EXHIBIT 10.42
This LOAN AGREEMENT dated as of the 3rd day of March, 1999;
BETWEEN: EUROGAS INC., a company incorporated under the
laws of the State of Utah and having an office at
00 Xxxxx Xxxxx Xxxxxx, Xxxxxx, Xxxxxxx X0X 0XX;
(the :Lender")
AND: PAN ASIA MINING CORP., a Company incorporated
under the laws of the Ykon Territory of the Dominion
of Canada and having its head office at 1200 - 000
Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx,
Xxxxxx X0X 0X0;
(the "Borrower")
WHEREAS:
A. The Lender has agreed to loan to the Borrower, and the
Borrower has agreed to borrow, the sum of CDN$3,000,000 by:
(i) making application to a financial institution of its
choosing for a Letter of Credit in favour of the Lender in the
amount of CDN$3,000,000 (a "Letter of Credit") and then
forwarding the funds to the Borrower; or
(ii) advancing CDN$3,000,000 to the Borrower; or
(iii) guaranteeing a Letter of Credit issued by a
financial institution of its choosing in favour of the Borrower
in the amount of CDN$3,000,000, and
B. The later of the date of this Agreement and the opening date
of the Letter of Credit, if one is opened is hereinafter referred
to as the "Opening Date".
NOW THEREFORE this Agreement witnesses that, in consideration of
the sum of $1.00 paid this day by the Borrower to the Lender, the
receipt and sufficiency of which each party acknowledges, and for
other good and valuable consideration, the parties agree as
follows:
1. ADVANCES
Upon receipt of notice during the period of one year from the
Opening Date from the President of the Borrower and from the duly
appointed representative of the Lender requesting that funds be
drawn down from the Loan or, if applicable, from the Letter of
Credit, the Lender shall forthwith disburse the funds so
requested to a bank account opened in the name of the Borrower
and having two signatories (one appointed by the Lender and one
by the Borrower) (the "Signatories"), or to the Company's other
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bank accounts or to its joint ventures (as the Signatories may
agree), up to the full principal amount of the Loan.
The parties hereto agree that notices provided in this Section 1
shall be given in accordance with the Use of Proceeds attached
hereto as Schedule "A".
2. INTEREST
The Borrower shall pay interest on the principal amount of the
Loan outstanding from time to time, at a rate of three percent
(3%) percent per annum above the prime rate of interest charged
by the Bank of Montreal in Vancouver, British Columbia,
calculated every six months from the Opening Date.
3. REPAYMENT
The Borrower hereby covenants and agrees to repay the Loan and
all accrued interest thereon as may be outstanding from time to
time to the Lender, as follows:
(a) accrued interest on or before the first anniversary of the
Opening Date;
(b) 25% of the ten-outstanding principal amount of the Loan,
plus all interest then accrued on the Loan, on or before the last
day of the 18th months following the Opening Date,
(c) 25% of the principal amount of the Loan then outstanding
plus all interest then accrued on the Loan, on or before the last
day of the 24th month following the Opening Date;
(d) 25% of the principal amount of the Loan then outstanding
plus all interest then accrued on the Loan, on or before the last
day of the 30th month following the Opening Date; and
(e) all the remaining principal amount of the Loan then
outstanding plus all interest then accrued on the Loan, on or
before the last day of the 36th month following the Opening Date
4. REPAYMENT
The Borrower may repay the whole or any part of the principal
amount of the Loan then outstanding, plus all interest accrued
thereon, in advance of the payment schedule set out in Section 3
hereof, without notice, bonus or penalty.
5. BONUS
Conditional upon closing of the private placement by the Borrower
to Lilac Financial Ltd of 10,000,000 units at a price of CDN$0.18
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each (the "Lilac Private Placement"), the Borrower shall issue
and deliver to the Lender a share purchase warrant (the
"Warrant") entitling the Lender to purchase up to 6,666,667
common shares of the Borrower at a price of CDN$0.18 per share in
the first year and CDN$0.21 in the second year, or such other
number of common shares on such terms as are in compliance with
the policies of the Vancouver Stock Exchange, which warrant shall
be in the form attached hereto as Schedule "A".
6. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows.
(a) the Borrower is a corporation duly incorporated and
organized and is validly existing and in good standing under the
laws of the Yukon Territory, Canada;
(b) subject to receipt of regulatory approval, the Borrower has
the corporate power to own its assets, to carry on its business and
to execute and deliver this Agreement and the Warrant;
(c) subject to receipt of regulatory approval, this Agreement
and the Warrant have been authorized by all necessary corporate
action on the part of the Borrower and each constitutes a legal,
valid and binding obligation of the Borrower enforceable against
it in accordance with its terms.
(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 Warrant 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 of may be bound;
(e) no material litigation or administrative proceedings before
any court or governmental authority are presently pending, or
have been threatened in writing, against the Borrower or any of
its assets or affecting it or any of its assets which could have
a material adverse effect on its business or assets.
7. EVENTS OF DEFAULT
7.1 Any one or more of the following events shall constitute an
event of default ("Event of Default") whether any such event of
default shall be voluntary or involuntary or be effected by
operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body.
(a) failure by the Borrower to repay any amounts due under the
Loan upon demand,
(b) failure by the Borrower to perform or observe any of the
covenants, conditions or agreements to be performed or observed
by the Borrower hereunder, which such failure shall continue
unremedied for a period of 30 days after delivery by the Lender
of written notice thereof to the Borrower,
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(c) making of any representation or warranty by the Borrower
herein or in any document or certificate furnished to the Lender
in connection herewith or pursuant hereto which shall prove at
any time to be materially incorrect, as of the date made;
(d) making of an order or the passage of a resolution for the
liquidation or winding-up of the Borrower;
(e) making by the Borrower of a proposal or general assignment
for the benefit of its creditors or other acknowledgment of its
insolvency, or
(f) appointment of a receiver, receiver-manager or receiver and
manager of the Borrower or any part of its property or assets
7.2 Upon the occurrence of any Event of Default and at any time
thereafter provided that the Borrower has not remedied all
outstanding events of default, the Lender may, in its discretion,
by notice to the Borrower, declare this Agreement to be in
default, whereupon the Lender may
(a) terminate any of its obligations hereunder to make further
disbursements of the Loan; and
(b) declare the then outstanding balance on the Loan, interest,
costs and all moneys owing by the Borrower and all liabilities of
the Borrower under the Warrant be immediately due and payable and
such moneys and liabilities shall forthwith become due and
payable without presentment, demand, protest or other notice on
any kind to the Borrower, all of which are hereby expressly
waived.
7.3 If anyone or more of the Events of Defaults 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,
elect to demand payment of all amounts owing to the Lender under
this Agreement.
12. REGULATORY APPROVAL
This Agreement is subject to the approval of the Vancouver Stock
Exchange (the "Exchange") and the Borrower shall make all
reasonable efforts to obtain the necessary approvals from the
Exchange
13. NOTICES
Notices, demands and communications required or permitted to be
given in writing hereunder shall be well and sufficiently given
if addressed and delivered by courier, by mail or by facsimile
transmission to the parties as follows:
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(a) if to the Lender:
EUROGAS INC.
Xxxxx 0000 - 000 Xxxx Xxxxx
Xxxx Xxxxxxxxx, XX
X0X 0X0
Fax: (000) 000-0000
Attention: Xx. Xxxxx X. Xxxxxx
(b) if to the Borrower:
Pan Asia Mining Group.
1200 - 000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX Xxxxxx
X0X 0X0
Fax: (000) 000-0000
Attention: Mr. Xxxxx Xxx
Any party hereto may from time to time change its address for
notice by notice to the other party given in the manner
aforesaid, effective upon receipt. Any change of address under
the section will also be a change of address with respect to such
address as it appears on any schedule or document ancillary
hereto.
14. ENUREMENT
This Agreement shall enure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted
assigns.
15. 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 to
be of the essence in the Agreement.
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17. GOVERNING LAW
18. AMENDMENT
This Agreement may be changed only by or pursuant to an agreement
in writing signed by both parties.
19. CURRENCY
All references herein to "dollars" or "$" are to Canadian
dollars.
20. GENERAL
The parties hereto agree to do all such further acts and execute
and deliver all further documents as may be reasonably required
to carry out the full intent and terms of this Agreement.
TO EVIDENCE THEIR AGREEMENT, each of the parties has executed
this Agreement on the date first above written, notwithstanding
its actual date of execution.
EUROGAS INC.
by its Authorized Signatory
PAN ASIA MINING CORP.
by its Authorized Signatory
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SCHEDULE "A"
USE OF FUNDS
An amount of Cdn.$3.5 million (U.S. $2.5 million) will be
used in its entirety to carry out the initial phase of the
Development and Capitalization of the 701 Changma Diamond
Mine. The Funds will earn Pan Asia Mining Corp's 50%
interest in the 701 Changma Diamond Mine joint venture
company.
The Funds will be sued as follows:
1. Up to Cdn.$1.90 (U.S. $1.36) million for the
rehabilitation and modernization of a process plant at the
701 Changma Diamond Mine, which is estimated to be complete
in approximately nine (9) months. The plant will be
modernized by designing and installing modular DMS and
diamond recovery units and redesigning the existing crushing
plant. Some U.s. $0.86 million has been allocated for the
purchase of the plant, which will originate in South Africa.
The cost of shipping, erection and the run-in of the plant
is estimated to cost U.S.$0.37 million, while an allowance
of U.S. $0.13 million has been allocated for the
rehabilitation of the existing plant. This work will start
immediately.
2. Up to Cdn.1.2 (U.S. $0.86) million for the commencement
of underground development at the 701 Changma Diamond Mine.
This work will include (a) the driving of a main production
decline to the first main level; (b) the commencement of
lateral development on this level; and (c) the driving of a
temporary decline and mine workings from the existing open
pit so as to ensure the early availability of diamond
bearing kimberlite, as feed for the process plant. The
engineering and design of this work, using a Chinese
engineering firm, will start immediately and it is planned
to contract out the work on firm price bids.
3. Up to Cdn.$0.40 (U.S. $0.28) million for the design, by
a Chinese firm, and commencement of the sinking of a main
production shaft at the 701 Changma Diamond Mine. The actual
shaft sinking will be contracted out to a Chinese firm. This
work should be started some six to seven months after work
has commenced on the mail decline.
The balance of the Funds will be used for general
corporate purposes including the payment of finders' fees
and funding of the Company's other activities in China.
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