EXHIBIT 10.6
LOAN AGREEMENT
THIS AGREEMENT dated for reference March 12, 2003 is between:
QUEST INVESTMENT CORPORATION, a British Columbia company
having an office at Xxxxx 000, 000 Xxxxxxxxx Xxxxxx,
Xxxxxxxxx, XX X0X 0X0
(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
$2,500,000 (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. DEFINITIONS. In this Agreement, "Business Day" means a day which is
not a Saturday, Sunday or a statutory holiday in British Columbia.
2. LOAN ADVANCE. Subject to and upon the fulfilment of the conditions
precedent contained in paragraph 12 of this Agreement, the Lender shall
advance the principal amount of the Loan to the Borrower's counsel,
Xxxxx Xxxxx Xxxx Xxxxxx Xxxxxxx & Xxxxx, in trust.
3. USE OF PROCEEDS. The Borrower covenants and agrees with the Lender that
the Loan funds will be used by the Borrower as follows:
(a) as to $2,250,000 to pay out and discharge certain indebtedness owed
to Bank One Michigan, N.A. ("Bank One"); and
(b) as to the remaining balance for general working capital purposes of
the Borrower;
and for no other purpose without the prior written consent of the
Lender.
4. 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) October 31, 2003;
(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 16 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 forthwith, 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.
5. EXTENSION OF LOAN TERM. Provided that an Event of Default (as defined
below) has not occurred and is continuing, the Borrower and the Lender
may elect to extend the term of the Loan on mutually agreeable terms,
to be determined at or prior to the maturity date.
6. INTEREST. Interest shall accrue on the Outstanding Balance from the
date of advance of the Loan, net of any applicable withholding or other
similar taxes, 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 commencing on April 30,
2003, as well as after maturity, default and judgment.
7. BONUS. As additional consideration for the advance of the Loan,
concurrently with the advance of the Loan the Borrower will issue and
deliver to the Lender a non-refundable bonus in the form of 688,000
shares of common stock of the Borrower at a deemed price of $0.3632 per
share (the "Bonus Shares"), subject to a maximum hold period of four
(4) months under applicable Canadian securities laws.
8. SHARE CERTIFICATE LEGENDS. Share certificates representing the Bonus
Shares will be legended with the following legends:
The securities represented by this certificate have not been
registered under the United States Securities Act of 1933 or
applicable State Securities Acts and may not be offered or
sold in the United States or to a U.S. person unless the
securities are registered under the United States Securities
Act of 1933 and applicable State Securities laws or an
exemption from the registration requirements is available.
These securities have been acquired for investment and may not
be sold or transferred for value in the absence of an
effective registration of them under the United States
Securities Act of 1933 and applicable State law, or an opinion
of counsel satisfactory to the issuer that such registration
is not required under the Act or Acts.
Unless permitted under applicable Canadian securities
legislation, the holder of the securities shall not trade the
securities represented by this certificate before July 22,
2003.
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Without prior written consent of the TSX Venture Exchange and
compliance with all applicable securities legislation, the
securities represented by this certificate may not be sold,
transferred, hypothecated or otherwise traded on or through
the facilities of the TSX Venture Exchange or otherwise in
Canada or to or for the benefit of a Canadian resident until
four months and one day after the distribution date.
9. REGISTRATION RIGHTS. The Borrower will prepare and file with the United
States Securities and Exchange Commission (the "SEC") a registration
statement with respect to the Bonus Shares and will cause such
registration statement to become effective on or before July 22, 2003,
and keep such registration statement effective for up to 180 days
thereafter. In connection therewith, the Borrower will prepare and file
with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration
statement as may be necessary to comply with applicable securities laws
with respect to the disposition of all securities covered by such
registration statement, and will furnish to the Lender the prospectus
and all such other documents as may be reasonably requested.
10. REMOVAL OF RULE 144 LEGEND. Notwithstanding paragraph 9 above, if the
Lender elects to sell, assign or transfer the Bonus Shares or any other
shares issued under this Agreement prior to the date on which the
registration statement becomes effective, and such proposed sale,
assignment or transfer is not made in the United States or to a U.S.
person, the Borrower will, at its cost and within 14 days of receipt of
any request from the Lender, provide the Lender or its counsel with all
necessary documentation, including opinions of legal counsel, as may be
necessary to remove the Rule 144 legend from the share certificate
representing such shares, so as to permit the Lender to complete such
sale, assignment or transfer of the Bonus Shares free from resale
restrictions under applicable US securities laws.
11. SECURITY. As security for the Loan, the Borrower will:
(a) execute and deliver to the Lender a promissory note, in the form
attached hereto as Schedule "A" (the "Note");
(b) execute and deliver a collateral mortgage, security agreement,
financing statement, pledge and assignment of production (the
"Lender's Security"), in form and terms satisfactory to the Lender
under which the Borrower will grant in favour of the Lender a first
mortgage and security interest over all of its real and personal
property, subject only to;
(i) the rights and priorities of TransAtlantic Petroleum (USA)
Corp., a Colorado corporation ("TransAtlantic") granted
pursuant to the TransAtlantic Subordination Agreement (as
defined below); and
(ii) the subsequent mortgage, charge and security interest of Bank
One pursuant to a multiple indebtedness mortgage collateral
assignment of rents and security agreement granted by the
Borrower in favour of Bank One (the "Bank One Security");
(c) execute and deliver and cause Bank One to execute and deliver a
subordination agreement in form and terms satisfactory to the
Lender (the "Bank One Subordination Agreement"), under which Bank
One will subordinate all of its security and indebtedness,
including the Bank One Security, in favour of the Lender; and
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(d) execute and deliver and cause TransAtlantic to execute and deliver
a subordination agreement in form and terms satisfactory to the
Lender (the "TransAtlantic Subordination Agreement"), under which
the Lender will subordinate the Lender's Security in favour of
TransAtlantic only in respect of the four xxxxx referred to in
Exhibit "A-1" of the mortgage, assignment of production, security
agreement and financing statement granted by the Borrower in favour
of TransAtlantic (the "TransAtlantic Security").
12. CONDITIONS PRECEDENT. As conditions precedent to the advance of the Loan by
the Lender:
(a) the representations and warranties of the Borrower contained in
paragraph 13 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,
including but not limited to the delivery and registration, as
appropriate, of the security referred to above;
(b) the Borrower will have received conditional approval from the
Exchange for the transactions contemplated herein, including the
issuance of the Bonus Shares, and will have provided the Lender
with written evidence of same;
(c) the Borrower will have duly filed or recorded a Joint Stipulation
and Cross-Conveyance with the State of Louisiana, Parish of St.
Xxxxxxx, confirming the Borrower's 91.25% operating interest and
68.4375% net revenue interest in the Bayou Couba property (prior to
the assignment of a 10% interest to TransAtlantic pursuant to a
Production Payment Conveyance Agreement between TransAtlantic and
the Borrower dated as of March 12, 2003);
(d) 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.
(e) the Lender will have received legal opinions, in form and terms
satisfactory to the Lender and its counsel, confirming the
registration, recording, validity, enforceability and priority of
the Lender's Security and such other matters as the Lender may
require;
(f) the Borrower will have delivered to Middlemarch Partners Limited
("Middlemarch") the 166,700 bonus shares or the $50,000 cash bonus
in lieu thereof due under paragraph 5 of the Middlemarch Loan
Agreement dated August 2, 2002, and will have paid out and
discharged all indebtedness under the Middlemarch Loan Agreement;
(g) the Borrower will have filed an annual information form 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;
(h) the Lender shall have completed and in its sole and absolute
discretion, be satisfied with its due diligence review of the
Borrower; and
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(i) 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 March 28, 2003, this
Agreement shall terminate, and the Lender shall be under no further
obligation to the Borrower in connection with the transaction
contemplated herein.
13. 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, to acquire, own, hold, lease and mortgage
its assets including real property and personal property, and to
enter into and perform its obligations under this Agreement and all
documents or instruments contemplated or delivered hereunder;
(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 the Borrower's constating documents, any law,
judgment, agreement or instrument to which it is a party or may be
bound;
(e) except as disclosed in Schedule "C" attached hereto and 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 nine months ended September 30, 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;
(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
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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,
New Brunswick, 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
continuous disclosure obligations under applicable securities laws
and, without limiting the generality of the foregoing, there has
not occurred any adverse material change since September 30, 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 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 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; and
(l) 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.
14. POSITIVE COVENANTS. The Borrower covenants and agrees that so long as
any monies shall be outstanding under this Agreement, it will:
(a) within 30 days of the date of this Agreement, file with the SEC its
Quarterly Report on Form 10-QSB for the quarter ended September 30,
2002 and will provide the Lender with written confirmation of same;
(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;
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(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.
15. NEGATIVE COVENANTS. The Borrower covenants with the Lender that the
Borrower will not, without first obtaining the written consent of the
Lender:
(a) except for the Bank One Security and the TransAtlantic Security,
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) except for the disposition of a 10% interest to TransAtlantic in
the Bayou Couba Lease, State Lease No. 17353, the Development
Agreement with Exxon Mobil Corporation, the particulars of which
are fully disclosed in a letter agreement dated January 16, 2003
between the Borrower and TransAtlantic, 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 fair 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 postponement of
claim by such person in favour of the Lender, in form and terms
satisfactory to the Lender; and
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(g) guarantee the obligations of any other person, directly or
indirectly.
16. 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;
(b) if the Borrower defaults in observing or performing any material
term, covenant or condition of this Agreement or any other
collateral document or instrument 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;
(c) if any of the Borrower's representations or warranties in this
Agreement or any other collateral document or instrument 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;
(e) except as disclosed in this Agreement, 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) 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, in the reasonable opinion of the Lender, a material adverse
change occurs in the financial condition of the Borrower or any of
its subsidiaries;
(i) if the Lender in good faith and on commercially reasonable grounds
believes that the ability of the Borrower to pay any of the
Outstanding Balance to the Lender or to perform any of the
covenants contained in this Agreement or any other collateral
agreement or other document is impaired or any security granted by
the Borrower to the Lender is or is about to be impaired or in
jeopardy;
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(j) 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
(k) 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.
17. 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.
18. 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.
19. LENDER'S 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 and hereby
irrevocably authorizes and directs the Lender to hold back $10,000 from
the advance of the Loan (the "Holdback"), to be applied on account of
the Lender's legal fees and other costs, charges and expenses payable
hereunder. Any amounts in excess of the Holdback will be payable within
30 days of presentment of an invoice. If not paid within that time,
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.
20. 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:
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:
Quest Investment Corporation
Xxxxx 000, 000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
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Attention: Xxxxxxx Xxxxxxxx
Fax No: (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.
21. 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. Upon receipt of written notice and
direction from the Lender, the Borrower covenants and agrees, 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.
Any assignment of any rights and obligations under this Agreement and
the issuance of any note or securities of the Borrower to any
participation in the Loan or securities issued pursuant to this
Agreement shall be subject to the execution of such investment
representation letters and other agreements as may be reasonably
required by the Borrower to assure the Borrower's compliance with U.S.
federal and State securities laws.
22. ENUREMENT. This Agreement will enure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted
assigns.
23. REMEDIES ARE CUMULATIVE. The Lender's rights and remedies hereunder
are cumulative and not exclusive of any rights or remedies at law or
in equity.
24. TIME. Time is of the essence of this Agreement and all documents and
instruments delivered hereunder.
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25. CRIMINAL CODE COMPLIANCE. In this paragraph the terms "interest",
"criminal rate" and "credit advanced" have the meanings ascribed to
them in Section 347 of the Criminal Code (Canada) as amended from time
to time. The Borrower and the Lender agree that, notwithstanding any
agreement to the contrary, no interest on the Loan or the credit
advanced by the Lender under this Agreement will be payable in excess
of that permitted under the laws of Canada. If the effective rate of
interest, calculated in accordance with generally accepted actuarial
practices and principles, would exceed the criminal rate on the credit
advanced, then:
(a) the elements of return which fall within the term "interest" will
be reduced to the extent necessary to eliminate such excess;
(b) any remaining excess that has been paid will be credited towards
prepayment of the Loan; and
(c) any overpayment that may remain after such crediting will be
returned forthwith to the Borrower upon demand,
and, in the event of dispute, a Fellow of the Canadian Institute of
Actuaries appointed by the Lender will perform the relevant
calculations and determine the reductions, modifications and credits
necessary to effect the foregoing and the same will be conclusive and
binding on the parties. This Agreement, the Note and all related
agreements and documents will automatically be modified to reflect such
modifications without the necessity of any further act or deed of the
Borrower and the Lender to give effect to them.
26. WAIVERS. No failure or delay on the Lender=s part in exercising any
power or right hereunder shall operate as a waiver thereof.
27. 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.
28. 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.
29. AMENDMENT. This Agreement may be changed only by or pursuant to an
agreement in writing signed by the parties hereto.
30. SCHEDULES. All Schedules attached hereto shall be deemed fully a part
of this Agreement.
31. CURRENCY. All references herein to "dollars" or "$" are to United
States dollars, unless otherwise indicated.
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32. 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.
33. 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.
QUEST INVESTMENT CORPORATION
Per: _______________________________
Authorized Signatory
AMERICAN NATURAL ENERGY CORPORATION
Per: _______________________________
Authorized Signatory
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SCHEDULE "A"
PROMISSORY NOTE
Principal Amount: US$2,500,000
For value received, AMERICAN NATURAL ENERGY CORPORATION (the
"Borrower") hereby promises to pay to QUEST INVESTMENT CORPORATION (the
"Lender") the principal sum of XXX XXXXXXX XXXX XXXXXXX XXXXXXXX XXXXXX XXXXXX
DOLLARS (US$2,500,000) on the earlier of:
(a) October 31, 2003;
(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
15 of the Loan Agreement dated for reference March 12, 2003,
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,
commencing April 30, 2003. 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. In this promissory note,
"Business Day" means a day which is not a Saturday, Sunday or a statutory
holiday in British Columbia.
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: March 12, 2003.
SIGNED AND DELIVERED by AMERICAN
NATURAL ENERGY CORPORATION
Per: _______________________________
Authorized Signatory
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SCHEDULE "B"
SUBSIDIARIES
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JURISDICTION OF
SUBSIDIARY PERCENT OWNERSHIP INCORPORATION
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Gothic Resources Inc. 000 Xxxxxx
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SCHEDULE "C"
LITIGATION DISCLOSURE
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