LOANAGREEMENT
Sept17th, 2018
WHEREASEmmett Lescroart (the“Lender”)andPetrolia Energy Corporation (the“Borrower”) wish toenter intothis loanagreement(the“Loan Agreement”) which provides a loanof US $200,000 at aninterest rate of12%;
AND WHEREASbySeptember 17th, 2018,Borrower hasacquired three percent (3%) undividedworkinginterest in the 3formerCona Resources Ltd. leases (“Cuthbert Assets”) and isprepared toissue certain securities ofPetrolia pursuant tothe terms herein;
NOW THEREFORE,inconsiderationof theincrease ofthe loanupontheterms hereof,the Lender and theBorrower covenant and agree asfollows:
Borrower: | Petrolia Energy Corporation |
Guarantor(s): | Petrolia Energy Corporation (the “Guarantor”or“Loan Party”). |
Lender: | Emmett Lescroart. |
Loan: | US $200,000 (“Loan”). |
Loan Purpose: | Toacquire3% workinginterest in the Cuthbert Assets formerly owned byCona Resources Ltd. inAlbertaandSaskatchewan, Canada; andare free andclearof anyliensandencumbrances on theClosing Date. |
Effective Date: | September 17th, 2018. |
Maturity Date: | October 17th,2019. |
Interest Rate: | TheBorrower shall pay interest on thetotalLoan at arate of 12% perannum. |
Warrants: | Inadditionto therepaymentofprincipalandinterestontheLoan, the Borrower shall grantto theLender anaggregate250,000warrants inPetroliaEnergy Corporation atan exercise priceofUSD$0.10 pershare expiringonMaturity Date (the “Warrants”).
Theterms of theWarrants shall include: (i) typical adjustment provisions toadjust thenumberofWarrants and theExercise Price in theeventof anyshare consolidation, recapitalization, reclassification,orsimilar transaction orreorganizationofshare capital; and(ii) provisions allowing exercise in theevent of anychange in control, business combination orother transaction involving theBorrower. |
Repayment: | Arepayment schedule isattached asSchedule A. Principal and interestshallberemittedon the17thofeach Month commencing October 17th,2018. |
Prepayment: | Prepaymentispermitted any time on, or after, 60days from the datehereof, withnopenalty, subject to awritten notification period of 10calendar days.In theeventofearly payout, theBorrower shall ensure total interest paid tothe lender is12%onUS $200,000. |
Security: | TheLender holds security (the “Security”) against the Borrower’s3%Working Interest inthe Cuthbert Assets.AllSecurity, as thesamemay beamended, replaced, restated orsupplemented, shall beheldbythe Lender ascontinuing securityforthe present and future indebtedness, liabilities andobligations (whether directorindirect, absoluteorcontingent) oftheBorrowerto the Lenderunder thisLoanAgreementandthe Securityasthe samemay beamended, replaced, restated orsupplemented. |
Petrolia Energy Corporation NewLoan Agreement–Sept 2018 | 2 |
RepresentationsandWarranties: | Borrower representsandwarrantsto theLender that: |
1. | ithas beenduly incorporated and isin good standingunderthe legislation governing it, andit has the powers, permits, andlicenses required to operate its businessorenterprise and toown, manage, andadminister its property; | |
2. | thisLoanAgreement constitutes, the Security, andthe Warrants and other agreements shall constitute, legal, valid, andbinding obligations of itself,enforceable inaccordance with their terms, subject to applicable bankruptcy, insolvency, orsimilarlawsaffecting creditors’ rights generallyand tothe availability ofequitable remedies; | |
3. | ithas theright to pledge, charge, mortgage, orlien its assets inaccordance with theSecurity contemplated by thisLoan Agreement; | |
4. | it ispresently ingood standing under,and shall dulyperformandobserve, allmaterialterms ofall material documents, agreements, and instruments affecting orrelatingtoits petroleum andnatural gas assets (collectively, the“PNG Agreements”); | |
5. | theBorrower is Petrolia Energy Corporation. | |
6. | it isnot involved in anydisputeorlegal proceedings likely tomaterially affect its financial position orits capacitytooperate itsbusiness; | |
7. | without limiting the generalityofclause 4above with respect to thePNG Agreements, it isnot indefault under anyother contracts towhichitis a party orundertheapplicable legislation andregulations governing the operationofits business orits property, including all material environmental requirements except where suchdefaultornon-compliance couldnot reasonably beexpected tohaveamaterial adverse effect onthe Borrower orits property; | |
8. | itis not indefault under the contractstowhich it is a party or under theapplicable legislationandregulations governing the operationofits businessoritsproperty,including allmaterial environmental requirements, other thanarrears in payment ofamounts outstanding tosuppliers and service providers, which havebeendisclosed tothe Lender; | |
9. | it hasprovided to theLenderallmaterial information in thepossession of oravailable to it andrelevanttothe Lender’s review andassessmentoftheLoan, Security andthe structure of the Loan Parties and,all such information istrue, complete andaccurate; | |
10. | ithas all the requisite power, authority andcapacity toexecuteanddeliver this Loan Agreement and theSecurity (towhichit is aparty) and toperform itsobligations hereunder andthereunder; | |
11. | theexecution and delivery ofthisLoanAgreement, the Warrants andthe Security (to which it is aparty)and theperformance of thetermsofthis Loan Agreement, the Warrants and Security do not violate the provisions of its contacting documents or its by-laws or any law, order, rule or regulation applicable to it and have been validly authorized by it; and | |
12. | theexecution, delivery and performanceofthe terms ofthis Loan Agreement, theWarrants and theSecurity(towhich it is aparty) shallnot constituteabreachofany agreement towhich it oritsproperty, assets orundertaking are boundoraffected. |
Petrolia Energy Corporation NewLoan Agreement–Sept 2018 | 3 |
Unlessexpressly stated tobemadeas of aspecific date, therepresentationsandwarranties made inthis Loan Agreement shall survivetheexecutionofthisLoanAgreement,theWarrants andallSecurity, and shall bedeemed to berepeatedas of thedate ofeach drawdown under the Loan subjecttomodifications made by theBorrowerto theLender inwriting andaccepted by theLender. The Lender shall bedeemed tohave relied uponsuch representations and warranties at each suchtimeas acondition ofmaking eachdrawdown under the Loan orcontinuingtoextend the Loan. |
Affirmative Covenants: | Each of the Loan Parties covenants and agrees that it shall: |
1. | pay all sums of money when due and payable by it to the Lender under this Loan Agreement and the Security; | |
2. | in the case of the Borrower, carry on business and operate its petroleum and natural gas reserves in accordance with good practices consistent with accepted industry standards and pursuant to applicable agreements, regulations, and laws; | |
3. | maintain its corporate existence and comply with all applicable laws; | |
4. | pay, when due, all taxes, assessments, deductions at source, crown royalties, income tax or levies for which the payment is guaranteed by legal privilege, prior claim, or legal hypothec, without subrogation or consolidations; | |
5. | comply with all regulatory bodies and provisions regarding environmental procedures and controls; | |
6. | upon reasonable notice, allow the Lender access to its books and records and to visit and inspect its assets and place of business; and |
inform the Lender of any event or action which would have a material adverse impact on its operational or financial affairs, including the sale of assets, guarantees, or alterations of type and business. |
Events of Default: | The Lender may accelerate the payment of any such outstanding amounts and cancel availability of any undrawn portion of any of the Loan at any time after the occurrence of anyone or more of the following events (each an“Event of Default”): |
1. | failure by the Borrower to pay principal. interest and fees when due; | |
2. | any material representations and warranties made by a Loan Party are incorrect in any material respect; | |
3. | any breach of applicable law by a Loan Party; |
Petrolia Energy Corporation NewLoan Agreement–Sept 2018 | 4 |
4. | any breach by a Loan Party of, or failure of a Loan Party to perform, any covenant set forth in this Loan Agreement or any of the Security to which it is a party (other than covenants referred to elsewhere in this Events of Default section) if such breach or failure continues unremedied for more than 30 business days after the Borrower first receives notice from the Lender requiring the applicable Loan Party to remedy such breach or failure; | |
5. | the bankruptcy or insolvency of a Loan Party, or any action is taken for the winding up, liquidation or any appointment of any person with respect to such bankruptcy or insolvency; | |
6. | any cross default as a result of a failure in the performance or observance of any material term or condition in respect of any other indebtedness or obligation of a Loan Party under this Loan Agreement or any of the Security to which it is a party or under any other material agreement to which it is a party; or |
any event which has happened or is expected to happen which would have a material adverse effect on a Loan Party. |
Indemnity: | The LoanParties jointly andseverally indemnify theLender against any loss,costs,claims,actions, suits, damages, expensesorliabilitiesof any andevery kind which theLender may sustain orincur, directly orindirectly,as aconsequenceof theentry into andperformanceofthisLoanAgreement and any ofthe Security, the use offunds advanced under this Loan Agreement,theconsummationof anytransaction contemplated by this LoanAgreement, any litigation orclaim commenced arising outoftheexecution, delivery orperformanceof,orthe enforcement of anyright under this LoanAgreementor any of theSecurity, adefaultby any LoanParty in thepaymentorperformance of anyobligations (including anyrepresentationorwarranty made herein by a LoanPartybeingincorrect at thetimeitwas made ordeemedtohave beenmade),thefailureby a Loan Party tocomply with any of itscovenantsinthisLoanAgreement or inanyof theSecurity, or theoccurrenceof anyother defaultorEventofDefault, except where such loss, costs,claims,actions, suits,damages,expensesorliabilities arise byreasonof thegross negligence orwillful misconduct oftheLender. The indemnities inthis LoanAgreement shall extend tothe agents and assigneesoftheLenderand. forcertainty, those forwhomtheLender actsasagent hereunder, and the LoanParties shall holdthebenefit of suchindemnities in trust for such indemnified parties to theextent necessary togiveeffect hereto.
Theprovisions, undertakings, andindemnificationssetout inthis LoanAgreement, shall survive thesatisfaction and release of theSecurity and payment and satisfactionoftheindebtedness andliabilityof the LoanParties tothe Lender. |
Costs: | Eachparty shall beresponsible for its ownlegal costs. |
General: | Timeis of theessence.
Theinsertion ofheadings inthis Loan Agreement isfor convenienceofreference only andshall not affect theconstruction orinterpretationofthis LoanAgreement.Theterms “thisLoan Agreement”, “hereof’, “hereunder”, “herein” and similar expressions refer tothis Loan Agreement andnot to anyparticular Sectionorother portion hereof and include anyagreement supplemental hereto. |
Petrolia Energy Corporation NewLoan Agreement–Sept 2018 | 5 |
Words importingthesingular number onlyshall include thepluralandviceversa, words importing the masculine gendershallinclude the feminine and neuter genders and vice versa, words importing persons shall include individuals, partnerships, associations, trusts, unincorporated organizations and corporations andviceversaandwordsandterms denotinginclusiveness (such as“include”or“includes” or“including”), whether ornot so stated, arenot limited bytheir context or by thewordsorphrases which precedeorsucceed them.
Reference hereinto anyagreement, instrument, license orother document shall bedeemedtoinclude reference tosuch agreement, instrument, license orother document asthe same may fromtime totime beamended, modified, supplemented orrestatedinaccordance with the provisions ofthis Loan Agreement if and tothe extent suchprovisions are applicable; andreference herein to anyenactment shall bedeemed toinclude referencetosuch enactment asre-enacted, amended orextended from time totimeand to anysuccessor enactment.
TheBorrower agrees that all information provided by it tothe Lendermay bedisclosed to the Lender’s consultants, advisors andlegal counsel.
TheBorrower shalldoall things andexecute all documents reasonably deemed necessary orappropriateby the Lender, for thepurposesofgiving fullforceandeffect to theterms, conditions, undertakings, andsecurity grantedorto begranted hereunder.
Itisunderstoodandagreed that theexecution, delivery andregistrationofthe Security shall in noway mergeorextinguish this Loan Agreement or thetermsandconditions hereof, which shall survive andcontinueinfull force and effect. When acontradictionorconflict exists between anexpress term of any ofthe Security and anexpress term of this LoanAgreement, the term ofthis Loan Agreement shallgovern andprevail. For greatercertainty a termcontainedin theSecurity andnot contained in the LoanAgreement andvice versa is not acontradiction orconflictwiththe other. Notwithstandingtheforegoing, ifthere is anyrightorremedyofthe Lender set out in any oftheSecurityor anypart ofwhich isnot setoutorprovided for inthis LoanAgreement, such additional right shall not constitute aconflictorinconsistency.
Ifanyamountdueto the Lender is not paid when due,then Borrower shall pay interest on suchunpaid amount if and tothe fullest extent permitted byapplicable law but not exceeding 19%per annum, provided such default is cured in 30days from the dateofthe default. After the occurrenceofanEvent ofDefault, theLender shallbeentitledtocharge $250 per hour forrecorded time toadminister its Loan and inexercisingitsrights andremedies under this LoanAgreement and theSecurity.
All interest rates specifiedarenominal annual rates. Theeffective annual rate in anycase shall vary with payment frequency. All interest payable hereunder bears interest aswell after as beforematurity,defaultandjudgment with interestonoverdue interest atthe applicable rate payable herein. |
Petrolia Energy Corporation NewLoan Agreement–Sept 2018 | 6 |
Notwithstanding any provision hereinto the contrary, in no event shall the aggregate “interest” (as defined in section 347oftheCriminal Code(Canada)) payable under this Loan Agreement exceed the maximum effective annual rateofintereston the“credit advanced”(asdefined in thatsection) permitted under thatsection and, if anypayment, collection ordemand pursuant tothis LoanAgreementin respectof“interest” (as defined in thatsection) is determined tobecontrary tothe provisionsof thatsection, such payment, collectionordemand shallbedeemed tohavebeenmade bymutual mistake and theamount of suchpaymentorcollection shallberefunded to theBorrower.Forpurposesofthis Loan Agreement, the effective annual rateofinterest shall bedetermined inaccordancewithgenerally accepted actuarial practicesandprinciplesoverthetermofthe Loan onthe basisofannual compoundingofthelawfully permitted rateofinterest and, inthe eventofdispute, acertificateof aFellowofthe Canadian InstituteofActuaries appointed by theLender shallbeprima facie evidence, forthe purposes of such determination.
Inaccordancewith prudent lending practices ofknowing your client, the Borrower acknowledges that the policies andproceduresofthe Lender requireinvestigation, verification andrecordingofinformation regarding the Borrower, the Guarantors, their directors, officersandshareholders and other persons incontrolofany LoanParty. Subject toanyapplicable privacy laws, theLoan Parties agree to promptly provide all information asmay bereasonably requested byEmmett Lescroart Capital Partners Corp. and theLender, including supporting documentation andotherevidence,inorder to comply with theLender’sinternal policies andanti-money laundering andanti- terrorist legislation.Subjecttocompliance with any applicable privacy laws, theLoan Parties hereby authorize anypersonal information agent, financial institution, creditor, tax authority, employer, orany other person including anypublic entity, having information concerning the LoanPartiesortheir respective property, more particularly anyfinancial information orinformation with respect toany undertaking, guarantee, orsuretyshipgivenby the LoanParties, tosupplysuchinformation tothe Lenderinorder to verify theaccuracyofall information furnished or to befurnishedfromtime totime to theLender and toensurethesolvency of any LoanParty atall times. | |
Requirements: | TheBorrower hereby agrees toprovide tothe Lender written noticeof achange inname oraddress immediately. |
Assignment: | Therights orobligationsoftheBorrower herein and theamountof theLoan may betransferred orassigned by theBorrower subject towritten approvalof theLender, acting reasonably. TheLendermayassign all or any partof the Loan, theSecurity andthis LoanAgreementwithout theconsentof theBorrower butshall notify theBorrow within areasonabletimeframe of suchassignment occurring. |
Binding Agreement: | Theterms andconditions ofthis Loan Agreement arebinding andlegal obligations andshall constitute acommitmenton the part ofthe Borrower and theLender. |
Confidentiality: | This Loan Agreementisdeliveredtoyou on theunderstanding that neither it nor itscontents shall bedisclosedto anyother partyexcept tocounsel, accountants, employees and agents ofthe Borrower who arespecifically involved in thetransaction. |
Lender’s Role: | Nothing containedinthisLoanAgreement, theSecurity or anyrelated documentation shall in anywaybedeemed to be or beconstrued as creating the relationship of joint venturer or partner or co-venturer with the Loan Parties.The parties each acknowledge and agree that the relationship between them is solely and exclusively one of borrower and lender. |
Petrolia Energy Corporation NewLoan Agreement–Sept 2018 | 7 |
Counterparts: | This Loan Agreement maybeexecutedby theparties hereto in anynumberofcounterparts and bydifferent parties inseparate counterparts, each ofwhich when soexecuted shallbedeemedto bean original andall ofwhich taken together shall constituteoneand thesamedocument. Executed copiesmay bedelivered byfacsimile transmission orelectronic mail transmission andit shall not benecessary toconfirm execution bydelivery oforiginallyexecuteddocuments. |
Currency: | All referencestoamounts in thisagreement, unless otherwise described, are in United States Dollars. |
RightsandRemedies Cumulative: | Therights, remedies andpowersoftheLender under this LoanAgreement and theSecurity, at lawand inequityarecumulative andnot alternative and are not insubstitution for anyother remedies, rights orpowers ofthe Lender, and no delay oromission inexerciseof anysuch right, remedy orpower shall exhaust suchrights, remediesandpowers to beconstrued as awaiver of any ofthem. |
WaiversandAmendments: | No term, provisionorconditionofthisLoanAgreement or any ofthe Security, may bewaived, variedoramended unless inwriting andsigned by a dulyauthorized officer of the Lender. |
Governing Law: | ThisLoanAgreement shall beconstrued, governed and enforced inaccordance with, and therights ofthe parties shall begovernedby, the law of theStateofNew Jersey andthe laws of theUnited States ofAmerica applicable therein. |
Notice: | All notices whichmayorarerequiredto begivenpursuant tothis Loan Agreement shall be inwritingandshallbeaddressed as follows:
IftoBorrower:
Petrolia Energy Corporation 710 N PostOak Road, Suite 522 Houston, Texas USA 77024 Attention: Tariq Chaudhary, CFO Withacopybyemail to: tariq.c@petroliaenergy.com Ifto theLender: Emmett Lescroart 280Cherry Valley Road Princeton, New Jersey08540 USA Withacopybyemail to: ejlesc@gmail.com
orsuch other addressesoremails as thepartiesmayadvisebynotice inwriting. All communications provided fororpermitted hereunder shallbein writing, personally delivered to anofficerorother responsible employee ofthe addresseeorsent byemail setforth above or tosuch other addressoremail as therecipientmay from time totimedesignatetothe other in suchmanner. Any communication sopersonally deliveredorsent byemail shall bedeemed tohave beenvalidlyandeffectivelygiven on thedateofsuch delivery orfacsimile, as the casemaybe. |
Petrolia Energy Corporation NewLoan Agreement–Sept 2018 | 8 |
Joint andSeveral Liability: | Ifmorethan oneperson is designated asGuarantor,theneachsuchperson shallbejointlyandseverally liable forallofthe indebtedness, liabilities, covenants, representations, warranties and other obligations ofthe Guarantors setout in this Loan Agreement.Ifmorethanone person isdesignatedas a LoanParty, then each suchperson shall bejointly andseverally liable for allof theindebtedness, liabilities, covenants, representations, warranties andother obligations of theLoan Parties set out inthis LoanAgreement. |
Waiver ofJuryTrial: | TheBorrower hereby irrevocably waives, to thefullest extent permitted byapplicable law, anyrightitmayhave to atrialby jury in anylegal proceeding directly orindirectly arising out of orrelating tothis Loan Agreement, theSecurity or anyother document or thetransactions contemplated hereby orthereby (whether based oncontract, tort or any ofother theory). |
AGREEDAND ACCEPTEDasof the 17th dayofSeptember2018.
![]() | ||
Witness | EMMETT LESCROART Lender |
PETROLIAENERGYCORPORATION | ||
Borrower | ||
Per: | ![]() | |
Name: | Zel C.Khan | |
Title: | CEO&President |