receipt of written
notice of such default from the Lender;
(b) if the Borrower defaults in observing or performing any
material term, covenant or condition of this Agreement or any
other collateral document delivered hereunder or in connection
with the Loan, other than the payment of monies as provided
for in subparagraph (a) hereof, on its part to be observed or
performed and such failure continues for five (5) business
days after receipt of written notice of such default from the
Lender;
(c) if any of the Borrower's covenants or representations in this
Agreement or any other collateral document delivered hereunder
or in connection with the Loan were at the time given false or
misleading in any material respect;
(d) if the Borrower defaults, in any material respect, in
observing or performing any term, covenant or condition of any
debt instrument or obligation by which it is bound, makes an
assignment for the benefit of creditors, or admits in writing
its inability to pay its debts as they become due, or is
adjudicated bankrupt or insolvent;
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(e) if the Borrower permits any sum which has been admitted as due
by the Borrower, or is not disputed to be due by it, and which
forms or is capable of being made a charge upon any of the
assets or undertaking of the Borrower to remain unpaid or not
challenged for thirty (30) days after proceedings have been
taken to enforce the same;
(f) if the Borrower, either directly or indirectly through any
material subsidiary, ceases or threatens to cease to carry on
business;
(g) except for a voluntary halt requested by the Borrower, if any
order is made or issued by a competent regulatory authority
prohibiting the trading in shares of the Borrower or if the
Borrower's shares are suspended or de-listed from trading on
any recognized stock exchange;
(h) if the Borrower petitions or applies to any tribunal for the
appointment of a trustee, receiver or liquidator or commences
any proceedings under any bankruptcy, insolvency, readjustment
of debt or liquidation law of any jurisdiction, whether now or
hereafter in effect; and
(i) if any petition or application for appointment of a trustee,
receiver or liquidator is filed, or any proceedings under any
bankruptcy, insolvency, readjustment of debt or liquidation
law are commenced, against the Borrower which is not opposed
by the Borrower in good faith, or an order, judgment or decree
is entered appointing any such trustee, receiver, or
liquidator, or approving the petition in any such proceeding.
11. EFFECT OF EVENT OF DEFAULT. If any one or more of the Events of Default
occurs or occur and is or are continuing, the Lender may without
limitation in respect of any other rights it may have in law or
hereunder, demand immediate payment of all monies owing hereunder.
12. CONFIDENTIALITY. Except as may be required by the Lender to enforce its
security or collect any Outstanding Balance after the occurrence of an
Event of Default, the Lender agrees to keep confidential all
information provided to it by the Borrower on a confidential basis
pending the Borrower's public disclosure of such information and
thereafter, to the extent the Borrower reasonably requires such
information to be kept confidential.
13. INDEMNITY. The Borrower agrees to indemnify and save harmless the
Lender and each of its directors, officers, employees and agents from
and against all liabilities, claims, losses, damages and reasonable
costs and expenses in any way caused by or arising directly or
indirectly from or in consequence of the occurrence of any Event of
Default under this Agreement.
14. LEGAL FEES. The Borrower shall pay to the Lender all of the Lender's
legal fees and other costs, charges and expenses (including due
diligence expenses) of and incidental to the preparation, execution and
completion of this Agreement and the security thereunder, as may be
required by the Lender to complete this transaction. If the Borrower
fails to pay all of the Lender's legal fees and other costs, charges
and expenses due hereunder within 30 days of presentment of an invoice,
such amount will be added to and form part of the principal amount of
the Loan and shall accrue interest from such date as if it had been
advanced by the Lender to the Borrower hereunder.
15. NOTICES UNDER THIS AGREEMENT. Any notice, direction or other document
required or permitted to be given pursuant to this Agreement shall,
unless otherwise specifically provided, be given in writing and may be
mailed, postage prepaid by registered mail, sent by facsimile
transmission or personally served upon the appropriate party at the
following addresses:
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if to the Borrower:
American Natural Energy Corporation
Suite 404, 0000 Xxxxx Xxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxx
Fax No.: (000) 000-0000
to the Lender:
Middlemarch Partners Limited
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxx X0X 0XX
Attention: Xxxxxxx Xxxxxxx
Fax No.: 000-00-000-000-0000
Any notice, direction or other document given:
(a) by registered mail as set out above shall be deemed to have
been given on the date of actual receipt by the addressee;
(b) by personal delivery as set out above shall be deemed to have
been given and received on the date on which it was so
delivered or on the first business day thereafter if the date
of delivery is not a business day in the place of delivery;
and
(c) by facsimile transmission as set out above shall be deemed to
have been given and received on the date on which it was so
transmitted or on the first business day thereafter if the
date of transmission is not a business day in the place of
receipt or if the time of transmission is after 4:00 p.m. at
the place of receipt.
Any party may change its address for notice by notifying the other
parties to this Agreement in accordance with the provisions of this
paragraph. If for any reason the method of giving notice selected by a
party is impracticable, then such party shall be obliged to select an
alternate method of giving notice.
16. AGENCY, ASSIGNMENT, SUCCESSORS AND ASSIGNS. The Borrower acknowledges
the Lender's right to assign all or part of its rights and obligations
under this Agreement to one or more other assignees, subject only to
the Lender's notification of such assignment or assignments being given
in writing to the Borrower. This Agreement shall enure to the benefit
of and be binding upon the parties hereto and their respective
successors and permitted assigns. Upon receipt of written notice and
direction from the Lender, the Borrower covenants and agrees, subject
to all applicable withholding taxes, to make all payments of interest,
principal and bonus due under this Agreement to the Lender and any
participant, pro rata in accordance with their respective proportionate
interests in the Loan as set out in such written notice and direction,
absent which all such payments may be made to the Lender.
17. WAIVERS. No failure or delay on the Lender's part in exercising any
power or right hereunder shall operate as a waiver thereof. The
Lender's rights and remedies hereunder are cumulative and not exclusive
of any rights or remedies provided by law. Time is of the essence
hereunder.
18. INVALIDITY. If at any time any one or more of the provisions hereof is
or becomes invalid, illegal or unenforceable in any respect under any
law, the validity, legality and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby
to the fullest extent possible by law.
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19. GOVERNING LAWS. This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of British Columbia and the
laws of Canada applicable therein. The Borrower submits to the
non-exclusive jurisdiction of the Courts of the Province of British
Columbia and agrees to be bound by any suit, action or proceeding
commenced in such Courts and by any order or judgment resulting from
such suit, action or proceeding, but the foregoing will in no way limit
the right of the Lender to commence suits, actions or proceedings based
on this Agreement in any jurisdiction it may deem appropriate.
20. AMENDMENT. This Agreement may be changed only by or pursuant to an
agreement in writing signed by the parties hereto.
21. SCHEDULES. All Schedules attached hereto shall be deemed fully a part
of this Agreement.
22. CURRENCY. All references herein to "dollars" or "$" are to United
States dollars, unless otherwise indicated.
23. COUNTERPARTS. This Agreement may be signed in one or more counterparts,
originally or by facsimile, each such counterpart taken together shall
form one and the same agreement.
24. FURTHER ASSURANCES. The Borrower covenants and agrees to take all
additional steps or provide the Lender with such additional
documentation as the Lender may reasonably require to give effect to
the transactions contemplated by this Agreement.
TO EVIDENCE THEIR AGREEMENT each of the parties has executed this Agreement as
of the date first above mentioned.
MIDDLEMARCH PARTNERS LIMITED
Per: ___________________________
Authorized Signatory
AMERICAN NATURAL ENERGY CORPORATION
Per: ___________________________
Authorized Signatory
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SCHEDULE "A"
PROMISSORY NOTE
Principal Amount: US$500,000
For value received, AMERICAN NATURAL ENERGY CORPORATION (the
"Borrower") hereby promises to pay to MIDDLEMARCH PARTNERS LIMITED (the
"Lender") the principal sum of US$500,000 on the earlier of:
(a) December 6, 2002;
(b) the completion of a successful take-over bid (as defined under
the Securities Act (British Columbia)) or a change of control
of the Borrower ("control" being defined as ownership of or
control of direction over, directly or indirectly, 20% or more
of the outstanding voting securities of the Borrower; and
(c) the occurrence of an Event of Default (as defined in paragraph
10 of the Loan Agreement dated August 1, 2002, between the
Borrower and the Lender),
together with interest accruing on the outstanding principal amount from the
date hereof at a rate of TWELVE (12%) PERCENT per annum, compounded monthly
(effective rate of 12.68% per annum), before and after each of maturity, default
and judgment, payable monthly on the last business day of every month. All
payments under this promissory note shall be made by certified cheque, cash or
bank draft and delivered to the Lender at Xxxxx 000, 000 Xxxxxxxxx Xxxxxx,
Xxxxxxxxx, XX X0X 0X0. All payments made by the Borrower shall be applied first
to interest, bonus and any other costs or charges owed to the Lender, then to
principal.
The undersigned shall be entitled to prepay this Promissory Note, in
whole or in part, without notice or penalty. This Promissory Note shall be
governed by and construed in accordance with the laws of British Columbia and
the federal laws of Canada applicable therein. The undersigned hereby waives
notice of dishonour and presentment.
Dated: August 2, 2002.
SIGNED AND DELIVERED by
AMERICAN NATURAL ENERGY CORPORATION
Per: ___________________________
Authorized Signatory
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SCHEDULE "B"
SUBSIDIARIES
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SUBSIDIARY PERCENT OWNERSHIP JURISDICTION OF INCORPORATION
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