EXHIBIT 10.5
CANARGO ENERGY CORPORATION
P.O. BOX 000
XX. XXXXX XXXX, GUERNSEY
BRITISH ISLES GY1 3RR
Senior Secured Notes due July 25, 2009
July 25, 2005
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
CanArgo Energy Corporation, a Delaware corporation (the "Company"),
agrees with you (the "Purchaser" and together with the other Purchasers listed
in the attached Schedule A collectively referred to herein as the "Purchasers")
as follows:
SECTION 1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of US$25,000,000.00
aggregate principal amount of its Senior Secured Notes due July 25, 2009 (the
"Notes", such term to include any such notes issued in substitution therefore
pursuant to Section 14 of this Agreement). The Notes shall be substantially in
the form set out in Exhibit 1, with such changes therefrom, if any, as may be
approved by you and the Company. Certain capitalized terms used in this
Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit"
are, unless otherwise specified, to a Schedule or an Exhibit attached to this
Agreement.
SECTION 2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 4, Notes in the principal amount specified opposite your
name in Schedule A at the purchase price of 100% of the principal amount of the
Notes (the "Purchase Price").
SECTION 3. SECURITY.
Section 3.1 Grant of Security Interests.
(a) Security Interest. As collateral security for all its
Obligations to the Purchasers under this Agreement and the other
Loan Documents, Company shall and hereby does grant, assign,
transfer and convey to Purchasers a first priority perfected
security interest in all of its interest in the Collateral (to the
extent perfection can be achieved through filing), said Lien
subject only to the Permitted Encumbrances.
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(b) Further Assurances. Pursuant to the provisions of the
Security Agreement, the Company will, upon request, execute and
deliver to the holders of the Notes any and all documents
necessary or desirable, in such holders' reasonable opinion, to
create, perfect, maintain and preserve the priority of such
holders' security interests in and on the Collateral. Company
will, at its own expense, cause searches of the Uniform Commercial
Code filing records or similar public records to be conducted at
Purchasers' reasonable request from time to time in order to
evidence, perfect, maintain or continue perfection, or confirm the
rights and remedies, of the holders of the Notes in and to the
Collateral granted or caused to be granted by Company, perfect
those security interests in after-acquired property, continue the
perfection of all security interests granted by Company, and file
financing statements against Company relating to the security
interests securing any Obligations. Company irrevocably authorizes
Purchasers to prepare and file at any time and from time to time
in any filing office, with a copy furnished to the Company,
initial financings statements and amendments to them necessary or
convenient to the perfection, continuation or administration of
the security interests granted by Company.
(c) Release of Financing Statements. Upon the indefeasible
payment in cash or conversion of all the Notes under Section 10.7,
and performance in full of all Obligations, under this Agreement,
the holders of the Notes will deliver to Company, at Company's
expense and in a form reasonably satisfactory to the Company,
releases of all financing statements and all other Security
Documents with an acknowledgement that the same have been
terminated, and Company shall deliver to the holders of the Notes
a general release of all of Purchasers liabilities and obligations
under this Agreement and the other Loan Documents.
SECTION 4. CLOSING.
The sale and purchase of the Notes to be purchased by you shall occur
at the offices of Xxxxx & XxXxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, at 10:00 a.m., Central time, at a closing (the "Closing"), or at such
other place and time as may be agreed upon by the Company and the Required
Holders, on July 25, 2005 or on such other Business Day thereafter on or prior
to July 31, 2005 as may be agreed upon by the Company and the Required Holders
(the "Closing Date"). At the Closing, the Company will deliver to each of you or
your nominee or other duly authorized Person acting on your behalf the Notes to
be purchased by you in the form of a single Note (or such greater number of
Notes in denominations of at least US$100,000 as you may request) dated the
Closing Date and registered in your name (or in the name of your nominee),
against delivery by you to the Company or its order of immediately available
funds in the amount specified opposite your name in Schedule A by wire transfer
of immediately available funds for the account of the Company to HSBC USA, 500
Xxxxxxx, Delaware 19713-2107, ABA: 000000000, Account Name: CanArgo Energy
Corporation, Account Number: # 001828509, (for further credit to:- HSBC Bank
plc, PO Box 00, 00 Xxxx Xxxxxx, Xx Xxxxx Xxxx, Xxxxxxxx, XX0 0XX, Account Name:
CanArgo Energy Corporation, Swift Code: XXXXXXXX, Sort Code: 40-49-20, Account
Number: # 011-660859-360). If at the Closing the Company shall fail to tender
such Notes to you as provided above in this Section 4, or any of the conditions
specified in Section 5 shall not have been fulfilled to your reasonable
satisfaction, you shall, at
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your election, be relieved of all further obligations under this Agreement,
without thereby waiving any rights you may have by reason of such failure or
such nonfulfillment.
SECTION 5. CONDITIONS TO CLOSING.
Section 5.1. Conditions to Purchaser's Obligation to Purchase Notes.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your reasonable satisfaction, prior
to or at the Closing, of the following conditions, one or more of which may be
waived in accordance with the provisions of Section 18:
Section 5.1.1. Representations and Warranties. Each of the
representations and warranties contained in Section 6 of this Agreement that are
not qualified by materiality shall be true and correct in all Material respects
as of the Closing Date and each of the representations and warranties contained
in Section 6 of this Agreement that are qualified by materiality shall be true
and correct as of the Closing Date, with the same force and effect as if made as
of the Closing Date (other than such representations and warranties as are made
as of another date, which shall have been true and correct as of such other date
and such representations and warranties not qualified by materiality shall be
true and correct in all Material respects as of such other date and except as
permitted by this Agreement to change between the date of this Agreement and the
Closing Date).
Section 5.1.2. Performance; No Default. The Company shall have
performed and complied in all Material respects with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing; and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Schedule 6.14 and 10.11), no Default or Event of Default shall have occurred and
be continuing. No CanArgo Group Member shall have entered into any transaction
since the date of the most recent financial statements delivered pursuant to
Section 6.5 that would have been prohibited by Sections 11.1, 11.3, 11.4, 11.7
or 11.9 (except with respect to transactions disclosed in Schedule 6.15) hereof
had such Sections applied since such date. Without limiting your rights with
respect to a breach of any representations, warranties or covenants herein, your
purchase of the Notes shall be deemed to constitute conclusive evidence of your
agreement that all such agreements and conditions contained in this Agreement
required to be performed or complied with by the Company prior to or at the
Closing have been performed or waived to your satisfaction.
Section 5.1.3. Compliance Certificates.
(a) Officer's Certificate. The Company shall have
delivered to you an Officer's Certificate, dated the date of the
Closing, certifying that the conditions specified in Sections
5.1.1 and 5.1.2 have been fulfilled.
(b) Secretary's Certificate. The Company shall have
delivered to you a certificate certifying as to the resolutions
attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Notes and this
Agreement.
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Section 5.1.4. Opinions of Counsel. You shall have received opinions in
form and substance satisfactory to you, dated the date of the Closing (a) from
Xxxxxxxxx Xxxxxxxx Xxxxx & Xxxxx LLP, special New York counsel (b) Xxxxx & Le
Masurier, special Guernsey counsel and (c) Xx. X. Xxxxxxxxxxxxxx & Co. Law
Office, special Cyprus counsel, in such forms and covering such matters incident
to such transactions as you may reasonably request.
Section 5.1.5. Purchase Permitted by Applicable Law, etc. On the
Closing Date your purchase of Notes shall (i) be permitted by the applicable
laws and regulations of each jurisdiction to which you are subject, without
recourse to provisions (such as Section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (ii) not violate any
applicable law or regulation (including, without limitation, Regulation U, T or
X of the Board of Governors of the Federal Reserve System) and (iii) not subject
you to any tax, penalty or liability under or pursuant to any applicable law or
regulation, which law or regulation was not in effect on the date hereof. If
requested by you, you shall have received an Officer's Certificate certifying as
to such matters of fact as you may reasonably specify to enable you to determine
whether such purchase is so permitted. Your purchase of the Notes at Closing
shall be deemed conclusive evidence of your compliance with clauses (i) through
(iii) above.
Section 5.1.6. Loan Documents. Company will execute and deliver or
cause to be executed and delivered to Purchaser each of the Loan Documents
executed by the Company and the other CanArgo Group Members party thereto on the
Closing Date.
Section 5.1.7. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by the Loan
Documents and all documents and instruments incident to such transactions shall
be reasonably satisfactory to the Required Holders and special counsel for the
Purchasers, and the Required Holders and such special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
Section 5.1.8. Subsidiary Guaranties. All Subsidiary Guarantors shall
have validly executed and delivered the Guaranty Agreements in form and
substance reasonably acceptable to you, and such agreements shall be in full
force and effect.
Section 5.1.9. Due Diligence. Completion by you of a satisfactory due
diligence review, including, but not limited to, the review of the CanArgo Group
Members' Material agreements and all engineering, operations, title,
environmental and financial data or information.
Section 5.2 Conditions to Obligations of the Company
The Company's obligation to issue and sell the Notes at Closing is
subject to the fulfillment to the Company's reasonable satisfaction, prior to or
at Closing, of the following conditions, one or more of which may be waived in
writing by the Company:
Section 5.2.1 Representations and Warranties. Each of the
representations and warranties of the Purchasers contained in Section 7 of this
Agreement that are not qualified by materiality shall be true and correct in all
Material respects as of the Closing Date and each of the representations and
warranties contained in Section 7 of this Agreement that are qualified by
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materiality shall be true and correct as of the Closing Date, with the same
force and effect as if made as of the Closing Date (other than such
representations and warranties as are made as of another date, which shall have
been true and correct as of such other date and such representations and
warranties not qualified by materiality shall be true and correct in all
Material respects as of such other date and except or permitted by this
Agreement to change between the date of this Agreement and the Closing Date).
Section 5.2.2. Performance. The Purchasers shall each have performed
and complied in all Material respects with all agreements and conditions
contained in this Agreement required to be performed or complied with by them
prior to or at the Closing
Section 5.2.3 Proceedings and Litigation. No action shall have been
taken by any Governmental Authority against any party hereto seeking to delay
the purchase and sale of the Notes or other transactions contemplated by the
Loan Documents.
Section 5.2.4 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
reasonably satisfactory to the Company and special counsel for the Company, and
such special counsel shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants, on its own behalf and on behalf of
each of the CanArgo Group Members, to you on the Closing Date that:
Section 6.1. Organization; Power and Authority. Each CanArgo Group
Member is a corporation (or other legal entity) validly existing and in good
standing under the laws of its jurisdiction of organization, and is duly
qualified as a foreign corporation (or other legal entity) and is in good
standing in each jurisdiction in which such qualification is required by law,
other than those jurisdictions as to which the failure to be so qualified or in
good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each CanArgo Group Member has the
legal power and authority to own or hold under lease the properties it purports
to own or hold under lease, to transact the business it transacts, to execute
and deliver the Loan Documents to which it is a party and to perform the
provisions hereof and thereof.
Section 6.2. Authorization, etc. Each of the Loan Documents have been
duly authorized by all necessary corporate action on the part of each CanArgo
Group Member party thereto, and each such Loan Document constitutes, and upon
execution and delivery thereof each such Loan Document will constitute (assuming
due execution and delivery by the Purchasers to the extent provided for
therein), a legal, valid and binding obligation of the CanArgo Group Member a
party thereto enforceable against such Person in accordance with their
respective terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the enforcement of creditors' rights
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generally and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 6.3. Disclosure. Except as disclosed in Schedule 6.3, this
Agreement, the Loan Documents, the certificates or schedules delivered to you by
or on behalf of the CanArgo Group Members in connection with the transactions
contemplated hereby and the financial statements listed in Schedule 6.5, taken
as a whole, do not contain any untrue statement of a Material fact or omit to
state any Material fact necessary to make the statements therein not misleading
in light of the circumstances under which they were made. Except as expressly
described in Schedule 6.3, or in one of the certificates or schedules identified
therein, or in the financial statements listed in Schedule 6.5, since December
31, 2004, there has been no change in the financial condition, operations,
business or properties of the CanArgo Group Members taken as a whole except
changes that are reflected in the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 2005, or that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
Section 6.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates.
(a) Schedule 6.4 contains (except as noted therein)
complete and correct lists (i) of each direct and indirect
Subsidiary of the Company, showing, as to each, the correct name
thereof, the jurisdiction of its organization, and the percentage
of shares of each class of its capital stock or similar equity
interests outstanding owned by any CanArgo Group Member, (ii) of
the Company's Affiliates, other than the direct and indirect
Subsidiaries, (iii) of the Company's directors and senior
officers; and (iv) of each direct and indirect Material Subsidiary
of the Company.
(b) All of the outstanding shares of capital stock or
other equity interest of each Subsidiary shown in Schedule 6.4
have been validly issued, are fully paid and nonassessable and are
owned as indicated by the Company or another Subsidiary free and
clear of any Lien (except as otherwise disclosed in Schedule 6.4).
(c) No CanArgo Group Member is a party to, or otherwise
subject to any legal restriction or any agreement (other than the
Loan Documents to which it is a party, the agreements listed on
Schedule 6.4 and customary limitations imposed by corporate or
fiscal law statutes) restricting the ability of such CanArgo Group
Member to pay dividends out of profits or make any other similar
distributions of profits to any other CanArgo Group Member that
owns outstanding shares of capital stock of such CanArgo Group
Member.
Section 6.5. Financial Statements. The Company has delivered or has
provided access to each Purchaser copies of the consolidated financial
statements listed on Schedule 6.5 of the Company and its Subsidiaries. All of
said financial statements (including in each case the related schedules and
notes) fairly present in all Material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of its operations and
cash flows for the respective periods so specified and have been prepared in
accordance with United States GAAP consistently applied throughout the
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periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal year-end adjustments and the
absence of footnotes).
Section 6.6. Compliance with Laws, Other Instruments, etc. The
execution, delivery and performance by each of the CanArgo Group Members of the
Loan Documents to which they are a party will not (i) contravene, result in any
breach of, or constitute a default under, or result in the creation of any Lien,
except as contemplated in the Loan Documents, in respect of any property of the
Company or any Subsidiary Guarantor under, any indenture, mortgage, deed of
trust, loan, purchase or credit agreement, lease, Charter Document, or any other
agreement or instrument to which the Company or any Subsidiary Guarantor is
bound or by which the Company or any Subsidiary Guarantor or any of their
respective properties may be bound or affected, (ii) conflict with or result in
a breach of any of the terms, conditions or provisions of any order, judgment,
decree, or ruling of any court, arbitrator or Governmental Authority applicable
to the Company or any Subsidiary Guarantor or (iii) violate any provision of any
current statute or other rule or regulation of any Governmental Authority
applicable to the Company or any CanArgo Group Member, in each case the effect
of which could have a Material Adverse Effect.
Section 6.7. Governmental Authorizations, etc.. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the Notes, and by the other CanArgo Group
Members of the Loan Documents to which they are a party that will not have been
obtained prior to the Closing, other than such approvals, authorizations and
filings which may be filed after the Closing with the SEC or other Governmental
Authorities in accordance with the provisions of applicable Securities Laws and
the provisions of the Registration Rights Agreement.
Section 6.8. Litigation; Observance of Agreements, Statutes and Orders.
(a) Except as disclosed in Schedule 6.8, there are no
actions, suits or proceedings pending or, to the Knowledge of the
Company or any other CanArgo Group Member, threatened against or
affecting the Company or any other CanArgo Group Member or any
property of the Company or any other CanArgo Group Member in any
court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate,
could reasonably be expected, if adversely determined, to have a
Material Adverse Effect.
(b) Neither the Company nor any other CanArgo Group Member
is in default under any term of any agreement or instrument to
which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law,
ordinance, rule or regulation (including without limitation
Environmental Laws) of any Governmental Authority, which default
or violation, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
Section 6.9. Taxes. Except as disclosed in Schedule 6.3, the Company
and each other CanArgo Group Member have filed all tax returns that are required
to have been filed in any
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jurisdiction in the seven prior fiscal years (including the current fiscal
period), and have paid all taxes shown to be due and payable on such returns and
all other taxes and assessments levied upon them or their properties, assets,
income or franchises, or otherwise payable by them, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
except for any taxes and assessments (i) the amount of which is not individually
or in the aggregate Material or (ii) the amount, applicability or validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which the Company or any other CanArgo Group Member, as the case
may be, has established adequate reserves in accordance with applicable GAAP.
The charges, accruals and reserves on the books of the Company and each other
CanArgo Group Member in respect of federal, provincial, state or other taxes for
all fiscal periods are adequate in all Material respects. The federal income tax
liabilities of the Company and each other CanArgo Group Member have been paid
for the seven prior fiscal years (including the current fiscal period) up to and
including the fiscal year ended December 31, 2004. No CanArgo Group Member has
Knowledge of the imposition of any other tax or assessment that, individually or
in the aggregate (considering all other taxes), could reasonably be expected to
have a Material Adverse Effect. For purposes of this Agreement, "tax" or "taxes"
means any taxes, levies, imposts, duties, charges, fees, deductions or
withholdings imposed, levied, collected, withheld or assessed by any taxing or
other Governmental Authority (together with any interest, penalties or similar
liabilities with respect thereto).
Section 6.10. Title to Collateral; Assets of the Company. Except as
disclosed in Schedule 6.3, the Collateral is owned by the Company or the other
CanArgo Group Members as described in the relevant Loan Document, free and clear
of any security interest, Lien, encumbrance, mortgages, security agreement or
other charge other than Permitted Encumbrances and those arising under the Loan
Documents.
Section 6.11. Licenses, Permits, etc. Except as disclosed in Schedule
6.11,
(a) the Company and each other CanArgo Group Member own or
possess all licenses, permits, franchises, authorizations,
patents, copyrights, service marks, trademarks and trade names, or
rights thereto, that individually or in the aggregate are Material
to the conduct of their respective businesses as currently being
conducted, without, to the Knowledge of the CanArgo Group Members,
conflict with the rights of others;
(b) to the Knowledge of the CanArgo Group Members, no
product of any CanArgo Group Member infringes in any Material
respect any license, permit, franchise, authorization, patent,
copyright, service mark, trademark, trade name or other right
owned by any other Person; and
(c) to the Knowledge of the CanArgo Group Members, there
is no Material violation by any Person of any right of any CanArgo
Group Member with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company
or any other CanArgo Group Member.
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Section 6.12. Benefit Plan Compliance.
(a) The Company is in compliance in all Material respects
with all presently applicable provisions of the ERISA; no
"reportable event" (as defined in ERISA) has occurred with respect
to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does
not expect to incur liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "pension plan"
or (ii) Sections 412 or 4971 of the Code , including the
regulations and published interpretations thereunder; and each
"pension plan" for which the Company would have any liability that
is intended to be qualified under Section 401(a) of the Code is so
qualified in all Material respects and nothing has occurred,
whether by action or by failure to act, which would cause the loss
of such qualification.
(b) Neither the Company nor any ERISA Affiliate of the
Company maintains any Foreign Pension Plan.
Section 6.13. Private Offering by the Company. Neither the Company nor
to the Knowledge of the Company anyone authorized to act on its behalf has
offered the Notes or any similar securities for sale to, or solicited any offer
to buy any of the same from, or otherwise approached or negotiated in respect
thereof with, any Person other than you and not more than 35 other Institutional
Investors, each of which has been offered the Notes at a private sale for
investment and not with a view to the distribution thereof or any interest
therein. Neither the Company nor to the Knowledge of the Company anyone
authorized to act on its behalf has taken, or will take, any action that would
subject the issuance or sale of the Notes to the registration requirements of
Section 5 of the Securities Act; provided, however, the availability of an
exemption from the registration requirements of Section 5 is based upon the
accuracy and completeness of the representations and warranties of each
Purchaser (and each other Person acquiring Notes from such Purchaser) set forth
in Section 7 on which the Company will rely.
Section 6.14. Use of Proceeds; Margin Regulations. The Company will
apply the proceeds of the sale of the Notes as set forth in Schedule 6.14. No
part of the proceeds from the sale of the Notes hereunder will be used, directly
or indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
(12 CFR 207), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). Margin stock does not
constitute more than 5% of the value of the Consolidated Assets of the Company
and its Subsidiaries and the Company does not have any present intention that
margin stock will constitute more than 5% of the value of such assets. As used
in this Section, the terms "margin stock" and "purpose of buying or carrying"
shall have the meanings assigned to them in said Regulation U.
Section 6.15. Existing Indebtedness; Future Liens.
(a) Schedule 6.15 sets forth a complete and correct list
of all outstanding Indebtedness of the Company. Since March 31,
2005, except as set forth on Schedule 6.15, there has been no
Material change in the amounts, interest rates, sinking funds,
installment payments or maturities of the Indebtedness of the
Company. Neither the
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Company nor any other CanArgo Group Member is in default and no
waiver of default is currently in effect, in the payment of any
principal or interest on any Indebtedness of the Company or any
other CanArgo Group Member and no event or condition exists with
respect to any Material Indebtedness of the Company or any other
CanArgo Group Member that would permit (or that with notice or the
lapse of time, or both, would permit) one or more Persons to cause
such Indebtedness to become due and payable before its stated
maturity or before its regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 6.15, neither the
Company nor any other CanArgo Group Member has agreed or consented
to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien not permitted by
Section 11.3.
Section 6.16. Foreign Assets Control Regulations, etc.. Neither the
sale of the Notes by the Company hereunder nor its use of the proceeds thereof
will violate the Trading with the Enemy Act, as amended, or any of the foreign
assets control regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto.
Section 6.17. Status under Certain Statutes. Neither the Company nor
any other CanArgo Group Member is subject to regulation under the Investment
Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935,
as amended, the ICC Termination Act of 1995, as amended, or the Federal Power
Act, as amended.
Section 6.18. Environmental Matters. Neither the Company nor any other
CanArgo Group Member has received any notice of any claim, and to the Knowledge
of the CanArgo Group Members, no proceeding has been instituted raising any
claim against the Company or any other CanArgo Group Member or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
applicable Environmental Laws, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect. Except as
disclosed in Schedule 6.18:
(a) neither the Company nor any other CanArgo Group Member
has been notified of any claim, public or private, regarding a
violation of applicable Environmental Laws or damage to the
environment emanating from, occurring on or in any way related to
real properties now or formerly owned, leased or operated by any
of them or to other assets or their use, except, in each case,
such as could not reasonably be expected to result in a Material
Adverse Effect;
(b) neither the Company nor any other CanArgo Group Member
has stored any Hazardous Materials, except Hydrocarbons, on real
properties now or formerly owned, leased or operated by any of
them or has disposed of any Hazardous Materials in a manner
contrary to any applicable Environmental Laws in each case in
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any manner that could reasonably be expected to result in a
Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased
or operated by the Company or any other CanArgo Group Member are
in compliance with applicable Environmental Laws, except where
failure to comply could not reasonably be expected to result in a
Material Adverse Effect.
Section 6.19. Basic Documents. Save as disclosed in Schedule 6.19, with
respect to the Basic
Agreements:
(a) no Basic Agreement has been Impaired and is not in
full force and effect in accordance with its terms and each Basic
Agreement constitutes a valid and binding obligation of each
CanArgo Group Member party thereto;
(b) to the Knowledge of the Company no other party to any
Basic Agreement (or any successor in interest to that party) is in
breach or default with respect to any of its obligations under the
Basic Agreements which could reasonably be expected to have a
Material Adverse Effect;
(c) no party to any Basic Agreement has given or to the
Knowledge of the Company has threatened to give notice of any
action to terminate, cancel, rescind or procure a judicial
reformation of any Basic Agreement or any of their provisions;
(d) the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement
will not result in a breach of, a default under, or other
violation of the provisions of any Basic Agreement;
(e) the Basic Documents constitute all Material contracts
and agreements to which the CanArgo Group Members are a party and
the Purchasers have received a certified copy of each Basic
Agreement to which the CanArgo Group Members are a party, in each
case as in effect on the date of delivery, and each amendment,
modification or supplement thereto;
(f) no event of force majeure (as defined in any Basic
Agreement) has occurred and is continuing under any Basic
Agreement, which could reasonably be expected to have a Material
Adverse Effect; and
(g) all Material conditions precedent to the obligations
of the CanArgo Group Members under the Basic Agreements have been
satisfied and, to the Knowledge of the CanArgo Group Members, all
Material conditions precedent to the obligations of the
counter-parties to the Basic Agreements have been satisfied.
Section 6.20. Solvency. The Company is, and on giving effect to the
issuance of the Notes and the transactions contemplated by the Loan Documents
will be, a "solvent institution" as such term is used in Section 1405(c) of the
New York Insurance Law, whose "obligations...are not in default as to principal
or interest" as such terms are used in said Section 1405(c).
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SECTION 7. REPRESENTATIONS OF THE PURCHASER.
Section 7.1. Due Authorization; Absence of Conflicts; Enforceability;
Purchase for Investment, etc.
(a) You represent and warrant to Company that you have the
full legal capacity, power and authority to execute, deliver and
perform the Loan Documents to which you are a party; the
execution, delivery and performance by you of each Loan Document
to which you are a party has been duly authorized by all necessary
legal action on your part; your execution, delivery and
performance of the Loan Documents to which you are a party and the
consummation of the transactions contemplated hereby and thereby
will not (a) conflict with (i) any provision of any governing
instrument applicable to you, or (ii) any Material permit,
franchise, judgment, decree, law, rule or regulation applicable to
you or your assets, or (b) result in any Material breach of any
terms or provisions of, or constitute a Material default under,
any Material contract, agreement or instrument to which you are a
party or by which you are bound; and such Loan Document
constitutes a legal, valid and binding obligation enforceable
against you in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar laws
affecting the enforcement of creditors' rights generally and (b)
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(b) You represent and warrant to the Company that you are
purchasing the Notes and upon their conversion, the Common Stock,
for your own account or for one or more separate accounts
maintained by you or for the account of one or more pension or
trust funds for investment and not with a view to the distribution
thereof or any interest therein, provided that the disposition of
your or their property shall at all times be within your or their
control and in compliance with applicable Securities Laws. You
understand that the Notes and except as contemplated by the
Registration Rights Agreement, upon their conversion, the Common
Stock, have not been and will not be registered under any
Securities Laws and may be resold only if registered pursuant to
the provisions of applicable Securities Laws or if an exemption
from such registration is available, except under circumstances
where neither such registration nor such an exemption is required
by law. You represent and warrant to the Company that you are an
"accredited investor" under Rule 501(a) of the Securities Act.
(c) You understand that you must bear the economic risk of
an investment in the Notes and the shares of Common Stock issuable
upon conversion of the Notes because, among other reasons, the
offering and sale of Notes and except to the extent contemplated
by the Registration Rights Agreement, the Common Stock have not
been and will not be registered under applicable Securities Laws;
the Notes and the shares of Common Stock issuable upon conversion
of the Notes are "restricted securities" as defined in Rule 144
promulgated under the Securities Act and, therefore, the Notes and
such shares cannot be sold unless such sales are subsequently
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registered under applicable Securities Laws or an exemption from
such registration is available. A legend to this effect shall be
set forth on the face of each Note.
(d) You have sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating
the merits and risks of your investment in the Notes and the
shares of Common Stock issuable upon conversion of the Notes and
you are capable of bearing the economic risks of such investment,
including a complete loss of your investment.
Section 7.2. Access to Information. Without affecting your right to
rely on the Company's representations and warranties set forth herein, you have
been given the opportunity to examine all documents and to ask questions of, and
to receive answers from, the Company and its representatives and to obtain any
additional information which the Company possesses or can acquire without
unreasonable effort or expense concerning the Company, its business affairs,
financial condition and terms and conditions of the purchase of Notes and their
conversion as you have requested in order to enable you to evaluate the merits
and risks of an investment in the Notes and upon their conversion the Common
Stock.
Section 7.3. Source of Funds. You represent and warrant to the Company
that at least one of the following statements is an accurate representation as
to each source of funds (a "Source") to be used by you to pay the purchase price
of the Notes to be purchased by you hereunder:
(a) the Source is an "insurance company general account"
within the meaning of Department of Labor Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no
employee benefit plan, treating as a single plan, all plans
maintained by the same employer or employee organization, with
respect to which the amount of the general account reserves and
liabilities for all contracts held by or on behalf of such plan,
exceeds ten percent (10%) of the total reserves and liabilities of
such general account (exclusive of separate account liabilities)
plus surplus, as set forth in the NAIC Annual Statement filed with
your state of domicile; or
(b) the Source is either (i) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January
29, 1990), or (ii) a bank collective investment fund, within the
meaning of the PTE 91-38 (issued July 12, 1991) and, except as you
have disclosed to the Company in writing pursuant to this
paragraph (b), no employee benefit plan or group of plans
maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such
pooled separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the
meaning of Part V of the QPAM Exemption), no employee benefit
plan's assets that are included in such investment fund, when
combined with the assets of all other employee benefit plans
established or maintained by the same employer or by an affiliate
(within the meaning of
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Section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of
the total client assets managed by such QPAM, the conditions of
Part I(c) and (g) of the QPAM Exemption are satisfied, neither the
QPAM nor a person controlling or controlled by the QPAM (applying
the definition of "control" in Section V(e) of the QPAM Exemption)
owns a 5% or more interest in the Company and (i) the identity of
such QPAM and (ii) the names of all employee benefit plans whose
assets are included in such investment fund have been disclosed to
the Company in writing pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (e); or
(f) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 7.3, the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
SECTION 8. INFORMATION AS TO COMPANY.
Section 8.1. Financial and Business Information. The Company shall
deliver to each holder of Notes that is an Institutional Investor:
(a) Quarterly Statements -- within 60 days after the end
of each quarterly fiscal period in each fiscal year of the Company
(other than the last quarterly fiscal period of each such fiscal
year), duplicate copies of:
(i) a consolidated balance sheet of the
Company and its Subsidiaries as at the end of such
quarter, and
(ii) consolidated statements of income,
changes in shareholders' equity and cash flows of the
Company and its Subsidiaries for such quarter and (in
the case of the second and third quarters) for the
portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding interim periods in the previous fiscal year, all in
reasonable detail, prepared in accordance with United States GAAP
applicable to quarterly financial statements generally and
certified by a Senior Financial Officer of the Company as fairly
presenting, in all Material respects, the financial position of
the companies being reported on and their results of operations
and cash flows, subject to changes resulting from year-end
adjustments and the absence of footnotes, provided that delivery
within the time period specified above of copies of the Quarterly
Report on Form 10-Q,
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including the Interim Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and
Results of Operations prepared in compliance with the requirements
therefor and filed with the SEC shall be deemed to satisfy the
requirements of this Section 8.1(a);
(b) Annual Statements -- within 105 days after the end of
each fiscal year of the Company duplicate copies of,
(i) a consolidated balance sheet of the
Company and its Subsidiaries, as at the end of such
year, and
(ii) consolidated statements of income,
changes in shareholders' equity and cash flows of the
Company and its Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in
accordance with United States GAAP and accompanied by an opinion
thereon of X X Xxxxxxxxx Associates LLC or other independent
certified public accountants of recognized national standing,
which opinion shall state that such financial statements present
fairly, in all Material respects, the financial position of the
companies being reported upon and their results of operations and
cash flows and have been prepared in conformity with United States
GAAP, and that the examination of such accountants in connection
with such financial statements has been made in accordance with
generally accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the circumstances,
provided that the delivery within the time period specified above
of the Company's Annual Report on Form 10-K, including audited
Consolidated Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations for such
fiscal year (together with the Company's annual report to
shareholders, if any) prepared in accordance with the requirements
therefor and filed with the SEC, shall be deemed to satisfy the
requirements of this Section 8.1(b);
(c) Public Reports -- promptly upon their becoming
available, one copy of (i) each financial statement, report,
notice or proxy statement sent by the Company to public securities
holders generally, and (ii) each regular or periodic report, each
registration statement (without exhibits except as expressly
requested by such holder), and each prospectus and all amendments
thereto filed by the Company with the SEC and of all press
releases and other statements made available generally by the
Company to the public concerning developments that are Material,
except in each case for those that are promptly made available on
XXXXX. Documents required to be delivered pursuant to Section
8.1(a) and (b) (to the extent any such documents are included in
materials otherwise filed with the SEC) shall be considered
delivered timely if delivered to the SEC in a timely manner and
may be delivered electronically. If so delivered, they shall be
deemed to have been delivered on the date (i) on which the Company
posts such documents, or provides a link thereto on the Company's
website on the Internet; or (ii) on which such documents are
posted on
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the Company's behalf on an Internet or intranet website (such as
XXXXX), if any, to which each Purchaser has access; provided,
that: (A) the Company shall deliver paper copies of such documents
to any holder of a Note that requests the Company to deliver such
paper copies until a written request to cease delivering paper
copies is given by such holder and (B) the Company shall notify
the holders of the Notes (by telecopier or electronic mail) of the
posting of any such documents and provide to such holder by
electronic mail electronic versions in portable document format
(i.e., pdf copies) of such documents.
(d) Notice of Default or Event of Default -- promptly, and
in any event within five Business Days after a Responsible Officer
becoming actually aware of the existence of any Default or Event
of Default or that any Person has given any notice or taken any
action with respect to a claimed Default hereunder or that any
Person has given any notice or taken any action with respect to a
claimed Default of the type referred to in Section 12(f), a
written notice specifying the nature and period of existence
thereof and what action the Company is taking or proposes to take
with respect thereto;
(e) ERISA Matters -- promptly, and in any event within
five Business Days after the Company receives notice of any of the
following, a written notice setting forth the nature thereof and
the action, if any, that the Company, an ERISA Affiliate or
another Affiliate proposes to take with respect thereto:
(i) with respect to any Plan subject to
ERISA, any reportable event, as defined in section
4043(b) of ERISA and the regulations thereunder for
which notice thereof has not been waived pursuant to
such regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to
institute, or the threatening by the PBGC of the
institution of, proceedings under section 4042 of
ERISA, for the termination of, or the appointment of
a trustee to administer, any Plan subject to ERISA,
or the receipt by the Company or any ERISA Affiliate
or other Affiliate of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with
respect to such Multiemployer Plan; or
(iii) any event, transaction or condition
that could result in the incurrence of any liability
by the Company or any ERISA Affiliate or other
Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating
to employee benefit plans, or in the imposition of
any Lien on any of the rights, properties or assets
of the Company or any ERISA Affiliate or other
Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions, if such liability
or Lien, taken together with any other such
liabilities or Liens then existing, could reasonably
be expected to have a Material Adverse Effect; or
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(iv) any contribution required to be made
with respect to a Foreign Pension Plan which is not
made within the time limit applicable thereto where
such failure could reasonably be expected to have a
Material Adverse Effect; or
(v) either the Company or an ERISA Affiliate
incurring a Material liability pursuant to any
Foreign Pension Plan which could reasonably be
expected to have a Material Adverse Effect.
(f) Notices from Governmental Authority -- promptly, and
in any event within 30 days of receipt thereof, copies of any
notice to any CanArgo Group Member from any federal, provincial,
territorial or state Governmental Authority relating to any order,
ruling, statute or other law or regulation that could reasonably
be expected to have a Material Adverse Effect; and
(g) Requested Information -- with reasonable promptness,
such other data and information in the possession or control of
the Company or any other existing or future CanArgo Group Member
or which the Company may obtain without unreasonable effort or
expense relating to the business, operations, affairs, financial
condition, assets or properties of the existing and future CanArgo
Group Members or relating to the ability of the Company to perform
its obligations hereunder and under the Notes as from time to time
may be reasonably requested by any such holder of Notes.
Section 8.2. Officer's Certificate. Each set of financial statements
delivered to a holder of Notes pursuant to Section 8.1(a) or Section 8.1(b)
hereof shall be accompanied by a certificate of a Senior Financial Officer
setting forth:
(a) Covenant Compliance -- the information (including
detailed calculations) required in order to establish whether the
Company was in compliance with the requirements of Section 10.1
through Section 11.11 hereof, inclusive, during the quarterly or
annual period covered by the statements then being furnished
(including with respect to each such Section, where applicable,
the calculations of the maximum or minimum amount, ratio or
percentage, as the case may be, permissible under the terms of
such Sections, and the calculation of the amount, ratio or
percentage then in existence); and
(b) Event of Default -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be
made, under his or her supervision, a review of the transactions
and conditions of the CanArgo Group Members from the beginning of
the quarterly or annual period covered by the statements then
being furnished to the date of the certificate and that to the
actual and not constructive Knowledge of such officer such review
shall not have disclosed the existence during such period of any
condition or event that constitutes a Default or an Event of
Default or, if any such condition or event existed or exists
(including, without limitation, any such event or condition
resulting from the failure of any CanArgo Group Member to comply
with any applicable Environmental Law),
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specifying the nature and period of existence thereof and what
action the Company or its Affiliates has taken or proposes to take
with respect thereto.
Section 8.3. Inspection. Subject to the provisions of Section 21, the
Company shall permit the representatives of each holder of Notes that is an
Institutional Investor:
(a) No Default -- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior
notice to the Company, to visit the principal executive office of
the Company, to discuss the affairs, finances and accounts of the
CanArgo Group Members with the Company's officers, and (with the
consent of the Company, which consent will not be unreasonably
withheld) its independent public accountants (and by this
provision the Company authorizes said accountants to discuss the
affairs, finances and accounts of the CanArgo Group Members), and
(with the consent of the Company, which consent will not be
unreasonably withheld) to visit the other offices and properties
of the CanArgo Group Members all at such reasonable times and as
often as may be reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then
exists, at the expense of the Company to visit and inspect any of
the offices or properties of the Company or any other CanArgo
Group Member, to examine all their respective books of account,
records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and
accounts with their respective officers and independent public
accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the
CanArgo Group Members), all at such times and as often as may be
requested.
SECTION 9. PREPAYMENT OF THE NOTES; CHANGE IN CONTROL.
Section 9.1. Optional Prepayments. The Company may, at its option, upon
notice as provided below, prepay at any time after July 31, 2006, all, or from
time to time any part of, the Notes, in a principal amount not less than
$100,000 in the case of a partial prepayment, at the Redemption Prices
(expressed as percentages of the principal amount so prepaid), set forth in
Section 9.5. The Company will give each holder of Notes written notice of each
optional prepayment under this Section 9.1 not less than 90 days and not more
than 120 days prior to the date fixed for such prepayment. Each such notice
shall specify such date, the aggregate principal amount of the Notes to be
prepaid on such date, the principal amount of each Note held by such holder to
be prepaid (determined in accordance with Section 9.2), and the interest to be
paid on the prepayment date with respect to such principal amount being prepaid,
at the Redemption Price pursuant to Section 9.5. Each holder of the Notes will
have the option to receive such prepayment in cash pursuant to this Section 9 or
to convert such Notes pursuant to Section 10.7. Each Holder that elects to
convert such Notes pursuant to Section 10.7, will give the Company written
notice of each election under this Section 9.1 not less than 30 days and not
more than 60 days prior to the date fixed for such prepayment.
Section 9.2. Allocation of Partial Prepayments. In the case of each
partial prepayment of the Notes, the principal amount of the Notes to be prepaid
shall be allocated among all of the
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Notes at the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof not theretofore called for
prepayment.
Section 9.3. Maturity; Surrender, etc. In the case of each prepayment
of Notes pursuant to this Section 9, the principal amount of each Note to be
prepaid shall mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued to such
date, at the applicable Redemption Price. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest, at the applicable Redemption Price, as aforesaid,
interest on such principal amount shall cease to accrue. Any Note paid or
prepaid in full shall be surrendered to the Company and cancelled and shall not
be reissued, and no Note shall be issued in lieu of any prepaid principal amount
of any Note. In the case of any conversion of Notes pursuant to Section 10.7,
the interest on the principal amount of the converted Notes through the date of
conversion shall be due and payable on the date of conversion.
Section 9.4. Purchase of Notes. Save with the consent of the Required
Holders, the Company will not and will not permit any CanArgo Group Member to
directly or indirectly purchase, redeem, prepay or otherwise acquire, directly
or indirectly, any of the outstanding Notes except upon the payment or
prepayment of the Notes in accordance with the terms of this Agreement and the
Notes or pursuant to an offer to purchase made to all holders on the same terms
and conditions. The Company will promptly cancel all Notes acquired by it or any
CanArgo Group Member pursuant to any payment, prepayment or purchase of Notes
pursuant to any provision of this Agreement and no Notes may be issued in
substitution or exchange for any such Notes.
Section 9.5. Redemption Price. The term "Redemption Price" means, with
respect to any Note, an amount determined in accordance with the following
table:
After: Redemption Price
------ ----------------
July 31, 2006 105%
January 1, 2007 104%
July 1, 2007 103%
January 1, 2008 102%
July 1, 2008 101%
January 1, 2009 100%
Section 9.6. Change in Control.
(a) Notice of Change in Control or Control Event. The
Company will, within five Business Days after any Responsible
Officer has actual and not constructive knowledge of the
occurrence of any Change in Control or Control Event, give written
notice of such Change in Control or Control Event to each holder
of Notes unless notice in respect of such Change in Control (or
the Change in Control contemplated by such Control Event) shall
have been given pursuant to subparagraph (b) of this Section 9.6.
If a Change in Control has occurred, such notice shall contain
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and constitute an offer to prepay Notes as described in Section
9.6(c) and shall be accompanied by the certificate described in
Section 9.6(f).
(b) Condition to Company Action. The Company will not take
any action that consummates or finalizes a Change in Control
unless (i) at least 15 Business Days prior to such action it shall
have given to each holder of Notes written notice containing and
constituting an offer to prepay Notes as described in Section
9.6(c), accompanied by the certificate described in Section
9.6(f), and (ii) contemporaneously with the action taken to
consummate or finalize any such Change in Control, it prepays all
Notes required to be prepaid in accordance with this Section 9.6.
(c) Offer to Prepay Notes. The offer to prepay Notes
contemplated by subparagraphs (a) and (b) of this Section 9.6
shall be an offer to prepay, in accordance with and subject to
this Section 9.6, all, but not less than all, the Notes held by
each holder (in this case only, "holder" in respect of any Note
registered in the name of a nominee for a disclosed beneficial
owner shall mean such beneficial owner) on a date specified in
such offer (the "Proposed Prepayment Date"). If such Proposed
Prepayment Date is in connection with an offer contemplated by
subparagraph (a) of this Section 9.6, such date shall be not less
than 30 days and not more than 90 days after the date of such
offer (if the Proposed Prepayment Date shall not be specified in
such offer, the Proposed Prepayment Date shall be the 30th day
after the date of such offer).
(d) Acceptance. A Purchaser may accept the offer to prepay
made pursuant to this Section 9.6 by causing notice of such
acceptance to be delivered to the Company at least 15 days prior
to the Proposed Payment Date. A failure by a Purchaser to respond
to an offer to prepay made pursuant to this Section 9.6 shall be
deemed to constitute an acceptance of such offer by such
Purchaser.
(e) Prepayment. Prepayment of the Notes to be prepaid
pursuant to this Section 9.6 shall be the Redemption Price of such
Notes, together with interest on such Notes accrued to the date of
prepayment. The prepayment shall be made on the Proposed
Prepayment Date.
(f) Officer's Certificate. Each offer to prepay the Notes
pursuant to this Section 9.6 shall be accompanied by a
certificate, executed by a Senior Financial Officer of the Company
and dated the date of such offer, specifying: (i) the Proposed
Prepayment Date; (ii) that such offer is made pursuant to this
Section 9.6; (iii) the principal amount of each Note offered to be
prepaid; (iv) the interest that would be due on each Note offered
to be prepaid, accrued to the Proposed Prepayment Date; (v) that
the conditions of this Section 9.6 have been fulfilled; and (vi)
in reasonable detail, the nature and date or proposed date of the
Change in Control.
(g) Effect on Required Payments. The amount of each
payment of the principal of the Notes made pursuant to this
Section 9.6 shall be applied against and reduce each of the then
remaining principal payments due pursuant to Section 9.6 by
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a percentage equal to the aggregate principal amount of the Notes
so paid divided by the aggregate principal amount of the Notes
outstanding immediately prior to such payment.
(h) "Change in Control" Defined. "Change in Control" means
(a) the Company shall at any time cease to be a publicly held
company or cease to have its capital stock traded on an exchange
or (b) a transaction or series of related transactions pursuant to
which (i) at least fifty-one percent (51%) of the outstanding
shares of Common Stock of the Company or, on a fully diluted
basis, shall subsequent to the date of this Agreement be owned by
any Person (as hereinafter defined) which is not related to or
Affiliated with the Company, (ii) the Company merges into or with,
consolidates with or effects any plan of share exchange or other
combination with any Person which is not related to or Affiliated
with the Company, or (iii) the Company disposes of all or
substantially all of its assets other than in the ordinary course
of business.
(i) "Control Event" Defined. "Control Event" means:
(i) the execution by any CanArgo Group
Member of any agreement or letter of intent with
respect to any proposed transaction or event or
series of transactions or events which, individually
or in the aggregate, may reasonably be expected to
result in a Change in Control, or
(ii) the execution of any written agreement
which, when fully performed by the parties thereto,
would result in a Change in Control.
SECTION 10. AFFIRMATIVE COVENANTS.
The Company covenants, on its behalf and on behalf of all the other
CanArgo Group Members, that so long as any of the Notes are outstanding:
Section 10.1. Compliance with Law. The Company will and will cause each
of the other CanArgo Group Members to comply with all applicable laws,
ordinances or governmental rules or regulations to which each of them is
subject, including, without limitation, applicable Environmental Laws, in all
respects, and will obtain and maintain in effect all licenses, certificates,
permits, franchises and other governmental authorizations necessary to the
ownership of their respective properties or to the conduct of their respective
businesses, in each case except to the extent that non-compliance with such
laws, ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 10.2. Insurance. Except for or as a result of the failure by a
counterparty to comply with its obligations under a Basic Document, the Company
will and will cause each of the other CanArgo Group Members to maintain with
insurers which on the date the policy commences are financially sound and
reputable, insurance with respect to their respective Material properties and
businesses against such casualties and contingencies, of such types, on such
terms and in such amounts (including deductibles, co-insurance and
self-insurance, if
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adequate reserves are maintained with respect thereto) as is customary in the
case of entities of established reputations engaged in the same or a similar
business and similarly situated. To the extent a counterparty to a Basic
Document fails to comply with its obligations under a Basic Document, the
Company shall, or shall cause any Material Subsidiary that is a party to such
Basic Document, to use commercially reasonable efforts to enforce the terms of
the Basic Document.
Section 10.3. Maintenance of Properties. Except for or as a result of
the failure by a counterparty to comply with its obligations under a Basic
Document, the Company will and will cause each of the other CanArgo Group
Members to maintain and keep, or cause to be maintained and kept, their
interests in the respective Properties constituting Material tangible personal
property in good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
conducted in the ordinary course at all times, provided that this Section shall
not prevent the Company or any of the other CanArgo Group Members from
discontinuing the operation and the maintenance of any of its Properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 10.4. Payment of Taxes and Claims. The Company will and will
cause each of the other CanArgo Group Members to file all tax returns required
to be filed in any jurisdiction and to pay and discharge all taxes shown to be
properly due and payable on such returns and all other taxes, assessments,
governmental charges, or levies imposed on them or any of their properties,
assets, income or franchises, to the extent such taxes and assessments have
become properly due and payable and before they have become delinquent, and all
claims for which sums have become due and payable that have become a Lien on
properties or assets of the Company or any other CanArgo Group Member, provided
that neither the Company nor any other CanArgo Group Member need pay any such
tax or assessment or claims if (i) the amount, applicability or validity thereof
is contested by the Company or such other CanArgo Group Member on a timely basis
in good faith and in appropriate proceedings, and the Company or such other
CanArgo Group Member has established adequate reserves therefor in accordance
with appropriate GAAP on the books of the Company or such other CanArgo Group
Member or (ii) the nonpayment of all such taxes and assessments and claims in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
Section 10.5. Corporate Existence, etc. The Company will at all times
preserve and keep in full force and effect its corporate existence. Subject to
Sections 11.2 and 11.8, the Company will at all times preserve and keep in full
force and effect the corporate existence of each of the other CanArgo Group
Members (unless merged into the Company or a Material Subsidiary) and all rights
and franchises of the Company and the other CanArgo Group Members unless, in the
good faith judgment of the Company, the termination of or failure to preserve
and keep in full force and effect such corporate existence, right or franchise
could not, individually or in the aggregate, have a Material Adverse Effect;
provided that the foregoing shall not prohibit any merger, consolidation,
liquidation or dissolution permitted under Section 11.2.
Section 10.6. Additional Subsidiaries. All Material Subsidiaries of the
Company formed or acquired after the date of the Closing shall execute a
Subsidiary Guaranty substantially
-22-
in the form required by the terms of the Subsidiary Guaranty and shall
thereafter be deemed to constitute a CanArgo Group Member. Notwithstanding the
foregoing, the Parties agree that the following Persons shall not be obliged,
pursuant to the requirements of this Section 10.6, to execute and deliver a
Subsidiary Guaranty: (i) a Material Subsidiary of the Company in which an equity
holder in such Material Subsidiary owns 20% or greater of all Equity Interest in
such a Material Subsidiary, (ii) BN Munai LLP, (iii) a Subsidiary of BN Munai
LLP, or (iv) a Material Subsidiary that is a Material Subsidiary solely because
such Material Subsidiary has Indebtedness outstanding of greater than $1,250,000
to a CanArgo Group Member and the Company, directly or indirectly, owns less
than 75% of all of the Equity Interest of such Material Subsidiary.
Section 10.7. Conversion of Note. Purchasers shall have the right to
convert each of their Notes as follows:
(a) At any time a Purchaser may convert all or a portion
of the outstanding principal into shares of Common Stock of the
Company at a price per share equal to US$0.90 per share, as such
price may be adjusted pursuant to Section 10.7(d) and 10.7(e)
("Conversion Price"). Any such conversions of a portion of the
Notes shall be in minimum aggregate amounts of $100,000, or
multiples thereof.
(b) To elect any conversion, a Purchaser shall provide to
the Company written notice of said election. The parties shall
thereafter proceed with diligence to close said conversion not
more than 30 days following the Company's receipt of the election
notice. The effective date of any conversion shall be the date on
which the election notice is delivered to the Company
notwithstanding that closing may be delayed beyond 30 days after a
Purchaser's election notice is delivered to the Company. Any
Purchaser electing to convert its Notes shall realize all economic
and equitable benefits of conversion from and after said effective
date.
(c) Upon the closing of a conversion, the Company shall
authorize and issue to such Purchaser a certificate representing
the applicable number of shares of Common Stock issuable upon such
conversion in accordance with this Section 10.7.
(d) In the event the Company issues equity securities
after the date of this Agreement (other than pursuant to the
granting of stock options pursuant to employee stock option plans
approved by the Company's stockholders; or the exercise or
conversion of outstanding warrants, stock options or convertible
securities, including without limitation the conversion of the
Ozturk Convertible Loan) with a price of less than US$0.90 per
share, such price per share determined net of all fees, costs and
expenses incurred in connection with such issuance, then the
Conversion Price in Section 10.7(a) shall be automatically reset
to the lowest net effective price per share, without any further
action of the Purchasers.
(e) In the event the number of outstanding shares of
Common Stock are changed into a different number or class of
shares by reason of any stock split, stock dividend, reverse stock
split, reclassification, recapitalization, combination, merger,
consolidation or any similar transaction, then the Conversion
Price in Section 10.7(a)
-23-
and the number of shares of Common Stock issuable upon conversion
of the Notes will be appropriately adjusted to reflect any such
event, such that the holders will receive upon conversion the
identical number of shares of Common Stock or other consideration
or property to be received by the holders of the Common Stock as
if the holders had converted their Notes immediately prior to any
such event as such amount would then be adjusted by reason of such
stock split, stock dividend, reverse stock split,
reclassification, recapitalization, combination, merger,
consolidation or other similar transaction. No fractional shares
of Common Stock shall be issued upon any conversion; instead the
Conversion Price shall be appropriately adjusted so that holders
shall receive the nearest whole number of shares upon any
conversion.
Section 10.8. Additional Security. Upon the reasonable request of the
Required Holders, the Company shall promptly, and shall promptly cause any
Material Subsidiaries requested by such Required Holders to, provide any
additional security as requested by the Required Holders, including, without
limitation, any additional pledges, charges, collateral assignments, security
agreements and/or any other encumbrance or lien in favor of the Purchasers with
respect to the Company or any of its Material Subsidiaries. In addition, upon
the reasonable request of the Required Holders, the Company shall also provide
or cause any Material Subsidiaries to provide any requested legal opinions
relating to such security and certificates of the Company or any of its Material
Subsidiaries certifying true and correct copies of any authorizing resolutions
relating to such security. The Parties acknowledge and agree that it is the
intent of the Parties to cause the Notes to be secured by all Material assets of
the CanArgo Group Members.
Section 10.9. Payment of Special Counsel and other Fees. After the
Closing, the Company shall pay or cause to be paid within ten Business Days
after receipt of an invoice therefor the reasonable fees, charges and
disbursements of your special counsel and the fees of other professionals
engaged to represent the Purchasers in connection with this Agreement. The
Company's obligation to pay such fees shall not to exceed in the aggregate
US$100,000.00 for services rendered by all such counsel and other professionals
in connection with the transactions contemplated by the Loan Documents.
Section 10.10. Payment of Placement Fee. Within ten Business Days after
the Closing, the Company shall pay or cause to be paid the placement fee to
Orion Securities in the amount of US$250,000.00.
Section 10.11. Termination of Cornell Facilities. Within ten Business
Days after the Closing, Company shall deliver to Purchasers (a) reasonably
satisfactory evidence of the payment of all of the Company's obligations under
the Cornell Facility and any other agreements relating to or arising out of the
Cornell Facility by the payment of the Cornell Facility in full and in cash with
the proceeds from the issuance of the Notes and (b) a copy of the notice of
termination delivered under the Cornell Facility.
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SECTION 11. NEGATIVE COVENANTS.
Without the prior written consent of the Required Holders, the Company
covenants, on its own behalf and on behalf of each of its other CanArgo Group
Members that so long as any aggregate principal amount of the Notes is
outstanding:
Section 11.1. Transactions with Affiliates. Except as provided in
Schedule 11.1, the Company will not and will not permit any other CanArgo Group
Member to enter into directly or indirectly any transaction or group of related
transactions (including, without limitation, the purchase, lease, sale or
exchange of Material properties of any kind or the rendering of any service)
with any Affiliate (other than the Company or another Material Subsidiary),
except in the ordinary course and pursuant to the reasonable requirements of the
Company's or such CanArgo Group Member's business and upon fair and reasonable
terms no less favorable to the Company or such CanArgo Group Member than would
be obtainable in a comparable arm's-length transaction with a Person not an
Affiliate.
Section 11.2. Merger, Consolidation, etc. The Company will not, and
will not permit any other CanArgo Group Member to, consolidate with or merge
with any other corporation or convey, transfer or lease substantially all of its
assets in a single transaction or series of transactions to any Person (except
that a Material Subsidiary of the Company may (x) consolidate with or merge
with, or convey, transfer or lease substantially all of its assets in a single
transaction or series of transactions to, another Material Subsidiary or the
Company and (y) convey, transfer or lease all of its assets in compliance with
the provisions of Section 11.8, provided immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing).
Section 11.3. Liens. The Company will not, and will not permit any
other CanArgo Group Member to, directly or indirectly create, incur, assume or
permit to exist (upon the happening of a contingency or otherwise) any Lien on
or with respect to any property or asset (including, without limitation, any
document or instrument in respect of goods or accounts receivable) of the
Company or any such other CanArgo Group Member, whether now owned or held or
hereafter acquired, or any income or profits therefrom, or assign or otherwise
convey any right to receive income or profits, except:
(a) Liens for taxes, assessments or other governmental
charges or levies the payment of which is not at the time required
by Section 10.4;
(b) statutory Liens of landlords, Governmental Authorities
and Liens of carriers, operators, vendors, equipment lessors,
warehousemen, mechanics, repairmen, suppliers, workers,
construction materialmen and other similar Liens and other like
Liens incident of the exploration, development, operation and
maintenance of oil and gas properties, in each case, incurred in
the ordinary course of business for sums not yet due or the
payment of which is not at the time required by Section 10.4;
(c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business (i) in
connection with workers' compensation, unemployment insurance and
other types of social security or
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retirement benefits, or (ii) to secure (or to obtain letters of
credit that secure) the performance of tenders, statutory
obligations, surety bonds, appeal bonds, bids, trade contracts,
leases (other than Capital Leases), government contracts,
performance bonds, purchase, construction or sales contracts,
regulatory obligations and other similar obligations, in each case
not incurred or made in connection with the borrowing of money,
the obtaining of advances or credit or the payment of the deferred
purchase price of property;
(d) any attachment or judgment Lien, not giving rise to an
Event of Default;
(e) leases or subleases granted to others, easements,
reservations, servitudes, permits, conditions, covenants,
exceptions, rights-of-way, restrictions and other similar charges
or encumbrances, in each case incidental to, and not interfering
with, the ordinary conduct of the business of the Company or any
of its Subsidiaries, provided that such Liens do not, in the
aggregate, materially detract from value of such property;
(f) any Lien created to secure all or any part of the
purchase price, or to secure Indebtedness incurred or assumed to
pay all or any part of the purchase price or cost of construction,
of property (or any improvement thereon) acquired or constructed
by the Company or any other CanArgo Group Member after the date of
the Closing, provided that
(i) any such Lien shall extend solely to the
item or items of such property (or improvement
thereon) so acquired, leased or constructed and, if
required by the terms of the instrument originally
creating such Lien, other property (or improvement
thereon) which is an improvement to or is acquired
for specific use in connection with such acquired,
leased or constructed property (or improvement
thereon) or which is real property being improved by
such acquired, leased or constructed property (or
improvement thereon),
(ii) the principal amount of the
Indebtedness secured by any such Lien shall at no
time exceed an amount equal to 80% (but 100% in the
case of property (or improvement thereon) the
acquisition of which is financed through a Capital
Lease Obligation) of the lesser of (A) the cost to
the Company or such other CanArgo Group Member of the
property (or improvement thereon) so acquired or
constructed and (B) the Fair Market Value (as
determined in good faith by the board of directors of
the Company) of such property (or improvement
thereon) at the time of such acquisition or
construction,
(iii) any such Lien shall be created
contemporaneously with, or within 180 days after, the
acquisition, lease or construction of such property;
-26-
(g) Liens securing Indebtedness arising under the Loan
Documents;
(h) contractual Liens which arise in the ordinary course
of business under and pursuant to the terms of the Basic Documents
or other concession agreements, production sharing agreements and
contracts; joint venture, exploration, limited or general
partnership, dry hole, bottom hole, acreage contribution, purchase
and acquisition agreements; exploration, production and
development licenses; operating agreements; drilling agreements;
oil and gas leases; farm-out and farm-in agreements; division
orders; contracts for the sale, transportation or exchange of oil
and natural gas; unitization and pooling declarations and
agreements; area of mutual interest agreements; overriding and net
profits royalty agreements; marketing agreements; processing
agreements; development agreements; gas balancing or deferred
production agreements; injection, repressuring and recycling
agreements; salt water or other disposal agreements; seismic or
other geophysical permits or agreements, and other agreements
which are usual and customary in the oil and gas business and are
for claims which are not delinquent or which are being contested
in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with applicable GAAP,
provided that any such Lien referred to in this clause does not
materially impair the use of the property covered by such Lien for
the purposes for which such property is held by the Company or any
other CanArgo Group Member or materially impair the value of such
property subject thereto;
(i) Liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of set-off
or similar rights and remedies and burdening only deposit accounts
or other funds maintained with a creditor depository institution,
provided that no such deposit account is a dedicated cash
collateral account or is subject to restrictions against access by
the depositor in excess of those set forth by regulations
promulgated by the Board of Governors of the Federal Reserve
System of the United States of America (or any successor
Governmental Authority) or other Governmental Authority and no
such deposit account is intended by the Company or any other
CanArgo Group Member to provide collateral to the depository
institution, except in each such case in connection with letter of
credit obligations issued pursuant to or in connection with any
Basic Documents or other agreements referred to in clause (h);
(j) Other Liens not described in clauses (a) to (i) of
this Section on the property of the Company or any Subsidiary in
an aggregate amount at any time not exceeding US$100,000; and
(k) Permitted Encumbrances.
Section 11.4. Priority. Company shall not, without the consent of the
Required Holders issue any Indebtedness with priority over, or pari passu with,
the Notes.
Section 11.5. Line of Business. The Company will not, and will not
permit any other CanArgo Group Member to, engage to any substantial extent in
any business other than the
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businesses in which the Company and the other CanArgo Group Members are engaged
on the date of this Agreement and businesses reasonably related thereto or in
furtherance thereof.
Section 11.6. Restricted Payments. The Company will not make any
Restricted Payments, except (a) the Company may declare and pay (i) dividends
with respect to its Equity Interests payable solely in additional shares of its
Equity Interests or Indebtedness and (ii) interest and principal on Indebtedness
owed by the Company to another CanArgo Group Member in either case which does
not contravene the provisions of this Agreement, and (b) the Company may make
distributions pursuant to and in accordance with stock incentive plans or other
Plans for management or employees of the Company and its Subsidiaries.
Section 11.7. Sale-and-Leasebacks. The Company will not, and will not
permit any of its Subsidiaries to, enter into any Sale-and-Leaseback
Transaction.
Section 11.8. Sale of Assets, etc.
(1) Sale of Assets, etc. The Company will not, and will not permit any
other CanArgo Group Members to, make any Transfer, provided that the foregoing
restriction does not apply to a Transfer if:
(a) the property that is the subject of such Transfer
constitutes either (i) inventory held for sale (including the sale
of Hydrocarbons in the ordinary course of business, including,
without limitation, pursuant to advance sales contracts, forward
contracts and production payments), (ii) abandonments,
assignments, leases, subleases or farm-outs of oil and gas
properties or dispositions of properties pursuant to operating
agreements or other forms of exploration and development
agreements or option agreements or (iii) property, equipment,
fixtures, supplies or materials no longer required in the
operation of the business of the Company or such Subsidiary or
that is redundant, condemned, obsolete, and, in the case of any
Transfer described in clauses (i) through (iii), such Transfer is
in the ordinary course of business (an "Ordinary Course
Transfer"); or
(b) either
(i) such Transfer is from a CanArgo Group
Member to the Company, or
(ii) such Transfer is from the Company to a
CanArgo Group Member or from a CanArgo Group Member
to another CanArgo Group Member and in either case is
for Fair Market Value,
so long as immediately before and immediately after the
consummation of such transaction, and after giving effect thereto,
no Default or Event of Default exists or would exist (each such
Transfer, an "Intergroup Transfer"); or
-28-
(c) such Transfer involves oil and gas properties or
interests therein that are exchanged for other oil and gas
properties or interests therein in arms length transactions or
such Transfer is pursuant to a Permitted Farmout Arrangement.
(2) Disposal of Ownership of a CanArgo Group Member. The Company will
not, and will not permit any CanArgo Group Members to, sell or otherwise dispose
of any shares of Subsidiary Stock, nor will the Company permit any such CanArgo
Group Member to issue, sell or otherwise dispose of any shares of its own
Subsidiary Stock, provided that the foregoing restrictions do not apply to:
(a) the issue of directors' qualifying shares by any such
Material Subsidiary;
(b) any such Transfer of Material Subsidiary Stock
constituting an Intergroup Transfer;
(c) any such Transfer of Material Subsidiary Stock by a
nominee holder as required pursuant to the terms of a Pledge
Agreement;
(d) any issuance of shares of Subsidiary Stock by a
Material Subsidiary that qualifies as a Permitted Farmout
Arrangement; and
(e) the disposition or dissolution of any Subsidiary that
is not a Material Subsidiary; provided that the proceeds of such
disposition or assets of the Subsidiary are transferred to another
CanArgo Group Member and immediately before and immediately after
the consummation of such transaction, and after giving effect
thereto, no Default or Event of Default exists or would exist.
Section 11.9. Future Indebtedness. The Company will not incur any
Indebtedness after the date of this Agreement other than (a) Indebtedness
outstanding under the Notes, (b) any additional unsecured Indebtedness, the
aggregate amount outstanding thereunder at any time shall not exceed
US$1,250,000, (c) unsecured Indebtedness of the Company to another CanArgo Group
Member or unsecured Indebtedness of a CanArgo Group Member or direct or indirect
Subsidiary of the Company to another CanArgo Group Member, and (d) Indebtedness
of a CanArgo Group Member to a direct or indirect Subsidiary of the Company that
is not a Material Subsidiary provided that the aggregate amount outstanding
thereunder at any time shall not exceed US$1,000,000. In considering whether to
give its consent to any future Indebtedness, the Required Holders shall be
entitled to take into consideration, inter alia, the potential effects of any
such proposed Indebtedness upon the financial condition and wherewithal of the
Company and/or upon their rights under the Loan Documents, and any decision by
the Required Holders to withhold their consent to any such proposed future
Indebtedness shall be final and binding absent a showing of manifest bad faith.
Section 11.10. Basic Documents. The Company shall not and shall not
permit any other CanArgo Group Member, to (i) cancel or terminate any Basic
Agreement to which the Company or other CanArgo Group Members are a party or
consent to or accept any cancellation or termination thereof prior to the
scheduled expiration thereof, (ii) sell, assign (other than pursuant
-29-
to the Security Documents or a Permitted Farmout Arrangement) or otherwise
dispose of (by operation of law or otherwise) any part of its interest in any
Basic Agreements, (iii) waive any default under or breach of any provision of
any Basic Agreement to which the Company or any of its Subsidiaries are a party,
or waive, fail to enforce, forgive, compromise, settle, adjust or release any
Material right, interest or entitlement, howsoever arising, under, or in respect
thereof, or (iv) amend, supplement, modify or in any way vary in any respect or
agree to any variation of any provision of any Basic Agreement to which the
Company or any other CanArgo Group Members are a party, or of the performance of
any Material covenant or obligation by any other Person under any Basic
Agreement, except any amendment, supplement, modification or variation of the
Basic Agreements as a result of the transfer by (x) NOC (Cyprus)'s interest in
the Ninotsminda PSC (as defined in Schedule 6.19) to NOC (Jersey) and (y) CNL
(Cyprus)'s interest in the Norio PSC and Tbilisi PSC (both as defined in
Schedule 6.19) to CNL (Jersey).
Section 11.11. Anti-takeover Defense.
(a) Except as hereinafter specifically provided, so long
as any Indebtedness under any of the Notes is outstanding, the
Company shall not enter into or adopt any anti-takeover defense,
"poison pill", shareholder rights plan or any other device
designed to prevent a takeover, hostile or otherwise, that could
encumber, restrict or affect Xxxxxxx & Xxxxxx LLC, Xxxxxx X.
Xxxxxx, Xxxxxx X. Xxxxxxx, and/or Xxxxxxx & Xxxxxx Value Partners
L.P. to acquire any Equity Interests of the Company.
(b) Notwithstanding the provisions of Section 11.11(a) to
the contrary provided, the Company may enter into or adopt an
anti-takeover defense, "poison pill", shareholder rights plan or
any other device designed to prevent Xxxxxxx & Xxxxxx LLC, Xxxxxx
X. Xxxxxx, Xxxxxx X. Xxxxxxx, and/or Xxxxxxx & Xxxxxx Value
Partners L.P. or other Note holders to acquire such Equity
Interests by means of or in connection with the direct or indirect
forbearance, cancellation or exchange of all or any part of the
Indebtedness evidenced by the Notes.
(c) Notwithstanding the provisions of Section 11.11(a) to
the contrary provided, Xxxxxxx & Xxxxxx Value Partners L.P. hereby
agrees that so long as any Notes are outstanding and no Event of
Default exists and is continuing and until the expiration of the
second anniversary after the indefeasible satisfaction of all
Indebtedness under the Notes, whether by payment, conversion,
exchange or otherwise (other than in connection with any
proceeding under the United States Bankruptcy Code), Xxxxxxx &
Xxxxxx Value Partners L.P. shall not, without the express written
consent or approval of the incumbent Board of Directors of the
Company, solicit or otherwise seek to effect or participate in a
Change of Control of the Company or a change in the composition of
the incumbent Board of Directors by means of the purchase or offer
to purchase of any Equity Interests of the Company, the
solicitation of proxies or written consents, or by voting any
Equity Interests acquired by Xxxxxxx & Xxxxxx Value Partners L.P.
upon the conversion of Notes pursuant to Section 10.7, in
connection with any solicitation of proxies or written consents or
at any regular or special meeting of shareholders or otherwise.
-30-
SECTION 12. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal
at the applicable Redemption Price, if any, on any Note when the
same becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on
any Note or in the payment of any expenses due hereunder or under
any Security Document for more than five Business Days after the
same becomes due and payable; or
(c) the Company defaults in the performance of or
compliance with any term contained in Sections 9.6, 10.11, 11.2,
11.3, 11.4, 11.6, 11.7, 11.8, 11.9, 11.10, or 11.11; or
(d) the Company defaults in the performance or compliance
with any other term herein (other than those referred to in
paragraphs (a), (b) and (c) of this Section 12) and such default
is not remedied within 30 days after the earlier of (i) a
Responsible Officer obtaining actual and not constructive
knowledge of such default and (ii) the Company receiving written
notice of such default from any holder of a Note (any such written
notice to be identified as a "notice of default" and to refer
specifically to this paragraph (d) of Section 12); or
(e) any representation or warranty made in writing by or
on behalf of the Company or any other CanArgo Group Member or by
any officer of the Company or any other CanArgo Group Member in
this Agreement, in any Security Document or in any writing
furnished in connection with the transactions contemplated hereby
proves to have been false or incorrect in any Material respect on
the date as of which made; or
(f) the Company or any other CanArgo Group Member (i) is
generally not paying, or admits in writing its inability to pay,
its debts as they become due, (ii) files, or consents by answer or
otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy,
for liquidation or to take advantage of any bankruptcy,
insolvency, reorganization, moratorium or other similar law of any
jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its
property, (v) is adjudicated as insolvent or to be liquidated, or
(vi) takes corporate action for the purpose of any of the
foregoing; or
(g) a court or governmental authority of competent
jurisdiction enters an order appointing, a custodian, receiver,
trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, or
constituting an order for relief or approving a petition for
relief or reorganization or any other
-31-
petition in bankruptcy or for liquidation or to take advantage of
any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Company or any
other CanArgo Group Member, or any such petition shall be filed
against the Company or any other CanArgo Group Member and such
petition shall not be dismissed or stayed pending appeal within 90
days, or are not discharged within 60 days after the expiration of
such stay; or
(h) a final judgment or judgments for the payment of money
aggregating in excess of US$2,500,000 (to the extent not covered
by insurance) are rendered against the Company or any other
CanArgo Group Member and which judgments are not, within 90 days
after entry thereof, bonded, discharged, finally settled or stayed
pending appeal, or are not discharged within 60 days after the
expiration of such stay; or
(i) if (i) any Plan subject to ERISA shall fail to satisfy
the minimum funding standards of ERISA or the Code for any plan
year or part thereof or a waiver of such standards or extension of
any amortization period is sought or granted under section 412 of
the Code, (ii) a notice of intent to terminate any Plan subject to
ERISA shall have been or is reasonably expected to be filed with
the PBGC or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer any
such Plan or the PBGC shall have notified the Company or any ERISA
Affiliate or other Affiliate that a Plan subject to ERISA may
become a subject of any such proceedings, (iii) the aggregate
"amount of unfunded benefit liabilities" (within the meaning of
section 4001(a)(18) of ERISA) under all Plans subject to ERISA,
determined in accordance with Title IV of ERISA shall exceed
US$500,000, (iv) the Company or any ERISA Affiliate or other
Affiliate shall have incurred or is reasonably expected to incur
any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit
plans subject to ERISA in excess of $500,000, (v) the present
value of the accrued benefit liabilities (whether or not vested)
under each Foreign Pension Plan maintained by the Company or an
ERISA Affiliate, determined as of the end of its most recently
ended fiscal year on the basis of actuarial assumptions, each of
which is reasonable, exceeds the current value of the assets of
such Foreign Pension Plan allocable to such benefit liabilities by
US$500,000 or more, (vi) either the Company or an any other
CanArgo Group Member incurs a Material liability pursuant to any
Foreign Pension Plan which could reasonably be expected to have a
Material Adverse Effect, (vii) the Company or any ERISA Affiliate
or other Affiliate withdraws from any Multiemployer Plan, or
(viii) the Company or any other CanArgo Group Member establishes
or amends any employee welfare benefit plan that provides
post-employment welfare benefits in a manner that would increase
the liability of the Company or any other CanArgo Group Member
thereunder in any Material respect; and any such event or events
described in clauses (i) through (viii) above, either individually
or together with any other such event or events, has a Material
Adverse Effect; or
(j) (i) this Agreement, the Notes, any Security Document,
or any other Loan Document ceases to be in full force and effect
(except in accordance with its
-32-
terms) or is declared null and void or the validity or
enforceability is contested or challenged by Company, any
Affiliate of Company or any of their respective partners or
shareholders; (ii) Company denies that it has any further
liability or obligation under any of the Loan Documents prior to
the indefeasible satisfaction in full of all Obligations under the
Loan Documents; or (iii) any of the Liens and security interest
granted to Purchasers under the Security Documents cease to be
valid or perfected or cease to have the priority required hereby
or under the Security Documents prior to the indefeasible
satisfaction in full of all Obligations under the Loan Documents,
other than as a result of the action or omission by any Purchaser
or holder; or
(k) the Company or any other CanArgo Group Member modifies
or amends any of its Charter Documents in any Material manner
without the Required Holders' prior written consent, unless any
such amendment will not result in a Default or Event of Default
(without regard to this Section 12(k)) and will not adversely
affect the rights of the holders under the Loan Documents; or
(l) a change occurs in the consolidated financial
condition of the Company or in the physical, operational or
financial status of the Properties, which change is not otherwise
described in this Article 12 and has a Material Adverse Effect and
which has not been remedied pursuant to Section 12(d).
SECTION 13. REMEDIES ON DEFAULT, ETC.
Section 13.1. Acceleration.
(a) If an Event of Default with respect to the Company or
any other CanArgo Group Member described in paragraph (f) or (g)
of Section 12 (other than an Event of Default described in clause
(i) of paragraph (f) or described in clause (vi) of paragraph (f)
by virtue of the fact that such clause encompasses clause (i) of
paragraph (f)) has occurred, all the Notes then outstanding shall
automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is
continuing, the Required Holders may at any time at its or their
option, by notice or notices to the Company, declare all the Notes
then outstanding to be immediately due and payable.
(c) If any Event of Default described in paragraph (a) or
(b) of Section 12 has occurred and is continuing, any holder or
holders of Notes at the time outstanding affected by such Event of
Default may at any time, at its or their option, by notice or
notices to the Company, declare all the Notes held by it or them
to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 13.1,
whether automatically or by declaration, such Notes will forthwith
mature and the entire unpaid principal amount of such Notes at the
applicable Redemption Price, if any, plus all accrued and unpaid
interest thereon (to the full extent permitted by applicable law),
shall all be immediately due and payable, in each and every case
without presentment,
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demand, protest or further notice, all of which are hereby waived. The
Company acknowledges, and the parties hereto agree, that each holder of
a Note has the right to maintain its investment in the Notes free from
repayment by the Company (except as herein specifically provided for),
and that the provision for payment at the Redemption Price by the
Company in the event that the Notes are prepaid or are accelerated as a
result of an Event of Default, is intended to provide compensation for
the deprivation of such right under such circumstances.
Section 13.2. Other Remedies. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section 13.1, the holder of
any Note at the time outstanding may proceed to protect and enforce the rights
of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Note, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law or otherwise. Upon an Event of Default, holders will have,
in addition to all of their other rights arising under any of the Loan Documents
or by operation of law or otherwise (which rights shall be cumulative), all of
the rights and remedies of a secured party under the Uniform Commercial Code or
other applicable law of the jurisdiction where any such Collateral is then
located and will have the right to enter upon any premises where the Collateral
is kept and peacefully retake possession in accordance with the provisions of
the Uniform Commercial Code or such other applicable law.
Section 13.3. Collateral. Holders will have no obligation to preserve
rights to any Collateral against prior parties or to proceed first against any
Collateral or to marshal any Collateral of any kind for the benefit of any other
creditor of Company or any other Person. Company grants to each holder a license
or other right to use, without charge, Company labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks and
advertising matter, or any property of a similar nature related to the
Collateral and necessary or convenient to enable holder to complete production
of, advertising for sale and selling any Collateral, and Company's rights under
all such licenses and any franchise, sales or distribution agreements will inure
to the holder's benefit in connection therewith. Xxxxxx agrees that it shall, in
connection with the foregoing and in the exercise of its rights hereunder comply
with all applicable laws, rules and regulations promulgated by all Governmental
Authorities with jurisdiction.
Section 13.4. Costs and Expenses. Company shall pay all costs and
expenses of amending, administering, implementing, perfecting, collecting,
defending, declaring and enforcing holder rights, security interests in the
Collateral under this Agreement or any Security Document or other instrument or
agreement delivered in connection with any of the Loan Documents, including
searches and filings at all times, and holder's reasonable attorneys' fees
(actually incurred, regardless of whether any litigation is commenced or default
is declared and regardless of tribunal or jurisdiction) .
Section 13.5. Rescission. At any time after any Notes have been
declared due and payable pursuant to clause (b) or (c) of Section 13.1, the
Required Holders, by written notice to the Company, may rescind and annul any
such declaration and its consequences if (a) the
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Company has paid all overdue interest on the Notes and all principal at the
applicable Redemption Price, if any, on any Notes that are due and payable and
are unpaid other than by reason of such declaration, and all interest on such
overdue principal at the applicable Redemption Price, if any, and (to the extent
permitted by applicable law) any overdue interest in respect of the Notes, at
the Default Rate, (b) all Events of Default and Defaults, other than non-payment
of amounts that have become due solely by reason of such declaration, have been
cured or have been waived pursuant to Section 18, and (c) no judgment or decree
has been entered for the payment of any monies due pursuant hereto or to the
Notes. No rescission and annulment under this Section 13.5 will extend to or
affect any subsequent Event of Default or Default or impair any right consequent
thereon.
Section 13.6. No Waivers or Election of Remedies, Expenses, etc. No
course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 16, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 13, including, without limitation,
reasonable attorneys' fees, expenses and disbursements actually incurred.
SECTION 14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
Section 14.1. Registration of Notes. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or Knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes; provided
that such holder in its request agrees that such information is subject to the
confidentiality provisions of Section 21.
Section 14.2. Transfer and Exchange of Notes. Upon surrender of any
Note at the principal executive office of the Company for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of such Note or its attorney duly authorized
in writing and accompanied by the address for notices of each transferee of such
Note or part thereof), the Company shall execute and deliver, at the Company's
expense (except as provided below), one or more new Notes (as requested by the
holder thereof) in exchange therefor, in an aggregate principal amount equal to
the unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be substantially in
the form of Exhibit 1. Each such new Note shall be dated and bear interest from
the date to which interest shall have been paid on the surrendered Note or dated
the date of the surrendered Note if no interest shall have been paid thereon.
The Company
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may require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes and may request that
such transferee, at the Company's reasonable cost and expense, provide the
Company with an opinion of counsel reasonably acceptable to the Company and in a
form and substance reasonably acceptable to the Company and its counsel to the
effect that such transfer is not subject to registration under applicable
Securities Laws. Notes shall not be transferred in denominations of less than US
$100,000, provided that if necessary to enable the registration of transfer by a
holder of its entire holding of Notes, one Note may be in a denomination of less
than US $100,000. Any transferee, by its acceptance of a Note registered in its
name (or the name of its nominee), shall be deemed to have agreed to become
bound by the provisions of the Loan Documents applicable to Purchasers and
holders and to have made the representations set forth in Section 7.
Section 14.3. Replacement of Notes. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of a bond
or other indemnity reasonably satisfactory to it (provided that if
the holder of such Note is, or is a nominee for, an original
Purchaser or another holder of a Note with a minimum net worth of
at least the greater of (i) the principal amount of such Note or
(ii) US$5,000,000, and the Company receives a certification from
any senior financial officer or other individual with the
responsibility for the administration of such Person's investment
in the Notes to such effect, such Person's own duly authorized
unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and
cancellation thereof, the Company at its own expense shall execute
and deliver, in lieu thereof, a new Note, dated and bearing
interest from the date to which interest shall have been paid on
such lost, stolen, destroyed or mutilated Note or dated the date
of such lost, stolen, destroyed or mutilated Note if no interest
shall have been paid thereon.
SECTION 15. PAYMENTS ON NOTES.
Section 15.1. Place of Payment. Subject to Section 15.2, payments of
principal at the applicable Redemption Price, if any, and interest becoming due
and payable on the Notes shall be made in
New York,
New York at the principal
office of the holder of such Note in such jurisdiction. The holder of such Note
may at any time, by notice to the Company and each other holder of a Note,
change the place of payment of the Notes so long as such place of payment shall
be either the principal office of the holder of such Note in such jurisdiction
or the principal office of a bank or trust company in such jurisdiction.
Section 15.2. Home Office Payment. So long as you or your nominee shall
be the holder of any Note, and notwithstanding anything contained in Section
15.1 or in such Note to the contrary, the Company will pay all sums becoming due
on such Note for principal at the applicable Redemption Price, if any, and
interest by the method and at the address specified for
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such purpose below your name in Schedule A, or by such other method or at such
other address as you shall have from time to time specified to the Company in
writing for such purpose, without the presentation or surrender of such Note or
the making of any notation thereon, except that upon written request of the
Company made concurrently with or reasonably promptly after payment or
prepayment in full of any Note, you shall surrender such Note for cancellation,
reasonably promptly after any such request, to the Company at its principal
executive office or at the place of payment most recently designated by the
Company pursuant to Section 15.1. Prior to any sale or other disposition of any
Note held by you or your nominee you will, at your election, either endorse
thereon the amount of principal paid thereon and the last date to which interest
has been paid thereon or surrender such Note to the Company in exchange for a
new Note or Notes pursuant to Section 14.2. The Company will afford the benefits
of this Section 15.2 to any Institutional Investor that is the direct or
indirect transferee of any Note purchased by you under this Agreement and that
has made the same agreement relating to such Note as you have made in Section
14.2 and in this Section 15.2.
SECTION 16. EXPENSES, ETC.
Section 16.1. Transaction Expenses. Whether or not the transactions
contemplated hereby are consummated and subject to the provisions of Section
10.9 with respect to costs and expenses incurred prior to Closing, the Company
will pay all costs and expenses (including reasonable attorneys' fees of a
special counsel and, if reasonably required, local or other counsel) incurred by
you in connection with such transactions and in connection with any amendments,
waivers or consents under or in respect of any of the Loan Documents (whether or
not such amendment, waiver or consent becomes effective), including, without
limitation: (a) the reasonable costs and expenses incurred in enforcing or
defending (or determining whether or how to enforce or defend) any rights under
any of the Loan Documents or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with any of the
Loan Documents, or by reason of being a holder of any Note, and (b) the
reasonable costs and expenses, including financial advisors' fees, incurred in
connection with the insolvency or bankruptcy of the Company or any Material
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes; provided, however,
notwithstanding anything in the foregoing provided to the contrary, the Company
shall not be required to pay: (i) the fees, costs and expenses of more than one
special counsel, and, if reasonably required, local or other counsel, for all
the Purchasers; (ii) any legal or other professional fees, costs and expenses
incurred in connection with or attributable to your or any holder's breach (as
determined by a final, binding and non-appealable order of a court of competent
jurisdiction) of any provision of the Loan Documents applicable to such Person
and (iii) legal or other professional fees, costs and expenses incurred prior to
and in connection with the Loan Documents, which exceed $100,000 in the
aggregate. The Company will pay, and will save you and each other holder
harmless from, all claims in respect of any fees, costs or expenses, if any, of
brokers and finders (other than those retained by you or such holder).
Section 16.2. Survival. The obligations of the Company under this
Section 16 will survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement, any Security Documents
or the Notes, and the termination of this Agreement.
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SECTION 17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained in the Loan Documents
shall survive the execution and delivery of the Loan Documents and the Notes,
the purchase or transfer by you of any Note or portion thereof or interest
therein and any partial payment on any Note, and may be relied upon by any
subsequent holder of a Note, regardless of any investigation made at any time by
or on behalf of you or any other holder of a Note and shall expire and be of no
further force and effect when all principal, interest and other amounts payable
on the Notes shall have been indefeasibly paid in full in accordance with the
provisions thereof. The Loan Documents embody the entire agreement and
understanding between you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
SECTION 18. AMENDMENT AND WAIVER.
Section 18.1. Requirements. This Agreement, the Security Documents and
the Notes may be amended, and the observance of any term hereof or of the
Security Documents or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6, or 22 hereof, or any defined term (as it
is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, (i) subject to
the provisions of Section 13 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest on, the
Notes, (ii) change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver, or
(iii) amend any of Sections 9, 12(a), 12(b), 13, 18 or 21.
Section 18.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of
the Notes (irrespective of the amount of Notes then owned by it)
with sufficient information, sufficiently far in advance of the
date a decision is required (but in no event less than five (5)
Business Days), to enable such holder to make an informed and
considered decision with respect to any proposed amendment, waiver
or consent in respect of any of the provisions hereof or of the
Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to
the provisions of this Section 18 to each holder of outstanding
Notes promptly following the date on which it is executed and
delivered by, or receives the consent or approval of, the
requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly
pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, or grant
any security, to any holder of Notes as consideration for or as an
inducement to the entering into by any holder of Notes or any
waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to
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each holder of Notes then outstanding even if such holder did not
consent to such waiver or amendment.
(c) Manner of Solicitation. Any such solicitation may be
made and written consents received by the Company in accordance
with the provisions of Section 19.
Section 18.3. Binding Effect, etc. Any amendment or waiver consented to
as provided in this Section 18 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note or any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
Section 18.4. Notes Held by Company, etc. Solely for the purpose of
determining whether the holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement, the Security
Documents or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
SECTION 19. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent
(a) by telefacsimile if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or
(b) by registered or certified mail with return receipt
requested (postage prepaid), or
(c) by a recognized overnight delivery service (with
charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it
at the address specified for such communications in
Schedule A, or at such other address as you or it
shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to
such holder at such address as such other holder
shall have specified to the Company in writing in
accordance with the provisions of this Section 19, or
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(iii) if to the Company, to the Company at
its address set forth at the beginning hereof to the
attention of Chief Executive Officer, or at such
other address as the Company shall have specified to
the holder of each Note in writing.
Notices under this Section 19 will be deemed given only when actually
received.
SECTION 20. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) subject to the provisions of Section 21, financial
statements, certificates and other information previously or hereafter furnished
to you, may be reproduced by you by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and you may destroy
any original document so reproduced. The Company agrees and stipulates that, to
the extent permitted by applicable law, any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 20 shall not prohibit the
Company or any other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from introducing evidence
to demonstrate the inaccuracy of any such reproduction.
SECTION 21. CONFIDENTIAL INFORMATION.
For the purposes of this Section 21, "Confidential Information" means
information delivered to you or any holder by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to the Loan Documents that is proprietary in nature and that was
clearly marked or labeled or otherwise adequately identified when received by
you or such holder as being confidential information of the Company or such
Subsidiary, provided that such term does not include information that (a) was
publicly known or otherwise known to you or such holder prior to the time of
such disclosure through no act or omission by you or any Person authorized to
act on your behalf in breach of any duty of confidentiality, (b) subsequently
becomes publicly known through no act or omission by you or any Person acting on
your behalf, (c) otherwise becomes known to you other than through disclosure by
the Company or any Subsidiary from any Person who has not breached any duty of
confidentiality owed to the Company or any Subsidiary, (d) constitutes financial
statements delivered to you under Section 8.1 that are otherwise publicly
available or (e) concerns or relates to the U.S. federal income tax treatment or
U.S. federal income tax structure of the transactions contemplated hereby (and
you may disclose to any and all persons, without limitation of any kind, any
such information with respect to such U.S. federal income tax treatment and U.S.
federal income tax structure). You will maintain the confidentiality of such
Confidential Information in accordance with procedures adopted by you in good
faith to protect confidential information of third parties delivered to you and
you may only use the Confidential Information in connection with the
transactions contemplated by the Loan Documents, including, without limitation,
the administration, preservation, or enforcement of your rights relating to your
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investment represented by your Notes, provided that you may deliver or disclose
Confidential Information to (i) your directors, officers, employees, agents,
attorneys and Affiliates (to the extent such disclosure reasonably relates to
the administration of the investment represented by your Notes) who are subject
to a duty of confidentiality or otherwise agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 21, (ii) your financial advisors and other professional advisors who
agree to hold confidential the Confidential Information substantially in
accordance with the terms of this Section 21, (iii) any other holder of any Note
who agrees to hold confidential the Confidential Information substantially in
accordance with the terms of this Section 21, (iv) any Institutional Investor to
which you sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this Section
21), (v) any Person from which you offer to purchase any security of the Company
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 21), (vi) any federal
or state regulatory authority having jurisdiction over you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio, or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement; provided, however, prior to
disclosing any Confidential Information pursuant to clauses (vi), (vii) or
(viii) (other than in connection with clause (z) of clause (viii)) you shall (if
reasonably practicable under the circumstances and provided that you are not
legally prohibited from doing so) notify the Company of the proposed disclosure
and afford it a reasonable opportunity to seek an injunction or other protective
order against the public release of all or any portion of such Confidential
Information. Each holder of a Note, by its acceptance of a Note, will be deemed
to have agreed to be bound by and to be entitled to the benefits of this Section
21 as though it were a party to this Agreement. On reasonable request by the
Company in connection with the delivery to any holder of a Note of information
required to be delivered to such holder under this Agreement or requested by
such holder (other than a holder that is a party to this Agreement or its
nominee), such holder will enter into an agreement with the Company embodying
the provisions of this Section 21.
SECTION 22. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate repeating and
reaffirming the accuracy with respect to it of all of the representations set
forth in Section 7 with the same effect as of such acquisition as when you
initially acquired your Notes. Upon receipt of such notice, wherever the word
"you" is used in this Agreement (other than in this Section 22), such word shall
be deemed to refer to such Affiliate in lieu of you. In the event that such
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Affiliate is so substituted as a purchaser hereunder and such Affiliate
thereafter transfers to you all of the Notes then held by such Affiliate, upon
receipt by the Company of notice of such transfer, wherever the word "you" is
used in this Agreement (other than in this Section 22), such word shall no
longer be deemed to refer to such Affiliate, but shall refer to you, and you
shall have all the rights of an original holder of the Notes under this
Agreement. Any substitute, by its acceptance of a Note registered in its name
(or the name of its nominee), shall be deemed to have agreed to become bound by
the provisions of the Loan Documents applicable to Purchasers and holders and to
have made the representations set forth in Section 7.
SECTION 23. MISCELLANEOUS.
Section 23.1. Successors and Assigns. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not.
Section 23.2. Payments Due on Non-Business Days. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of principal
at the applicable Redemption Price, if any, or interest on any Note that is due
on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation of
the interest payable on such next succeeding Business Day.
Section 23.3. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
Section 23.4. Construction and Interpretation. Each covenant contained
herein shall be construed (absent express provision to the contrary) as being
independent of each other covenant contained herein, so that compliance with any
one covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with any other covenant. Where any provision herein refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person. All references to immediately available funds or
dollar amounts contained in this Agreement shall mean United States dollars. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. The
parties acknowledge and agree that (i) each party and its counsel have reviewed
the terms and provisions of this Agreement and have contributed to its revision,
(ii) the normal rule of construction, to the effect that any ambiguities are
resolved against the drafting party, shall not be employed in the interpretation
of it, and (iii) the terms and provisions of this Agreement shall be constructed
fairly as to all parties hereto and not in favor or against any party,
regardless of which party was generally responsible for the preparation of this
Agreement. The terms "herein", "hereof"" or "hereunder" shall refer to the
entire Agreement; all references to Sections shall refer to sections of this
Agreement; "including" means "and including without limitation." Words importing
the singular also include the plural and vice versa.
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Section 23.5. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.
Section 23.6. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the law of the State of
New York excluding choice of law principles of the law
of such State that would require the application of the laws of a jurisdiction
other than such State.
Section 23.7 Submission to Jurisdiction. For the purposes of any action
or proceeding involving this Agreement, the Notes or any other agreement or
document referred to herein or therein, the Company hereby, and shall cause its
Subsidiaries to, expressly submit to the nonexclusive jurisdiction of all
federal and state courts sitting in the Borough of Manhattan, City and State of
New York and consents that any order, process, notice of motion or other
application to or by any of said courts or a judge thereof may be served within
or without such court's jurisdiction by registered mail or by personal service,
provided that a reasonable time for appearance is allowed. The Company hereby
waives, and shall cause its Subsidiaries to irrevocably waive any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement, the Notes or any other
agreement or document referred to herein or therein brought in any federal or
state court sitting in the City and State of
New York, and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.
Section 23.8 Appointment of Agent for Service of Process.
(a) The Company hereby irrevocably designates and
appoints, and shall cause the other CanArgo Group Members to
irrevocably designate and appoint Xxxxxxxxx Xxxxxxxx Xxxxx & Xxxxx
LLP, at its office at 000 Xxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, X.X.
10169, Attention: Xxxxx X Xxxxxxxxxx Esq., as its and their
authorized agent, to accept and acknowledge on its behalf service
of any and all legal process which may be served in any suit,
action or proceeding referred to in Section 23.7 above in any
federal or
New York State court sitting in the Borough of
Manhattan,
New York City. The Company represents and warrants that
such agent has agreed to accept such appointment. Said designation
and appointment shall not be revocable by the Company or any other
CanArgo Group Member until all principal, interest and other
amounts payable on the Notes shall have been paid in full in
accordance with the provisions thereof. If such agent shall cease
to act as agent, the Company shall, and shall cause the other
CanArgo Group Members to, designate irrevocably and appoint
without delay another such agent.
(b) The Company hereby consents, and shall cause the other
CanArgo Group Members to consent to process being served in any
suit, action or proceeding referred to in Section 23.7 in any
federal or New York State court sitting in the Borough of
Manhattan, New York City by service of process upon its agent
appointed as provided in subsection (a) above; provided that, to
the extent lawful and possible,
-43-
notice of said service upon such agent shall be mailed by
registered or certified air mail, postage prepaid, return receipt
requested, to such Person at its address. The Company hereby
irrevocably waives, and shall cause the other CanArgo Group
Members to irrevocably waive, to the fullest extent permitted by
law, all claim of error by reason of service in such manner and
agrees that such service shall be deemed in every respect
effective service of process upon such Person in any such suit,
action or proceeding and shall, to the fullest extent permitted by
law, constitute valid and personal service upon and personal
delivery to such Person.
(c) Nothing in this Section 23.8 shall affect the right of
the Purchasers to serve process in any other manner permitted by
law or limit the right of the Purchasers to bring proceedings
against the Company or any Material Subsidiary in the courts of
any jurisdiction or jurisdictions.
(d) In the event process is served pursuant to Section
23.8(a), the Purchasers shall endeavor to provide the Company with
a copy of such process promptly after delivering service of
process in accordance with Section 23.8(a). The Parties agree that
any delay or failure to comply with this Section 23.8(d) shall in
no way constitute a defense of the Company or any other CanArgo
Group Member and the Company covenants not to use any such failure
as a defense of any kind.
Section 23.9 Company Indemnification. The Company covenants with each
such holder that it will indemnify and hold harmless such holder against any
liability of any kind which may be actually incurred or suffered in connection
with the conduct of the CanArgo Member Group's businesses or use of their
property except in circumstances where the liability arises from the act or
omission of such holder; provided, however, the Company shall not be liable for
any punitive, consequential or special damages or liability incurred by such
holder, unless such punitives, consequential or special damages arise in
connection with a third party claim against you, in which case, the Company's
indemnity obligation shall not be limited.
If any action is brought against a holder (an "indemnified party") in
respect of which indemnity may be sought against the Company pursuant to the
foregoing paragraph, such indemnified party shall promptly notify the Company in
writing of the institution of such action (but the failure so to notify shall
not relieve the Company from any liability it may have other than pursuant to
this Section 23.9 unless the Company's defense of any such action is actually
prejudiced) and the Company shall promptly assume the defense of such action
including the appointment of counsel and payment of expenses. Such indemnified
party shall have the right to employ its or their own counsel in any such case,
but the fees and expenses of such indemnified party unless (i) the employment of
such counsel shall have been authorized in writing by the Company, (ii) the
Company shall not have promptly employed counsel satisfactory to such
indemnified party to have charge of the defense of such action or (iii) such
indemnified party shall have reasonably concluded that there may be one or more
legal defenses available to it which are different from or additional to those
available to the Company and the representation of the indemnified party by
counsel chosen by the parties represented by such counsel, in any of which
events such fees and expenses shall be borne by the Company and the Company
shall have the right to direct such the defense of such action on behalf of the
indemnified party. Anything in this paragraph to the contrary notwithstanding,
the Company shall not be liable for
-44-
settlement for any such claim or action effected without its written consent.
The Company agrees promptly to notify the holders of the commencement of any
litigation or proceedings against the Company or any of its officers or
directors in connection with the sale of the Notes or any application.
* * * * *
-45-
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
CanArgo Energy Corporation
----------------------------------------------
By
-------------------------------------------
Its
---------------------------------------
S-1
The foregoing is hereby agreed to as of the date thereof.
PURCHASERS:
XXXXXXX & XXXXXX VALUE PARTNERS L.P.
-----------------------------------------
Xxxxxx X. Xxxxxxx Xx.
General Partner
Xxxxxxxx X. Xxxxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxx Xxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxx XXX
-----------------------------------------
Xxxx Xxxxxxx
-----------------------------------------
S-2
Xxxxxx Xxxxx
-----------------------------------------
Fledgling Associates, LLC
By: Xxxxx Trading, Inc., Manager
-----------------------------------------
Xxxxxx Xxxxx
President
Xxxx Xxxxxxx
-----------------------------------------
Xxxx Xxxxxxx
-----------------------------------------
Xxxxxxx Xxxxx
-----------------------------------------
Xxxx Xxxxxx
-----------------------------------------
Xxxxxx Xxxxxxx
-----------------------------------------
S-3
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
Xxxxxxx & Xxxxxx Value Partners, L.P. US $14,000,000.00
(1) All payments by wire transfer of immediately available funds to:
XX Xxxxxx Xxxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ABA#000000000
fbo Xxxxxxx & Xxxxxx LLC
a/c 000-0-000000
ffc ISVP/CanArgo
A/c 00-00000-0
with sufficient information to identify the source and application of
such funds.
(2) All communications and notices of payments and written confirmations of
such wire transfers:
Xxxxxx X. Xxxxxxx, Xx.
Xxxxxxx & Xxxxxx LLC
00 Xxxxxxxx
Xxx Xxxx, XX 00000
000-000-0000 v
000-000-0000 f xxx@Xxxxxxx.xxx
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
Xxxxxxxx X. Xxxxxxxx US $3,000,000.00
(1) All payments by wire transfer of immediately available funds to:
XX Xxxxxx Xxxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ABA#000000000
fbo Xxxxxxx & Xxxxxx LLC
a/c 000-0-000000
ffc X. Xxxxxxxx - R/O IRA
A/c 00-00000-0
with sufficient information to identify the source and application of
such funds.
(2) All communications and notices of payments and written confirmations
of such wire transfers:
Xxxxxx X. Xxxxxxx, Xx.
Xxxxxxx & Xxxxxx LLC
00 Xxxxxxxx
Xxx Xxxx, XX 00000
000-000-0000 v
000-000-0000 f xxx@Xxxxxxx.xxx
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
Xxxxxx X. Xxxxxx US $2,000,000.00
(1) All payments by wire transfer of immediately available funds to:
XX Xxxxxx Xxxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ABA#000000000
fbo Xxxxxxx & Xxxxxx LLC
a/c 000-0-000000
ffc TLG
A/c 00-00000-0
with sufficient information to identify the source and application of
such funds.
(2) All communications and notices of payments and written confirmations
of such wire transfers:
Xxxxxx X. Xxxxxxx, Xx.
Xxxxxxx & Xxxxxx LLC
00 Xxxxxxxx
Xxx Xxxx, XX 00000
000-000-0000 v
000-000-0000 f xxx@Xxxxxxx.xxx
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
Xxxxxx Xxxxxx US $2,000,000.00
(1) All payments by wire transfer of immediately available funds to:
XX Xxxxxx Xxxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ABA#000000000
fbo Xxxxxxx & Xxxxxx LLC
a/c 000-0-000000
ffc Xxxxxx Xxxxxx
A/c 00-00000-0
with sufficient information to identify the source and application of
such funds.
(2) All communications and notices of payments and written confirmations
of such wire transfers:
Xxxxxx X. Xxxxxxx, Xx.
Xxxxxxx & Xxxxxx LLC
00 Xxxxxxxx
Xxx Xxxx, XX 00000
000-000-0000 v
000-000-0000 f xxx@Xxxxxxx.xxx
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
Xxxxxx X. Xxxxxx XXX US $1,000,000.00
(1) All payments by wire transfer of immediately available funds to:
XX Xxxxxx Xxxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ABA#000000000
fbo Xxxxxxx & Xxxxxx LLC
a/c 000-0-000000 ffc TLG IRA
A/c 00-00000-0
with sufficient information to identify the source and application of
such funds.
(2) All communications and notices of payments and written confirmations
of such wire transfers:
Xxxxxx X. Xxxxxxx, Xx.
Xxxxxxx & Xxxxxx LLC
00 Xxxxxxxx
Xxx Xxxx, XX 00000
000-000-0000 v
000-000-0000 f xxx@Xxxxxxx.xxx
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
Xxxx Xxxxxxx US $550,000.00
(1) All payments by wire transfer of immediately available funds to:
XX Xxxxxx Xxxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ABA#000000000
fbo Xxxxxxx & Xxxxxx LLC
a/c 000-0-000000
ffc Xxxx Xxxxxxx
A/c 00-00000-0
with sufficient information to identify the source and application of
such funds.
(2) All communications and notices of payments and written confirmations
of such wire transfers:
Xxxxxx X. Xxxxxxx, Xx.
Xxxxxxx & Xxxxxx LLC
00 Xxxxxxxx
Xxx Xxxx, XX 00000
000-000-0000 v
000-000-0000 f xxx@Xxxxxxx.xxx
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
Xxxxxx Xxxxx US $500,000.00
(1) All payments by wire transfer of immediately available funds to:
XX Xxxxxx Xxxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ABA#000000000
fbo Xxxxxxx & Xxxxxx LLC
a/c 000-0-000000
ffc Xxxxxx Xxxxx
A/c 01-00412-0-2
with sufficient information to identify the source and application of
such funds.
(2) All communications and notices of payments and written confirmations
of such wire transfers:
Xxxxxx X. Xxxxxxx, Xx.
Xxxxxxx & Xxxxxx LLC
00 Xxxxxxxx
Xxx Xxxx, XX 00000
000-000-0000 v
000-000-0000 f xxx@Xxxxxxx.xxx
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
Fledgling Associates, LLC US $500,000.00
(1) All payments by wire transfer of immediately available funds to:
XX Xxxxxx Xxxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ABA#000000000
fbo Xxxxxxx & Xxxxxx LLC
a/c 000-0-000000
ffc Fledgling Associates, LLC
A/c 00-00000-0
with sufficient information to identify the source and application of
such funds.
(2) All communications and notices of payments and written confirmations
of such wire transfers:
Xxxxxx X. Xxxxxxx, Xx.
Xxxxxxx & Xxxxxx LLC
00 Xxxxxxxx
Xxx Xxxx, XX 00000
000-000-0000 v
000-000-0000 f xxx@Xxxxxxx.xxx
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
Xxxx Xxxxxxx US $400,000.00
(1) All payments by wire transfer of immediately available funds to:
XX Xxxxxx Xxxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ABA#000000000
fbo Xxxxxxx & Xxxxxx LLC
a/c 000-0-000000
ffc Xxxx Xxxxxxx
A/c 00-00000-0
with sufficient information to identify the source and application of
such funds.
(2) All communications and notices of payments and written confirmations
of such wire transfers:
Xxxxxx X. Xxxxxxx, Xx.
Xxxxxxx & Xxxxxx LLC
00 Xxxxxxxx
Xxx Xxxx, XX 00000
000-000-0000 v
000-000-0000 f xxx@Xxxxxxx.xxx
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
Xxxx Xxxxxxx US $400,000.00
(1) All payments by wire transfer of immediately available funds to:
XX Xxxxxx Xxxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ABA#000000000
fbo Xxxxxxx & Xxxxxx LLC
a/c 000-0-000000
ffc Xxxx Xxxxxxx
A/c 00-00000-0
with sufficient information to identify the source and application of
such funds.
(2) All communications and notices of payments and written confirmations
of such wire transfers:
Xxxxxx X. Xxxxxxx, Xx.
Xxxxxxx & Xxxxxx LLC
00 Xxxxxxxx
Xxx Xxxx, XX 00000
000-000-0000 v
000-000-0000 f xxx@Xxxxxxx.xxx
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
Xxxxxxx Xxxxx US $250,000.00
(1) All payments by wire transfer of immediately available funds to:
XX Xxxxxx Xxxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ABA#000000000
fbo Xxxxxxx & Xxxxxx LLC
a/c 000-0-000000
ffc Xxxxxxx Xxxxx
A/c 00-00000-0
with sufficient information to identify the source and application of
such funds.
(2) All communications and notices of payments and written confirmations
of such wire transfers:
Xxxxxx X. Xxxxxxx, Xx.
Xxxxxxx & Xxxxxx LLC
00 Xxxxxxxx
Xxx Xxxx, XX 00000
000-000-0000 v
000-000-0000 f xxx@Xxxxxxx.xxx
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
Xxxx Xxxxxx US $250,000.00
(1) All payments by wire transfer of immediately available funds to:
XX Xxxxxx Xxxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ABA#000000000
fbo Xxxxxxx & Xxxxxx LLC
a/c 000-0-000000
ffc Xxxx Xxxxxx
A/c 01-28416-7-1
with sufficient information to identify the source and application of
such funds.
(2) All communications and notices of payments and written confirmations
of such wire transfers:
Xxxxxx X. Xxxxxxx, Xx.
Xxxxxxx & Xxxxxx LLC
00 Xxxxxxxx
Xxx Xxxx, XX 00000
000-000-0000 v
000-000-0000 f xxx@Xxxxxxx.xxx
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
Xxxxxx Xxxxxxx US $150,000.00
(1) All payments by wire transfer of immediately available funds to:
XX Xxxxxx Xxxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ABA#000000000
fbo Xxxxxxx & Xxxxxx LLC
a/c 000-0-000000
ffc Xxxxxx Xxxxxxx
A/c 00-00000-0
with sufficient information to identify the source and application of
such funds.
(2) All communications and notices of payments and written confirmations
of such wire transfers:
Xxxxxx X. Xxxxxxx, Xx.
Xxxxxxx & Xxxxxx LLC
00 Xxxxxxxx
Xxx Xxxx, XX 00000
000-000-0000 v
000-000-0000 f xxx@Xxxxxxx.xxx
Schedule A
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"Affiliate" means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.
"Agreement" means this Note Purchase Agreement.
"Basic Agreements" means the agreements listed on Schedule 6.19.
"Basic Documents" means production sharing contracts and production
sharing agreements, the Basic Agreements, and any other Hydrocarbon purchase,
sales, exchange, processing, gathering, treatment, compression and
transportation agreements; farmout or farm-in agreements; drilling contracts;
seismic or other geologic or geographical agreements; unitization agreements;
joint venture, exploration, limited or general partnership, dry hole, bottom
hole, acreage contribution, purchase and acquisition agreements; area of mutual
interest agreements; salt water disposal agreements, servicing contracts;
easement and/or pooling agreements; surface leases, permits, licenses,
rights-of-way, servitudes or other interests appertaining to the Properties and
all other contracts and agreements relating to the Properties.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which commercial banks in New York City are required or authorized to be
closed.
"CanArgo Group Member" means the Company and each Material Subsidiary
of the Company identified in Schedule 6.4, and all of them collectively. Each
newly formed or acquired Material Subsidiary shall become and be deemed to
constitute a CanArgo Group Member upon execution of a Subsidiary Guaranty.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP applicable to such lessee.
"Capital Lease Obligations" means, with respect to any Person and a
Capital Lease, the amount of the obligation of such Person as the lessee under
such Capital Lease, which would, in
SCHEDULE B
accordance with GAAP applicable to such lessee, appear as a liability on a
balance sheet of such Person.
"Change in Control" has the meaning set forth in Section 9.6(h).
"Charter Documents" means, as applicable for any Person that is not an
individual, the articles or certificate of incorporation or formation,
certificate of limited partnership, regulations, bylaws, partnership or limited
partnership agreement, and all similar documents related to the formation and
governance of that Person, together with all amendments to any of them.
"Closing" is defined in Section 4.
"CNL (Cyprus)" means CanArgo Norio Limited, a company organized under
the laws of the Republic of Cyprus.
"CNL (Jersey)" means CanArgo Norio Limited, a company organized under
the laws of Jersey.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Collateral" means all Property and all Personal Property now owned or
later acquired by the Company.
"Common Stock" means the common stock, par value $.10 per share, of the
Company.
"Company" means
CanArgo Energy Corporation, a Delaware corporation.
"Confidential Information" is defined in Section 21.
"Consolidated Assets" means the total assets of the Company and its
Subsidiaries which would be shown as assets on a consolidated balance sheet of
the Company and its Subsidiaries prepared in accordance with applicable GAAP,
after eliminating all amounts properly attributable to minority interests, if
any, in the stock and surplus of Subsidiaries.
"Control Event" has the meaning set forth in Section 9.6(i).
"Cornell Facility" means the Promissory Note between the Company and
Cornell Capital Partners, LP dated April 26, 2005 and the Standby Equity
Distribution Agreement between the Company and Cornell Capital Partners, LP
dated February 11, 2004.
"Default" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"Default Rate" means 3% per annum above the rate of interest stated in
Table 1 of the Note.
B-2
"Distribution" means, in respect of any corporation, association or
other business entity:
(a) dividends or other distributions or payments on
capital stock or other Equity Interests of such corporation,
association or other business entity (except distributions in such
stock or other Equity Interests or Indebtedness as permitted by
the Agreement); and
(b) the redemption or acquisition of such stock or other
Equity Interests or of warrants, rights or other options to
purchase such stock or other Equity Interests (except when solely
in exchange for such stock or other Equity Interests or
Indebtedness as permitted by the Agreement) unless made,
contemporaneously, from the net proceeds of a sale of such stock
or other Equity Interests.
"Disposition Value" means, at any time, with respect to any property,
the book value thereof, valued at the time of such disposition in good faith by
the Company.
"Dollar" or "$" means lawful money of the United States of America.
"Environmental Laws" means any and all federal, state, provincial,
local, and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, concessions, grants, franchises, licenses, agreements
or governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"Equity Interests" means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person, and any
warrants, options or other rights entitling the holder thereof to purchase or
acquire any such Equity Interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"Event of Default" is defined in Section 12.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).
"Foreign Pension Plan" means any plan, fund (including, without
limitation, any superannuation fund but excluding any governmental plan or
program requiring the mandatory
B-3
payment of social insurance taxes or similar contributions to a governmental
fund with respect to the wages of an employee) or other similar program
established or maintained outside the United States of America by the Company or
any ERISA Affiliate for the benefit of employees of the Company or any ERISA
Affiliate residing outside the United States of America, which plan, fund or
other similar program provides, or results in, retirement income, a deferral of
income in contemplation of retirement or payments to be made upon termination of
employment excluding contractual notice payments, and which plan is not subject
to ERISA or the Code.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the stated jurisdiction.
"Governmental Authority" means
(a) the governments of
(i) the United States of America, the
Republic of Georgia, the Republic of Kazakhstan or
the United Kingdom or any State, province or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company
or any other CanArgo Group Member conducts all or any
part of its business, or which asserts jurisdiction
over any properties of the Company or any other
CanArgo Group Member, or
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining
to, any such government, including any stock exchange.
"Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or
payment of such indebtedness or obligation, or (ii) to maintain
any working capital or other balance sheet condition or any income
statement condition of any other Person or otherwise to advance or
make available funds for the purchase or payment of such
indebtedness or obligation;
(c) to lease properties or to purchase properties or
services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of any other Person to
make payment of the indebtedness or obligation; or
B-4
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"holder" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
14.1.
"Hydrocarbons" means oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all products refined or separated therefrom.
"Impairment" means, with respect to any Basic Agreement, the
rescission, termination, cancellation, repeal, invalidity, suspension (other
than by reason of an event of "force majeure" (as defined in such Basic
Agreement) to the extent suspension by reason of an event of "force majeure" (as
defined in such Basic Agreement) is expressly permitted by such Basic Agreement
or approval of any Governmental Authority or results from applicable law),
injunction, inability to satisfy stated conditions to effectiveness or
amendment, modification or supplementation. The verb "Impair" shall have a
correlative meaning.
"Indebtedness" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatory redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable
arising in the ordinary course of business but including all
liabilities created or arising under any conditional sale or other
title retention agreement with respect to any such property);
(c) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not
it has assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks and other financial
B-5
institutions (whether or not representing obligations for borrowed
money) other than with respect to letters of credit which are 100%
cash collateralized;
(f) interest rate, currency or commodity (including crude
oil and natural gas) swaps, caps, collars, forwards, futures or
derivatives transactions or similar obligations obligating such
Person to make payments, whether periodically or upon the
happening of a contingency of such Person; and
(g) any Guaranty of such Person with respect to
liabilities of a type described in any of clauses (a) through (f)
hereof, other than parent company guarantees provided by the
Company in respect of the Indebtedness or obligations of any of
its Subsidiaries under the Basic Documents.
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"Institutional Investor" means (a) any Purchaser, (b) any holder of a
Note holding more than 10% of the aggregate principal amount of the Notes then
outstanding, and (c) any bank, trust company, savings and loan association or
other financial institution, any pension plan, any investment company, any
insurance company, any broker or dealer, or any other similar financial
institution or entity, regardless of legal form.
"Knowledge" means, either:
(i) in respect of the Company, the actual and not
constructive knowledge of Dr Xxxxx Xxxxxx, Xxxxxxx XxXxxxxxx, Xxxx
Xxxxxxxx and any officers of the Company or any Material
Subsidiary or any employees of the Company or any Material
Subsidiary in each case that report directly to any officers of
the Company or any Material Subsidiary; or
(ii) in respect of the Purchaser, the actual and not
constructive knowledge of the officer of the Purchaser with
responsibility for making or administering of the investment in
the Notes.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person.
"Loan Documents" means this Agreement, the Notes, the Security
Documents, the Registration Rights Agreement, and all other agreements,
certificates, documents, instruments and writings at any time delivered in
connection herewith or therewith, all as amended, modified, restated or
reassigned from time to time.
"Material" means material in relation to the business, operations,
financial condition, assets or properties of the CanArgo Group Members taken as
a whole.
B-6
"Material Subsidiary" means any direct or indirect Subsidiary of the
Company (a) listed in Schedule 5.11, or (b) (i) having either net assets, annual
revenues or Indebtedness to any CanArgo Group Member in excess of US$1,250,000,
as stated in such Subsidiary's most recent annual audited financial statements;
or (ii) that is a party to a Basic Agreement.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, financial condition, assets or properties of the CanArgo
Group Members taken as a whole, (b) the ability of any CanArgo Group Member to
perform its obligations under the Loan Documents to which it is a party or (c)
the validity or enforceability of any of the Loan Documents.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
"NOC (Cyprus)" means Ninotsminda Oil Company Limited, a company
organized under the laws of the Republic of Cyprus.
"NOC (Jersey)" means Ninotsminda Oil Company Limited, a company
organized under the laws of Jersey.
"Notes" is defined in Section 1.
"Obligations" means and include all Indebtedness, liabilities,
obligations, covenants, duties and amounts owing or to be owing by Company to
Purchasers of any kind or nature, present or future, whether or not evidenced by
any note, guaranty or other instrument, arising directly or indirectly, under
any Loan Documents, and all renewals, extensions and/or rearrangements of any of
the foregoing. The term includes, but is not limited to, all interest,
reasonable charges, expenses, consultants' and attorneys' fees and any other sum
chargeable to Company under any of the Loan Documents.
"Officer's Certificate" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"Ozturk Convertible Loan" means the Convertible Loan in the sum of
$1,070,000 plus accrued interest advanced to the Company pursuant to the Amended
and Restated Loan and Warrant Agreement between Xxxxxx Xxxxxx and the Company
dated August 27, 2004.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"Permitted Encumbrances" shall mean (i) royalties, overriding
royalties, reversionary interests, production payments and similar burdens which
are in existence on the date hereof; (ii) sales contracts or other arrangements
for the sale of production Hydrocarbons which would not (when considered
cumulatively with the matters discussed in clause (i) above) deprive Company
B-7
of any Material right in respect of Company's assets or properties (except for
rights customarily granted with respect to such contracts and arrangements);
(iii) statutory Liens for taxes or other assessments that are not yet delinquent
(or that, if delinquent, are being contested in good faith by appropriate
proceedings, levy and execution thereon having been stayed and continue to be
stayed and for which Company has set aside on its books adequate reserves in
accordance with GAAP); (iv) easements, rights of way, servitudes, permits,
surface leases and other rights in respect to surface operations, pipelines,
grazing, logging, canals, ditches, reservoirs or the like, conditions, covenants
and other restrictions, and easements of streets, alleys, highways, pipelines,
telephone lines, power lines, railways and other easements and rights of way on,
over or in respect of Company's assets or properties and that do not
individually or in the aggregate, cause a Material Adverse Effect; (v) rights
reserved to or vested in any Governmental Authority to control or regulate
Company's assets and properties in any manner, and all applicable laws, rules
and orders from any Governmental Authority; and (vi) those liens issued pursuant
to Section 11.3.
"Permitted Farmout Arrangement" means a farmout agreement with a
counterparty (a) with (i) equity securities listed on a major North American or
European exchange and (ii) a market capitalization on the date of such agreement
of greater than US$100,000,000; (b) that is a Person listed in Schedule 11.8; or
(c) that has estimated quantities of proved developed oil reserves in excess of
20 million barrels which geological and engineering data from an internationally
known engineering firm or another engineering firm acceptable to the Required
Holders demonstrates with reasonable certainty to be recoverable in future years
from known reservoirs.
"Personal Property" means all personal property of every kind including
all goods (including equipment), documents, accounts, chattel paper (whether
tangible or electronic), money, deposit accounts, letters of credit and
letter-of-credit rights (without regard to whether the letter of credit is
evidenced by a writing), documents, securities and all other investment
property, supporting obligations, any other contract rights (including all
rights in transportation agreements, processing agreements, delivery agreements
and seismic agreements related to the Properties) or rights to the payment of
money, insurance claims and proceeds, all general intangibles (including all
payment intangibles and rights to seismic and other geophysical data) and all
permits, licenses, books and records related to the Properties or the businesses
of Company, whether now owned or later acquired by Company.
"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"Pledge Agreements" means the three Pledge Agreements executed by
CanArgo Limited, a company organized under the laws of Ontario, Canada, and
Canargo Limited, a company organized under the law of the Island of Guernsey as
Pledgors, in favor of the Purchasers and the holders from time to time of the
Notes, as secured parties, pursuant to which such pledgors pledge the Equity
Interests indicated in each such Pledge Agreement.
B-8
"Preferred Stock" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"Property" or "Properties" means, collectively, all real and personal
property of Company, including but not limited to goods, accounts, contract
rights, money, deposits, receivables, inventory, licenses, permits, leases,
insurance proceeds, intangibles, all books and records with respect to all of
the foregoing and the interests of Company in any oil and gas transportation
agreements, processing agreements, delivery agreements, seismic and other
geophysical data and agreements, and other similar agreements, including,
without limitation, the Properties described on Schedule 6.19 attached hereto as
the same may be amended from time to time. For the purposes of this Agreement,
the Company will be deemed to be the owner of any Property which it has acquired
or holds subject to a conditional sale agreement, or leases under a financing
lease or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person in a transaction intended to create a
financing.
"Proposed Prepayment Date" is defined in Section 9.6(c).
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"Redemption Price" is defined in Section 9.5.
"Registration Rights Agreement" means the Registration Rights Agreement
in a form reasonably acceptable to the Company and the Purchasers.
"Required Holders" means, at any time, the holders of at least 51% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company, any of its Subsidiaries or any of its Affiliates).
"Responsible Officer" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"Restricted Payments" means any Distribution in respect of the Company
or any other CanArgo Group Member (other than on account of capital stock or
other Equity Interests or Indebtedness authorized by this Agreement of a CanArgo
Group Member owned legally and beneficially by the Company or another CanArgo
Group Member), including, without limitation, any Distribution resulting in the
acquisition by the Company of securities which would constitute treasury stock.
"Sale-and-Leaseback Transaction" means a transaction or series of
transactions pursuant to which the Company or any Subsidiary shall sell or
transfer to any Person (other than the Company or a Subsidiary) any property,
whether now owned or hereafter acquired, ad, as part of the same transaction or
series of transactions, the Company or any Subsidiary shall rent or lease as
lessee (other than pursuant to a Capital Lease), or similarly acquire the right
to possession or use of, such property or one or more properties which it
intends to use for the same purpose or purposes as such property.
B-9
"SEC" means the United States Securities and Exchange Commission or any
other successor Governmental Authority.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Securities Laws" means the Securities Act and all other federal,
provincial or state securities or "blue sky" laws or foreign securities laws and
all rules or regulations promulgated thereunder by any Governmental Authority,
each as amended from time to time.
"Security Agreements" means the
Security Interest Agreement and
Security Agreement executed by the Company, as debtor, in favor of the
Purchasers and the holders from time to time of the Notes, as secured parties.
"Security Documents" means this Agreement, the Security Agreement and
the Pledge Agreements and includes, without limitation, any other agreement or
writing evidencing any assignment, lien, encumbrance or security interest
executed in favor of Purchasers in or on the Collateral and any other documents
relevant thereto.
"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership of which the Company or a
Subsidiary is the general partner.
"Subsidiary Guaranty" means the Guaranty Agreement executed and
delivered by each Subsidiary Guarantor in a form reasonably acceptable to the
Purchasers and the Company.
"Subsidiary Guarantor" means each Material Subsidiary of the Company
identified on Schedule 5.11 and each newly formed or acquired Material
Subsidiary required to execute and deliver a Subsidiary Guaranty in accordance
with the provisions of the Loan Documents.
"Subsidiary Stock" means, with respect to any Person, the stock (or any
options or warrants to purchase stock or other securities exchangeable for or
convertible into stock) of any Subsidiary of such Person.
"Transfer" means, with respect to any Person, any transaction in which
such Person sells, conveys, transfers or leases (as lessor) any of its property
having a Fair Market Value of greater than US $2 million, including, without
limitation, Subsidiary Stock.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect in the State of New York and in the State of Delaware.
"Wholly-Owned Subsidiary" means, at any time, any Subsidiary one
hundred percent (100%) of all of the Equity Interests (except directors' and
nominee's qualifying shares)
B-10
and voting interests of which are owned by any one or more of the Company and
the Company's other Wholly-Owned Subsidiaries at such time.
B-11
EXHIBIT 1
[FORM OF NOTE]
THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED ("THE SECURITIES ACT"), OR ANY STATE OR FOREIGN SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE OR FOREIGN SECURITIES LAWS OR
CANARGO
ENERGY CORPORATION ("THE COMPANY") SHALL HAVE RECEIVED AN OPINION OF ACCEPTABLE
COUNSEL IN A FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION OF SUCH SECURITIES UNDER SUCH SECURITIES LAWS IS NOT REQUIRED.
CANARGO ENERGY CORPORATION
XXXXXX SECURED NOTE DUE JULY 25, 2009
No. [*] July 25, 2005
US $[*]
FOR VALUE RECEIVED, the undersigned,
CanArgo Energy Corporation (herein
called the "Company", which includes any successor corporation), a corporation
organized and existing under the laws of Delaware, hereby promises to pay to
[*], or registered assigns ("holder"), the principal sum of US$[*] DOLLARS on
[*], 200_, with interest (computed on the basis of a 360-day year of twelve
30-day months) (a) on the unpaid balance thereof at the per annum rates of
interest set out in Table 1 hereto, payable semiannually, on the Thirtieth day
of June and December in each year, commencing December 30, 2005, until the
principal hereof shall have become due and payable, and (b) to the extent
permitted by law on any overdue payment (including any overdue prepayment) of
principal at the applicable Redemption Price (as defined in the Note Purchase
Agreement referred to below) and any overdue payment of interest, payable
semiannually as aforesaid (or, at the option of the registered holder hereof, on
demand), at a rate per annum from time to time equal to 3% above the applicable
rate of interest set out in Table 1 attached hereto.
Payments of principal of at the applicable Redemption Price (if any)
and interest on with respect to this Note are to be made in lawful money of the
United States of America at New York, New York or at such other place as the
Company shall have designated by written notice to the holder of this Note as
provided in the Note Purchase Agreement referred to below.
This Note is issued pursuant to a Note Purchase Agreement, dated as of
[*], 2005 (as from time to time amended, the "Note Purchase Agreement"), between
the Company and the Purchasers named therein and is entitled to the benefits
thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i)
to have agreed to the confidentiality provisions set forth in
Exhibit 1
Section 21 of the Note Purchase Agreement and (ii) to have made the
representations set forth in Section 7 of the Note Purchase Agreement.
This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such xxxxxx's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
This Note is subject to optional prepayment, in whole or from time to
time in part, at the times and on the terms specified in the Note Purchase
Agreement, but not otherwise.
This Note is convertible by the holder into shares of common stock, par
value $0.10 per share, of the Company at the Conversion Price, as adjusted, in
the manner and as otherwise provided in Section 10.7 of the Note Purchase
Agreement.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Redemption Price) and with the effect provided in the Note Purchase
Agreement.
This Note shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the law of the State of New York
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.
The Company has caused this Note to be duly executed.
CANARGO ENERGY CORPORATION
Xxxxx Xxxxxx
Chairman, President
and Chief Executive Officer
TABLE 1 - PER ANNUM INTEREST RATE
FROM TO PER ANNUM RATE
---- -- --------------
Date of Issuance December 31, 2005 3%
January 1, 2006 December 31, 2006 10%
January 1, 2007 Final Payment of Notes 15%
E-1-2
SCHEDULE 5.11
SUBSIDIARY GUARANTORS
NINOTSMINDA OIL COMPANY LIMITED, organized under the laws of the Republic of
Cyprus
CANARGO LIMITED, organized under the laws of the Island of Guernsey
TETHYS PETROLEUM INVESTMENTS LIMITED, organized under the laws of the Island of
Guernsey
CANARGO (NAZVREVI) LIMITED, organized under the laws of the Island of Guernsey
CANARGO NORIO LIMITED, organized under the laws of the Republic of Cyprus
CANARGO SAMGORI LIMITED, organized under the laws of the Island of Guernsey
CANARGO LIMITED, organized under the laws of Ontario, Canada
SCHEDULE 6.3
DISCLOSURE MATERIALS
SECTION 6.10 AND 6.15
Under the terms of the service agreement dated January 27, 2005 between
Ninotsminda Oil Company Limited ("NOC") and Saipem S.p.A ("Saipem"), NOC had an
obligation to provide irrevocable standby letters of credit to Saipem to
guarantee payment by NOC under the agreement. Three standby letters of credit in
the aggregate amount of $3,900,000 were issued by HSBC International Limited
("HSBC") on the basis that they were 100% cash collateralized pursuant to the
security interest agreement between the Company and HSBC dated February 2, 2005.
One of the letters of credit in the sum of $1,100,000 expired on July 15, 2005.
The second letter of credit in the sum of $2,250,000 expires on October 30, 2005
and the final letter of credit for $550,000 expires on December 30, 2005.
SECTION 6.9 - TAXES
The Company was delinquent in filing income tax and information returns required
by tax authorities in Canada and the United States during the fiscal years 2002
and 2003. These payments have now been made
SCHEDULE 6.4
SUBSIDIARIES OF THE COMPANY
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
JUNE 30, 2005 *MATERIAL SUBSIDIARIES
CANARGO
ENERGY
CORPORATION
BENEFICIAL
LEGAL NAME INCORPORATION OWNERSHIP NOTES STATUS
---------- ------------- ----------- ----- ------
1 CanArgo Energy Corporation Delaware Parent Active
2 Fountain Oil Production Incorporated Delaware 100% Inactive
3 Fountain Oil Adygea Incorporated Delaware 100% Inactive
4 CanArgo Oil & Gas Inc Ontario, Canada 100% Active
5 CanArgo Limited Ontario, Canada 100% A Active
6 Fountain Oil Ukraine Limited New Brunswick, Canada 100% Inactive
7 UK-RAN Oil Corporation New Brunswick, Canada 90% B Inactive
8 Fountain Oil Canada Limited New Brunswick, Canada 100% Inactive
9 Focan Limited New Brunswick, Canada 100% Inactive
10 EOR Canada Limited New Brunswick, Canada 100% C Inactive
11 CanArgo Acquisition Corporation New Brunswick, Canada 100% Inactive
*12 NINOTSMINDA OIL COMPANY LIMITED CYPRUS 100% D ACTIVE
13 CanArgo Oil Boryslaw Limited Cyprus 100% E Inactive
14 CaspArgo Limited Cyprus 10% F Inactive
*15 CANARGO NORIO LIMITED CYPRUS 100% D ACTIVE
16 Groundline Limited Cyprus 100% D Inactive
17 E.P.S. European Petroleum Services Limited Cyprus 100% D Inactive
18 Lateral Vector Resources Limited (formerly Longtex Limited) Cyprus 100% G Inactive
19 Xxxxxxxx Limited Cyprus 100% D Inactive
*20 CANARGO LIMITED GUERNSEY 100% H ACTIVE
*21 CANARGO (NAZVREVI) LIMITED GUERNSEY 100% D ACTIVE
22 CanArgo Power Corporation Limited Guernsey 100% D Active
23 CanArgo (Kaspi) Limited Guernsey 100% D Active
24 Argonaut Well Services Limited Guernsey 100% D Active
25 CanArgo Petroleum Refining Limited Guernsey 100% D & J Inactive
*26 TETHYS PETROLEUM INVESTMENTS LIMITED GUERNSEY 100% D ACTIVE
27 Tethys Kazakhstan Limited Guernsey 100% K Active
*28 CANARGO SAMGORI LIMITED GUERNSEY 100% D ACTIVE
29 CanArgo Services (UK) Limited England 100% D Active
30 Sagarejo Power Corporation Limited Republic of Georgia 85% L Inactive
31 Georgian British Oil Company Ninotsminda Republic of Georgia 50% M & J Inactive
32 Georgian British Oil Company Nazvrevi Republic of Georgia 50% N & J Inactive
33 Georgian British Oil Company Norio Republic of Georgia 50% P & J Inactive
34 Ninotsminda Services Limited Republic of Georgia 100% Q Active
35 CanArgo Georgia Limited Republic of Georgia 100% D & S Active
36 Ninotsminda Oil Company Limited Jersey 100% D Inactive
37 CanArgo Norio Limited Jersey 100% D Inactive
38 CanArgo Services Iraq Limited Jersey 100% D & J Inactive
39 KaspOil JSC Russia Less than 1% S Active
40 BN Munai LLP Kazakhstan 70% held by TKL T Active
41 Tethys MunaiGaz LLP Kazakhstan 100% U
NOTES
A 100% owned by CanArgo Oil and Gas Inc.
B 90% owned by Fountain Oil Ukraine Limited. Balance owned by UK-Ran Energy
Corp
C 100% owned by Focan Ltd. which in turn is 100% owned by CanArgo Energy
Corporation
D 100% owned by CanArgo Limited, Guernsey
E Formerly Fountain Oil Boryslaw Cyprus. Hold loans from Boryslaw Oil
Company
F 10% owned by CanArgo (Kaspi) Limited. Balance owned by Allied Petroleum
Technologies Corporation.
G 100% owned by Groundline Limited. Established to own interest in JIPA.
Legal interest never tranferred.
H 100% owned by CanArgo Ltd. (Ontario)
J In process of dissolution
K 100% owned by Tethys Petroleum Investments Limited
L 85% owned by CanArgo Energy Corporation. Balance owned by Sagarejo
Electric Service.
M 50% controlling interest owned by Ninotsminda Oil Company Limited. Balance
owned by Georgian Oil.
N 50% controlling interest owned by XxxXxxx Xxxxxxxx Limited. Balance owned
by Georgian Oil.
P 50% controlling interest owned by XxxXxxx Xxxxx Limited. Balance owned by
Georgian Oil.
Q 100% owned by Ninotsminda Oil Company Limited. Holds ownership of
apartments in payment of Rusatvi Cement Factory debt.
R Non profit making PSC operator of Ninotsminda, Xxxxxxxx, Xxxxx and Tbilisi
PSCs
S Ownership uncertain but between less than 1% and 10%
T 70% owned by Tethys Kazakhstan Limited. 20% by BN Invest. 10% by X
Xxxxxxxxx.
U In process of being formed - to be owned 100% by Tethys
Kazakhstan Limited
DIRECTORS AND SENIOR OFFICERS OF THE COMPANY
NAME POSITION
---- --------
Dr Xxxxx Xxxxxx Chairman of the Board, Chief Executive Officer and
President
Xxxxxxx XxXxxxxxx Director, Chief Operating Officer and Chief
Commercial Officer
Xxxxxxx Xxxx (1) Director
Xxxxxxx Xxxxxxx (1) (2) Director
Xxxx Xxxxxxxx (1) (2) Director
Xxxxxxxxx Xxxxxxx Corporate Secretary
Xxxxxxx Xxxxxx Chief Financial Officer
(1) Member of Audit Committee
(2) Member of Compensation Committee
SCHEDULE 6.5
FINANCIAL STATEMENTS
Annual Report for the fiscal year ended December 31, 2004 on Form 10-K, as filed
with the SEC on March 15, 2005.
Quarterly Report for the fiscal quarter ended March 31, 2005 on Form 10-Q, as
filed with the SEC on May 12, 2005.
SCHEDULE 6.8
CERTAIN LITIGATION
1. The Company has disputed a number of invoices received from WEUS Holding
Inc. ("Weatherford") pursuant to the Supply Contract between the parties
dated 1 June 2004. The Company is currently in negotiations with
Weatherford to settle this matter.
2. One of the Company's Wholly Owned Subsidiaries, UK-Ran Oil Corporation
("UK-Ran") is named as one of the defendants in an action commenced in
Alberta, Canada by Xxxxxxxxxx Developments Limited, Xxxxxx Xxxxxx, Xxxxxx
Xxxxxxxxx and Ruscan International Inc. The dispute relates to the
Kashtan project in the Ukraine. The Company transferred its entire
interest in the Kashtan project to a co-defendant Zhoda Corporation
("Zhoda") in 1999. The plaintiff's principal claims are (i) that by
entering into this transfer both Zhoda and UK-Ran are in breach of their
obligations under the unanimous shareholder agreement ("USA") for UK-Ran
which provided that Zhoda would conduct all of its oil and gas activities
in the Republic of the Ukraine through UK-Ran; and (ii) that the
plaintiffs are due to be paid dividends under the Overriding Royalty
Agreements between the plaintiffs and UK-Ran.
SCHEDULE 6.11
LICENSES, PERMITS, ETC.
1. The License for the contract area covered by the Production Sharing
Contract among (1) State Agency of Georgia, (2) Georgian Oil and (3)
National Petroleum Limited dated May 2001 is held in the name of the
operating company under the contract, Ioris Valley Oil and Gas.
2. The Company's interests in Kazakhstan are held through one of its wholly
owned subsidiaries Tethys Kazakhstan Limited's 70% interest in BN-Munai
LLP, a Kazakh limited liability partnership.
SCHEDULE 6.14
USE OF PROCEEDS
The proceeds from the sale of the US $25,000,000 aggregate principal amount of
Senior Secured Notes due [*], 2009 shall be used for the following:
o Repayment of the Cornell Facilities and payment of fees specified
in Sections 10.9 and 10.10
o Working capital for existing projects in the Republics of Georgia
and Kazakhstan
SCHEDULE 6.15
EXISTING INDEBTEDNESS
Promissory Note between the Company and Cornell Capital Partners, LP dated April
26, 2005 and Standby Equity Distribution Agreement between the Company and
Cornell Capital Partners, LP dated February 11, 2004.
Convertible Loan in the sum of $1,070,000 plus accrued interest advanced to the
Company pursuant to the Amended and Restated Loan and Warrant Agreement between
Xxxxxx Xxxxxx and the Company dated August 27, 2004,
Pursuant to the terms of the consultancy agreement between the Company and
Europa Oil Services Limited dated January 8, 2004, the Company has an obligation
to issue up to a further restricted 12 million shares of Common Stock in the
event that certain production targets are met from future developments under the
Samgori Production Sharing Contract.
Pursuant to the terms of the Memorandum of Agreement between Fountain Oil
Incorporated and Xxxxxxx Management Services PTY, Ltd ("Xxxxxxx") dated May 16,
1995, the Company has an obligation upon satisfaction of certain conditions
relating to the achievement of specified Stynawashe Field project performance
targets to issue to Xxxxxxx up to 187,500 shares of Common Stock.
Under the terms of the service agreement dated January 27, 2005 between
Ninotsminda Oil Company Limited ("NOC") and Saipem S.p.A ("Saipem"), NOC had an
obligation to provide irrevocable standby letters of credit to guarantee payment
by NOC under the agreement. Three standby letters of credit in the aggregate
amount of $3,900,000 were issued by HSBC International Limited ("HSBC") on the
basis that they were 100% cash collateralized pursuant to the
security interest
agreement between the Company and HSBC dated February 2, 2005. One of the
letters of credit in the sum of $1,100,000 expired on July 15, 2005. The second
letter of credit in the sum of $2,250,000 expires on October 30, 2005 and the
final letter of credit for $550,000 expires on December 30, 2005.
SCHEDULE 6.18
ENVIRONMENTAL MATTERS
In September 2004, the Company had a blow-out of its N100 well on the
Ninotsminda Field which was successfully capped three days later. The Company
has incurred and continues to incur costs in relation to the blow-out
principally for clearing the environment and compensation. The Company's
insurance covers 80% of these costs up to a cap of $2,500,000.
SCHEDULE 6.19
BASIC AGREEMENTS
1. Production Sharing Contract among (1) Georgia, (2) Georgian Oil and (3)
JKX Ninotsminda Limited dated February 15, 1996 ("Ninotsminda PSC").
2. Production Sharing Contract among (1) State Agency in Georgia, (2)
Georgian Oil and (3) CanArgo Norio Limited dated December 12, 2000
("Norio PSC").
3. Production Sharing Contract among (1) the State Agency for Regulation of
Oil and Gas Resources of Georgia, (2) National Oil Company- Saknavtobi
and (3) CanArgo Norio Limited for Blocks XI (G) and XI(H) dated June 28,
2003 ("Tbilisi PSC").
4. Production Sharing Contract among (1) Georgia, (2) Georgian Oil and (3)
CanArgo (Nazvrevi) Limited dated February 20, 1998.
5. Production Sharing Contract among (1) State Agency of Georgia, (2)
Georgian Oil and (3) National Petroleum Limited dated May 2001 ("Samgori
PSC").
SCHEDULE 11.1
TRANSACTIONS WITH AFFILIATES
The transactions provided for in:-
(i) Management Services Contract dated June 29, 2000 between the Company
and Vazon Energy Limited, as amended by Deed of Variation of Management
Services Agreement dated May 2, 2003 between the parties; and
(ii) Agreement for Provision of Management Services dated February 18,
2004 between the Company and Vazon Energy Limited.
SCHEDULE 11.8
PERMITTED FARMOUT COUNTERPARTIES
Exceptions when no consent to farm-out is required by the Company would include:
1. Any company, or the wholly owned subsidiary of any company quoted on a
Recognised Stock Exchange with a market capitalization of US$100 million
or above. The following are Recognised Stock Exchanges:
American Stock Exchange
Amsterdam Exchanges N.V.
Athens Stock Exchange
Australian Stock Exchange Ltd
Barcelona Stock Exchange
Bolsa de Madrid
Bolsa de Comercio xx Xxxxxxxx
Bolsa de Valores de Bilboa
Bolsa de Valores de Lisboa
Bolsa de Valores do Rio de Janeiro
Bolsa de Valores de Sao Paulo
Bolsa Mexicana de Valores
Bourse de Montreal
Brussels Exchanges Ltd
Canadian Venture Exchange
Copenhagen Stock Exchange
Deutsche Borse AG
Helsinki Exchanges Group Ltd
Irish Stock Exchange
Italian Stock Exchange
London Stock Exchange
National Association of Securities Dealers Inc
National Market System
New York Stock Exchange Inc
New Zealand Stock Exchange
Osaka Stock Exchange
Oslo Xxxx
Xxxxx Bourse SBF SA
Singapore Exchange
Societe de la Bourse de Luxembourg SA
Swiss Exchange
Taiwan Stock Exchange
The Stock Exchange of Hong Kong Ltd
The Toronto Stock Exchange
Tokyo Stock Exchange
Warsaw Stock Exchange
Wiener Borse AG
2. Any company which is 10% or more owned (directly or indirectly) by the
government of a member of the United Nations.
3. In addition, the following specific companies so long as the aggregate
equity ownership of the CanArgo Group Members, the Officers and the
Directors in such company is less than 5% of the outstanding equity
capital of the named company:
Nations Energy Company Limited
Central Asian Oil
Caspian Gas
Kaz Trans Oil Company
KazMunayGas
KazTransGas
KazRosGas
Kazakhstan Electricity Grid Operating Company (KEGOC)
Victory Oil Company
Xxxxxxxx Xxxxx
Union - N
Sandvik - Tamrok
Proussag Energy
Nimir Petroleum Bars
MMG - AM Nova
Kazoilproduct
Oman Gas Company
Kazakhstan Pipeline Company SA
Offshore Kazakhstan International Operating Company (OKIOC)
KazakhstanCaspiShelf
Roustabout International Energy
Alcor
Boccard
Borkit Ltd
Caspian Energy
Caspian Resources
Caspian Holdings
Xxxxxx Resources
Petrokazakhstan
Imperial Energy
Kazneftekhim
Kaztrubprom
Kazneftegasmash JSC
Kazgiproneftetrans JSC
OGO Interoil
Petrom S.A.
Polish Oil and Gas Group
Roxar Services AS
Xxxxxx XX
Somex
Stroitrans Gas
Wika Kazakhstan
Karakudukmunai
Zarubejhneft
Embamunaigas
Transmeridian
BMB Munai
Georgian State Oil Company (Saknaftobi)
PetroChina
Questerre Energy Corporation
China Petrochemical Corporation (Sinopec)
China National Petroleum Corporation (CNPC)
China National Offshore Oil Company (CNOOC)
China Oilfield Service, Ltd. (COSL)
China National Star Petroleum
Bright Ocean (BOCO)
Japan National Oil Company (JNOC).
Japan Petroleum Exploration Corporation (Japex),
Inpex
Nippon Oil
Teikoku Oil
Japex
Itochu Corporation
Tokyo Gas
Osaka Gas
Toho Gas
Gazprom
Itera
Tatneft
Transneft
Lukoil
OAO Yukos
Sibneft
XXX UES
OMV
PA Resources
Questerre
Xxxxxx Petroleum
Tanganyika Oil Company Ltd.
Valkyries Petroleum Corp
Northern Petroleum
North Oil
DNO
Centurion Energy International
Kuwait Petroleum
Iraq National Oil Company
Nigerian National Oil Company
Saudi Arabian Oil Company
Statoil
Repsol
Norsk Hydro
Sonatrach
Chinese Petroleum (Taiwan)
Pemex
Petrobras
Petronas
Dragon Oil
Qatar Petroleum
Saudi Aramco
PDVSA, Venezuela
Sonangol, Angola
ONGC, India
MOL
Indonesia Petroleum (Inpex)
ATH Resources
BlackRock
Caledonia Resources
Caspian Energy
Caspian Holdings
Desire Petroleum
Egdon Resources
Equator Exploration
Circle Oil
Falkland Oil and Gas
First Calgary
Frontera Resources
GTL Resources
Global Energy
Granby Oil and Gas
Gulf Keystone
Xxxxxxx Resources
Imperial Energy
Island Oil and Gas
MCC Energy
Xxxxxx Resources
Oriel Resources
Petrel Resources
Ramco
Regal Petroleum
Sibir Energy
Star Energy
Sterling Energy
Victoria Oil and Gas
Westmount Energy
Arawak Energy Corporation
Bankers Petroleum Ltd.
Canoro Resources Ltd
Centurion Energy International
Petrofalcon Corporation
TransGobe Energy Corporation
Altinex
Discover Petroleum
Dong
Endeavour International Corp
Ener Petroleum
Northern Oil
Northern Petroleum
Norwegian Energy Company
Norwegian Petroleum Group
Paladin Resources
RockSource
EXHIBIT 99.1
(CANARGO ENERGY CORPORATION LOGO)
CANARGO ENERGY CORPORATION
FOR IMMEDIATE RELEASE IN EUROPE & NORTH AMERICA
$25 MILLION CONVERTIBLE FINANCING CLOSED
July 25, 2005, New York, New York, CanArgo Energy Corporation (AMEX:CNR;
OSE:CNR) ("CanArgo") today announced that it has closed the private placement of
a $25 million issue of Senior Convertible Secured Loan Notes (the "Notes") with
a group of investors arranged by Xxxxxxx & Xxxxxx LLC of New York City.
The Notes are convertible in whole or in part into CanArgo common stock at a
price of $0.90 per share, subject to certain anti-dilution adjustments, and
mature on July 25, 2009. CanArgo may call the Notes from July 1, 2006 at an
initial price of 105% of par. Interest will be payable in cash at 3% per annum
until December 31, 2005, 10% per annum during 2006, and 15% per annum
thereafter. The Notes are fully secured against all material assets of the
CanArgo group.
CanArgo intends to file a registration statement on Form S-3 with the SEC in
respect of the conversion stock.
The proceeds of this financing will be used to redeem short term debt in the
form of the currently outstanding Loan Note with Cornell Capital Partners LP
("Cornell"), to fund the appraisal of a new gas project in Georgia, to fund the
development of the Kyzyloy gas field in Kazakhstan and adjacent exploration
areas, and for additional working capital for CanArgo's development, appraisal
and exploration activities in Georgia. In addition, CanArgo will terminate the
Standby Equity Distribution Agreement which it currently has with Cornell.
Forward Plans
With this financing in place, CanArgo is now in a position to announce its
forward plans for the next 12 months, both in its core area of Georgia and on
its more recently acquired assets in Kazakhstan.
Georgia
In Georgia, XxxXxxx is involved with the appraisal of the Xxxxxx oil discovery,
development of the Ninotsminda and Samgori oilfields, exploration on the Norio
block and the appraisal of a gas discovery.
The Xxxxxx appraisal program is proceeding well, with a 5 inch liner having been
run on the Xxxxxx M11Z sidetrack well, and with the top of the Middle Eocene
reservoir sequence being encountered high to prognosis. The well will now be
drilled through
the Middle Eocene and into the primary Cretaceous target using the Saipem rig
and slim-hole drilling technology. This well is appraising the M11 oil discovery
where the production test on the Cretaceous limestone sequence was prematurely
terminated following the collapse of the production tubing due to pressure
during testing. Prior to this, during the initial clean-up flow, good flow rates
were observed from the well, although un-metered, with 34.4 degrees API oil
being recovered. CanArgo believes that the M11 Cretaceous oil discovery has
potential to be one of the most significant oil discoveries made recently in the
Southern Caucasus. Over 150 metres (490 feet) of hydrocarbon bearing Cretaceous
limestone reservoir was encountered, with the top at 4,348 metres (14,265 feet).
Regional outcrop studies indicate this reservoir unit to be over 300 metres
(~1,000 feet) thick. No oil-water contact was indicated in the well. The M11Z
well is expected to be tested before the end of August, and will be followed by
the M12 appraisal well, which will be drilled to the west of M11. The drilling
site is already prepared and it is anticipated that the well will be spudded in
September. Following this it is planned to drill the M13 appraisal well (located
to the east of M11) commencing in the first quarter of 2006. Given a successful
test on M11Z, an early production system will be installed and test production
will commence from the well, this being both to achieve early revenue and to
gather production data for the full-field development.
The 2005 / 2006 horizontal development program on the Ninotsminda and Samgori
fields is now about to move ahead again following demobilisation of the
Xxxxxxxxxxx under-balanced coiled-tubing drilling spread. The program has been
modified and now involves the drilling of up to two xxxxx on the Ninotsminda
field using jointed-pipe, and possibly one well on the Samgori field. A service
contract has been signed with Xxxxx Xxxxxx to provide the directional equipment
for these xxxxx, which will be drilled using a CanArgo rig. Four horizontals
have already been successfully drilled on the Ninotsminda field using these
techniques in the past. The first of the new xxxxx will be the second horizontal
well from the N100 wellbore on Ninotsminda. This part of the Ninotsminda
reservoir has been shown to be very productive in the past, with the original
N100 horizontal well testing at rates in excess of 2,200 bopd. Information
gained from the N22H under-balanced well appears to indicate that under-balanced
drilling will be beneficial for production from this reservoir, and as such
CanArgo is in negotiation with several providers of under-balanced coiled-tubing
drilling services to move ahead with the planned program of up to 15 horizontal
xxxxx on the two fields, and with a production target of 10,000 bopd. This
program is also planned to include a new well (N99) to test and produce the
eastern part of the Ninotsminda reservoir, which XxxXxxx believes is currently
un-drained and offers additional potential.
At Norio, the MK72 well has now recommenced drilling following the acquisition
by CanArgo of a 100% working interest in the Norio Production Sharing Agreement.
The MK72 well is targeting a potentially large prospect mapped at Middle Eocene
level, just to the north of the Samgori field, which is reported to have
produced some 180 million barrels of oil to date at rates in excess of 70,000
bopd. Oil has already been encountered in the well, which penetrated some 300
metres (984 feet) of net sandstones in the Oligocene secondary target, with oil
being indicated by electric logs and with good oil and gas shows whilst
drilling. The well is now being drilled towards the primary target which seismic
data indicates to be at a depth of some 4,800 metres (15,747 feet), and it is
hoped that this target will be reached during August.
The Norio block covers a large area and it is planned to acquire further seismic
data next summer to firm up additional leads in the western part of the area.
Following agreement with the Georgian government on the principles of a gas
offtake agreement, CanArgo is planning an appraisal well to the West Rustavi R16
well, which flowed gas from the Cretaceous sequence at a depth of 3,900 metres
(12,792 feet), close to the interpreted gas-water contact. Seismic data acquired
by CanArgo indicates that the structure rises to the west and could contain a
substantial volume of gas. Subject to finalization of the gas offtake agreement,
it is hoped to commence drilling the Kumisi #1 well in Q4 2005 depending on rig
availability. Given success, the well will be tied in to the Georgian gas
system, with further development drilling anticipated.
XxxXxxx has also expressed interest in several blocks for potential licensing in
the next Georgian oil & gas licence round.
Kazakhstan
In Kazakhstan, CanArgo, through its 70% subsidiary BN-Munai LLP is involved with
the development of the Kyzyloy gas field, and in an exploration program on the
surrounding Akkulkovsky area located in the North Ustyurt basin to the west of
the Aral Sea.
The first of six gas xxxxx on the Kyzyloy field is currently being worked over,
and a 60 km (37.5 mile) pipeline is planned to tie this field to the main
Bukhara-Urals gas trunkline system. The field is estimated to contain
independently assessed Proved Undeveloped Reserves of 30 billion cubic feet
(0.85 billion cubic metres) of natural gas, and is planned to produce with a
plateau rate of 17.7 million cubic feet (500,000 cubic metres) per day of gas,
with first gas expected before the end of the year, subject to finalisation of a
gas sales agreement.
Five exploration xxxxx are planned on identified shallow gas prospects in the
area around the Kyzyloy field, with the first well currently being drilled.
Given success these prospects could substantially increase the size of the
Kyzyloy development, and the Kyzyloy export pipeline is being designed with a
capacity of up to 78 million cubic feet (2.2 million cubic metres) of gas per
day.
Seismic data reprocessing is currently underway on the Akkulkovsky area in an
attempt to firm up deeper gas condensate prospects similar to the reported large
gas condensate fields just to the south in Uzbekistan. Given success a deep
exploration well may be planned for 2006.
Work is continuing to finalise the acquisition of the exploration contract for
the Greater Akkulkovsky area, a very large (approximately 10,000 km(2) (10.9
million acre)) area surrounding the Akkulkovsky block which CanArgo believes has
substantial exploration potential. CanArgo has also applied for three further
areas in the recent Kazakh licencing round.
Kazakhstan affords CanArgo a more diversified production base and the potential
to develop the business in a country close to its core area with prolific
hydrocarbon potential.
Dr. Xxxxx Xxxxxx, Chairman, President and CEO said, "I am very pleased to have
now closed this financing through Xxxxxxx & Xxxxxx, and in the confidence shown
in the company by these new loan note holders. This additional capital will
allow us to retire short-term debt and significantly advance our projects in
Georgia and in Kazakhstan, including some new opportunities which should yield
early cash flow, as well as with significant upside potential. We are making
good progress at present on the appraisal of our Xxxxxx oil discovery, with
further results expected soon, and we now have a way forward on our horizontal
development program. The next few months are going to be an exciting time for
the company and with this new capital we are in a good position to achieve our
goals."
CanArgo is an independent oil and gas exploration and production company with
its oil and gas operations currently located in the Republic of Georgia and the
Caspian area.
The matters discussed in this press release include forward-looking statements,
which are subject to various risks, uncertainties and other factors that could
cause actual results to differ materially from the results anticipated in such
forward-looking statements. Such risks, uncertainties and other factors include
the uncertainties inherent in oil and gas development and production activities,
the effect of actions by third parties including government officials,
fluctuations in world oil prices and other risks detailed in the Company's
reports on Forms 10-K and 10-Q filed with the Securities and Exchange
Commission. The forward-looking statements are intended to help shareholders and
others assess the Company's business prospects and should be considered together
with all information available. They are made in reliance upon the safe harbor
provisions of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The Company cannot give
assurance that the results will be attained.
For more information please contact:
CANARGO ENERGY CORPORATION
Xxxxxx Xxxxxxx, Investor Relations Manager
Tel: x00 0000 000 000
Fax: x00 0000 000 000
e-mail: xxxx@xxxxxxx.xxx
NORWAY
Xxxxxx Xxxxxxxx
Xxxxxx H&K AS
Tel: + 00 00000000
USA
Xxxxxxx Xxxxx
XXXxxxx.xxx
Tel: x0 000 000 0000
EXHIBIT 10.5
CANARGO LIMITED (GUERNSEY)
CANARGO LTD (ONTARIO)
XXXXXXX & XXXXXX LLC
AND
THE SECURED PARTIES
SECURITY INTEREST AGREEMENT
(SECURITIES)
ABX
CONTENTS
1 DEFINITIONS AND INTERPRETATION..........................................1
2 GRANT OF SECURITY INTEREST..............................................5
3 THE SECURED OBLIGATIONS.................................................6
4 DEBTOR'S REPRESENTATIONS AND WARRANTIES.................................6
5 DEBTOR'S COVENANTS......................................................8
6 LIEN...................................................................10
7 EVENTS OF DEFAULT......................................................10
8 ENFORCEMENT BY THE SECURED PARTIES.....................................14
9 FURTHER ASSURANCE AND POWER OF ATTORNEY................................15
10 SUSPENSE ACCOUNT.......................................................16
11 SECURITY CONTINUING AND INDEPENDENT....................................16
12 FEES, COSTS AND EXPENSES...............................................17
13 REMEDIES AND XXXXXX....................................................17
14 INDEMNITY AND LIABILITY................................................18
15 RULING OFF.............................................................18
16 ILLEGALITY.............................................................19
17 CERTIFICATE OF SECURED PARTIES.........................................19
18 AMALGAMATION AND CONSOLIDATION.........................................19
19 CONVERSION OF CURRENCY.................................................19
20 AMENDMENT..............................................................20
21 ASSIGNMENT.............................................................20
22 NOTICES................................................................20
23 COUNTERPARTS...........................................................21
24 GOVERNING LAW AND JURISDICTION.........................................21
SCHEDULE 1 ................................................................25
SCHEDULE 2 ................................................................26
SECURITY INTEREST AGREEMENT
THIS AGREEMENT is made on 2005
BETWEEN
(1) CANARGO LTD a company incorporated under the laws of Ontario having its
registered office at Lang Xxxxxxxx, 000 Xxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxx X0X 0X0 (the "DEBTOR");
(2) CANARGO LIMITED a company incorporated under the laws of Guernsey
having its registered office at XX Xxx 000, Xx Xxxxx Xxxx, Xxxxxxxx
(the "COMPANY");
(3) XXXXXXX & XXXXXX LLC a company formed under the laws of New York having
its office at 00 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx, XXX as agent for the
Secured Parties (the "SECURITY AGENT"); and
(4) XXXXXXX & XXXXXX VALUE PARTNERS L.P. XXXXXXXX X. XXXXXXXX, XXXXXX X.
XXXXXX, XXXXXX XXXXXX, XXXXXX X. XXXXXX XXX, XXXX XXXXXXX, XXXXXX
XXXXX, FLEDGLING ASSOCIATES LLC, XXXX XXXXXXX, XXXX XXXXXXX, XXXXXXX
XXXXX, XXXX XXXXXX, XXXXXX XXXXXXX all care of 00 Xxxxxxxx, Xxx Xxxx,
XX 00000, XXX as the purchasers (together the "SECURED PARTIES").
WHEREAS:
This Agreement is made between the parties hereto for the purposes of creating
security over the issued share capital of the Company held by the Debtor.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1 DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, the following words and expressions shall, except
where the context otherwise requires, have the following meanings:
"AFFILIATE" has the meaning ascribed to it in the Note Purchase
Agreement;
1
"BUSINESS DAY" means any day on which commercial banks are open for
full banking business in Guernsey;
"CANARGO ENERGY CORPORATION" means CanArgo Energy Corporation, a
company incorporated under the laws of Delaware, having its registered
office at 0000, Xxxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx,
00000 XXX;
"CANARGO GROUP MEMBER" has the meaning ascribed to it in the Note
Purchase Agreement;
"CODE" has the meaning ascribed to it in the Note Purchase Agreement;
"COLLATERAL" means the Securities, the Derivative Assets and the
Derivative Rights;
"DEFAULT" has the meaning ascribed to it in the Note Purchase
Agreement;
"DERIVATIVE ASSETS" means all rights, moneys (including without
limitation, distributions and dividends, interest and other property
whatsoever which may from time to time at any time be derived from,
accrue on or be offered in respect of, or incidental to or created or
issued in substitution for the Securities whether by way of redemption,
exchange, conversion, rights, bonus, capital reorganisation or
otherwise howsoever;
"DERIVATIVE RIGHTS" means all present and future right, title, benefit
and interest in and to the Derivative Assets including without
limitation all rights to subscribe for, convert other securities into
or otherwise acquire any other shares, stock, debentures, debenture
stock, loan stock, bonds or units of a unit trust scheme;
"ENCUMBRANCE" means any mortgage, charge, pledge, lien, assignment,
hypothecation, title retention, security interest, trust arrangement or
any other agreement or arrangement which has the effect of creating
security;
"ERISA" has the meaning ascribed to it in the Note Purchase Agreement;
"ERISA AFFILIATE" has the meaning ascribed to it in the Note Purchase
Agreement;
"EVENTS OF DEFAULT" means any of the events or circumstances specified
in Clause 7;
2
"FOREIGN PENSION PLAN" has the meaning ascribed to it in the Note
Purchase Agreement;
"GUARANTEE" means the Guaranty Agreement of even date herewith from
Ninotsminda Oil Company Limited and others (including the Debtor) in
favour of the Secured Parties;
"KNOWLEDGE" has the meaning ascribed to it in the Note Purchase
Agreement;
"LAW" means the Security Interests (Guernsey) Law, 1993;
"LIEN" has the meaning ascribed to it in the Note Purchase Agreement;
"LOAN DOCUMENTS" has the meaning ascribed to it in the Note Purchase
Agreement;
"MATERIAL" has the meaning ascribed to it in the Note Purchase
Agreement;
"MATERIAL ADVERSE EFFECT" has the meaning ascribed to it in the Note
Purchase Agreement;
"MULTIEMPLOYER PLAN" has the meaning ascribed to it in the Note
Purchase Agreement;
"NOTE PURCHASE AGREEMENT" means the note purchase agreement dated as of
the date hereof between CanArgo Energy Corporation and the Secured
Parties;
"NOTES" mean the senior secured notes issued to the Secured Parties
pursuant to the Note Purchase Agreement;
"OBLIGATIONS" has the meaning ascribed to it in the Note Purchase
Agreement;
"PERSON" has the meaning ascribed to it in the Note Purchase Agreement;
"PLAN" has the meaning ascribed to it in the Note Purchase Agreement;
"PROPERTIES" has the meaning ascribed to it in the Note Purchase
Agreement;
"REDEMPTION PRICE" has the meaning ascribed to it in the Note Purchase
Agreement;
3
"REQUIRED HOLDERS" means, at any time, the holders of at least 51 per
cent. in principal amount of the Notes at the time outstanding
(exclusive of the Notes then owned by CanArgo Energy Corporation, any
of its Subsidiaries or any of its Affiliates);
"RESPONSIBLE OFFICER" has the meaning ascribed to it in the Note
Purchase Agreement;
"SECURED OBLIGATIONS" shall have the meaning given to it in Clause 3;
"SECURITIES" means the shares specified in the Schedule 1 and includes
all of the Debtor's present and future right, title, benefit and
interest in and to the Securities;
"SECURITY DOCUMENTS" has the meaning ascribed to it in the Note
Purchase Agreement;
"SECURITY PERIOD" means the period commencing on the date hereof and
terminating on the date upon which the Required Holders shall have
determined that all of the Secured Obligations have been irrevocably
and indefeasibly paid, performed and discharged in full; and
"SUBSIDIARY" has the meaning ascribed to it in the Note Purchase
Agreement.
1.2 The Secured Parties shall be the "SECURED PARTIES", the Debtor shall be
the "DEBTOR" and the Events of Default shall be the "EVENTS OF DEFAULT"
for the purposes of the Law.
1.3 References to the Secured Parties include their successors and assigns.
References to the Debtor or the Company include their successors and
permitted assigns, if any.
1.4 Words and expressions not otherwise defined in this Agreement shall be
construed in accordance with the Law.
1.5 Except where the context otherwise requires, words denoting the
singular include the plural and vice versa, words denoting a gender
include every gender and references to persons include bodies corporate
and unincorporate.
4
1.6 References to Recitals, Clauses and Schedules are, unless the context
otherwise requires, references to recitals and clauses hereof and
schedules hereto and references to Sub-clauses are, unless otherwise
stated, references to the sub-clause of the clause in which the
reference appears.
1.7 The Recitals and Schedules form part of this Agreement and shall have
the same force and effect as if they were expressly set out in the body
of this Agreement and any reference to this Agreement shall include the
Recitals and Schedules.
1.8 Any reference to this Agreement or to any agreement or document
referred to in this Agreement shall be construed as a reference to such
agreement or document as amended, varied, modified, supplemented,
restated, novated or replaced from time to time.
1.9 Any reference to any statute or statutory provision shall, unless the
context otherwise requires, be construed as a reference to such statute
or statutory provision as the same may have been or may be amended,
modified, extended, consolidated, re-enacted or replaced from time to
time.
1.10 Clause headings and the index are inserted for convenience only and
shall not affect the construction of this Agreement.
2 GRANT OF SECURITY INTEREST
2.1 Without affecting, and in addition to, the Secured Parties' other
rights under or pursuant to this Agreement, for the purpose of granting
each Secured Party a first priority security interest in the Collateral
pursuant to the Law, the Debtor hereby:
(a) assigns the Collateral to the Security Agent; and
(b) delivers and agrees that the Security Agent or its nominees
shall have possession of the certificates of title to the
Securities.
2.2 The Debtor xxxxxx agrees that the security interests created by Xxxxxx
2.1 may exist independently and concurrently.
5
2.3 Pursuant to Section 1(8) of the Law, the Company hereby agrees that it
has received notice of and acknowledges the creation of a security
interest over the Securities pursuant to this Agreement.
2.4 Upon the expiry of the Security Period, the Security Agent shall, at
the request and expense of the Debtor, return to the Debtor the
certificates of title to the Securities and/or assign, transfer or make
over title to the Securities to the Debtor (as appropriate), without
recourse or warranty, executing such documents as may be required to
release the security created by this Agreement and shall thereby
discharge the security created hereunder.
3 THE SECURED OBLIGATIONS
The grants of security interest set out in Clause 2.1 shall secure as a
continuing security for the payment and/or discharge on demand of the
Guarantee and of all other present or future obligations, monies and
liabilities of the Debtor to the Secured Parties which shall for the
time being (and whether on or at any time after such demand) be or
become due, owing or incurred to any Secured Party by the Debtor
whether actually or contingently, solely or jointly with any other
person or as principal or surety and including interest (whether simple
or compound and as well after as before judgment) together with
discount, commission and all other lawful charges and expenses
(including, without limitation, legal fees and other professional fees
plus disbursements) of the Secured Parties under the Guarantee
(together the "SECURED OBLIGATIONS").
4 DEBTOR'S REPRESENTATIONS AND WARRANTIES
The Debtor hereby represents and warrants to each Secured Party on the
date hereof that:
(a) this Agreement constitutes the legal, valid and binding
obligations of the Debtor, and constitutes a valid first
priority security interest under the Law, enforceable against
the Debtor in accordance with its terms;
(b) no event has occurred or circumstance exists which constitutes
or with the giving of notice or lapse of time or both would
constitute an Event of Default;
6
(c) the Debtor and Xxxxx Xxxxxx are the sole legal and the Debtor
is the sole beneficial owner of and has good title to the
Collateral subject only to the rights granted in favour of the
Secured Parties by this Agreement;
(d) the Securities constitute the entire issued capital of the
Company and have been duly authorised and validly issued and
are fully paid;
(e) the Collateral is free from all Encumbrances and rights of
set-off other than those created by this Agreement in favour
of the Secured Parties;
(f) the Debtor has the necessary power to execute, deliver and
perform its obligations under this Agreement; and the
execution, delivery and performance by the Debtor of this
Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action;
(g) all necessary authorisations or approvals or other actions by
and notices or filings with any governmental authority,
regulatory body or any other third party to enable the Debtor
to execute, deliver and perform this Agreement and the
perfection of the security interest created hereunder have
been obtained and are in full force and effect;
(h) the execution, delivery and performance by the Debtor of this
Agreement and the consummation by the Debtor of the
transactions contemplated hereby do not:
(i) require any consent or approval of any Person that
has not been obtained and each such consent or
approval that has been obtained is in full force and
effect;
(ii) violate any provision of the memorandum and articles
of association of the Debtor;
(iii) violate any provision of any statute, regulation,
order, injunction or judgment applicable to each
Debtor which violation could reasonably be expected
to have a Material Adverse Effect; or
7
(iv) violate, result in a breach of or constitute a
default under any mortgage, indenture or any other
material agreement to which the Debtor is a party or
by which it or its property may be bound which
violation or breach could reasonably be expected to
have a Material Adverse Effect.
(i) there are no actions, suits, litigation, administrative
proceedings or other proceedings at law or in equity or by or
before any governmental authority or arbitral tribunal now
pending, or to the Knowledge of the Debtor, threatened against
or affecting the Collateral which could reasonably be expected
to have a Material Adverse Effect.
5 DEBTOR'S COVENANTS
The Debtor covenants and undertakes to the Secured Parties that:
(a) contemporaneously with the execution and delivery of this
Agreement and otherwise from time to time and if and when the
Required Holders shall require, it shall deliver to the
Security Agent, or to its order for the rateable benefit of
the Secured Parties:
(i) certificates of title in respect of the Securities,
together with undated and signed xxxx completed stock
transfer forms with the consideration left blank and
all related declarations of nomineeship/trust in
favour of the Secured Parties (if any);
(ii) such other documents as the Required Holders shall
acting reasonably require to protect, maintain or
enforce their security interest or security interests
granted hereby; and
(iii) at any time following the occurrence of an Event of
Default do all other acts and things as the Required
Holders may acting reasonably require in order to
transfer title of the Collateral or any part of it
into the name of the Security Agent or the name of
its nominees;
(b) it will promptly pay all payments to be made or becoming due
and discharge any lien which may arise on any of the
Securities;
8
(c) any of the Collateral not held by the Security Agent (or its
nominees) shall be held on trust for and to the Secured
Parties' order or otherwise as the Required Holders may
require from time to time;
(d) at any time after the occurrence of an Event of Default which
is thereafter continuing unremedied and unwaived, and if and
when the Required Holders shall require, distributions,
dividends, interest or other income declared or payable on any
of the Securities shall be paid or assigned to the Security
Agent for the rateable benefit of the Secured Parties which it
shall then be entitled to apply as though they were proceeds
of sale or application; provided, however, until the
occurrence of an Event of Default which is continuing, Debtor
shall be entitled to receive and retain all distributions,
dividends, interest or other income declared or payable on any
of the Securities;
(e) at any time after the occurrence of an Event of Default which
is thereafter continuing unremedied and unwaived the Security
Agent will forthwith exercise all voting, consensual and other
powers and rights attaching to the Securities in such manner
as the Required Holders may direct from time to time and, in
the absence of such direction, only with the object of
preserving or enhancing the value of the Securities; provided,
however, until the occurrence of an Event of Default which is
continuing, Debtor shall be entitled to exercise all voting,
consensual and other powers and rights attaching to the
Securities;
(f) immediately upon receipt of any report, accounts, circular,
offer or notice received by the Debtor (or, as the case may
be, its nominee) in respect of, or which may affect, the
Securities, it shall deliver a copy to the Security Agent with
notice that it relates to this Agreement;
(g) it will not unless authorised in writing by the Required
Holders:
(i) except as set out in this Agreement or the Note
Purchase Agreement, to any extent sell, assign, grant
any option with respect to or otherwise dispose of or
create an Encumbrance over or agree to any extent to
sell, assign, grant any option with respect to,
dispose of or encumber the Collateral; or
9
(ii) negotiate, settle or waive any claim for loss, damage
or other compensation affecting the Collateral;
(h) it will do everything in its power to prevent any person from
becoming entitled to claim any right over the Collateral;
(i) it will do or cause to be done everything necessary to help
the Security Agent to:
(i) confirm or protect the interest of the Secured
Parties in the Collateral; and
(ii) exercise any of its or the Secured Parties' rights
under this Agreement.
(j) it will charge in favour of the Secured Parties, immediately
upon its acquisition (directly or indirectly) thereof, any and
all additional shares of stock or other securities of the
Company not otherwise hereby charged.
6 LIEN
Without affecting, and in addition to, the grant of security interest
and other rights hereunder, the Debtor hereby agrees that the Secured
Parties shall, for so long as any amount remains outstanding under or
in respect of the Secured Obligations, have a lien over the Securities.
7 EVENTS OF DEFAULT
7.1 There shall be an Event of Default if there occurs or exists any event
described as or constituting an Event of Default under the Note
Purchase Agreement namely:
(a) CanArgo Energy Corporation defaults in the payment of any
principal at the applicable Redemption Price (if any) on any
Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration
or otherwise; or
(b) CanArgo Energy Corporation defaults in the payment of any
interest on any Note or in the payment of any expenses due
hereunder or under any Security
10
Document for more than five Business Days after the same
becomes due and payable; or
(c) CanArgo Energy Corporation defaults in the performance of or
compliance with any term contained in sections 9.6, 10.11,
11.2, 11.3, 11.4, 11.6, 11.7, 11.8, 11.9, 11.10 or 11.11 of
the Note Purchase Agreement (an extract of such sections from
the Note Purchase Agreement are set out in Schedule 2 hereof);
or
(d) CanArgo Energy Corporation defaults in the performance of or
compliance with any term contained in the Note Purchase
Agreement (other than those referred to in paragraphs (a), (b)
or (c) above) and such default is not remedied within 30 days
after the earlier of (i) a Responsible Officer obtaining
actual and not constructive knowledge of such default and (ii)
CanArgo Energy Corporation receiving written notice of such
default from any holder of a Note (any such written notice to
be identified as a "notice of default" and to refer
specifically to paragraph (d) of Section 12 of the Note
Purchase Agreement); or
(e) any representation or warranty made in writing by or on behalf
of CanArgo Energy Corporation or any other CanArgo Group
Member or by any officer of CanArgo Energy Corporation or any
other CanArgo Group Member (including the Company) in the Note
Purchase Agreement, in any Security Document or in writing
furnished in connection with the transactions contemplated
hereby proves to have been false or incorrect in any Material
respect on the date as of which made; or
(f) CanArgo Energy Corporation or any other CanArgo Group Member
including the Company (i) is generally not paying, or admits
in writing its inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to the filing
against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy,
insolvency, reorganization, moratorium or other similar law of
any jurisdiction, (iii) makes an assignment for the benefit of
its creditors, (iv) consents to the appointment of a
custodian, receiver, trustee or
11
other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes
corporate action for the purpose of any of the foregoing; or
(g) a court or governmental authority of competent jurisdiction
enters an order appointing a custodian, receiver, trustee or
other officer with similar powers with respect to it or with
respect to any substantial part of its property, or
constituting an order for relief or approving a petition for
relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of CanArgo Energy
Corporation or any other CanArgo Group Member including the
Company, or any such petition shall be filed against CanArgo
Energy Corporation or any other CanArgo Group Member including
the Company and such petition shall not be dismissed or stayed
pending appeal within 90 days, or are not discharged within 60
days after the expiration of such stay; or
(h) a final judgment or judgments for the payment of money
aggregating in excess of US$2,500,000 (to the extent not
covered by insurance) are rendered against CanArgo Energy
Corporation or any other CanArgo Group Member including the
Company and which judgments are not, within 90 days after
entry thereof, bonded, discharged, finally settled or stayed
pending appeal, or are not discharged within 60 days after the
expiration of such stay; or
(i) if (i) any Plan subject to ERISA shall fail to satisfy the
minimum funding standards of ERISA or the Code for any plan
year or part thereof or a waiver of such standards or
extension of any amortization period is sought or granted
under section 412 of the Code, (ii) a notice of intent to
terminate any Plan subject to ERISA shall have been or is
reasonably expected to be filed with the Pension Benefit
Guaranty Corporation referred to and defined in ERISA or any
successor thereto ("PBGC") or the PBGC shall have instituted
proceedings under ERISA section 4042 to terminate or appoint a
trustee to administer any such Plan or the PBGC shall have
notified CanArgo Energy Corporation or any ERISA Affiliate or
other Affiliate that a Plan subject to
12
ERISA may become a subject of any such proceedings, (iii) the
aggregate "amount of unfunded benefit liabilities" (within the
meaning of section 4001(a)(18) of ERISA) under all Plans
subject to ERISA, determined in accordance with Title IV of
ERISA shall exceed US$500,000, (iv) CanArgo Energy Corporation
or any ERISA Affiliate or other Affiliate shall have incurred
or is reasonably expected to incur any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions
of the Code relating to employee benefit plans subject to
ERISA in excess of $500,000, (v) the present value of the
accrued benefit liabilities (whether or not vested) under each
Foreign Pension Plan maintained by CanArgo Energy Corporation
or an ERISA Affiliate, determined as of the end of its most
recently ended fiscal year on the basis of actuarial
assumptions, each of which is reasonable, exceeds the current
value of the assets of such Foreign Pension Plan allocable to
such benefit liabilities by US$500,000 or more, (vi) either
CanArgo Energy Corporation or any other CanArgo Group Member
(including the Company) incurs a Material liability pursuant
to any Foreign Pension Plan which could reasonably be expected
to have a Material Adverse Effect, (vii) CanArgo Energy
Corporation or any ERISA Affiliate or other Affiliate
withdraws from any Multiemployer Plan , or (viii) CanArgo
Energy Corporation or any other CanArgo Group Member
establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that
would increase the liability of CanArgo Energy Corporation or
any other CanArgo Group Member including the Company
thereunder in any Material respect; and any such event or
events described in clauses (i) through (viii) above, either
individually or together with any other such event or events,
has a Material Adverse Effect;
(j) (i) the Note Purchase Agreement, the Notes, any Security
Document, or any other Loan Document ceases to be in full
force and effect (except in accordance with its terms) or is
declared null and void or the validity or enforceability is
contested or challenged by CanArgo Energy Corporation, any
Affiliate of CanArgo Energy Corporation (including the Debtor
and the Company) or any of their respective partners or
shareholders; (ii) CanArgo Energy Corporation denies that it
has any further liability or obligation under
13
any of the Loan Documents prior to the indefeasible
satisfaction in full of all Obligations under the Loan
Documents; or (iii) any of the Liens and security interest
granted to the Secured Parties under the Security Documents
cease to be valid or perfected or cease to have the priority
required hereby or under the Security Documents prior to the
indefeasible satisfaction in full of all Obligations under the
Loan Documents, other than as a result of the action or
omission by any of the Secured Parties or holder; or
(k) CanArgo Energy Corporation or any other CanArgo Group Member
(including the Company) modifies or amends any of its
constitutional documents in any Material manner without the
Required Holders' prior written consent, unless any such
amendment will not result in a Default or Event of Default
(without regard to this paragraph) and will not adversely
affect the rights of the holders under the Loan Documents; or
(l) a change occurs in the consolidated financial condition of
CanArgo Energy Corporation or in the physical, operational or
financial status of the Properties, which change is not
otherwise described in this section and has a Material Adverse
Effect and which has not been remedied pursuant to paragraph
(d) above.
7.2 Any failure on the part of the Debtor to discharge any of its
obligations and liabilities and/or to pay any monies to any of the
Secured Parties when due under the Guarantee.
8 ENFORCEMENT BY THE SECURED PARTIES
8.1 At any time following the occurrence of an Event of Default which is
thereafter continuing unremedied and unwaived and provided that the
Security Agent has served on the Debtor a notice specifying the
particular Event of Default complained of:
(a) the power of sale or application under the Law shall become
exercisable over the Collateral without any order of the Royal
Court of Guernsey;
(b) the power of sale or application may be exercised in such
manner and for such consideration (whether payable
immediately, by instalments or otherwise deferred) as the
Required Holders shall in their absolute discretion determine;
14
(c) for the purposes of this Agreement, references to the exercise
of the "POWER OF SALE OR APPLICATION" shall include any method
or process by which value is given, allowed or credited by the
Required Holders for the Collateral against the Secured
Obligations;
(d) the Security Agent, acting at the written instruction of the
Required Holders, may exercise and be entitled to any and all
rights of an owner of the Collateral subject hereto; and
(e) the Security Agent may, at the written instruction of the
Required Holders, collect, receive or compromise and give a
good discharge for any and all monies and claims for monies
due and to become due for the time being comprised in the
Collateral subject hereto.
8.2 Neither the Security Agent nor the Required Holders shall be under any
liability to the Debtor for any failure to apply and distribute the
proceeds of sale or application of the Collateral in accordance with
the Law if the Required Holders apply or direct the Security Agent to
apply and distribute such proceeds in good faith without further
enquiry and in accordance with the information expressly known to them
at the time of the application and distribution.
8.3 The exercise by the Secured Parties of any right or power of sale or
application under this Clause 8 shall not constitute a waiver or
release of nor the exercise of any other right or power of sale or
application held by any Secured Party unless expressly stated in
writing.
8.4 For the purposes of this Clause 8, time shall be of the essence with
regard to the performance by the Debtor of the Secured Obligations.
9 FURTHER ASSURANCE AND POWER OF ATTORNEY
9.1 The Debtor agrees that it shall from time to time upon the written
request of the Required Holders promptly do all such things and execute
and deliver all such instruments and documents (including, without
limitation, any replacement or supplemental security) as the Required
Holders may consider necessary or desirable
15
for creating the security contemplated hereby, giving full effect to
this Agreement or for securing or protecting the rights of the Secured
Parties hereunder.
9.2 In accordance with the Powers of Attorney and Affidavits (Xxxxxxxxx of
Guernsey) Law, 1995 (the "POWERS OF ATTORNEY LAW"), for the purpose of
facilitating the exercise of the powers of the Secured Parties under
the Law and the powers given pursuant to this Agreement, the Debtor
hereby irrevocably appoints the Security Agent, acting upon the written
instructions of the Required Holders, as the Debtor's true and lawful
attorney (with full power of substitution and delegation) with
authority in the name of and on behalf of the Debtor upon the
occurrence of an Event of Default which is continuing to sign, execute,
seal, deliver, complete, acknowledge, file, register and perfect any
and all assurances, documents, transfers, instruments, agreements,
certificates and consents whatsoever and to do any and all such acts
and things in relation to any matters dealt with in this Agreement and
which the Required Holders may deem necessary or advisable in order to
give full effect to this Agreement (including, without limitation,
anything referred to in Clause 8 (Enforcement by the Secured Parties))
and anything to perfect its security over the Collateral. The Debtor
further covenants with the Secured Parties to ratify and confirm any
lawful exercise or purported exercise of this power of attorney.
10 SUSPENSE ACCOUNT
All monies received, recovered or realised by the Security Agent under
this Agreement may, at the discretion of the Required Holders, be
credited to a separate or suspense account for so long as the Required
Holders may think fit without any intermediate obligation on the part
of the Security Agent or the Secured Parties to apply the same in or
towards payment and discharge of the Secured Obligations.
11 SECURITY CONTINUING AND INDEPENDENT
The security constituted by this Agreement:
(a) shall not be discharged by any partial or intermediate payment
or performance of the Secured Obligations;
16
(b) shall take effect as a security for the whole and every part
of the payment or performance of the Secured Obligations and
shall be independent of and in addition to, and it shall not
be prejudiced or be affected by and shall not affect or
prejudice, any other security now or hereafter held by any
Secured Party in respect of the payment or performance of all
or any part of the Secured Obligations; and
(c) shall not be in any way discharged, impaired or otherwise
affected by reason of any of the Secured Obligations becoming
illegal, void, voidable, invalid or unenforceable or by reason
of any other act, circumstance or omission which might but for
provisions of this Clause 11 constitute a discharge of such
security.
12 FEES, COSTS AND EXPENSES
12.1 Subject to the provisions of Section 10.9 of the Note Purchase
Agreement, the Debtor agrees to reimburse the Security Agent on demand
for all fees (including legal fees), costs and expenses incurred by the
Security Agent in connection with or relating to the negotiation,
preparation and/or execution of this Agreement, the creation,
preservation and/or enforcement of any of the Secured Party's rights
under this Agreement or the exercise or purported exercise of any of
the powers arising pursuant to this Agreement.
12.2 All such fees, costs and expenses shall be reimbursed by the Debtor on
a full indemnity basis.
13 REMEDIES AND WAIVER
Time shall be of the essence of this Agreement but no failure by the
Security Agent or any Secured Party to exercise, nor any delay by the
Security Agent or any Secured Party in exercising, any right or remedy
hereunder shall operate as a waiver hereof nor shall any single or
partial exercise prevent any further or other exercise thereof or the
exercise of any other right or remedy. The rights and remedies provided
herein are cumulative and not exclusive of any rights or remedies
provided by law, which may be exercised at the Required Holders'
discretion.
17
14 INDEMNITY AND LIABILITY
14.1 The Debtor will indemnify and keep indemnified the Secured Parties and
the Security Agent and/or its nominees (if any) on demand against each
and every loss, action, claim, expense (including legal expenses), cost
and liability which the Secured Parties or the Security Agent and/or
its nominees may incur (as holder of the Collateral) or which may be
properly incurred in or in connection with the preservation and/or
enforcement of any of the Secured Parties' rights under this Agreement
or flowing from the exercise or purported exercise of any of the powers
arising under any of the provisions of this Agreement save where such
loss, action, claim, expense, cost or liability arises as the result of
the gross negligence or wilful misconduct of either of the Security
Agent or any of the Secured Parties.
14.2 Without prejudice to any other provision hereof:
14.2.1 the obligations of the Security Agent to the Secured Parties and to the
Debtor shall not be and/or shall be deemed not to be fiduciary in
nature;
14.2.2 the provisions of the Trusts (Guernsey) Law, 1989 shall not apply to
the Security Agent in respect of its duties under this Agreement; and
14.2.3 the obligations of the Security Agent to the Secured Parties and to the
Debtor shall be limited to (a) its obligations as expressed in this
Agreement and (b) in accordance with the written authorisation of the
Required Holders, where such authorisation is required.
14.3 Notwithstanding any other provision hereof, neither the Security Agent
nor its nominees nor any of the Secured Parties shall be liable by
reason of (a) taking any action permitted by this Agreement, (b) any
neglect or default in connection with the Collateral or (c) the taking
possession or realisation of all or any part of the Collateral, except
in the case of gross negligence or wilful default upon their part.
15 RULING OFF
In the event of the affairs of the Debtor being declared en etat de
desastre or the commencement of any form of bankruptcy or insolvency
proceeding affecting the Debtor or of all or any part of this Agreement
ceasing for any reason to be binding on
18
the Debtor or if the Security Agent receives notice (actual or
otherwise) of any other or subsequent Encumbrance affecting the
Collateral, the Required Holders may at any time rule off the Debtor's
obligations. No monies paid thereafter by the Debtor to the Security
Agent for the rateable benefit of the Secured Parties shall thereby
discharge or reduce the amount recoverable pursuant to this Agreement.
If the Required Holders in any of the above cases do not rule off the
obligations of the Debtor it shall nevertheless be treated as if they
had done so at the time when the Security Agent first had notice
(actual or otherwise) of the event in question and all payments made by
or on behalf of the Debtor to the Security Agent for the rateable
benefit of the Secured Parties shall not operate to reduce the amount
recoverable pursuant to this Agreement.
16 ILLEGALITY
If at any time one or more of the provisions of this Agreement becomes
invalid, illegal or unenforceable in any respect, that provision shall
be severed from the remainder and the validity, legality and
enforceability of the remaining provisions of this Agreement shall not
be affected or impaired in any way.
17 CERTIFICATE OF SECURED PARTIES
Any certificate submitted by the Security Agent to the Debtor as to the
amount of the Debtor's obligations or any part of them shall (in the
absence of manifest error) be conclusive and binding on the Debtor at
the relevant time.
18 AMALGAMATION AND CONSOLIDATION
The rights and benefits of each Secured Party under this Agreement
shall remain valid and binding for all purposes notwithstanding any
change, amalgamation, consolidation, migration or otherwise which may
be made in the constitution of such Secured Party and shall be
available to such entity as shall carry on the business of that Secured
Party for the time being.
19 CONVERSION OF CURRENCY
All monies received or held by the Security Agent subject to this
Agreement may at any time, after the occurrence of an Event of Default,
be converted into such other currency as the Required Holders consider
necessary or desirable to satisfy the
19
Secured Obligations in that other currency at the then prevailing spot
rate of exchange of the XX Xxxxxx Xxxxx Bank (as conclusively
determined by the Required Holders) for purchasing that other currency
with the original currency.
20 AMENDMENT
No variation or amendment of this Agreement shall be valid unless in
writing and signed by or on behalf of Debtor, the Company and the
Security Agent, acting upon written instructions of the Required
Holders.
21 ASSIGNMENT
21.1 Any Secured Party at any time may grant a participation in or make an
assignment or transfer or otherwise dispose of, the whole or any part
of its rights and benefits under this Agreement. Subject to the
provisions of Section 21 of the Note Purchase Agreement, for the
purpose of any such participation, assignment, transfer or disposal,
the Security Agent may disclose information about the Debtor and the
financial condition of the Debtor as may have been made available to
the Security Agent by the Debtor or which is otherwise publicly
available.
21.2 Except with the written consent of the Required Holders, neither the
Debtor nor the Company shall assign or transfer all or any part of
their respective rights, benefits and/or obligations under this
Agreement.
22 NOTICES
All notices with respect to this Agreement shall be delivered by hand
or sent by first class post to the address of the addressee as set out
in this Agreement with respect to the Security Agent or Section 19 in
the Note Purchase Agreement or to such other address as the addressee
may from time to time have notified for the purpose of this Clause 22
or to any other "PROPER ADDRESS" as defined in the Law, or sent by
facsimile transmission ("FAX") and shall be deemed to have been
received:
(a) if sent by first class prepaid post, five Business Days after
posting;
(b) if delivered by hand, on the day of delivery; and
20
(c) if sent by fax, at the time of transmission provided that the
sender shall receive a successful transmission report.
If the Debtor is a body corporate registered outside the Island of
Guernsey, it shall appoint a process agent in the Island of Guernsey to
accept service of notices pursuant to this Agreement on its behalf,
such appointment to take effect from the date of this Agreement, and it
shall promptly notify the Security Agent in writing of the identity and
address of such process agent from time to time.
23 COUNTERPARTS
This Agreement may be executed in any number of counterparts each of
which shall be an original but which shall together constitute one and
the same instrument.
24 GOVERNING LAW AND JURISDICTION
24.1 This Agreement shall be governed by and construed in accordance with
the laws of the Island of Guernsey and the parties hereby irrevocably
agree for the exclusive benefit of the Secured Parties that the courts
of the Island of Guernsey are to have jurisdiction to settle any
disputes which arise out of or in connection with this Agreement and
that accordingly any suit, action or proceeding arising out of or in
connection with this Agreement (in this Clause referred to as
"PROCEEDINGS") may be brought in such court.
24.2 Nothing contained in this Clause shall limit the right of any Secured
Party to take Proceedings against the Debtor or the Company in any
other court of competent jurisdiction nor shall the taking of
proceedings in one or more jurisdiction preclude the taking of
Proceedings in any other jurisdiction, whether concurrently or not.
24.3 The Debtor and the Company each irrevocably waive (and irrevocably
agrees not to raise) any objection which either may have now or
hereafter to laying of the venue of any Proceedings in any such court
as referred to in this Clause and any claim that any such Proceedings
have been brought in an inconvenient forum and further irrevocably
agree that a judgment in any Proceedings brought in any such court as
is referred to in this Clause shall be conclusive and binding upon the
Debtor and/or the Company (as the case may be) and may be enforced in
the court of any other jurisdiction.
21
AS WITNESS WHEREOF have caused this Agreement to be duly executed the day and
year first above written.
22
SIGNED for and on behalf of
CANARGO LIMITED (GUERNSEY)
by:
Name:
-----------------------------------
Title:
SIGNED for and on behalf of
CANARGO LTD (ONTARIO)
by:
Name:
-----------------------------------
Title:
SIGNED for and on behalf of
XXXXXXX & XXXXXX LLC
by:
Name:
-----------------------------------
Title:
SIGNED for and on behalf of
XXXXXXX & XXXXXX VALUE
PARTNERS L.P.
by:
Name:
-----------------------------------
Title:
SIGNED by
XXXXXXXX X XXXXXXXX
-----------------------------------
SIGNED by
XXXXXX X XXXXXX
-----------------------------------
23
SIGNED by
XXXXXX XXXXXX
-----------------------------------
SIGNED by
XXXXXX X XXXXXX XXX
-----------------------------------
SIGNED by
XXXX XXXXXXX
-----------------------------------
SIGNED by
XXXXXX XXXXX
-----------------------------------
SIGNED for and on behalf of
FLEDGLING ASSOCIATES LLC
by:
Name:
-----------------------------------
Title:
SIGNED by
XXXX XXXXXXX
-----------------------------------
SIGNED by
XXXX XXXXXXX
-----------------------------------
SIGNED by
XXXXXXX XXXXX
-----------------------------------
SIGNED by
XXXX XXXXXX
-----------------------------------
SIGNED by
XXXXXX XXXXXXX
-----------------------------------
24
SCHEDULE 1
999 ordinary shares of L1.00 each in the Company registered in the
name of the Debtor
1 ordinary share of L1.00 each in the Company registered in the
name of Xxxxx Xxxxxx.
25
SCHEDULE 2
EXTRACTS FROM THE NOTE PURCHASE AGREEMENT
SECTION 9.6 CHANGE IN CONTROL
(a) NOTICE OF CHANGE IN CONTROL OR CONTROL EVENT. CanArgo Energy
Corporation will, within five Business Days after any
Responsible Officer has actual and not constructive knowledge
of the occurrence of any Change in Control or Control Event,
give written notice of such Change in Control or Control Event
to each holder of Notes unless notice in respect of such
Change in Control (or the Change in Control contemplated by
such Control Event) shall have been given pursuant to
subparagraph (b) of this Section 9.6. If a Change in Control
has occurred, such notice shall contain and constitute an
offer to prepay Notes as described in Section 9.6(c) and shall
be accompanied by the certificate described in Section 9.6(f).
(b) CONDITION TO COMPANY ACTION. CanArgo Energy Corporation will
not take any action that consummates or finalises a Change in
Control unless: (i) at least 15 Business Days prior to such
action it shall have given to each holder of Notes written
notice containing and constituting an offer to prepay Notes as
described in Section 9.6(c) accompanied by the certificate
described in Section 9.6(f), and (ii) contemporaneously with
the action taken to consummate or finalise any such Change in
Control, it prepays all Notes required to be prepaid in
accordance with this Section 9.6.
(c) OFFER TO PREPAY NOTES. The offer to prepay Notes contemplated
by subparagraphs (a) and (b) of this Section 9.6 shall be an
offer to prepay, in accordance with and subject to this
Section 9.6 all, but not less than all, the Notes held by each
holder (in this case only, "holder" in respect of any Note
registered in the name of a nominee for a disclosed beneficial
owner shall mean such beneficial owner) on a date specified in
such offer (the "Proposed Prepayment Date"). If such Proposed
Prepayment Date is in connection with an offer contemplated by
subparagraph (a) of this Section 9.6, such date shall be not
less than 30 days and not more than 90 days after the date of
such offer (if the Proposed Prepayment Date shall not be
specified in such offer, the Proposed Prepayment Date shall be
the 30th day after the date of such offer).
(d) ACCEPTANCE. A Purchaser may accept the offer to prepay made
pursuant to this Section 9.6 by causing notice of such
acceptance to be delivered to CanArgo Energy Corporation at
least 15 days prior to the Proposed Payment Date. A failure by
a Purchaser to respond to an offer to prepay made pursuant to
this Section 9.6 shall be deemed to constitute an acceptance
of such offer by such Purchaser.
(e) PREPAYMENT. Prepayment of the Notes to be prepaid pursuant to
this Section 9.6 shall be the Redemption Price of such Notes,
together with interest on such
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Notes accrued to the date of prepayment. The prepayment shall
be made on the Proposed Prepayment Date.
(f) OFFICER'S CERTIFICATE. Each offer to prepay the Notes pursuant
to this Section 9.6 shall be accompanied by a certificate,
executed by a Senior Financial Officer of CanArgo Energy
Corporation and dated the date of such offer, specifying: (i)
the Proposed Prepayment Date; (ii) that such offer is made
pursuant to this Section 9.6; (iii) the principal amount of
each Note offered to be prepaid; (iv) the interest that would
be due on each Note offered to be prepaid, accrued to the
Proposed Prepayment Date; (v) that the conditions of this
Section 9.6 have been fulfilled; and (vi) in reasonable
detail, the nature and date or proposed date of the Change of
Control.
(g) EFFECT ON REQUIRED PAYMENTS. The amount of each payment of the
principal of the Notes made pursuant to this Section 9.6 shall
be applied against and reduce each of the then remaining
principal payments due pursuant to Section 9.6 by a percentage
equal to the aggregate principal amount of the Notes so paid
divided by the aggregate principal amount of the Notes
outstanding immediately prior to such payment.
(h) "CHANGE IN CONTROL" DEFINED. "Change in Control" means (a)
CanArgo Energy Corporation shall at any time cease to be a
publicly held company or cease to have its capital stock
traded on an exchange; or (b) a transaction or series of
related transactions pursuant to which: (i) at least fifty-one
percent (51%) of the outstanding shares of Common Stock of
CanArgo Energy Corporation or, on a fully diluted basis, shall
subsequent to the date of the Note Purchase Agreement be owned
by any Person (as hereinafter defined) which is not related to
or Affiliated with CanArgo Energy Corporation; (ii) CanArgo
Energy Corporation merges into or with, consolidates with or
effects any plan of share exchange or other combination with
any Person which is not related to or Affiliated with CanArgo
Energy Corporation, or (iii) CanArgo Energy Corporation
disposes of all or substantially all of its assets other than
in the ordinary course of business.
(i) "CONTROL EVENT" DEFINED. "Control Event" means:
(i) the execution of any CanArgo Group Member of any
agreement or letter of intent with respect to any
proposed transaction or event or series of
transactions or events which, individually or in the
aggregate, may reasonably be expected to result in a
Change in Control, or
(ii) the execution of any written agreement which, when
fully performed by the parties thereto, would result
in a Change in Control.
SECTION 10.11 TERMINATION OF CORNELL FACILITIES.
Within ten Business days after the Closing, CanArgo Energy Corporation
shall deliver to Purchasers: (a) reasonably satisfactory evidence of
the payment of all CanArgo Energy Corporation's obligations under the
Cornell Facility and any other agreements relating to or arising out of
the Cornell Facility by the payment of the
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Cornell Facility in full and in cash with the proceeds from the
issuance of the Notes; and (b) a copy of the notice of termination
delivered under the Cornell Facility.
SECTION 11.2 MERGER, CONSOLIDATION, ETC.
CanArgo Energy Corporation will not, and will not permit any other
CanArgo Group Member to, consolidate with or merge with any other
corporation or convey, transfer or lease substantially all of its
assets in a single transaction or series of transactions to any Person
(except that a Material Subsidiary of CanArgo Energy Corporation may:
(x) consolidate with or merge with, or convey, transfer or lease
substantially all of its assets in a single transaction or series of
transactions to, another Material Subsidiary or CanArgo Energy
Corporation; and (y) convey, transfer or lease all of its assets in
compliance with the provisions of Section 11.8 provided immediately
after giving effect to such transaction, no Default or Event of Default
shall have occurred and be continuing).
SECTION 11.3 LIENS.
CanArgo Energy Corporation will not, and will not permit any other
CanArgo Group Member to, directly or indirectly create, incur, assume
or permit to exist (upon the happening of a contingency or otherwise)
any Lien on or with respect to any property or asset (including,
without limitation, any document or instrument in respect of goods or
accounts receivable) of CanArgo Energy Corporation or any such other
CanArgo Group Member, whether now owned or held or hereafter acquired,
or any income or profits therefrom, or assign or otherwise convey any
right to receive income or profits, except:
(a) Liens for taxes, assessments or other governmental charges or
levies the payment of which is not at the time required by
Section 10.4;
(b) statutory Liens of landlords, Governmental Authorities and
Liens of carriers, operators, vendors, equipment lessors,
warehousemen, mechanics, repairmen, suppliers, workers,
construction materialmen and other similar Liens and other
like Liens incident of the exploration, development, operation
and maintenance of oil and gas properties, in each case,
incurred in the ordinary course of business for sums not yet
due or the payment of which is not at the time required by
Section 10.4;
(c) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business: (i) in
connection with workers' compensation, unemployment insurance
and other types of social security or retirement benefits, or
(ii) to secure (or to obtain letters of credit that secure)
the performance of tenders, statutory obligations, surety
bonds, appeal bonds, bids, trade contracts, leases (other than
Capital Leases), government contracts, performance bonds,
purchase construction or sales contracts, regulatory
obligations and other similar obligations, in each case not
incurred or made in connection with the borrowing of money,
the obtaining of advances or credit or the payment of the
deferred purchase price of the property;
(d) any attachment or judgment Lien, not giving rise to an Event
of Default;
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(e) leases or subleases granted to others, easements,
reservations, servitudes, permits, conditions, covenants,
exceptions, rights-of-way, restrictions and other similar
charges or encumbrances, in each case incidental to, and not
interfering with, the ordinary conduct of the business of
CanArgo Energy Corporation or any of its Subsidiaries,
provided that such Liens do not, in the aggregate, materially
detract from value of such property;
(f) any Lien created to secure all or any part of the purchase
price, or to secure Indebtedness incurred or assumed to pay
all or any part of the purchase price or cost of construction,
of property (or any improvement thereon) acquired or
constructed by CanArgo Energy Corporation or any other CanArgo
Group Member after the date of the Closing, provided that:
(i) any such Lien shall extend solely to the item or
items of such property (or improvement thereon) so
acquired, leased or constructed and, if required by
the terms of the instrument originally creating such
Lien, other property (or improvement thereon) which
is an improvement to or is acquired for specific use
in connection with such acquired, leased or
constructed property (or improvement thereon) or
which is real property being improved by such
acquired, leased or constructed property (or
improvement thereon),
(ii) the principal amount of the Indebtedness secured by
any such Lien shall at no time exceed an amount equal
to 80% (but 100% in the case of property (or
improvement thereon) the acquisition of which is
financed through a Capital Lease Obligation) of the
lesser of: (A) the cost to CanArgo Energy Corporation
or such other CanArgo Group Member of the property
(or improvement thereon) so acquired or constructed;
and (B) the Fair Market Value (as determined in good
faith by the board of directors of CanArgo Energy
Corporation) of such property (or improvement
thereon) at the time of such acquisition or
construction,
(iii) any such Lien shall be created contemporaneously
with, or within 180 days after, the acquisition,
lease or construction of such property;
(g) Liens securing Indebtedness arising under the Loan Documents;
(h) contractual Liens which arise in the ordinary course of
business under and pursuant to the terms of the Basic
Documents or other concessions agreements, production sharing
agreements and contracts; joint venture, exploration, limited
or general partnership, dry hole, bottom hole, acreage
contribution, purchase and acquisition agreements;
exploration, production and development licenses; operating
agreements; drilling agreements; oil and gas leases; farm-out
and farm-in agreements; division orders; contracts for the
sale, transportation or exchange of oil and natural gas;
unitization and pooling declarations and agreements; area of
mutual interest agreements; overriding and net profits royalty
agreements; marketing agreements; processing agreements;
development agreements; gas balancing or deferred production
agreements; injection, repressuring and recycling agreements;
salt water or other disposal agreements; seismic or other
geophysical permits or
29
agreements, and other agreements which are usual and customary
in the oil and gas business and are for claims which are not
delinquent or which are being contested in good faith by
appropriate action and for which adequate reserves have been
maintained in accordance with applicable GAAP, provided that
any such Lien referred to in this clause does not materially
impair the use of the property covered by such Lien for the
purposes for which such property is held by CanArgo Energy
Corporation or any other CanArgo Group Member or materially
impair the value of such property subject thereto;
(i) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or
similar rights and remedies and burdening only deposit
accounts or other funds maintained with a creditor depository
institution, provided that no such deposit account is a
dedicated cash collateral account or is subject to
restrictions against access by the depositor in excess of
those set forth by regulations promulgated by the Board of
Governors of the Federal Reserve System of the United States
of America (or any successor Governmental Authority) or other
Governmental Authority and no such deposit account is intended
by CanArgo Energy Corporation or any other CanArgo Group
Member to provide collateral to the depository institution,
except in each such case in connection with letter of credit
obligations issued pursuant to or in connection with any Basic
Documents or other agreements referred to in clause (h);
(j) Other Liens not described in clauses (a) to (i) of this
Section on the property of CanArgo Energy Corporation or any
Subsidiary in an aggregate amount at any time not exceeding
US$100,000; and
(k) Permitted Encumbrances
SECTION 11.4 PRIORITY
CanArgo Energy Corporation shall not, without the consent of the
Required Holders issue any Indebtedness with priority over, or pari
passu with, the Notes.
SECTION 11.6 RESTRICTED PAYMENTS.
CanArgo Energy Corporation will not make any Restricted Payments,
except: (a) CanArgo Energy Corporation may declare and pay (i)
dividends with respect to its Equity Interests payable solely in
additional shares of its Equity Interests or Indebtedness and (ii)
interest and principal on Indebtedness owed by CanArgo Energy
Corporation to another CanArgo Group Member in either case which does
not contravene the provisions of the Note Purchase Agreement, and (b)
CanArgo Energy Corporation may make distributions pursuant to and in
accordance with stock incentive plans or other Plans for management or
employees of CanArgo Energy Corporation and its Subsidiaries.
SECTION 11.7 SALE-AND-LEASEBACKS.
CanArgo Energy Corporation will not, and will not permit any of its
Subsidiaries to, enter into any Sale-and-Leaseback Transaction.
30
SECTION 11.8 SALE OF ASSETS, ETC.
(1) SALE OF ASSETS ETC. CanArgo Energy Corporation will not, and
will not permit any other CanArgo Group Members to, make any
Transfer, provided that the foregoing restriction does not
apply to a Transfer if:
(a) the property that is the subject of such Transfer
constitutes either: (i) inventory held for sale
(including the sale of Hydrocarbons in the ordinary
course of business, including, without limitation,
pursuant to advance sale contracts, forward contracts
and production payments), (ii) abandonments,
assignments, leases, subleases or farm-outs of oil
and gas properties or dispositions of properties
pursuant to operating agreements or other forms of
exploration and development agreements or option
agreements; or (iii) property, equipment, fixtures,
supplies or materials no longer required in the
operation of the business of CanArgo Energy
Corporation or such Subsidiary or that is redundant,
condemned, obsolete, and, in the case of any Transfer
described in clauses (i) through (iii), such Transfer
is in the ordinary course of business (an "Ordinary
Course Transfer"); or
(b) either:
(i) such Transfer is from a CanArgo Group Member
to CanArgo Energy Corporation; or
(ii) such Transfer is from CanArgo Energy
Corporation to a CanArgo Group Member or
from a CanArgo Group Member to another
CanArgo Group Member and in either case is
for Fair Market Value,
so long as immediately before and immediately after the
consummation of such transaction, and after giving effect
thereto, no Default or Event of Default exists or would exist
(each such Transfer, an "Intergroup Transfer"); or
(c) such Transfer involves oil and gas properties or
interests therein that are exchanged for other oil
and gas properties or interests therein in arms
length transactions or such Transfer is pursuant to a
Permitted Farmout Arrangement.
(2) DISPOSAL OF OWNERSHIP OF A CANARGO GROUP MEMBER. CanArgo
Energy Corporation will not, and will not permit any CanArgo
Group Members to, sell or otherwise dispose of any shares of
Subsidiary Stock, nor will CanArgo Energy Corporation permit
any such CanArgo Group Member to issue, sell or otherwise
dispose of any shares of its own Subsidiary Stock, provided
that the foregoing restrictions do not apply to:
(a) the issue of directors' qualifying shares by any such
Material Subsidiary;
(b) any such Transfer of Material Subsidiary Stock
constituting an Intergroup Transfer;
31
(c) any such Transfer of Material Subsidiary Stock by a
nominee holder as required pursuant to the terms of a
Pledge Agreement;
(d) any issuance of shares of Subsidiary Stock by a
Material Subsidiary that qualifies as a Permitted
Farmout Arrangement; and
(e) the disposition or dissolution of any Subsidiary that
is not a Material Subsidiary; provided that the
proceeds of such disposition or assets of the
Subsidiary are transferred to another CanArgo Group
Member and immediately before and immediately after
the consummation of such transaction, and after
giving effect thereto, no Default or Event of Default
exists or would exist.
SECTION 11.9 FUTURE INDEBTEDNESS.
Without the prior written consent of the Required Holders, which
consent shall not be unreasonably withheld, conditioned or delayed,
CanArgo Energy Corporation will not incur any Indebtedness after the
date of the Note Purchase Agreement other than: (a) Indebtedness
outstanding under the Notes; (b) any additional unsecured Indebtedness,
the aggregate amount outstanding thereunder at any time shall not
exceed US$1,250,000; (c) unsecured Indebtedness of CanArgo Energy
Corporation to another CanArgo Group Member or unsecured Indebtedness
of a CanArgo Group Member or direct or indirect Subsidiary of CanArgo
Energy Corporation to another CanArgo Group Member; and (d)
Indebtedness of a CanArgo Group Member to a direct or indirect
Subsidiary of CanArgo Energy Corporation that is not a Material
Subsidiary, provided that the aggregate amount outstanding thereunder
at any time shall not exceed US$1,000,000. In considering whether to
give its consent to any future Indebtedness, the Required Holders shall
be entitled to take into consideration, inter alia, the potential
effects of any such proposed Indebtedness upon the financial condition
and wherewithal of CanArgo Energy Corporation and/or upon their rights
under the Loan Documents, and any decision by the Required Holders to
withhold their consent to any such proposed future Indebtedness shall
be final and binding absent a showing of manifest bad faith.
SECTION 11.10 BASIC DOCUMENTS.
CanArgo Energy Corporation shall not and shall not permit any other
CanArgo Group Member, without the prior written consent of the Required
Holders to (i) cancel or terminate any Basic Agreement to which CanArgo
Energy Corporation or other CanArgo Group Members are a party or
consent to or accept any cancellation or termination thereof prior to
the scheduled expiration thereof; (ii) sell, assign (other than
pursuant to the Security Documents or a Permitted Farmout Arrangement)
or otherwise dispose of (by operation of law or otherwise) any part of
its interest in any Basic Agreements; (iii) waive any default under or
breach of any provision of any Basic Agreement to which CanArgo Energy
Corporation or any of its Subsidiaries are a party, or waive, fail to
enforce, forgive, compromise, settle, adjust or release any Material
right, interest or entitlement, howsoever arising, under, or in respect
thereof; or (iv) amend, supplement, modify or in any way vary in any
respect or agree to any variation of any provision of any Basic
Agreement to which CanArgo Energy Corporation or any other CanArgo
Group Members are a party, or of the performance of any Material
covenant or obligation by any other Person under any Basic
32
Agreement, except any amendment, supplement, modification or variation
of the Basic Agreements as a result of the transfer by (x) NOC
(Cyprus)'s interest in the Ninotsminda PSC (as defined in Schedule
6.19) to NOC (Jersey) and (y) CNL (Cyprus)'s interest in the Norio PSC
and Tbilisi PSC (both as defined in Schedule 6.19) to CNL (Jersey).
SECTION 11.11 ANTI-TAKEOVER DEFENSE.
(a) Except has hereinafter specifically provided, so long as any
Indebtedness under any of the Notes is outstanding, CanArgo
Energy Corporation shall not enter into or adopt any
anti-takeover defense, "poison pill", shareholder rights plan
or any other device designed to prevent a takeover, hostile or
otherwise, that could encumber, restrict or affect Xxxxxxx &
Xxxxxx LLC, Xxxxxx X Xxxxxx, Xxxxxx X Xxxxxxx, and/or Xxxxxxx
& Xxxxxx Value Partners L.P. to acquire any Equity Interests
of CanArgo Energy Corporation;
(b) Notwithstanding the provisions of Section 11.11(a) to the
contrary provided, CanArgo Energy Corporation may enter into
or adopt an anti-takeover defense, "poison pill", shareholder
rights plan or any other device designed to prevent Xxxxxxx &
Xxxxxx LLC, Xxxxxx X Xxxxxx, Xxxxxx X Xxxxxxx , and/or Xxxxxxx
& Xxxxxx Value Partners L.P. or other Note holders to acquire
such Equity Interests by means of or in connection with the
direct or indirect forbearance, cancellation or exchange of
all or any part of the Indebtedness evidenced by the Notes;
(c) Notwithstanding the provisions of Section 11.11(a) to the
contrary provided, Xxxxxxx & Xxxxxx Value Partners L.P. hereby
agrees that so long as any Notes are outstanding and no Event
of Default exists and is continuing and until the expiration
of the second anniversary after the indefeasible satisfaction
of all Indebtedness under the Notes, whether by payment,
conversion, exchange or otherwise (other than in connection
with any proceeding under the United States Bankruptcy Code),
Xxxxxxx & Xxxxxx Value Partners LP shall not, without the
express written consent or approval of the incumbent Board of
Directors of CanArgo Energy Corporation, solicit or otherwise
seek to effect or participate in a Change of Control of
CanArgo Energy Corporation or a change in the composition of
the incumbent Board of Directors by means of the purchase or
offer to purchase of any Equity Interests of CanArgo Energy
Corporation, the solicitation of proxies or written consents,
or by voting any Equity Interests acquired by Xxxxxxx & Xxxxxx
Value Partners L.P. upon the conversion of Notes pursuant to
Section 10.7, in connection with any solicitation of proxies
or written consents or at any regular or special meeting of
shareholders or otherwise.
33
