EX-10 11 exhatb.htm EXHIBIT 10.6 ATB AGREEMENT

Phone (403) 974-5770
Fax (403) 974-5784

OIL & GAS DEPARTMENT
2nd Floor, 239-8th Avenue SW
Calgary, Alberta T2P 1B9

 

September 24, 2001 

 

Capital Reserve Canada Limited
1528B-9 Avenue SW
Calgary, AB
T2G 0T7

Attn: James F. Marsh, President

Dear Sirs:

Alberta Treasury Branches has approved and offers financial assistance on the terms and conditions in the attached Outline of Credit.

You may accept our offer by returning the enclosed duplicate of this letter, signed as indicated below, by 4:00 p.m. on or before September 28, 2001 or our offer will automatically expire. We reserve the right to cancel our offer at any time prior to acceptance.

Yours truly,

 Yours truly,

/s/ Phil Burnham
Phil Burnham
Relationship Manager
/fg

/s/ Brad Haack
Brad Haack
Account Manager

Encl.

Accepted this 27th day of September, 2001

CAPITAL RESERVE CANADA LIMITED
 

Per: /s/ W. Scott Lawler
 

Per: /s/ James F. Marsh

 

OUTLINE OF CREDIT

LENDER: ALBERTA TREASURY BRANCHES

BORROWER: CAPITAL RESERVE CANADA LIMITED

GUARANTOR(S): N/A

 

A) DETAILS OF CREDIT FACILITIES:

Specific Variable Rate Loan Facility $300,000.00

    1. Funds previously used to finance general operating of Borrower which included acquisition of oil and gas properties and the development of oil and gas properties; loan now on a repayment basis.

    2. Interest calculated on daily outstanding principal at 1% above Prime will be payable on the last day of each month

      3. In addition to interest, principal payment of $10,000 per month, will be payable on the last day of each month commencing September 30, 2001

    3. Lender is authorized to charge monthly payments to Borrower's account 760-1139932-24

    4. This loan is subject to periodic (and at least annual) review. Next scheduled review date is May 31, 2002

    5. This loan will expire and all outstanding amounts under it will be payable in full on the earlier of demand by Lender or May 31, 2002

B. SECURITY DOCUMENTS:

    1. The security documents (whether now held or hereafter delivered) will secure all Credit Facilities unless and until otherwise agreed in writing by Lender.

    2. The following security is required:

        1. Environmental Questionnaire & Disclosure Statement;

        2. Authority to Debit account

        3. All other security deemed necessary by ATB or it's solicitor 

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C. FEES:

    1. Non-refundable commitment fee of $1,500 is payable on acceptance of this offer

    2. Any amount in excess of established credit facilities will be subject to a fee of 1% of such excess for each minimum 30 day period, where ATB in its discretion permits excess borrowings, if any.

    3. For monthly or quarterly reports or statements not received within the stipulated periods, the Borrower will be subject to a fee of $50 per month, per report or statement at the lender's discretion, for each late reporting occurrence.

    4. For annual reports or statements not received within the stipulated periods, the Borrower will be subject to a fee of $250 per month at the lender's discretion, per report or statement, for each late reporting occurrence.

D. COVENANTS:

Borrower will perform and observe the Positive and Negative Covenants set forth in Schedule "A" attached hereto. Guarantors (if any) will perform and observe the covenants in Schedule "A" under 1(c), (f), (h), (i), and (l), and 2(e), and (l). In addition, Borrower and each of the Guarantors (if any) covenants that they will perform and observe the following covenants, namely:

1. Borrower will provide to Lender as soon as possible and in any event:

        1. annually within 90 days after the end of its fiscal years, an engineering report, in an economic evaluation format, of Borrower's major oil and gas interest, prepared by a firm acceptable to Lender and using Lender's pricing forecasts;

        2. within 90 days after the end of each month, monthly production and revenue reports (operator statements or government "S" reports or internally generated area-by-area summaries supported by an Officer's Certificate) which will clearly indicate gross and/or net oil and gas production volumes, gross revenues, royalties and other burdens, operating costs, etc; and

        3. ongoing and at least annually at the review date, details of all gas contracts having a term of 13 months or longer.

2. Borrower will not, without the prior written consent of Lender, breach the following restrictions:

        1. working capital ratio (as defined by GAAP with the exception that current liabilities will exclude the current portion of long term debt) not less than 1:1;

        2. debt to equity ratio not to exceed 2:1.

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E. CONDITIONS PRECEDENT:

None of the Credit Facilities will be available and the availability of further advances on any of the loans will be curtailed until the following conditions precedent have been satisfied, unless waived by Lender:

      1. Lender has received all Security Documents and all registrations and filings have been completed, in all cases in form and substance satisfactory to Lender except at provincial energy departments which may be registered after loan advance;

      2. Borrower has provided all financial statements, appraisals, environmental reports and any other information that Lender may require;

      3. Lender is satisfied as to the value of the Borrower's assets and financial condition, and Borrower's ability to carry on business and repay any amount owned to Lender from time to time, and that no Event of Default exists; and

      4. There is no Event of Default. 

F. EVENTS OF DEFAULT:

Without restricting the rights of Lender to terminate any Credit Facility and to demand payment in full at any time, if any of the "Events of Default" in the attached Schedule "A" occurs and is continuing, Lender may at its option, by notice to Borrower, terminate any or all of the Credit Facilities hereunder and demand immediate payment in full of all or any part of the amounts owed by Borrower. Failing such immediate payment, Lender may, without further notice, realize under the Security Documents to the extent Lender chooses.

It will be an Event of Default if control of Borrower ceases to be vested either directly or indirectly in Capital Reserve Corporation. In the foregoing "control" means the right to elect a majority of the Board of Directors of Borrower.  

G. MISCELLANEOUS:

    1. all legal and other costs and expenses incurred by Lender in respect of the Credit Facilities, the Security Documents and other related matters will be paid or reimbursed by Borrower on demand by Lender.

    2. all security documents will be prepared by or under the supervision of Lender's solicitors.

    3. acceptance of this offer will authorized Lender to instruct its solicitors to prepare all necessary security documents and proceed with related matters.  

      4. 4

      G. MISCELLANEOUS (continued):

    4. Lender, without restriction, may waive the satisfaction, observance or performance of any of the Conditions or Covenants contained in this Outline of Credit. Except to the extent that such waiver relates to an obligation of a Guarantor, the obligations of Guarantors (if any) will not be diminished, discharged or otherwise affect by or as a result of any such waiver.

    5. Acceptance of this Commitment Letter will confirm that to the best of the Borrower's knowledge, the Corporation is currently in compliance with environmental laws and that there is no existing impairment to the properties as a result of environmental damage.

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SCHEDULE "A'
CONTAINING STANDARD COVENANTS, EVENTS OF DEFAULT
AND INTERPRETATION PROVISIONS

  1. Positive Covenants:

Borrower and Guarantor or each of the Guarantors to the extent required under the outline of Credit to which this Schedule is attached, covenants with Lender that so long as it is indebted or otherwise obligated to Lender, it will:

    1. pay to Lender when due all amounts (whether principal, interest or other sums) owing by it to Lender from time to time;

    2. execute and deliver to Lender promissory notes or other evidence of indebtedness, in such form and at such times, as Lender may require;

    3. deliver to Lender the Security Documents, in all cases in form and substance satisfactory to Lender;

    4. ensure the Guarantor complies with all notice requirements at the times and in the manner as required under Section 42 of the Business Corporations Act (Alberta)

    5. use the proceeds of loans only for the purposes approved by Lender;

    6. maintain its separate corporate existence and all licences and authorizations required from regulatory or governmental authorities or agencies to permit it to carry on its business, including, without limitation, any licences, certificates, permits and consents for the protection of the environment;

    7. maintain appropriate books of account, records, reports and other papers relative to the operation of the business' affairs and financial conditions;

    8. continuously carry on and conduct its business in a proper, efficient and businesslike manner;

    9. maintain appropriate types and amounts of insurance, provide evidence of insurance to Lender on request and promptly advise Lender in writing of any significant loss or damage to its property;

    10. maintain, repair and keep in good working order and condition all of its property and assets for continuous operation of its business;

    11. pay when due all material amounts owed to any person and governmental authority unless payment is being disputed by it in good faith or is being withheld for prudent business reasons other than inability to make payment, and it will observe and perform its obligations to all persons and governmental authorities;

    12. permit Lender, by its officers or authorized representatives at any reasonable time, to enter Borrower's premises and to inspect it's plant, machinery, equipment and other real and personal property and their operation, and to examine and copy all relevant books of accounts, records, reports and other papers of Borrower;

      13. 6

      1. Positive Covenants (Cont'd):

    13. provide to Lender as soon as possible and in any event;

      14. i) within 120 days after the end of each of its fiscal years, financial statements on a minimum review engagement basis prepared by a firm of qualified accountants, and signed by appropriate officers of Borrower. Lender reserves the right to require audited financial statements; and

      ii) within 60 days following the end of each quarter, internally produced financial statements for that quarter;

    14. provide to Lender on request any further information regarding its assets, operations and financial condition that Lender may from time to time require;

    15. pay and remit all sums when due to tax and other governmental authorities (including, without limitation, any sums in respect of employees) and provide proof to Lender upon request;

    16. upon request, provide Lender with such information and documentation as Lender may reasonably require from time to time in respect of the collection and payment of G.S.T. including, without limitation, information concerning the amount of taxable supplies, G.S.T. collected, input tax credits received and G.S.T. paid during each year of Borrower's operations;

    17. upon request, Borrower will forward to Lender copy of any G.S.T. election forms filed with Revenue Canada Taxation;

    18. Borrower will advise Lender of any transfer or exchange of assets with a related party where no funds are exchanged (ie. nil consideration);

    19. promptly advise Lender in writing, giving reasonable details, of each event which has or is reasonably likely to have a material adverse effect on its business, affairs or financial condition; and

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2. Negative Covenants:

Borrower and Guarantors or each of the Guarantors to the extent required under the Outline of Credit to which this Schedule is attached, covenants with Lender that while it is indebted or otherwise obligated to Lender, it will not, without the prior written consent of Lender:

    1. create or permit to exist any mortgage, charge, lien, encumbrance or other security interest on any of its present of future assets except the permitted encumbrances (if any) identified in the Outline of Credit. Permitted encumbrances will include encumbrances incurred through the normal course of business such as overriding royalties and Crown Royalties that have been advised to Lender through engineering reports and other means;

    2. amalgamate, consolidate, or merge with or enter into any partnership or joint venture with any other person. Partnerships and joint ventures that are entered into in the normal course of business for the development of oil and gas properties and are advised to Lender through engineering reports before loan values are established on those properties, will be permitted without further reference to Lender;

    3. sell, lease or otherwise dispose of any assets except assets being sold in the ordinary course of business including farm-ins used for the development of undeveloped properties which will be permitted;

    4. move any of its assets or allow any of its assets to be moved outside the Provinces of Alberta, Saskatchewan, British Columbia or Manitoba;

    5. change the present nature of its business;

    6. operate accounts with, take loans from, or otherwise conduct any banking business with any financial institution other than Lender;

    7. reduce its capital or redeem, purchase or otherwise acquire, retire or pay off any of its present or future share capital;

    8. pay unusual sum(s) to or for the benefit of shareholders or persons associated with shareholders (within the meaning of the Business Corporations Act of Alberta) by way of salaries, bonuses, dividends, management fees, repayment of loans or otherwise, in excess of the amount for any fiscal year approved by Lender;

    9. permit its working capital ratio (as determined by Lender in accordance with generally accepted accounting practices) to fall below the level approved by Lender;

    10. permit its debt to equity ratio (as determined by Lender in accordance with generally accepted accounting practices) to exceed the level approved by Lender; 

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2. Negative Covenants (Cont'd):

    1. provide financial assistance (by means of loan, guarantees, or otherwise) to any person other than in favour of Lender; and

    2. respecting any land now or in the future mortgaged or charged as security in favour of Lender by Borrower or any Guarantor, allow any pollutant (including any pollutant now on, under or about such land) to be placed, handled, stored, disposed of or released on, under or about such land without the prior written consent of Lender which may be arbitrarily or unreasonably withheld, and, if granted, may be subject to conditions, except that Borrower may use or produce any pollutants in the normal course of Borrower's business as long as Borrower complies with all applicable laws placing, handling, storing, transporting, disposing of or otherwise dealing with such pollutants.

3. Events of Default:

  1. if Borrower defaults in paying when due all or any part of its indebtedness or other liability to Lender and such default continues after notice from Lender;

  2. if Borrower or a Guarantor (if any) defaults in the observance or performance of any of its covenants or obligations in this Schedule or in the Outline of Credit to which this Schedule is attached or in any of the Security Documents, or in any other document under which Borrower or a Guarantor (if any) is obligated to Lender, and in any such cases, the default continues after notice from Lender;

  3. if any charge or encumbrance on any property of Borrower becomes enforceable and steps are taken to enforce it;

  4. if Borrower defaults in any obligation to any other person which involves or may involve a sum which Lender considers material, and the default will not be cured within seven (7) days of the date Borrower first knew or should have known of the default;

  5. if any other creditor of Borrower or a Guarantor (if any) takes collection steps against Borrower or its assets;

  6. if final judgement or judgements should be entered against Borrower or Guarantor (if any) for the payment of any amount of money which Lender considers material, and the judgement is or judgements are not discharged within 20 days;

  7. if an order is made, an effective resolution passed, or a petition is filed for the winding up the affairs of Borrower or a Guarantor (if any) or if a receiver of Borrower or a Guarantor (if any) or any part of its assets is appointed;

  8. if Borrower or a Guarantor (if any) becomes insolvent or makes a general assignment for the benefit of its creditors or otherwise acknowledges its insolvency or if a bankruptcy petition is filed or receiving is made against a Borrower or Guarantor (if any) and is not being disputed in good faith

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3. Events of Default (continued):

  1. if Borrower ceases or threatens to cease to carry on its business or makes a bulk sale of its assets;

  2. if any of the licences, permits or approvals granted by any government or governmental authority or agency and essential to the business of Borrower is withdrawn, cancelled, suspended or adversely amended; and

  3. if any material adverse change occurs (as determined by Lender in its sole discretion) in the business, management, prospects assets, liabilities or condition (financial or otherwise) of Borrower or a Guarantor (if any).

4. Interpretation:

In the Positive Covenants, Negative Covenants, Events of Default and the Outline of Credit (including any other Schedules) to which this Schedule "A" is attached:

  1. words importing the singular will include the plural and vice versa, and words importing gender will include the masculine, feminine and neuter, and anything importing or referring to a person will include a body corporate and a partnership and any entity, in each case all as the context and the nature of the parties requires;

  2. any Covenant or Event of Default or any part of any Covenant or Event of Default which contemplates that Borrower or Guarantor is a body corporate will, to that extent only, be inapplicable to Borrower or such Guarantor if not a body corporate;

  3. "Prime" means the prime lending rate per annum established by Lender from time to time. Where the interest rate for a credit is based on Prime, the applicable rate on any day will depend on the Prime in effect on that day. The statement by Lender as to Prime and as to the rate of interest applicable to a credit on any day will be binding and conclusive for all purposes;

  4. all interest rates specified are nominal annual rates. The effective annual rate in any case will vary with payment frequency;

  5. any written communication which Lender may wish to serve on Borrower or Guarantor (if any) may be served personally (in the case of a body corporate, on any officer or director thereof) or by leaving the same at or mailing the same by registered mail to the last known address of Borrower or Guarantor (if any), and in the case of mailing will be deemed to have been received two (2) business days after mailing except in the case of postal disruption; and

  6. "Lender", "Borrower", "Guarantors" (if any) and "Security Documents" have the meaning set out in the Outline of Credit to which this Schedule is attached. "Security Documents" will also include any other securities and related documents now held or hereafter delivered by Borrower or Guarantors (if any) to Lender as security for the debts and other liabilities of Borrower to Lender, whether arising prior to or after acceptance by Borrower or Guarantor of the Outline of Credit and this Schedule "A". 

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September 27, 2001 

 

Alberta Treasury Branches
Oil & Gas Department
2nd Flr., 239 - 8th Avenue S.W.
Calgary, AB.
T2P 1B9

Attn: Phil Burnham, Relationship Manager

Dear Sirs:

In connection with the undersigned's request for a loan from you of $300,000, we hereby authorize Alberta Treasury Branches to debit account 760-1139932-24 in the amount of $1,500 as a commitment fee.

Yours truly,

CAPITAL RESERVE CANADA LIMITED 

 

Per: /s/ W. Scott Lawler 

Per: /s/ James F. Marsh