EXHIBIT 4.1
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CANARGO ENERGY CORPORATION
US $25,000,000.00
Senior Secured Notes due July 25, 2009
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NOTE PURCHASE AGREEMENT
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DATED JULY 25, 2005
TABLE OF CONTENTS
(Not a part of the Agreement)
SECTION HEADING PAGE
SECTION 1. AUTHORIZATION OF NOTES.................................................................1
SECTION 2. SALE AND PURCHASE OF NOTES.............................................................1
SECTION 3. SECURITY...............................................................................1
Section 3.1. Grant of Security Interests............................................................1
SECTION 4. CLOSING................................................................................2
SECTION 5. CONDITIONS TO CLOSING..................................................................3
Section 5.1 Conditions to Purchaser's Obligation to Purchase Notes.................................3
Section 5.1.1. Representations and Warranties.........................................................3
Section 5.1.2. Performance; No Default................................................................3
Section 5.1.3. Compliance Certificates................................................................3
Section 5.1.4. Opinions of Counsel....................................................................4
Section 5.1.5. Purchase Permitted by Applicable Law, etc..............................................4
Section 5.1.6. Loan Documents.........................................................................4
Section 5.1.7. Proceedings and Documents..............................................................4
Section 5.1.8. Subsidiary Guaranties..................................................................4
Section 5.1.9. Due Diligence..........................................................................4
Section 5.2 Conditions to Obligations of the Company...............................................4
Section 5.2.1 Representations and Warranties.........................................................4
Section 5.2.2. Performance............................................................................5
Section 5.2.3. Proceedings and Litigation.............................................................5
Section 5.2.4. Proceedings and Documents..............................................................5
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................5
Section 6.1. Organization; Power and Authority......................................................5
Section 6.2. Authorization, etc.....................................................................5
Section 6.3. Disclosure.............................................................................6
Section 6.4. Organization and Ownership of Shares of Subsidiaries; Affiliates.......................6
Section 6.5. Financial Statements...................................................................6
Section 6.6. Compliance with Laws, Other Instruments, etc...........................................7
Section 6.7. Governmental Authorizations, etc.......................................................7
Section 6.8. Litigation; Observance of Agreements, Statutes and Orders..............................7
Section 6.9. Taxes..................................................................................7
Section 6.10. Title to Collateral; Assets of the Company.............................................8
Section 6.11. Licenses, Permits, etc.................................................................8
Section 6.12. Benefit Plan Compliance................................................................8
Section 6.13. Private Offering by the Company........................................................9
Section 6.14. Use of Proceeds; Margin Regulations....................................................9
Section 6.15. Existing Indebtedness; Future Liens....................................................9
Section 6.16. Foreign Assets Control Regulations, etc...............................................10
Section 6.17. Status under Certain Statutes.........................................................10
Section 6.18. Environmental Matters.................................................................10
Section 6.19. Basic Documents.......................................................................11
Section 6.20. Solvency..............................................................................11
SECTION 7. REPRESENTATIONS OF THE PURCHASER......................................................12
Section 7.1 Due Authorization; Absence of Conflicts; Enforceability; Purchase for
Investment, etc.......................................................................12
Section 7.2 Access to Information.................................................................13
Section 7.3. Source of Funds.......................................................................13
SECTION 8. INFORMATION AS TO COMPANY.............................................................14
Section 8.1. Financial and Business Information....................................................14
Section 8.2. Officer's Certificate.................................................................17
Section 8.3. Inspection............................................................................18
SECTION 9. PREPAYMENT OF THE NOTES; CHANGE IN CONTROL............................................18
Section 9.1. Optional Prepayments..................................................................18
Section 9.2. Allocation of Partial Prepayments.....................................................18
Section 9.3. Maturity; Surrender, etc..............................................................19
Section 9.4. Purchase of Notes.....................................................................19
Section 9.5. Redemption Price......................................................................19
Section 9.6. Change in Control.....................................................................19
SECTION 10. AFFIRMATIVE COVENANTS.................................................................21
Section 10.1. Compliance with Law...................................................................21
Section 10.2. Insurance.............................................................................21
Section 10.3. Maintenance of Properties.............................................................22
Section 10.4. Payment of Taxes and Claims...........................................................22
Section 10.5. Corporate Existence, etc..............................................................22
Section 10.6. Additional Subsidiaries...............................................................22
Section 10.7. Conversion of Note....................................................................23
Section 10.8. Additional Security...................................................................24
Section 10.9. Payment of Special Counsel and Other Fees.............................................24
Section 10.10. Payment of Placement Fee..............................................................24
Section 10.11 Termination of Cornell Facilities.....................................................24
SECTION 11. NEGATIVE COVENANTS....................................................................25
Section 11.1. Transactions with Affiliates..........................................................25
Section 11.2. Merger, Consolidation, etc............................................................25
Section 11.3. Liens.................................................................................25
Section 11.4. Priority..............................................................................27
Section 11.5. Line of Business......................................................................27
Section 11.6. Restricted Payments...................................................................28
Section 11.7. Sale-and-Leasebacks...................................................................28
Section 11.8. Sale of Assets, etc...................................................................28
Section 11.9. Future Indebtedness...................................................................29
Section 11.10. Basic Documents.......................................................................29
Section 11.11. Anti-takeover Defense.................................................................30
SECTION 12. EVENTS OF DEFAULT.....................................................................31
SECTION 13. REMEDIES ON DEFAULT, ETC..............................................................33
Section 13.1. Acceleration..........................................................................33
Section 13.2. Other Remedies........................................................................34
Section 13.3. Collateral............................................................................34
Section 13.4. Costs and Expenses....................................................................34
Section 13.5. Rescission............................................................................34
Section 13.6. No Waivers or Election of Remedies, Expenses, etc.....................................35
SECTION 14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.........................................35
Section 14.1. Registration of Notes.................................................................35
Section 14.2. Transfer and Exchange of Notes........................................................35
Section 14.3. Replacement of Notes..................................................................36
SECTION 15. PAYMENTS ON NOTES.....................................................................36
Section 15.1. Place of Payment......................................................................36
Section 15.2. Home Office Payment...................................................................36
SECTION 16. EXPENSES, ETC.........................................................................37
Section 16.1. Transaction Expenses..................................................................37
Section 16.2. Survival..............................................................................37
SECTION 17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT..........................38
SECTION 18. AMENDMENT AND WAIVER..................................................................38
Section 18.1. Requirements..........................................................................38
Section 18.2. Solicitation of Holders of Notes......................................................38
Section 18.3. Binding Effect, etc...................................................................39
Section 18.4. Notes Held by Company, etc............................................................39
SECTION 19. NOTICES...............................................................................39
SECTION 20. REPRODUCTION OF DOCUMENTS.............................................................40
SECTION 21. CONFIDENTIAL INFORMATION..............................................................40
SECTION 22. SUBSTITUTION OF PURCHASER.............................................................41
SECTION 23. MISCELLANEOUS.........................................................................42
Section 23.1. Successors and Assigns................................................................42
Section 23.2. Payments Due on Non-Business Days.....................................................42
Section 23.3. Severability..........................................................................42
Section 23.4. Construction and Interpretation.......................................................42
Section 23.5. Counterparts..........................................................................43
Section 23.6. Governing Law.........................................................................43
Section 23.7. Submission to Jurisdiction............................................................43
Section 23.8 Appointment of Agent for Service of Process...........................................43
Section 23.9. Company Indemnification...............................................................44
Signatures........................................................................................................1
SCHEDULE A -- Information Relating To Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE 5.11 -- Subsidiary Guarantors
SCHEDULE 6.3 -- Disclosure Materials
SCHEDULE 6.4 -- Subsidiaries of CanArgo
SCHEDULE 6.5 -- Financial Statements
SCHEDULE 6.8 -- Certain Litigation
SCHEDULE 6.11 -- Licenses, Permits, etc.
SCHEDULE 6.14 -- Use of Proceeds
SCHEDULE 6.15 -- Existing Indebtedness
SCHEDULE 6.18 -- Environmental Matters
SCHEDULE 6.19 -- Basic Agreements
SCHEDULE 11.1 -- Transactions with Affiliates
SCHEDULE 11.8 -- Permitted Farmout Counterparties
CANARGO ENERGY CORPORATION
▇.▇. ▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇
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 ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
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 ▇▇▇▇▇▇▇,
Delaware 19713-2107, ABA: ▇▇▇▇▇▇▇▇▇, Account Name:
CanArgo Energy Corporation,
Account Number: # 001828509, (for further credit to:- HSBC Bank plc, ▇▇ ▇▇▇ ▇▇,
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇, Account Name:
CanArgo Energy
Corporation, Swift Code: ▇▇▇▇▇▇▇▇, 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
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP, special
New York counsel (b) Ogier & Le
Masurier, special Guernsey counsel and (c) ▇▇. ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ & 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 ▇▇▇▇,
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 ▇▇▇▇, trademark,
trade name or other right owned or used by the Company or any other
CanArgo Group Member.
Section 6.12. Benefit Plan Compliance.
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(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 ▇ ▇
▇▇▇▇▇▇▇▇▇ 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
▇▇▇▇▇. 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
▇▇▇▇▇), 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
-18-
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
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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)
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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;
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(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
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(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
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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
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and/or
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, and/or ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ 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, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ 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), ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ 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.
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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
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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
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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. Holder 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
-39-
(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
-40-
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
-41-
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.
-42-
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 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP, at its office at ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, N.Y. 10169, Attention: ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇ 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:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ VALUE PARTNERS L.P.
_______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
General Partner
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_______________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇
_______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇
_______________________________
▇▇▇▇ ▇▇▇▇▇▇▇
_______________________________
S-2
▇▇▇▇▇▇ ▇▇▇▇▇
_______________________________
Fledgling Associates, LLC
By: ▇▇▇▇▇ Trading, Inc., Manager
_______________________________
▇▇▇▇▇▇ ▇▇▇▇▇
President
▇▇▇▇ ▇▇▇▇▇▇▇
_______________________________
▇▇▇▇ ▇▇▇▇▇▇▇
_______________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇
_______________________________
▇▇▇▇ ▇▇▇▇▇▇
_______________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
_______________________________
S-3
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Value Partners, L.P. US $14,000,000.00
(1) All payments by wire transfer of immediately
available funds to:
▇▇ ▇▇▇▇▇▇ Chase
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
fbo ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
a/c ▇▇▇-▇-▇▇▇▇▇▇
ffc ISVP/CanArgo
A/c ▇▇-▇▇▇▇▇-▇
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:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ v
▇▇▇-▇▇▇-▇▇▇▇ f ▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ US $3,000,000.00
(1) All payments by wire transfer of immediately
available funds to:
▇▇ ▇▇▇▇▇▇ Chase
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
fbo ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
a/c ▇▇▇-▇-▇▇▇▇▇▇
ffc ▇. ▇▇▇▇▇▇▇▇ - R/O ▇▇▇
A/c ▇▇-▇▇▇▇▇-▇
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:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ v
▇▇▇-▇▇▇-▇▇▇▇ f ▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ US $2,000,000.00
(1) All payments by wire transfer of immediately
available funds to:
▇▇ ▇▇▇▇▇▇ Chase
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
fbo ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
a/c ▇▇▇-▇-▇▇▇▇▇▇
ffc TLG
A/c ▇▇-▇▇▇▇▇-▇
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:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ v
▇▇▇-▇▇▇-▇▇▇▇ f ▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
▇▇▇▇▇▇ ▇▇▇▇▇▇ US $2,000,000.00
(1) All payments by wire transfer of immediately
available funds to:
▇▇ ▇▇▇▇▇▇ Chase
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
fbo ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
a/c ▇▇▇-▇-▇▇▇▇▇▇
ffc ▇▇▇▇▇▇ ▇▇▇▇▇▇
A/c ▇▇-▇▇▇▇▇-▇
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:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ v
▇▇▇-▇▇▇-▇▇▇▇ f ▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇ US $1,000,000.00
(1) All payments by wire transfer of immediately
available funds to:
▇▇ ▇▇▇▇▇▇ Chase
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
fbo ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
a/c ▇▇▇-▇-▇▇▇▇▇▇
ffc TLG ▇▇▇
A/c ▇▇-▇▇▇▇▇-▇
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:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ v
▇▇▇-▇▇▇-▇▇▇▇ f ▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
▇▇▇▇ ▇▇▇▇▇▇▇ US $550,000.00
(1) All payments by wire transfer of immediately
available funds to:
▇▇ ▇▇▇▇▇▇ Chase
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
fbo ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
a/c ▇▇▇-▇-▇▇▇▇▇▇
ffc ▇▇▇▇ ▇▇▇▇▇▇▇
A/c ▇▇-▇▇▇▇▇-▇
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:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ v
▇▇▇-▇▇▇-▇▇▇▇ f ▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
▇▇▇▇▇▇ ▇▇▇▇▇ US $500,000.00
(1) All payments by wire transfer of immediately
available funds to:
▇▇ ▇▇▇▇▇▇ Chase
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
fbo ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
a/c ▇▇▇-▇-▇▇▇▇▇▇
ffc ▇▇▇▇▇▇ ▇▇▇▇▇
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:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ v
▇▇▇-▇▇▇-▇▇▇▇ f ▇▇▇@▇▇▇▇▇▇▇.▇▇▇
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:
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
fbo ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
a/c ▇▇▇-▇-▇▇▇▇▇▇
ffc Fledgling Associates, LLC
A/c ▇▇-▇▇▇▇▇-▇
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:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ v
▇▇▇-▇▇▇-▇▇▇▇ f ▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
▇▇▇▇ ▇▇▇▇▇▇▇ US $400,000.00
(1) All payments by wire transfer of immediately
available funds to:
▇▇ ▇▇▇▇▇▇ Chase
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
fbo ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
a/c ▇▇▇-▇-▇▇▇▇▇▇
ffc ▇▇▇▇ ▇▇▇▇▇▇▇
A/c ▇▇-▇▇▇▇▇-▇
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:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ v
▇▇▇-▇▇▇-▇▇▇▇ f ▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
▇▇▇▇ ▇▇▇▇▇▇▇ US $400,000.00
(1) All payments by wire transfer of immediately
available funds to:
▇▇ ▇▇▇▇▇▇ Chase
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
fbo ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
a/c ▇▇▇-▇-▇▇▇▇▇▇
ffc ▇▇▇▇ ▇▇▇▇▇▇▇
A/c ▇▇-▇▇▇▇▇-▇
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:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ v
▇▇▇-▇▇▇-▇▇▇▇ f ▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
▇▇▇▇▇▇▇ ▇▇▇▇▇ US $250,000.00
(1) All payments by wire transfer of immediately
available funds to:
▇▇ ▇▇▇▇▇▇ Chase
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
fbo ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
a/c ▇▇▇-▇-▇▇▇▇▇▇
ffc ▇▇▇▇▇▇▇ ▇▇▇▇▇
A/c ▇▇-▇▇▇▇▇-▇
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:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ v
▇▇▇-▇▇▇-▇▇▇▇ f ▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
▇▇▇▇ ▇▇▇▇▇▇ US $250,000.00
(1) All payments by wire transfer of immediately
available funds to:
▇▇ ▇▇▇▇▇▇ Chase
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
fbo ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
a/c ▇▇▇-▇-▇▇▇▇▇▇
ffc ▇▇▇▇ ▇▇▇▇▇▇
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:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ v
▇▇▇-▇▇▇-▇▇▇▇ f ▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Schedule A
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASERS NOTES TO BE PURCHASED
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ US $150,000.00
(1) All payments by wire transfer of immediately
available funds to:
▇▇ ▇▇▇▇▇▇ Chase
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
fbo ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
a/c ▇▇▇-▇-▇▇▇▇▇▇
ffc ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
A/c ▇▇-▇▇▇▇▇-▇
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:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ v
▇▇▇-▇▇▇-▇▇▇▇ f ▇▇▇@▇▇▇▇▇▇▇.▇▇▇
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 ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ 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 Salahi Ozturk 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) 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-10
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
Senior 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 holder'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
▇▇▇▇▇ ▇▇▇▇▇▇
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
▇ ▇▇▇▇▇▇▇ ▇▇▇ & ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 100% Active
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 100% A Active
▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 100% Inactive
▇ ▇▇-▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 90% B Inactive
▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 100% Inactive
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 100% Inactive
▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 100% C Inactive
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇ 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 T Active
TKL
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 transferred.
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 CanArgo Nazvrevi Limited. Balance owned
by Georgian Oil.
P 50% controlling interest owned by CanArgo Norio 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, Nazvrevi, Norio 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 B
Nazabayev.
U In process of being formed - to be owned 100% by Tethys Kazakhstan Limited
DIRECTORS AND SENIOR OFFICERS OF THE COMPANY
NAME POSITION
---- --------
Dr ▇▇▇▇▇ ▇▇▇▇▇▇ Chairman of the Board, Chief Executive Officer and President
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Director, Chief Operating Officer and Chief Commercial Officer
▇▇▇▇▇▇▇ ▇▇▇▇ (1) Director
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (1) (2) Director
Nils Trulsvik (1) (2) Director
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Corporate Secretary
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇▇▇ Developments Limited, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ 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 July 25, 2009 shall be used for the following:
- Repayment of the Cornell Facilities and payment of fees specified in
Sections 10.9 and 10.10
- Corporate working capital
- To make loans and/or capital contributions to its Subsidiaries,
including its Material Subsidiaries, for existing operations and
future 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
Salahi Ozturk 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 ▇▇▇▇▇▇▇ Management Services PTY, Ltd ("▇▇▇▇▇▇▇") 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 ▇▇▇▇▇▇▇ 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 ▇▇ ▇▇▇▇▇▇▇▇
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 ▇▇▇▇
▇▇▇▇▇ 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
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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
▇▇▇▇▇▇ Resources
Petrokazakhstan
Imperial Energy
Kazneftekhim
Kaztrubprom
Kazneftegasmash JSC
Kazgiproneftetrans JSC
OGO Interoil
Petrom S.A.
Polish Oil and Gas Group
Roxar Services AS
▇▇▇▇▇▇ ▇▇
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
▇▇▇ UES
OMV
PA Resources
Questerre
▇▇▇▇▇▇ 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
▇▇▇▇▇▇▇ Resources
Imperial Energy
Island Oil and Gas
MCC Energy
▇▇▇▇▇▇ 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