exv10w6







Exhibit 10.6




SUBSIDIARY GUARANTEE AGREEMENT




     This Guarantee, as amended, restated, supplemented or otherwise modified from time to time,
the “Guarantee”) is made by [name of subsidiary], a ___(the
“Guarantor”), in favor of PERSISTENCY, a Cayman Islands limited company (the
“Lender”).



Background




          1. Canargo Energy Corporation, a Delaware corporation and debtor and debtor-in-possession (the
“Borrower”) in a bankruptcy case commenced under chapter 11 of title 11 of the United
States Code before the United States Bankruptcy Court for the Southern District of New York (the
“Court”), Case No. 09-16453 (AJG) is the direct or indirect parent of Guarantor;




          2. The Borrower has requested and Lender has agreed to make one or more loans to the Borrower
(the “Loans”) pursuant to the terms of a Debtor In Possession Financing Agreement, dated as
of even date herewith (the “Financing Agreement”) and related documents, all as approved by
the Court pursuant to certain approval orders to be entered in connection therewith (the
“Approval Orders”);




          3. The proceeds of the Loans will be used for, among other things, operations, benefiting
Guarantor and the Borrower’s other direct and indirect subsidiaries;




          4. Among the conditions to the Loans is the requirement that the Borrower’s direct and
indirect subsidiaries execute and deliver a guarantee of the Loans with negative pledges as to the
equity interests in their direct subsidiaries for the repayment of the Loans;




          5. The Guarantor intends this Guarantee to be an inducement for the Lender to enter into the
transactions contemplated by the Loan Documents;




          6. The Lender is unwilling to enter into the transactions contemplated by the Loan Documents
unless the Guarantor delivers to the Lender this Guarantee.




N OW, T H E R E F O R E,




     In consideration of the premises and the mutual covenants and agreements herein set forth, and
in order to induce the Lender to extend credit to the Borrower, the Guarantor hereby agrees with
the Lender as follows (defined terms used herein without definition have the meanings ascribed to
them in the Financing Agreement):



     Section 1. Guarantee. The Guarantor, as primary obligor and not merely as surety,
absolutely, unconditionally, irrevocably, guarantees to the Lender the full and punctual payment
when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or
otherwise, of all the Obligations. This Guarantee constitutes a guarantee of payment when due and
performance and not of collection only, and the Guarantor specifically agrees that it shall not be
necessary or required that the Lender or any holder of the Loans exercise any right, assert any
claim or demand or enforce any remedy whatsoever against the Borrower or any other obligor before
or as a condition to the obligations of the Guarantor hereunder.



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     Section 2. Termination; Guarantee Absolute. This Guarantee shall in all respects be
a continuing, absolute, unconditional and irrevocable guarantee of payment and performance, and
shall remain in full force and effect until all of the Obligations shall have been fully satisfied,
including, without limitation, if the Obligations are converted pursuant to the Conversion or are
otherwise satisfied in accordance with Section 2.04 of the Financing Agreement (the
“Termination Date”), at which time this Guarantee shall terminate and be of no further
force and effect. The Guarantor guarantees that the Obligations will be paid and satisfied
strictly in accordance with the terms of the Loan Documents, as applicable, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or
the rights of the Lender with respect thereto. Subject to the provisions of any Approval Orders
that may be applicable to the Guarantor, the liability of the Guarantor under this Guarantee shall
be absolute, unconditional and irrevocable irrespective of:




	 	(a)	 	Any lack of validity, legality or enforceability of any of the Loan Documents
or any agreement or instrument delivered pursuant thereto;
	 
	 	(b)	 	The failure of the Lender to assert any claim or demand or to enforce any right
or remedy against the Borrower or any other person under the provisions of the Loan
Documents, agreement or instrument delivered pursuant thereto or otherwise;
	 
	 	(c)	 	Any change in the time, manner or place of payment of, or in any other term of,
all or any of the Obligations, or any other extension, compromise or renewal of any
Obligation;
	 
	 	(d)	 	Any reduction, limitation, impairment or termination of any Obligations for any
reason, including any claim or waiver, release, surrender, alteration or compromise,
and shall not be subject to (and the Guarantor hereby waives any right to or claim of)
any defense or set off, counterclaim, recoupment or termination whatsoever by reason of
the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability
of, or any other event or occurrence affecting, any Obligations;
	 
	 	(e)	 	Any amendment to, rescission, waiver, or other modification of, or any consent
to departure from, any of the terms of the Loan Documents;
	 
	 	(f)	 	Any addition, exchange, release, surrender or nonperfection of any collateral,
or any amendment to or waiver or release or addition of, or consent to departure from,
any other guarantee, held by the Lender securing any of the Obligations;
	 
	 	(g)	 	Any other circumstance which might otherwise constitute a defense available to,
or a legal or equitable discharge of the Borrower, any surety or any guarantor;
	 
	 	(h)	 	Any change in circumstances, whether or not foreseen or foreseeable, whether or
not imputable to the Guarantor or the Borrower and whether or not such change in
circumstances shall or might in any manner and to any extent vary the risk of the
Guarantor hereunder;




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	 	(i)	 	The voluntary or involuntary liquidation, dissolution, receivership,
insolvency, bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of the Borrower, or any other similar
proceeding affecting the status, existence, assets or obligations of the Borrower, or
the limitation of damages for the breach of, or the disaffirmation of, the Notes, the
Loan Agreement or any of the Loan Documents in any such proceeding; and
	 
	 	(j)	 	Any other cause, whether similar or dissimilar to the foregoing; it being the
intention of the Guarantor that this Guarantee be irrevocable, absolute and
unconditional in any and all circumstances and that this Guarantee shall be discharged
only by the indefeasible payment in full of all sums and the performance of all
obligations with respect to which this Guarantee relates.





     Section 3. Waiver. The Guarantor hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the Obligations and this Guarantee and any
requirement that the Lender protect, secure, perfect or insure any security interest or lien, or
any property subject thereto, or exhaust any right or take any action against the Borrower or any
other person (including any other guarantor) or entity or any collateral securing any Obligations.



     Section 4. Subrogation; Subordination. Until the Termination Date, the Guarantor
will not exercise any rights which it may acquire by reason of any payment made hereunder, whether
by way of subrogation, reimbursement or otherwise, and shall refrain from taking any action or
commencing any proceeding against the Borrower (or its successors or assigns) to recover any
amounts in respect of payments made under this Guarantee to the Lender. Furthermore, while this
Guarantee is in effect, Guarantor shall not incur any obligations for indebtedness that are senior
to its obligations hereunder without the prior written consent of Lender (other than Permitted
Indebtedness or indebtedness secured by Permitted Liens).



     Section 5. Governing Law. This Guarantee shall be governed by and construed in
accordance with the laws of the State of New York, without resort to such jurisdiction’s conflicts
of laws principles.



     Section 6. Representations and Warranties; Shares Covenant. Except as provided for
in a Schedule hereto, the Guarantor represents and warrants to the Lender that:




	 	(a)	 	Upon the entry of the Approval Orders, the Guarantor has the power,
authority and legal right to enter into, execute and deliver this Guarantee and
all actions, approvals and consents of any party necessary for the Guarantor to
validly execute and deliver this Guarantee have been obtained;
	 
	 	(b)	 	Upon the entry of the Approval Orders, the execution, delivery and
performance of this Guarantee by the Guarantor will not violate or contravene any
provision of any existing law or regulation or decree of any court, governmental
authority, bureau or agency having jurisdiction over the Guarantor or its
property of which the Guarantor has Knowledge, or of any material mortgage,
indenture, security agreement, contract, undertaking or




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	 	 	 	other agreement to which Guarantor is a party or which purports to be binding
upon it or any of its material properties or assets;
	 
	 	(c)	 	Upon the entry of the Approval Orders, this Guarantee creates
legal, valid and binding obligations of the Guarantor, fully enforceable against
the Guarantor in accordance with their terms, except as the same may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws or
equitable principles relating to or affecting the rights of creditors generally;
	 
	 	(d)	 	Other than the Approval Orders, no material consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Guarantor is required in connection with the
execution, delivery or performance by the Guarantor of this Guarantee or the
consummation of the transactions contemplated thereby;
	 
	 	(e)	 	The assumption by the Guarantor of its obligations hereunder and
under any instruments securing or relating to this Guarantee will result in a
direct and material financial benefit to the Guarantor, and there is due and
valid consideration to the Guarantor for undertaking the obligations hereunder
and under any instruments securing or relating to this Guarantee; and
	 
	 	(f)	 	There is no action or proceeding pending or, to the Knowledge of
the Guarantor, threatened against the Guarantor before any court or
administrative agency that might materially adversely affect the ability of the
Guarantor to perform its obligations under this Guarantee.
	 
	 	(g)	 	It is the legal and beneficial owner of, and has good and
marketable title to, the issued and outstanding equity interests listed on
Schedule 1 hereto (the “Shares”), and except for Permitted
Priority Liens and subject to the provisions of any Approval Orders applicable to
the Guarantor, to the Knowledge of the Guarantor the Shares are not subject to
any pledge, lien, mortgage, hypothecation, security interest, charge, option or
other encumbrance whatsoever.




The Guarantor hereby covenants that from the date hereof through the Termination Date, except for
the Permitted Priority Liens, or as contemplated by the Plan or provided in any Approval Orders, or
as herein provided, without the prior written consent of the Lender, it shall not sell, assign,
transfer, charge, pledge or encumber in any manner any part of the Shares or suffer to exist any
encumbrance on its portion of the Shares.




     Section 7. Counterparts. This Guarantee may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument.



     Section 8. Insolvency. This Guarantee shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of any of the
obligations to be paid



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by Guarantor hereunder, is rescinded or must otherwise be restored or returned by any Person,
or upon the insolvency, bankruptcy or reorganization of the Guarantor, all as though such payment
had not been made. Notwithstanding anything to the contrary contained herein, the provisions of
this paragraph shall survive the Termination Date.



     Section 9. Notices. Any notice or other communication to be given hereunder shall be
in writing and mailed or sent by facsimile transmission at the address or number set forth below:



	 	 	 	 	 	 	 
	

	 	If to Lender:
	 	Persistency

c/o Persistency Capital LLC

1270 Avenue of the Americas

New York, NY 10020

Attention: Andrew J. Morris

Fax No.: (646) 619-4642	 	 
	 
	 	 	 	 	 	 
	 

	 	with a copy to:
	 	John R. Ashmead, Esq.

Seward & Kissel LLP

One Battery Park Plaza

New York, NY 10004

Fax No.: (212) 480-8421
	 	 
	 
	 	 	 	 	 	 
	 

	 	If to the Guarantor:
	 	[name]

[address]

[address]

Attention: [name]

Telephone No.:___

Fax No.:___	 	 
	 
	 	 	 	 	 	 
	 

	 	With a copy to:
	 	Peter Basilevsky, Esq.

Satterlee Stephens Burke & Burke LLP

230 Park Avenue

New York, NY 10169

Fax No.: (212) 818-9606	 	 





or to such other person, address or number as the party entitled to such notice or communication
shall have specified by notice to the other party given in accordance with the provisions of this
Section. Any such notice or other communication shall be deemed given: (i) if mailed, when
deposited in the mail, properly addressed and with postage prepaid; or (ii) if sent by facsimile,
when receipt thereof is acknowledged to sender.




     Section 10. Remedies Cumulative. The rights and remedies herein are cumulative and
not exclusive of other rights and remedies which may be granted or provided by law.



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     Section 11. Severability. Wherever possible each provision of this Guarantee shall
be interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Guarantee shall be prohibited by or invalid under such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Guarantee.



     Section 12. Successors and Assigns. The terms and provisions of this Guarantee shall
inure to the benefit of the Lender and its successors and any assignee or transferee of all of the
Lender’s rights and obligations under the Loan Documents, and in the event of such transfer or
assignment, the rights and privileges herein conferred upon the Lender shall automatically extend
to and be vested in the transferee, assignee, or successor of the Lender, subject to the terms and
conditions hereof. The Guarantor may not delegate its obligations hereunder, whether by operation
of law or otherwise, without the prior written consent of the Lender.



     Section 13. Merger; Amendment. This Guarantee and the Financing Agreement embody the
entire understanding of the parties hereto with respect to the subject matter hereof and thereof
and this Guarantee may not be amended, waived or discharged except by an instrument in writing
executed by the party against whom such amendment, waiver or discharge is to be enforced. In the
event of any conflict between this Guarantee and the Financing Agreement the provisions of the
Financing Agreement will control.



     Section 14. Reliance. The Obligations shall conclusively be deemed to have been
created, contracted, incurred, renewed, extended, amended or waived in reliance upon this
Guarantee, and all dealings between either Guarantor and the Lender (or its assigns) shall likewise
be conclusively presumed to have been completed or consummated in reliance upon this Guarantee.



     Section 15. Consent to Loan Documents. The Guarantor agrees with, and consents to,
all the terms, conditions, duties, obligations and other agreements of the Borrower as set forth in
the Loan Documents.



     Section 16. Headings. In this Guarantee, section headings are inserted for
convenience of reference only and shall be ignored in the interpretation thereof.


TO THE EXTENT PERMITTED BY LAW, THE UNDERSIGNED EXPRESSLY WAIVES ALL RIGHTS TO A TRIAL BY JURY ON
ACCOUNT OF ANY ISSUE, CLAIM OR DEFENSE CONCERNING THIS GUARANTEE OR ANY INSTRUMENTS GIVEN BY THE
UNDERSIGNED TO SECURE THIS GUARANTEE.




[Signature Page Follows]






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THE UNDERSIGNED IRREVOCABLY AGREES THAT ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING ARISING OUT OF
THIS GUARANTEE MAY BE BROUGHT IN THE COURTS OF RECORD OF THE STATE OF NEW YORK OR THE COURTS OF THE
UNITED STATES LOCATED IN THE STATE OF NEW YORK; CONSENTS TO THE JURISDICTION OF EACH SUCH COURT IN
ANY SUIT, ACTION OR PROCEEDING; AND WAIVES ANY OBJECTION WHICH THE UNDERSIGNED MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY OF SUCH COURTS.




     IN WITNESS WHEREOF, the Guarantor has executed and delivered this Guarantee effective as of
the                      day of October, 2009.



	 	 	 
	 

	 	[subsidiary name].
	 
	 	 
	 

	 	By:
	 

	 	 
	Witness